Working for yourself or starting your own business can be a wonderful, rewarding endeavor that many people attempt every day. It can also be filled with new challenges and obstacles that the average office worker may not have fully considered. Below, I’ll give you a light overview of some of the less-than-obvious issues you need to keep in mind with exploring gainful self-employment. Even though each of these topics could be an entire blog post (or book) on their own, they are offered here as an overview and through provoker.
1. Find people to work with.
One is the loneliest number. You may be looking forward to a little peace and quiet in your work day. Getting away from distractions can be necessary to stay focused and get a lot of work done. However, over time this solace can end up being your worst enemy. You might be surprised just how many distractions you can create for yourself–especially when working at home where you can easily be distracted by your TV, couch, and other household tasks.
A great solution is to find co-working spaces in your area that allow you to work along side of others in a similar situation as you. These types of offices tend to offer other services you may be missing at home, such as flex offices, meeting spaces, large whiteboards, and more. Plus, it gives you the chance to network and talk with other human beings. Alternatively, working for part of your day at a local coffee shop is also great for this. Just getting out of the house and away from household distractions can help you focus.
2. Create a dedicated work space in your home.
Even if you are lucky enough to have a sweet co-working space in your town, you are still going to need a home base to operate out of. More than likely, if you are just starting out on your own, this is going to be your home. This may seem like an easy proposition, but there are many potentially tricky situations that can require skillful navigation to be successful in the long run. First, it’s very important to designate an area of your home as your office area and keep it separate from your “living” areas (obviously, this can be difficult if you are living in a studio apartment. However, it is still important to create as much organizational and visual separation between these two areas of your life). This allows you to be “in” and “out” of the office. When you are “in,” you are in work mode and focused on the tasks that run your business.
This goes hand in hand with another tricky subject for the newly minted self-employed super star: effectively managing family time vs. work time. If you are single and live alone, this may be less of an issue. But for those of you with significant others, spouses, children or herds of needy dogs, sooner or later the time priorities of making a living and living your life will come into conflict. My best advice is to talk with your loved ones, share what you’re trying to do and what you’ll need to be successful (if this is your first real talk about self-employment, you may have larger issues I can’t cover here). Be sure to listen to their concerns and together come up with a plan for your “work” hours and when you’ll be off the clock and available. If you can come up with this plan together, you’ll smooth over a typically thorny area for those that work at home and make everyone feel like they are part of the process (because they are).
3. Double or triple your hourly rate.
This can be a scary proposition upon first thought, but you are stepping out of the soft, cushy, “paid bathroom breaks” world of salaried office life. Yes, I said “paid bathroom breaks.” For those of you billing hourly, there are now a myriad of things you used to technically get paid for that now you do not. In most salaried office-type jobs, you are being paid for all your time in the office. Chatting with a co-worker, using the bathroom, stepping out for a smoke are all things you aren’t getting paid for on your own. That doesn’t sound like much, but if all your calculations we’re based on you getting your current salary figured as an hourly rate, you’ll be working 12+ hours just trying to get 8 billable hours. In fact, when you factor in all the non-billable work you’ll do just trying to find billable work (such as research, keeping your skill set up-to-date, finding new clients, administrative tasks such as billing, bookkeeping, etc.) you’ll easily spend 2 to 3 hours for each billable hour you turn in.
That’s not even taking into account all the taxes your previous employer used to pay for you. You will now be on the hook for things like self-employment tax and a larger share of things like social security, medicare, etc. (see #5 below if you have started to hyperventilate). I’ve always read that it’s a really great idea to save up to 6-8 months worth of living expenses before striking out on your own (and that’s probably not a conservative number).
The bottom line is that you need to make sure you are both charging for what your true costs are as well as for the value of work you are providing.
4. Network, network, network.
Going along with #1 on this list, you really need to get out if you are going to survive. Not just for your own sanity, but in order to find new business. As social networking continues to be a powerful (and popular) tool for connecting with people, there is no substitute for good old face-to-face networking. There are lots of networking events happening around you all the time (if not, start one!). From industry-specific meet ups that can introduce you to other like-minded individuals and potential business partners down the road to more diverse events designed to get you in front of local businesses that could lead to actual work down the road.
5. Consult a tax professional.
This is often the most overlooked piece of advice and yet the most important to consider. There are many legal and tax implications to starting out on your own. Decisions like staying a sole-proprietor or moving to a more protected status like Limited Liability Company (LLC) are vital to your success and appropriate protection from risk. Knowing how to file your taxes properly and on time (in many cases, you may be required to file quarterly taxes) can help protect your from audits and penalties from improperly filed taxes. Also, knowing about the many deductions available can be a big help. For example, making a separate office space from your living space allows you to use that space as a deduction on your taxes. I would highly recommend consulting a tax professional about the best way to proceed on your own. It will be well worth the money you spend in the long run.
These five things sum up a few of the best things I’ve learned during my brief stint in the wild west of self-employment. While there are many new challenges and costs you may not be used to, several of the rewards you’ve been coveting about the lifestyle of being your own boss are true. Getting to set your own schedule, a 10-second commute to your home office, and the ability to set your sails to whichever direction you choose all await you. It is not for the faint of heart, but if you can survive your first year, learn from your mistakes, and stay focused–you have a great chance of being a successful entrepreneur.