The economic downturn and recession that occurred nearly a decade ago pushed a lot of people out of their jobs. Instead of looking for another job, though, many of these displaced employees decided to hang out a shingle and go to work for themselves.
There are currently about 17 million people in the U.S. who classify themselves as self-employed. This represents around 10 percent of all workers, according to the Bureau of Labor Statistics. Or put another way: About one out of every 10 working people in the U.S. is now self-employed.
Thanks to the digital economy, there may be more self-employment opportunities today than ever before. These range from content creators, freelance writers and web designers to social media and SEO consultants, bloggers and those who sell items on eBay or Amazon. Career and life coaching, professional training and tutoring, computer networking and consulting, and photography and video production are other common avenues for self-employment today.
Perhaps you’ve thought about making the leap from a full-time job to self-employment. For example, maybe you possess a marketable skill like one of those listed above that you believe could form the foundation of a freelance business. Or maybe you’re just tired of “punching the clock” working for somebody and want to scratch your entrepreneurial itch.
If so, here are 5 steps that can help you make the transition from a full-time job to self-employment:
- Identify a marketable skill set. This is the first and probably most important step in becoming a successful self-employed professional. You have to be able to perform tasks or deliver services that the marketplace is willing to pay for.
Maybe these are natural talents or skills that you possess and have honed over your lifetime, like writing, painting, taking photographs or repairing things. Or maybe they are skills that you learned during your career that you can put to work as a paid consultant or contractor.
Either way, two things are essential for your success: Number one, you must be exceptionally good at them. And number two, there must be enough demand in the marketplace for them that clients will pay you for your knowledge, expertise or services.
- Create a financial plan. You’ll need to plan financially for the transition from a job to self-employment. In other words, how will you bridge the financial gap from a full-time salary and benefits … to no salary and no benefits?
One strategy is to save enough money to cover a certain number of months of living expenses. For example, you might save up six months worth of living expenses in a liquid savings account to carry you through the transition until your business is generating enough income to support you and your family financially. Also be sure to investigate health insurance options and costs since this could be a major new expense if you currently receive health insurance through an employer.
- Determine how you’ll market yourself. Self-employment success takes more than just possessing marketable skills. You also have to be able to find clients who want and need your services and skills.
Again, the digital economy has made marketing easier for many self-employed professionals than ever. For example, it’s relatively easy to build your own website, or relatively inexpensive to hire someone to build it for you. And don’t forget about good old-fashioned “shoe-leather” marketing — like attending industry events and trade shows — and tapping your network of industry contacts.
- Start out working your business on the side. One of the best ways to ease the transition into self-employment is to start your new venture “on the side” while you’re still working your full-time job. Then when you’ve built a solid foundation and are generating enough revenue to cover at least some of your living expenses, you can leave your job and devote yourself to your new business full time.
This may require some long hours and hard work as you juggle the responsibilities of holding a full-time job and starting a new business at the same time. But when executed correctly, this strategy can pay off by enabling you to start self-employment on a more firm foundation.
- Set up a dedicated work space. One of the benefits of self-employment for many people is the ability to work from home. This saves both the time and financial costs of commuting while also providing lifestyle benefits.
If you do operate your new business from home, it’s usually a good idea to create a dedicated space for your work activities. Ideally, this would be a spare bedroom or an area set aside in a basement or attic. Doing so will help you block out distractions and make it easier to stay focused on running your business.
Not For Everyone, But…
Self-employment isn’t for everyone, to be sure. But if it’s something you’d like to do one day, following these five steps can help make the transition go more smoothly.
Please contact us if you have questions about creating a financial plan for the transition from a full-time job to self-employment.