Are you ready to quit your job and start a new business venture? The idea is tempting, but before leaving your current job, ask yourself this question: “Am I financially ready to launch a startup?”

You might be fascinated by an idea, but it’s not easy to launch a business and reap profits—especially not right away. According to Forbes, 8 out of 10 businesses fail within the first 18 months. Why? Because they run out of cash. And even if you are successful, you likely won’t see profits for 5 years.

In short: Without proper financial planning, your business is doomed before it even gets off the ground.

The good news is, there are ways to build a solid financial foundation that makes success more likely. Here are a few tips you can use to be financially ready for starting your new company.

1. Conduct market research

Whatever your exciting new business prospect is, don’t get swayed by mere possibility. Evaluate your profit potential accurately. Here’s where to start:

First, consider the details of the business—especailly the cost. Ask yourself:

• What product or service will I be offering?
• What is the market demand for that product or service?
• What will it cost to produce and disseminate my product or service?
• What future does my product or service have, and can I easily adapt for a changing market?
• Who is my audience and how is it likely to change over the next 5-10 years?
• What overhead costs will I need to cover (office, transportation, employees, etc.)?
• What income do I need during early company growth (and possibly low or no profits)?

If you honestly answer these questions, you’ll know if a new company is worth your effort.

Second, look at your competitors (those selling similar products and services) and find out how they are performing. This will give you a sense for what is working and what isn’t, and how you can improve your product or differentiate it from competitors’.

Review this Entrepreneur article on complete market research before setting up your business. Take notes, make outlines, and craft a long-form pros and cons list about your new venture. These will all help you define your goals, your deliverables, and your vision.

Here are some additional tools you can use to get secure data on your target industry:

Crunchbase Enterprise

Questback

Qualtrics

Keep in mind that market research can cost $1,000s for accurate data, so be prepared to spend money upfront. While costly, know that this investment could be the difference between sinking in a year and soaring in a few years.

2. Figure out the start-up cost

While your initial market research will give you a general sense of start-up costs, now is the time to dig into the numbers. Some estimates show that the cost of launching a business can reach $30,000, so make sure you take all factors into account.

For example, as a brick-and-mortar venture like a retail shop or restaurant, you’ll need to calculate leasing fees on a property. Calculate the likely increase in monthly fees based on inflation and demand. Also, be sure to include estimates for construction or renovation costs if you need to update the space to fit your concept.

On the other hand, most online-only business have a lower startup cost. However, you still need to secure dedicated server space, a domain, email client, and marketing software. Know what you need not only at launch, but also how you can scale over the course of 2-5 years. Will your technology/software handle growth during a successful 5-year period?

Other overhead costs to consider would be employee wages, insurance, transportation, utilities (internet, cell phone plans, etc.), supplies, shipping, and technology (computers, servers, etc.).

The Wall Street Journal published this indispensable startup calculator for just such a purpose. Use this as a starting point, but be sure to tailor your expenses to fit your own needs. Remember: Don’t quit your job unless you have enough funds to start a business.

3. Start an LLC

Once you’ve determined the viability of your business and product/service, start an LLC. You’ll have to submit articles of organization to your state’s Secretary of State. Usually, this costs between $40 and $900.

Check to see if you have to pay corporate tax separately. If you need help registering your company, please send a mail to agsolutions@agricdemy.com

4. Save for your living expenses

Now that you’ve got some solid numbers, start saving. Along with the expenses associated with setting up and operating a new successful business, you need to be financially prepared to cover your living expenses for several months. It will take time to make your company a profitable business. Remember, there won’t be any change in your personal expenses just because you have set up a business. Moreover, you need to be prepared for extra expenses related to out-of-pocket health care premiums and random costs.

Initially, your expenses will be more than your income. Save enough money to cover your living expenses for 6 months before leaving your job.

5. Examine how best to secure investor or startup capital

Depending on your financial needs, this could be as easy as asking friends and family for a small loan. But it could also mean crowdsourcing, taking out a much larger bank loan, or seeking out investors or angel investors.

Keep in mind that outside investors will want to see a business plan—including a clear financial path from start-up to profitability. Have one ready.

[Ed. Note: Patricia Sanders is a financial writer and a regular contributor at wiki.debtcc.com]