Recently, I posted a Call for Feedback asking you to weigh in on the issue of self-employment. It’s a career decision that’s on a lot of minds these days, as the job market recovers only in very small doses and as people become increasing unhappy in their current situations.
I read through all the comments you posted and all the email I received in response to this request for feedback. Based on all those responses, as well as on my own experiences, here are 10 things you should seriously consider before you venture out on your own.
1: Practice good financial management
Always bear in mind that a rainy day will come. So when the sun is shining, save. In other words, remember that the business cycle is volatile. When you’re doing well, save money so that you can ride out the inevitable slow cycle.
Further, be disciplined when it comes to finances. Open a business checking account, pay yourself what you can, and avoid mixing business and personal funds. When possible, get the business its own line of credit, too. Never forget to pay your taxes and make sure you pay your vendors on time. Also, maintain a cash flow you can rely on.
The most basic precept that came from the feedback I received, however, was this: Make sure you have enough cushion to get started! Get the absolute basics — supplies, equipment and things like health insurance for your family — handled before you leave the comfort of the full-time world for the excitement of self-employment.
The lesson: Make money, keep the tax man off your back, and make sure the important stuff is covered.
2: Learn to love to sell and self-promote
The most important part of business is sales. If you can’t sell, you can’t succeed. As we’ll see next, one of the critical lessons is to diversify. How can you diversify if you can’t convince other customers or clients to come on board? If self-promotion doesn’t come naturally to you, learn how to get it there. Without the ability to tell someone why they should pick you, you can’t grow your business.
The lesson: Sales and marketing make the world go round! Learn to love the game.
3: Diversify your customer base as quickly as possible
If you have one big client you work for, you’ve made a great start. Now, get the second one, the third one, and the fourth one. Take on as much work as you can from as many clients as possible without sacrificing your overall work quality. It’s a lot easier for a company to drop a freelancer than to drop a full-time employee. When times get tough, they might scale back your work or cut it off altogether.
The lesson: Don’t put all your eggs in one basket.
4: Make it legal
For every client — every client, even friends and family — write a contract for services. Too many friendships are lost and families broken over money. Further, if the time comes when you need to force the issue of payment or there is disagreement about the scope of a service, you will always have the paper trail that can back you up.
The lesson: Dot your I’s and cross your T’s. Don’t leave anything to chance.
5: Love what you’re doing
Your new endeavor is now your job, so you better love doing it. More than one respondent advised that people considering self-employment better get used to what could be long hours, a crazy schedule, and demanding clients. Although you may think that you get to set your own hours, that may not always be the case. Your clients may have different things in mind, so a new sense of flexibility may be in order. Self-employment is just like any other job in one significant respect: If you don’t love what you’re doing, you’re going to be miserable.
The lesson: Love your job.
6: Stay relevant, stay sane, and stay connected
Many people wrote to tell me that training was critical. There is no longer a line in the corporate training budget for your professional development, nor is there a bustling office water cooler around which you can catch up on the day’s gossip. It’s now up to you to stay current in your chosen field using whatever means you can.
Find a way to maintain interaction with real, live people. Work at a coffee shop sometimes or rent an office. Likewise, consider using social media to satisfy some of your human interaction needs. Make sure you continually network with colleagues, competitors, customers, and friends. This might bring in new business, too.
Another reader suggested bringing on a partner to help each other stay focused and bounce ideas off one another. If you both can afford it, this is not a bad idea.
The lesson: If you fail to stay relevant and current with your profession, your business will fail.
7: Always get paid
I’ll be the first to admit that I’m not that great talking money, and I hate following up on failure to pay. But, guess what? I don’t want to work for free, either. Remember, your clients are not your friends! If you don’t pay your bills, bad things happen. Your service gets cut off and your account gets sent to collections. Make absolutely sure that your clients are paying you so that you can stay in business. This is another reason that client diversification is so critical. If you eventually have to cut off a client, you need to make sure that it doesn’t doom your business.
The lesson: Make sure you get paid 100% of the time.
8: Set rates and prices that are reasonable and livable
You want to be in business? Make sure your rates can keep you that way. Set your rates too low and you won’t be able to survive and you will devalue your services. Set them too high and you won’t have any customers. If you’re unable to set rates and prices that allow you to survive and that customers are willing to pay, your business will fail.
When you’re setting rates and prices, take into consideration the fact that you need to pay for your own health insurance, self-employment insurance, and other items you may have taken for granted when you were working full-time.
The lesson: Make sure you can survive your business.
9: Work in a dedicated space
One reader suggested that you go to an office everyday so that you don’t go nuts at home, but others recommended simply having a dedicated office space from which you can work regardless of whether it’s in your home. Personally, when I’m not traveling on a consulting engagement, I work from a home office. I don’t want to pay rent and utilities for a separate space. If my business were to grow and I took on employees who needed to work together, I would then rent a space. I can certainly envision not wanting to have a bunch of people working in my home.
The lesson: Make sure your workspace is conducive to the kind of business you want to undertake.
10: Have some guts
It takes guts to cut the full-time tether. If you don’t have guts, you can’t survive self-employment. After all, there will be slow periods, and you’ll need to have confidence that you can get through them without having to shut down. If you don’t have confidence in yourself and in your business model, there is nothing wrong with sticking with the comfort of the 9-to-5 job.
The lesson: No guts, no glory! If you can’t stomach uncertainty, stick with certainty.
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