How to Prepare Financially Before Quitting Your Job to Start a Business

There are a number of things to take into account when considering quitting a formal job to launch a business, such as market research, exit strategy, and financial management systems.

This is according to Stephanie Wanjiru, a Nairobi-based business owner and entrepreneur, who spoke during the Co-op Bank’s Youth Forum on Friday, October 30.

Wanjiru says that among the key things aspiring entrepreneurs need to do is identify what they are passionate about before making the transition from employment to business.

She explains that one should research the opportunity, develop a business plan, and be intentional about when and how they leave their jobs.

To succeed, Wanjiru said entrepreneurs must also establish proper business systems, including hiring the right employees, maintaining accurate financial records and separating personal money from business income.

According to Wanjiru, business owners should open a dedicated account for their businesses, track their income and expenses and pay themselves a fixed salary instead of regularly withdrawing money.

Wanjiru also cautioned entrepreneurs against tying up too much money in stock that may not sell.

“For stock, the best advice is always to have what is enough. You don’t want to have dead stock,” she said, explaining that for her, she focuses on stocking makeup brands that customers regularly buy instead of trying to offer every available product.

Wanjiru advises business owners to keep records of stock received and sold, monitor inventory levels and check expiry dates to avoid losses from damaged or expired products.

According to her, entrepreneurs should also take time when hiring employees, clearly assign responsibilities, and ensure they have the right people to support the business.

She further encouraged business owners to maintain a consistent online presence to attract customers and make their products and services more visible.

“When your business is doing so well, it is important to save and invest so that when it is time to grow, you have a backup,” she said.

Wanjiru cautioned against taking loans simply because financing is available, advising entrepreneurs to establish whether their businesses genuinely need the money before borrowing.

“If you opt to borrow, be sure your business needs the loan,” she said, adding that business owners should remain willing to learn, improve themselves and maintain consistency.

Wanjiru’s advice is timely, as data from the Kenya National Bureau of Statistics (KNBS) shows a large portion of informal and micro-enterprises do not survive long-term.