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From Employee to Self-Employed Make that final transition by making your business a full-time gig.

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Q: I've had some success with my business, but I still maintain a part-time job in addition to my self-employment in order to make ends meet. How can I make that final transition to full-time entrepreneur, and when will I know that it's the right thing to do?

A: The first thing to remember is that you are always your own employer, regardless of who writes your check. Even if you are in a traditional employer-employee relationship, you are still a company of one, engaged in the selling of your time and expertise to a single client (your employer). Think of your part-time job as an entrepreneurial exercise--a step in the process of achieving a goal. If a job, whether it be part time or full time, doesn't give you some sense of entrepreneurial spirit, excitement and ownership, then it's time to think about making a change.

Ultimately your goal is to focus all your energy on your own business. However, it's not unusual for entrepreneurs to hold down a traditional job while their companies grow, and hopefully, once you are in a position to separate from that traditional job, there will be some knowledge, experience, and relationships that you will be able to take with you into your own business. The trick is to know when to make the ultimate transition and strike out completely on your own. There are several things to consider.

The first and most obvious one is financial. If you're going to give up that part-time job, you must consider how dependent you have been on the income you derived from it. Are you in a position to sustain yourself independently for a period of time if things don't go exactly as planned for your entrepreneurial business? Before you make the separation, your business should be at a point where it is generating enough revenue to cover your living expenses. Arriving at this figure can be more difficult than you realize.

Don't forget to factor in the expense of health insurance if you do make the transition. This may be something as simple as opting to take advantage of a COBRA plan that allows you to retain your company insurance for a period of time after you leave. Of course, the full cost of the insurance will be your own responsibility; your former employer will no longer pay for it.

Another factor that is too often forgotten is the amount of money you have to pay the taxman. Before you make the leap to full-time entrepreneur, calculate the net amount you need (after taxes) to sustain yourself and your family. Then add in all your business expenses to that amount, remembering to factor in additional self-employment taxes that you did not have to bear as somebody else's employee. The final figure is the amount of revenue your business needs to take in before you can quit your part-time job.

If anybody is currently providing you with financial support, expect that they will have to continue doing so, perhaps even to a greater extent, once you make the switch. If you're getting outside investors or if your company will be venture funded, this may not have to be a consideration.

Examine your client base, and how much security that will give to your small business. If your client base is too small, even if it is bringing in adequate revenue, you may just be one client away from disaster.

Another very important factor is family and children, and how the transition will affect them, not only financially, but emotionally. Without that regular paycheck from your part-time job, you may find yourself compelled to work unreasonably long hours at your business to make up for it. In fact, although most entrepreneurs cite "being able to make my own hours" as an incentive to working for oneself, working one's own hours too often ends up being too many hours.

Make sure that everyone involved--partners, clients, spouses and children--see the move as positive, and most of all, don't forget to take care of your health and your spirit during the transition.

Janice Bryant Howroyd is founder, chairman and CEO of Torrance, California-based ACT-1 Group, the largest woman minority-owned employment agency in the United States, with more than 70 offices, 300 full-time employees, 65,000 temporary "stars" and annual revenues exceeding $500 million. Founded in 1978 around Howroyd's personal philosophy of "Keeping the Humanity in Human Resources," ACT-1 is today a multidivision conglomerate serving such clients as Ford Motor Co., Gap Inc. and Sempra Energy and meeting demands for well-educated and well-trained temporary, full-time and contract employees. She has twice been honored by the Star Group as one of 50 Leading Woman Entrepreneurs of the World.


The opinions expressed in this column are those of the author, not of Entrepreneur.com. All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.

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