(This post was written by Keith Harrison was shared by Vault, 11 December 2018.)
Self-employment can be an attractive career path, thanks to the flexibility to work whenever and wherever you want, the unlimited earning potential, and the freedom to work with the clients of your choice.
While self-employment can be empowering, it’s far from easy, and there are several things you need to consider before making the decision. Here are the five most important.
- Financially stability
Being financially stable is the most important consideration of all. While you should be able to find some business grants and funding, they can’t be solely relied upon, and you need to set aside enough funds to ensure your self-employment journey isn’t over as quickly as it starts. Whether you have a technology-based business idea that’s going to need $40,000 thousand to start up, or you’re offering a service within your expertise and only need an initial $2,500 investment, you’re going to need something to get started.
In addition to making sure you have the funds to start a business, you need to prepare for not having a wage for a while. You may have an aim to start paying yourself straight away, but it’s not unlikely that, all too soon, the money will be swept up in reinvesting in the business instead. With this in mind, give yourself enough time in your current job to save a substantial amount of money that can cover your monthly living costs until the business is in a financial position to take a wage from.
- Impact on lifestyle
Starting a business and becoming self-employed takes a hit on your lifestyle from both a financial and personal time point of view. In an effort to get organized, you’ll need to start rethinking your commitments, as time will quickly be eaten up and funds will soon be running low if lifestyle changes aren’t made.
Look at when would be the right time to make the jump. For example, if you know that within the next six months you have a holiday booked, a summer full of weddings, and a few days here and there blocked out with social engagements, is it going to be the best time to become self-employed? Be savvy with your social calendar and name a date in your diary that’s a cut-off point for planning events, as this way you’ll have the first six months of running the business with no distractions.
The financial elements of self-employment will also affect your lifestyle. If you’re someone who likes going out for dinner twice a week, has frequent trips to the cinema, or likes to jam pack your weekend full of social activities, then you need to evaluate whether you can live without these things. The reality is, soon, you either won’t have the money to do so, or you’d rather not spend money on these things. Before committing to the self-employed life, try a month of cutting back to see if you can get by on a smaller wage and not going out as often. This way, the money you save while you’re testing yourself can be added to the business investment funds.
- Business plan
Two words you’ll hear over and over when you first start out is “business plan.” You might think that it’s not necessary to have a business plan written down and that you’re mentally storing it, but having some form of a written plan with goals will not only motivate you but will also keep you on a path to achieving what you set out to do.
A business plan allows you to highlight what the pain points might be and what your unique selling points are. Business can be unpredictable, but if you’re aware of potential issues that you may face and how to use your unique selling points to your advantage then you’re immediately putting yourself in a position where success is more likely than failure.
- Solo responsibility
Working for yourself means you’re responsible for absolutely everything: creating a product or service, marketing, delivering on promises, attending networking events, and invoicing clients. This can work well—if you’re prepared for it and are willing to accept that a few mistakes will be made along the way.
If you have financial flexibility, you might be able to hire a social media management agency or an accountant who also looks after creating all of your client invoices. Investing in a little help will make a considerable difference to your stress levels.
This is the boring but oh so necessary bit! Nothing is exciting about going on the hunt for the best insurance coverage out there and poring over the application process. However, it’s vital that you make sure you have the appropriate coverage you need so it can act as your safety net. Whether you’re going to set up as a sole trader or a limited liability company, you will have to have some element of insurance cover on the off chance you have to make a claim.
Of course, depending on the type of business you’re starting, the insurance cover you’ll need will vary. The most common insurance coverage you should look at when starting on your own is public liability coverage and professional indemnity insurance. Professional indemnity is there to cover you in case one of your clients loses money due to a result of your advice or services. Public liability insurance covers you if someone were to get injured at an event you’re hosting, or if you damage something in a client’s office space such as a computer. You’ll also find that many clients will want to make sure you have insurance coverage before starting to work with you, so get it sorted early so it doesn’t prevent you from hitting the ground running.
Keith Harrison is a content creator and writer for Jolly Good Loans—your online personal loans encyclopedia.