Are you financially ready to go full-time on your business?

You’ve dreamed about it for years—quitting your job, being your own boss, and pouring your energy into building your business. But before you take the leap, there’s one critical question to answer: Can you afford to make the move?

According to Startups, around 20% of UK small businesses fail within their first year, and poor financial planning is one of the main reasons. In this guide, we’ll walk you through exactly what to consider before quitting your job—including how to calculate your cost of living and gain a clear understanding of your expected income.

Let’s help you turn your dream into a well-planned entrepreneurial journey.

Work out your monthly cost of living 

Before you part ways with your usual income, you need to know how much it actually costs to live.  

Essential costs

First, calculate the minimum amount you need to get by. Go through your bank and credit card statements to make a list of your fixed, essential expenses, including: 

• Rent or mortgage 
• Utility bills 
• Council tax 
• Insurance (car, home, life) 
• Groceries 
• Transport costs – this may be reduced if you leave your job and stop commuting 
• Childcare 
• Debt repayments 
• Basic personal spending 

Add it all up and write this number down. This is the minimum amount of money you need to stay afloat each month. 

Lifestyle costs

Next, think about the amount you spend to maintain your current lifestyle, including any: 

• New clothing, cosmetics, home furnishings and other luxuries 
• Entertainment costs like subscriptions and tickets to events 
• Hobby maintenance costs 
• Dining out 
• Holiday costs 
• Treats and gifts for others 

Write this number down, and add it to your essential costs—this total is your monthly living costs. Consider how much flexibility you have with these expenses in case your business takes longer than expected to generate consistent income.

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You could use a simple spreadsheet to add it all up, but budgeting apps like Emma or Plum make this task much easier. They connect to your bank accounts and credit cards and automatically categorise each expense. This way, you can see exactly how much you spend on each category month by month and get overall averages for the year.

Savings goals

You may have ongoing saving goals you want to keep up while building your business. These may include: 

• Buying a house 
• Overpaying your mortgage 
• A wedding 
• A dream holiday 
• Pension contributions 

Write down the ideal amount you want to contribute to your monthly savings goals. You may have to occasionally sacrifice on these, but it helps to be aware of the bigger picture you aim for. 

Assess your current savings 

Let’s now consider how you will afford your living costs. Will your business be able to pay you an income from day one? If not, how long can you afford to support yourself through your savings?

Most financial advisers say you should have at least 4-6 months’ worth of your living expenses in an easy-access savings account before taking a risk like leaving a job. This gives you enough time to support yourself while things ramp up and to turn to a backup plan if things go slower than expected (more on this later).

So, if your living costs are £2,500 a month, you’ll want between £10,000-£15,000 saved. Even if you expect to turn a profit quickly, having a cushion set aside for unexpected emergencies, like replacing a laptop, is smart. 

It’s ok if you don’t already have this much saved, especially if you’re already investing in your business. Even 2-3 months of expenses can buy you time and peace of mind while you get things off the ground. However, be honest: can you afford your lifestyle if you don’t make any income for three months? Then, when your business starts and initially brings in £1,000 per month, can you top that up from your savings? 

Work out your cash runway 

Also known as a ‘business runway’ or ‘startup runway’, this is how long you can keep your business going before money runs out. 

To calculate it, look at: 

• Your available cash to invest in the business (through your savings and external funding) 
• Your monthly business expenses (subscriptions, marketing, inventory, staff, office space, etc.) 
• Your personal living costs (only if your business needs to cover these too – don’t count this if you will support yourself via your savings) 

Your cash runway = available cash ÷ (monthly business + personal costs) 

Let’s say you’ve got £6,000 in the bank and expect to spend £1,500 a month running your business and paying yourself. That gives you a 4-month runway. 

This number helps you see how long you can go without generating a significant profit. This gives you a realistic look at how quickly you need to find clients or make sales.

Increase your available cash 

Plenty of household name businesses grew from humble beginnings – like Levi Roots, which was initially self-funded and ran out of the founder’s kitchen. Eventually, most entrepreneurs turn to external funding, grants, and loans to scale their businesses. Financial support will give you a longer runway, more flexibility, and less pressure to immediately generate significant profits. 

Look into government-backed financial support. For example, Start-up Loans range from £500 to £25,000 and have a fixed interest rate of 6%.  

You can explore the British Business Bank’s online tools to find the right type of funding for your business based on your goals and stage of growth.

There are also crowdfunding platforms like Kickstarter and GoFundMe, which allow you to raise money from the public and build a community of supporters.  

Our guide provides more information about support for entrepreneurs, including where to find mentorship, training, and compliance support. 

Have a backup plan 

Hope for the best, but plan for the unexpected. A Plan B can relieve pressure and make you more confident about taking the leap into self-employment.  

If your business does not grow as quickly as you expect, here are some other options that can keep you going financially:

Freelance, part-time or short-term contract work

If you’ve worked in a role with transferable skills, like finance, marketing, design, or tech, these can often be turned into freelance services. You can always lean on these skills to generate income while building your business. Your professional network may be full of potential clients. 

Stay connected to your industry so you can return if needed

Don’t burn bridges, even if you’re desperate to get out. Leaving your job on a positive note helps protect your reputation and provides a safety net just in case you ever want or need to return, even temporarily.

Try casually checking in with former colleagues or managers every now and again by text or on social media. 

Are you financially ready to quit your job? A quick checklist 

Before you hand in your notice, ask yourself: 

1. Do I know how much I need to live on each month? 
2. Have I saved at least 4 months of living costs? 
3. Do I have a clear idea of my business costs? 
4. Have I calculated my runway? 
5. Do I have a backup plan if income is slow? 

If you’ve ticked most of these, you’re in a strong financial position. You’re ready to go full-time with confidence. 

Thinking of going full-time? 

We’ve explored the practical realities of transitioning into full-time entrepreneurship—an exciting move that comes with opportunity and uncertainty. As you weigh this decision, focusing solely on momentum and ignoring the risks can be tempting. But building a business that lasts requires more than a leap of faith.

To close, we’d like to share some personal insight from Graeme Donnelly, CEO and Founder of 1st Formations. His words remind us that true success in business isn’t just about getting started—it’s about starting right.

As a company formation agency, it would be easy—almost expected—for us to simply say, ‘Just go for it.’ After all, our role begins at the starting line. But over the years, we’ve learned that entrepreneurship isn’t just about getting started—it’s about building something that endures.

We’re not here to fill a ledger with company registrations. We’re here to help people turn well-considered ideas into meaningful ventures with real potential. That means being honest about risk, deliberate in planning, and thoughtful about timing—not because we want to introduce doubt, but because we genuinely want you to succeed.

Our greatest achievement isn’t how many businesses we help start. It’s how many of those businesses are still standing, still growing, and still led by people who are proud of what they’ve built.

If you’re ready to make the leap, our company formation services can help you get off to the best start with fast, simple company setup and expert guidance from day one. 

Set up your company with 1st Formations today.