In How Starting Your Own Business Helps You and the Economy we discussed the benefits of self-employment both to you as an individual, and to the overall economy in general. Self-employment not only liberates people from their corporate cubicles, but it also increases the number of available jobs, as the newly self-employed exit the job market.
In this article, I’d like to get into the basic strategies of how to become self-employed even if you’ve never been before. According to the Bureau of Labor Statistics there were 15 million self-employed people in the US workforce, or about 10% of all workers. More recent projections has the number increasing to 42 million by 2020. It’s a good bet many will be side businesses. You could be one of them.
My guess is that fear is the primary obstacle to people becoming self-employed. They may fear the business will fail, or simply lack the confidence to ever get started. So let’s see if we can overcome those concerns, and help you at least gradually transition into self-employment. As one who has been self-employed for years, I can tell you it’s certifiably worth the effort.
You should be aware from the start that it’s possible to remove much or even most of the risk involved in launching a business. And I’m also of the opinion that in many respects, being self-employed is now more secure than holding a job.
Let’s take it one step at a time. But first let’s start with this…
A SPECIAL NOTE TO RETIREES AND THOSE APPROACHING RETIREMENT WITH INSUFFICIENT INCOME OR SAVINGS…
Please seriously consider self-employment, and not assume this article is directed at younger people. It’s for people of all ages. Self-employment, even on a part-time basis, can be the perfect solution for a lack of sufficient retirement income or savings. Increasingly, non-retiree and retiree alike need to consider developing multiple income sources to deal with the rising cost of living.
Retirees in particular have a big advantage. If you’re on Social Security and/or a pension, you already have a base income source. A part-time business can be the perfect supplement. If you’re on Medicare you’re free from the health insurance dilemma that’s a serious problem for most of the self-employed. And if your children are already emancipated, you only need to support yourself and a spouse if you’re married.
If you’re on your way to retirement, starting a business could provide an extra source of income to save more money or get out of debt before retiring. It can only help.
Just in the past week or so I’ve seen a 70-something woman working as a bagger at a grocery store, a man of at least 70 taking a new job as a mall security guard, a woman in her late 60s delivering heavy packages for a delivery service, and a man I guessed to be in his late 60s selling used cars. (For more examples, read this article.)
I don’t diminish any of these efforts to earn additional income in retirement. But given that so many retirement age people are either delaying retirement, or returning to the workforce after retiring, you owe it to yourself to create a means of earning a living the will better suit your skills, talents, work schedule and desired lifestyle. Self-employment is a way to do that at any age.
On to the strategies…
1. Start a Business Around Your Current Skill Sets
One of the common misconceptions about self-employment is that you need to start a business in something totally new. In my experience, that’s a recipe for failure. Think about the people you know who have bought a franchise or entered into some sort of service business they knew nothing about. If your experience is anything like mine, failure is the common outcome.
You don’t need to go that route, and you shouldn’t even try. Instead, focus on the skill sets you have. With the growth of both the gig economy and contract work, practically any skill can be converted to self-employment.
For example, millions of people who work in administrative capacities think they have no chance of becoming self-employed. But the growth of virtual assistants is showing how wrong that thinking is. Thousands of people with administrative skills are performing fee-based services for multiple clients around the world, many who they’ll never meet.
Make a list of any skills you have. It should include both occupational and personal skills. Next, go on the Internet, and do some research to see how many people are selling those skills directly to either the general public or to businesses. Another good source is Craigslist. People are offering their services for hire there all the time.
From that research, determine which skills you have that you will be most likely to be sold profitably on the open market. Never assume the skills you’re using on your current job can’t be converted to self-employment. After all, your employer is paying you to do that very job. And rest assured, there are thousands of other people selling those same skills for a lot more money than you’re getting paid right now.
2. Favor Businesses that Don’t Require a Big Upfront Investment
There are several reasons for this:
- Most people don’t have a big chunk of money to spare, at least not to launch a business.
- Investing a lot of money in a business in no way guarantees its success.
- Having most or all your money tied up in your business could put you in a desperate situation.
