The day I walked out the door from my last job, knowing I was going into business for myself full-time from that day on, was a scary one. I had built up in my mind that this was a major life change – a point of no return.
To further challenge my resolve, the organization I worked for really wanted me to stay – so much so that my boss created a special position for me, and the president herself asked me to stay. But I knew that if they wanted me that much, they’d be willing to hire me as a consultant – on my own terms.
That next day, with no routine to follow, felt lonely and scary, even though I knew I was finally going to do what I love every day, my way. My success or failure was now 100% up to me, and I had bills to pay and people counting on me.
Would I be able to attract and keep enough clients to support myself? What if I took on more work than I could handle? Who could I count on to do the things I couldn’t? What if I made a mistake so big there’d be no way to recover?
I realize now, it was just a matter of mindset. I had been my own boss for a long time. I got myself out of bed every day to do a job for someone else, managed my finances, and paid my bills. In essence, my employers were simply clients. I would go to work, providing a service for as long as the engagement lasted, and then find another one.
I had been taking on side jobs from clients anyway, so making a big deal out of going into business for myself full time was just a way of talking myself out of actually doing it. It would have been easier if I had just kept it simple.
There are three major differences between being self-employed and being employed by someone else – mindset, setting, and tax status.
Mindset – Even if you go to work for an employer every day, and the work you do puts money in their pockets and not in yours, you can be self-employed. Owning your own business is surprisingly easy, if you’re willing to let go of pre-conceived notions and get creative. Just knowing that you have a side business can help give you the perspective you need to not feel trapped in your current job. And it can give you a sense of security, knowing that even if one job ends, you are still employed.
Consider this – if the business you choose to establish is as a career adviser, and the way you conduct business is by comparing colleges or career paths and sharing what you learn with your friends in exchange for lunch or gas, you’re still working even when you’re job hunting.
Setting – When you’re employed by someone else, they dictate what hours you work and where you work (on site, in the field, or telecommuting). When you’re self-employed and working as a consultant, your client cannot legally tell you what hours you’ll work, or insist that you work on site. (Always check with legal counsel if you have questions about the legality of work or business situations.)
Tax Status – In most states, there are few or no requirements that someone must meet before they can become a sole proprietor. Sole proprietorship is the simplest form of small business ownership, and can mean significant tax savings on things like*:
> Books, tuition and training
> Clothing purchased for work
> Design, development, maintenance and hosting costs for creating a website
> The cost of a prepaid cell phone used only for work
> The cost of a computer used just for work-related activities
> Other costs related to work space and utilities
> The cost of meals related to building and maintaining business relationships
> The cost of gas for tasks related to work
> Office supply and software costs
> Expenses from doctor appointments, prescriptions and hospitalizations
(* Always verify potential tax deductions with a reputable Certified Public Accountant.)
So what does it take to start your business as a sole proprietor? Just picking a name for your company and an official start date. (Some states require registration which is usually free or low cost.)
Even if you don’t have a grand idea that you know will launch you to new levels of success, owning your own company can give you the confidence to start exploring ideas. Starting small is a great testing ground to see if entrepreneurship is truly for you. You don’t have to build Rome in a day – start with your own little acre and see what grows.
Overcoming Perceived Obstacles
Obtaining Benefits – Similar to employer benefits such as health insurance, 401k and flexible spending, personal benefits can be obtained by most self-employed workers through organizations like Freelancer’s Union and MavenLink, by direct purchase (the Small Business Health Insurance Network and other websites like it can help choose providers), or membership in some associations.
Incorporation – Many people think of incorporation as being officially “in business”. In actuality, it’s a business tax structure that provides additional protection that is important for businesses that take on a certain level of risk, or for individuals who have an abundance of assets that could be pursued in legal situations.
Incorporation can save a lot in taxes too – more than a sole proprietorship. But the reporting requirements are more complex, there’s more paperwork involved, and it can cost $100-$200 to self-incorporate through your state’s small business website or local office (more if you hire an MBA or business lawyer to do it for you).
If you’re planning on building your business quickly, adding employees, working with partners and selling products, the protections from incorporation are worth serious consideration. Otherwise, if you want to provide low-risk services as a consultant – for example as a designer, writer, organizer, career adviser or Web developer – than sole proprietorship is likely to be a sufficient business entity. You can always incorporate later.
Business Planning – In the same way that anyone can benefit from being self-employed (even if they only work a couple hours a month on maintaining their business), any self-employed worker can benefit from having a business plan. It’s true that grand ideas take grand planning, largely because they take grand funding. But the scope of a business doesn’t have to be big, and a business plan doesn’t have to be long and complicated.
What a business plan does need to be is a clear picture of the purpose of your business, what products or services you offer, who is most likely to buy them, who your competition is, who your key staff people are, what assets you have, how you’ll make money, how you’ll market, and your exit strategy.
It will change a lot over time, but should always be a big picture reminder of what your business is all about. There are many templates and business planning software packages out there – pick one that matches the scope of your vision.
Steps to Take Today
You can start weaning yourself away from dependence on the employment of others today by following these steps:
1. Choose a simple company concept, a name, and a start date (if only for mindset and tax purposes).
2. Check out your state’s small business website and register your new sole-proprietorship (if required).
3. Write up a one-page business plan, just to capture your initial thoughts (you can add more as your plan evolves).
4. In your own mind, consider yourself your boss, and your current boss as your client to whom you provide services.
5. Look for opportunities to develop casual partnerships and collaborations, and seek out manageable side jobs that support your new business entity.
Have you thought about becoming your own boss?
If yes, what is holding you back from taking small steps to making this a reality?
Ellen Berry is a member of BrainTrack’s writing staff, and contributes regularly to BrainTrack’s Career Planning Guide, which features additional articles about self-employment, matching passions with careers, and developing career goals.
* Join the Work Happy Now Facebook Page and interact with other people who are trying to improve their superpowers. It’s very basic right now, but it’s a fun place to visit. We ask good questions, support each other, and laugh. Stop by and hang out.
* Alex over at Positive Sharing is a work happiness expert who presented at TEDx Copenhagen about creating the right attitude at work. Quality stuff.
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