Should You Try Self-employment? 12 Things to Consider
Many people dream of someday being the boss -- by being self-employed. But how do you know if self-employment is right for you or not?
On the plus side, being self-employed may allow you some more flexibility and freedom to make your own decisions -- and if you work from or near home, a better commute. But there are negatives, too. Self-employment can involve stress, unpredictable income, risk -- and the challenge of obtaining benefits like health insurance on your own. Think of the pros and cons this way: If you're self-employed, you can decide when and if to take a vacation day -- but no one will pay you if you do.
If you're thinking about working for yourself, it's a good idea to talk to other people who have (or have had) a business similar to the one you're trying to start. And you'll want to do lots of research -- both into the market you're considering entering and into general small-business topics such as record-keeping and tax obligations.
Even if you're simply considering starting a one-person business doing the kind of work you already do -- say, starting your own business as a handyman or graphic designer after doing that kind of work as an employee for years -- you still need to educate yourself about the practical realities of self-employment. Here are 12 questions to consider:
1. How flexible are you -- and how comfortable are you with uncertainty? How do you feel about having a wide range of tasks in your work?
2. How high are your fixed expenses -- and what kind of financial safety net and resources does your household have (such as savings or income from a spouse's job)?
3. Is the market you plan to enter growing over the long term?
4. Who will your competitors be, and what will be your competitive advantage -- the thing that makes you stand out in the marketplace?
5. How do you feel about selling and marketing for yourself and your business?
6. How can you test your business ideas? Are there ways you can first test your business model -- the way you think your business will make money -- to get a sense of whether it will work?
7. Are you self-motivated and self-disciplined?
8. Have you educated yourself about small-business topics and resources?
9. Do you have an estimate of how much money you'll need to start your business and pay living expenses while your business is getting launched? Do you have that capital? If not, how might you obtain it? What will you do if your expenses are significantly higher or income significantly lower than you forecast?
10. Who do you know (former colleagues, friends, family, community members) who might be helpful to you as you seek to get your business started?
11. What will you do for health insurance?
12. Are you familiar with the licenses, permits, and insurance you may need for the type of business you'll be starting? Do you understand the tax and record-keeping responsibilities you'll have?
Don't have all the answers to those questions? Don't despair. There are lots of resources out there that can help educate you about starting your own business. SCORE (www.score.org) is a nonprofit association that provides free advice to people thinking about starting a business, and Small Business Development Centers around the United States also offer information and resources for people who own or are starting a small business. You can find out more about the SBDC program on the Web site of the U.S. Small Business Administration (www.sba.gov).
As you explore self-employment topics, keep in mind that, if you are currently out of work and job hunting, you may be interested in transitional self-employment --- even if your long-term goal is to find your next full-time job. In an uncertain economic environment, organizations may be slow to hire full-time workers -- but still have work that needs doing. As a result, you may in some cases be able to find project or freelance work in your field, as a self-employed independent contractor, more quickly than you can find a full-time job.
While transitional self-employment may not be ideal if you're seeking a full-time job, project work can help you bring in income, make contacts and build additional skills while you're job hunting. So even if self-employment isn't right for you in the long-term, it can sometimes be helpful in the short-term, during a job search.
Martha E. Mangelsdorf is the author of the book "Strategies for Successful Career Change: Finding Your Very Best Next Work Life" (Ten Speed Press/Random House). Portions of this article are adapted from a chapter in "Strategies for Successful Career Change" called "Is self-employment right for you?" Mangelsdorf is a former senior editor of the small-business magazine Inc.
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