- You’ll likely need your money to stabilize your personal financial situation, which interestingly increases the chance your business will succeed.
- Any business venture you go into should rely primarily on your personal skills, and not on a large upfront or continuing injection of funds.
What I’ve discovered over the years is that being liquid is a fundamentally important part of keeping your business going. There will be times when income will be on the lean side, and you’ll need your cash to fall back on. If everything you have is tied up in your business, that door will be closed.
3. Pattern Yourself Off Others in the Same Business
It’s extremely unlikely you’ll come up with a completely unique business idea. Whatever you decide to do, it’s close to 100% certain there are others out there doing it successfully right now. Pattern yourself off those people. It’s part and parcel of that saying “don’t try to reinvent the wheel”.
Learn all you can about your competitors. It’s amazing what you can learn even from afar. Peruse their websites. Pose as a potential customer, to call and ask questions. If possible, take on a part-time job or perform contract services for that business. That’ll be the best way to learn the business from the inside.
Don’t concern yourself that any of that is somehow underhanded. You need to learn how to run a brand-new business venture, so you’ll have to put yourself out there.
4. How to Become Self-employed – Ironically – Don’t Quit Your Day Job
If there’s one strategy that’s practically guaranteed to lead to failure, it’s taking “the plunge”. That’s where you quit your current job, and go full tilt, full-time into a new business. That’s worse than buying stock in a company you know nothing about.
Instead, keep your day job, and run your new venture as a side business. There are several advantages to the strategy:
- Your job will function as a cash flow, until you build up a reliable cash flow from your business.
- The job will remove the fear factor. You won’t be sitting around stressing about a lack of income.
- You’ll need to keep your employer sponsored benefits – particularly health insurance – at least until you’re able to afford private coverage.
- The continued income from your job will give you the staying power you’ll need to make your business a success.
- You’ll have time and financial breathing room to test different business strategies, without fear of experiencing a complete financial disaster.
Will it be easy to do double duty, building a business on the side while you’re holding a full-time job? Absolutely not! But know this: there is nothing worthwhile that you’ll ever accomplish without making some sort of sacrifice. Juggling two occupations will be a large part of that sacrifice.
5. Don’t Try to Take the World by Storm
If you have any notion of immediate business success, drop it now. If you’ve never been self-employed before, you’re going to start small, and grow your business gradually.
When you think about it logically, that’s the way any of us learn to do anything at all. Think about when you were a child, and you were first learning to read; how quickly did it come to you? You started out reading painfully simple Dick and Jane books, and it was many years before you reached the point where you could read an adult level novel.
The same will be true with your business. When I first started blogging, I didn’t make any money for the first four months. None. In Month #5, I’m made slightly less than $5.
Now to some people, that might signal the end of the line. But I knew it was just the beginning. After all, if I could make $5 online, I can make $50, and then $100. And if I can make $100, I knew I could make $500, or $1,000 and more.
Do you get the point? You’ll have to approach it the same way. If you’re jumping into a brand-new venture, starting small is better than not starting. And perhaps just as important, if your expectations for quick success are too high, it can cause you to give up early. Keeping your expectations in check is critical to business success.
6. Gradually Add New Skills and Product Lines as You Go Forward
When you start your business, you’ll begin with a certain number of skills. Depending on the business, it may even be a single skill. But as you go forward, you’ll need to add new ones.
There’s an important reason for this process. In the organizational world, you may be doing a very specific job. There are likely many different jobs that need to be done, but the size of the organization enables spreading those tasks to several different people.
But when you’re running your own business, your skill set will need to be more diversified. You may have a primary skill, but you’ll need to add others along the way. One of the main reasons a client or customer will hire you is precisely because you bring a more diversified skill set to the table. You’ll need to gradually develop those additional skills.
The more skills you have, and the better you’re able to blend them together into providing your service, the more money you can charge.
The best way to do this on an ongoing basis is to maintain the mindset of a student. You should always be looking to add new skills, grow your current skills, and take on more challenging assignments. At the same time, keep a close eye on what your competitors are doing. That’s the business environment you’re operating in, and you need to know what’s going on.
