So you want to work for yourself. Work when you want, doing what you want, all from the comfort of your own front room. Living the dream, right? Well, not quite. As a person who has spent significant periods of time employed and significant periods of time self employed, I’ve come to appreciate the upsides and pitfalls of both arrangements. And the most important thing I’ve learned from the whole process is that you have to pick the best option to match your present situation and your longer-term aspirations. It’s not that one is intrinsically any better than the other, it’s that one will suit you better at this point in your life and in getting you where you want to go. From my own hard-won experience, here are 5 questions that anybody looking to transition into self employment should ask themselves before making the leap.
1. Do you have sufficient financial security?
This is rule number one. In a freelance/self employed arrangement, demand for your services will fluctuate – potentially drastically – and so too will your earnings. You might have problems getting payment from clients. You might incur unexpected expenses. In short, gone are the days of the steady pay check, and that means you need a financial buffer – a sizeable one. I would suggest that you have 6 months of living expenses on hand as a very minimum, and preferably some alternative income streams in place to mitigate the risk. Financial security and stability is your first and primary consideration; you should think of it as a duty of care both to yourself and others, since you cannot hope to be effective while living under the financial stress of wondering where your next penny is going to come from.
2. Do you have the skills and experience you need?
So you’ve determined you have the financial security you need – what next? Ask yourself simply this: do I have the skills and experience I need to do what I want to do and get where I want to go? The experience part relates directly to your proposed self employed activity – Do you have the credentials from your past work to attract new clients? Do you have sufficient track record? Have you built up a professional network? The skills component, meanwhile, is more nuanced; of course, it applies to your self employment but you also need to ask yourself whether you have the skills to fulfil your longer-term objectives. For example, you may be an excellent accountant, who could easily consult lucratively for the rest of your days. Only you don’t want to be a pure accountant, you have managerial aspirations and other business ideas in mind. In such a case, it would be far better to acquire those skills in a traditional employment environment than go freelance straightaway and be stuck as an accounting specialist with little opportunity for development.
3. What’s your end game?
What we’ve been touching on with our accountant example is the need to keep longer-term objectives in mind alongside your present situation. Or to put it simply, what’s your end game? If you love the field in which you are working, and want to do more of the same just with more profit and more autonomy, then self employment may be for you. But if you’re looking to develop into other areas or nurture entirely new skills, it’s a whole different question. Similarly, one person might be financially secure and looking for the flexibility of self employment, which makes it much more attractive to them than it does to someone who is still building financial assets and looking for a full-time income. Ultimately, the trick is to ask yourself what you want to achieve at the end of all this and then choose the option that is best for you right now. Note that even if self employment is your ultimate goal, the best decision might involve stepping stones in which you are still employed. It all depends on your individual situation and goals.
4. Do you appreciate the difference between running a business and creating your own employment?
When people transition into self employment, they think they are leaving to run a business – which, in a sense they are, since they are now having to invoice clients, manage accounts, equip their office, and all the rest of it. However, as sole contractors, they are also still doing all the work they did in their old jobs themselves, and they quickly get overwhelmed by all the work. They have created their own employment, and now they have to be employer and employee all at the same time. This is a distinction that Michael E. Gerber covers superbly in his go-to book on small business, the E-Myth. The thing to realize about self employment is that it is not running a business – it is, in the literal sense, creating your own job. However, therein also lies its prime advantage, in that it gives you the opportunity (if you wish) to run a business in the truest sense, which is when you step out of the technician role to manage an organization that employs other people to do the day-to-day work. Appreciating this distinction – and knowing what you want for yourself – is something you must consider before you leave behind the traditional employment scenario.
5. Are you prepared to do what it takes?
There are many upsides to self employment – flexibility, autonomy, and the direct link between personal effort and reward, to name just a few. However, you have to be ready to face a few challenges as well, especially if you’ve been employed for a while. Self employment takes discipline, time management and personal responsibility. It can be a lonely and isolated existence, and the boundaries between work and play are forever blurred. Before you make any hasty decisions, make sure that you have given adequate consideration to the pros as well as the cons and are willing to see it through. Self employment won’t be for everyone, though it can be a great thing for others. Ultimately, it’s a decision you have to make for yourself.
If, however, you’ve made it through this 5-point checklist with a resounding yes, then congratulations, you are as ready for self employment as I think one can be. I hope that this has been helpful in clarifying your thoughts on the matter, and I wish you every success!