Can I afford to leave my job?

The two numbers that decide it

The worked example below uses one household throughout, so the figures connect. It is illustrative. Your numbers will differ, and the point is the method.

Step one: your monthly personal number

List what your household spends in a normal month, and price each item as it will be once you have left. Anything your employer currently shares, such as the medical aid contribution, becomes yours in full. The list of what employment provides shows what to add.

If a partner earns an income the household will keep relying on, reduce the number by that amount. Include debt repayments. They continue whether or not income does.

Step two: the income the business must produce

A personal number of R45 000 does not mean the business needs to earn R45 000. Tax and running costs sit on top, so the business has to bring in more than you take out.

For a service business, convert that into a day rate. At 15 billable days a month, R63 000 to R72 000 is R4 200 to R4 800 a day. New practices seldom bill 15 days from the start. The consulting rate calculator assumes about 60% of your target days while you build a pipeline, which is nine days a month. At nine days, the same revenue needs R7 000 to R8 000 a day, a rate few new consultants can charge in their first months.

That gap is why the first months pay less than the target. Number two exists to cover it. For a product or retail business, the break-even calculator turns the same target into units per day, and for a franchise the franchise calculator works backwards from your take-home. Once the business is a company, the salary versus dividends calculator shows the tax-efficient way to pay yourself.

Step three: the cash to bridge the gap

Assume, for illustration, that the business pays you nothing for three months, then R15 000, then R30 000, and reaches the full R45 000 from month ten. The shortfall in each period is what your savings must cover.

Compare R435 000 with your liquid savings, meaning money you can spend without penalty and separate from your emergency fund. If nothing arrived for 12 months, the figure would be R540 000, which is R45 000 multiplied by 12 before start-up costs. The R105 000 difference between the two is the value of income you can show is coming, and it is why a paid test while you are employed comes before resigning.

The runway calculatorruns this with your own figures. Enter your savings as cash on hand, your personal number as the owner’s draw, and add a monthly growth rate to see whether break-even arrives before the cash runs out. It models recurring monthly costs only, so subtract once-off start-up costs from your savings first.

If your savings fall short

Where to start

The calculators are free and need no account. Choose the one that matches your business.

Further reading

• Using Your Two-Pot Withdrawal to Fund a Business? Here Is What It Really Costs You
• My Wife Never Had to Consent to the R10 Million I Put on the Line
• Small Business Funding in South Africa: What Nobody Tells You Before You Apply
• South Africa’s Small Business Funding Gap Is Mostly a Readiness Gap
• Profit vs Cash Flow: Why the Difference Matters
• Business Funding Options in South Africa