7. Don’t be Afraid to Make Changes Along the Way
Simply put, if something you’re doing isn’t working, drop it. The business world shift gears quickly, so flexibility will need to be part of your modus operandi.
This is closely related to Number 6 above, but it goes beyond adding new skills. You may need to be prepared to drop certain skills or practices that are not particularly productive. That extends to customers and clients as well. If you have a few who are perpetual problems, you may need to drop them to move forward.
You’ll need to constantly streamline your business. The purpose is to create the optimum work environment, freeing you to do your best work, maintain the most profitable client base, and remove any obstacles to forward progress.
Like anything else in life, you’re operating at maximum efficiency when you’re in “the zone”. That isn’t to say you’re never going to do anything that will make you uncomfortable. But you do want to minimize those activities.
Once your business is up and running, your mission will be to spend most of your time on the most profitable activities. You’ll need to learn the subtle difference between being busy and being profitable. To be profitable, you’ll need to eliminate as much busy work as possible.
8. “Follow Your Gut”
Do you know that sense you get deep inside, that “little voice” you think you’re hearing? It’s real. I don’t know the mechanics of how it works, but it seems our minds have the capability to absorb and assess information we’re not even aware we’re receiving. From that information, are the likely sources hunches and inspirations from deep inside.
Never ignore that little voice. It may be that non-quantifiable quality that tells you either to proceed or to pull back. Now I’m not talking about fear here in the case of pulling back. Fear something you’ll need to get control of early on. It will keep you from ever moving forward. But at the same time, you can get a gut feeling that something isn’t right. It probably isn’t. As long as that’s not coming from a place of fear, it’s something to pay attention to.
This whole concept is counter-intuitive in the organizational world, with its rules, regulations and protocols. In that universe, you can get into trouble following your gut. But in the self-employment realm, you won’t have an organization. The little voice can function as something of your own personal Board of Directors.
9. There WILL be Obstacles – Face them Head On – That’s REALLY How to Become Self-employed
One of the inherent weaknesses of all human beings is our patented inability to anticipate obstacles. That missing ability causes us to assume perpetually happy outcomes.
If you’ve spent much time in the adult world, you should already know that isn’t realistic. Whenever you try something new, you can and should fully anticipate you’ll have problems. There’s no way to know what those problems will be in advance. But you do need to adopt a mindset that will assume problems are in your future, and more important, to adopt a full willingness to deal with them.
For example, there may be times when your business income will drop. Many will take that as a sign of business failure, and go back to a job. If you do, that will almost certainly be the end of your self-employment ambitions. Instead, always be on the lookout for potentially new sources of income. At a minimum, you can prepare yourself to pursue those sources at some point in the future. That won’t prevent the declining cash flow. But it will give you the ability to deal with it.
10. How to Become Self-employed Secret: Prepare Your Finances Before Going Full-time
It’s unlikely you’ll ever come to a point in life that will be the perfect time to start a business. Like having children or buying a house, there’s really no such thing as the perfect time. Those events take place, and we do our best to make them work.
The same will be true with launching a business, particularly when you’re ready to go full-time. If you have a business idea, start it as a part-time venture. There’s no need to wait until the time is right. But you will need to do your best to be ready for when you quit your job and go full-time with your business.
Naturally, you’re not going to do that until you have a cash flow from your business that at least mostly replaces your job income. Apart from that, you’ll need to prepare your finances for the transition.
While you’re building up your business as a side venture, build up your liquid savings, and pay off as much debt as you can. The dual income should help. It’s an unfortunate fact that businesses are at least as likely to fail due to a poor personal financial condition as they are for problems specific to the business. The stronger you are on a personal financial level, the greater the likelihood your business will succeed.
And don’t stop on the personal financial front after you get your business going on a full-time basis. Maintaining a strong personal financial position is much more important for a self-employed person than it is for someone with a job. That just goes with the territory when you’re self-employed, so you’ll need to embrace it.
Follow these 10 strategies, and you’ll be able to become self-employed even if you’ve never been before.