Handbook / Starting out on your own
Leaving your job to work for yourself: a practical exit plan
Leaving a steady job to work for yourself is one of the biggest financial decisions people make. It can go very well, but the people who do best usually leave with a plan rather than a resignation letter and a hope. This guide sets out what to put in place before you leave, how to exit cleanly, and how to use the first months.
The three conditions
Before giving notice, aim to have three things in place.
1. Runway. Savings to cover personal and business costs while income builds. Client payments often arrive weeks after work is done, so even a full order book can leave a gap. Add up monthly personal spending, business costs and tax savings, then decide how many months you want covered.
2. Pipeline. Evidence that people will pay you: existing side clients, signed agreements, or serious conversations with dates and budgets. A pipeline is not a list of people who said "let me know when you start".
3. A plan for coverage and tax. Health insurance and tax payments change completely once you leave employment. Price them before you go.
Test before you leap
The safest route is often to start while employed, if your employer's rules allow it. Weekend or evening work tests demand, builds a portfolio and creates early clients. The guide on moonlighting policies explains how to check your contract first.
Health coverage
Losing employer coverage is a common worry. HealthCare.gov explains that you may qualify for a Special Enrollment Period if you lost qualifying coverage in the past 60 days or expect to lose it in the next 60 days, including job-based coverage. That means you can often arrange a Marketplace plan to start soon after your employment ends.
Your employer's plan may also offer continuation coverage, which usually costs more than the employee share you paid while working. HealthCare.gov notes that voluntarily dropping continuation coverage before it ends does not by itself qualify you for a Special Enrollment Period, so compare options before deciding. The guide on Marketplace health insurance covers estimating income for an application.
Tax changes
Once you are self-employed, nobody withholds tax from your income. The IRS expects tax to be paid during the year, usually through estimated payments. Set aside a share of every payment you receive in a separate account and put the estimated payment dates in your calendar. The guide on Form 1040-ES explains the schedule.
In your first year, your final paychecks will have had withholding, and your business income will not. Plan for both.
Your employment agreements
Before you resign, reread:
- notice period and any garden leave terms
- non-compete clauses, whose enforceability varies by state
- non-solicitation of clients and colleagues
- confidentiality obligations, which usually continue after you leave
- intellectual property terms covering work you created
Return company property and do not take files, client lists or materials. If your new business is in your employer's field, get legal advice on what you can and cannot do.
Giving notice
Keep it simple and professional. Give the notice your agreement requires, offer a reasonable handover, and leave on good terms. Former employers and colleagues are often a source of referrals later.
Set up before day one
In your last weeks of employment, prepare:
- a separate bank account for the business
- invoicing and bookkeeping tools
- a simple contract template
- any license or registration your work requires
- insurance if your work carries risk
- your profile, portfolio or website
Then you can start earning in the first week rather than spending it on setup.
The first ninety days
Treat the first three months as a launch with targets:
- Weeks 1 to 4: deliver for early clients, contact everyone in your network, and set routines for bookkeeping and tax savings.
- Weeks 5 to 8: follow up on every lead, ask satisfied clients for referrals, and review pricing.
- Weeks 9 to 12: compare income and costs with your plan, adjust your offer, and decide on any investment.
Track three numbers weekly: money in, money committed, and months of runway left.
Know your fallback
Decide in advance what you will do if things go slower than planned: part-time or contract work, a cheaper living arrangement for a period, or a return to employment. Having a fallback is not pessimism; it lets you make calm decisions.
Leave with runway, paying work, a coverage plan and clean contracts, then run the first ninety days like a project.
Questions people ask
How much savings do I need?
It depends on your costs and how quickly income will arrive. Many people aim for several months of personal and business expenses, because client payments often lag the work by weeks.
What happens to my health insurance?
HealthCare.gov says losing job-based coverage can qualify you for a Special Enrollment Period if you lost coverage in the past 60 days or expect to lose it in the next 60 days. You may also be offered continuation coverage through your employer's plan.
Can I take clients from my employer?
Be careful. Non-solicitation and confidentiality clauses may restrict approaching your employer's clients or using its information. Read your agreements and get legal advice if they are broad.
Should I tell my employer what I am planning?
Give the notice your agreement requires, keep it professional, and be cautious about details if your new work is in a related field.
Do this week
- Add up your monthly personal costs and multiply by the number of months of runway you want.
- List your current and likely clients, with realistic amounts and dates.
- Price health coverage options, including Marketplace plans and any continuation coverage.
- Reread your employment agreement for notice, non-compete, non-solicitation and confidentiality terms.
- Write a ninety-day plan with weekly targets for sales, delivery and admin.
Sources read for this page
Published November 8, 2026. Sources checked November 8, 2026. Rules, limits and forms change; the linked page is the authority.