Quitting Your Job: The Number That Tells You When

Short Answer: You can quit when your business earns enough profit to pay your household what it needs after tax, or when your savings can cover the gap until it does. Work out what your household needs, subtract income that continues after you leave, gross the rest up for self-employment and income tax, and compare that profit target to what the business earns. The shortfall, month by month until the business catches up, is the savings you need, plus a cushion.

Most business plans start with the business: market size, revenue projections, growth. That suits a startup raising money. For someone deciding whether to leave a paycheck, it answers the wrong question. The question that decides when you can quit starts with your household.

Step 1: What Does Your Household Need, After Tax?

Add up real annual spending, then add the costs your employer covers today and won't after you leave: health insurance, the retirement match, paid time off. People underestimate this number more than any other, usually by the subscriptions and irregular costs they forget.

Step 2: Subtract Income That Continues

A partner's salary, rental income or dividends keep arriving after you quit. Subtract their after-tax amount. What remains is the job your business has to do.

Step 3: Gross It Up for Taxes

Your employer used to pay half your Social Security and Medicare. As a business owner you pay all of it: 15.3% self-employment tax on most of your profit, plus income tax. So the business has to earn noticeably more before tax than the take-home you need.

Step 4: Compare the Target With What the Business Earns

If the business already runs on the side, you have a real number to start from. Project how profit grows once it has your full time, month by month, and be conservative.

Step 5: Size the Runway

For each month the business earns less than the target, the gap comes out of savings. Add those gaps up, then add a cushion for the months that go worse than planned. That total is the savings you need on the day you quit.

A Worked Example

Before a hypothetical landscaping company, Greenline Landscaping, was a full-time business, its owner worked as a crew lead and ran landscaping jobs on weekends.

Steps 1–3. The household needs $6,000 a month after tax, including the health insurance the owner will buy once off the employer's plan and $500 a month into retirement. There's no other income. For a single filer in a state with no income tax, keeping $72,000 a year takes about $92,000 of profit, roughly $7,670 a month, under 2026 federal rules.

Step 4. The weekend business makes about $2,500 a month in profit. With the owner full time, they project profit starting at $4,000 a month and reaching the target in about a year.

Step 5. The runway:

Measuring the gap in pre-tax profit is deliberately conservative: in the lean months the tax bill is lower too. With $40,000 saved, the owner can quit knowing the plan survives a slow start. With $15,000, the honest answer is to keep the job for another season and grow the weekend business first.

What to Look For

• Costs your employer covers today. Health insurance and the retirement match are the two most often left out of the household number.
• The ramp, not just the destination. A business that reaches the target in 12 months needs very different savings from one that takes 30.
• The cushion as a share of the plan. If the plan only works with zero bad months, it isn't a plan yet.

What a Finance Consultant Would Do Next

A consultant working with Greenline's owner would stress-test the ramp: what happens to the runway if profit starts at $3,000 instead of $4,000, or takes 18 months to reach the target, and which of those scenarios the savings can survive.

That analysis is what Occam's Model runs with your own numbers. It works out what your business has to earn to support your household after tax, models the business you're building month by month to that point, and shows how long your starting cash lasts on the way. When you need extra help, an expert can review it with you.

Common Questions

How much savings should I have before quitting my job to start a business?
Enough to cover the gap between what the business earns and what your household needs, month by month, until the business catches up, plus a cushion. For many owners that's six to twelve months of household costs, but the math above gives your own number.

When is a side business ready to go full time?
When its profit, with your full time, can reach your after-tax household target within a period your savings can cover. Profit on the side is the best evidence you have.

What costs do people forget when they leave a job?
Health insurance, the employer's half of Social Security and Medicare, the retirement match, and paid time off. Together they can add thousands a month.

Why not just use a business plan template?
A template forecasts the business without asking what it has to pay you. Starting from your household number gives every other figure in the plan a target to hit.