5 Things to Consider Before Taking the Leap into Self-Employment- PersonalProfitability.com

5 Things to Consider Before Taking the Leap into Self-Employment

Making the decision to quit your job to pursue self-employment is a tough one. You are leaving the world of comfort and familiarity (and a steady paycheck), for a world full of unknowns.

I took the plunge four months ago, after working like a fiend for six months working both my full-time job, and nearly full-time side hustle. The 80-90 hour work weeks were wreaking havoc on my sanity and personal life. It was then that I realized that my side hustle income had nearly matched my low nonprofit salary. After deliberating for a while, I made the decision to leave my job and haven’t looked back. It’s been a fun and wild ride and I have learned so much in such a short time.

Perhaps you also work full-time and side hustle in your free time, or maybe you are unemployed and dreaming of creating your own job. Whatever your situation may be, the prospect of self-employment can be seductive. No commute. You can sleep in. No more office politics.

Sounds great, right? Well it is, but remember the grass is always greener. That is not to say that pursuing self-employment isn’t worth it, but there are definitely things you should (seriously) consider before taking the leap. Below are five things to consider before making the jump:

Taxes

There are two things that are certain in life: death and taxes. And I swear it feels like self-employed people pay more in taxes. Now that you are running your own business, it’s your job to take out taxes. To stay on top of your taxes, start taking 30% off the top of each payment. I know, it’s painful. But it’s better safe than sorry. I have always gotten a tax refund and this year was the first year that I owed Uncle Sam. Even though it was a few hundred bucks, I felt like I was caught off guard. Now, I’m much more diligent with saving for taxes. I have a separate Capital One 360 saving account named “Taxes.” After I receive a payment, I immediately transfer over some money.

Long-term Sustainability

Self-employment isn’t a vacation or something you should do “just to try.” It’s important to consider the long-term sustainability of your product or service. It’s easy to fail, and it’s hard to go back and find a full-time job. You will need to make your work sustainable and scalable, so that you can continue to grow.

Being the Boss

One of the most rewarding and most difficult aspects of being self-employed is that I’m the boss. For the first month of self-employment, my schedule was completely out of whack. It was the first time in my life I had no one telling me what to do. I could, technically, do whatever I wanted. At first, there were days of staying in my pajamas, or wasting too much time on Facebook. Then I realized, that’s not really how I want to operate day in and day out. It’s nice to have the option to do that, but I wanted to really focus on my work.

Learning how to stay focused was much harder than I thought. It was weird too, because I love the work that I do and I enjoy working for my clients. But without someone peering over your shoulder, clocking in and out, and checking in every day, it is easy to lose track of where your time is going. As the boss, you need to stay focused and manage your time and projects. It’s all you.

Another aspect of being the boss that I found difficult was actually embracing the idea that I was the boss. Transforming from the employee mentality to the boss mentality was harder than I thought. A common mistake that many new freelancers make is thinking that their clients are their bosses — and all of a sudden they feel like they have 10 mini-bosses and it is just as bad, if not worse, than having one boss at the old job.

The people you contract with are your clients, not your bosses. Yes, you still rely on payment from them and you have deadlines to abide by. But at the end of the day, you set the terms. If you are sick of working for a client, find a new one. If you are unhappy about the pay rate, negotiate.

Embracing the boss mentality is key to getting over lingering issues from the employee mentality that can so often hold us back.

Wearing Many Hats

Being self-employed means that you wear many hats at all times. All of a sudden you are a one person show that acts as the HR department, marketing department, accounting department, operations and more.

You are never just your work title. Essentially, you do all the work of a small agency to make sure things keep running. So while you may be fantastic at what you do, you have to be prepared for some of the more unglamorous aspects of self-employment. Some days it feels like you are trying to herd cats, or that no one is getting back to you. It is in these moments where self-doubt can easily creep in, so it’s important to be confident and have a strong emotional (and financial) foundation to keep you steady.

Ask the Hard Questions

Before you take the leap, ask yourself some difficult questions:

  • How much do you have saved up, in case all your clients dropped you?
  • What are you willing to give up, in order to succeed?
  • What is the bare minimum you need to survive financially?
  • How does this align with your life goals and values?
  • How will you know when it’s time to dump a client — and how will you do it?
  • Can you see yourself doing this in 5 years? 10 years? 20 years?
  • What makes you stand out? Or, why should people want to work with you?
  • Can you handle putting 30% of your money to taxes?
  • Can you handle an irregular paycheck (sometimes waiting over a month)?
  • Do you consider yourself confident?
  • How will you deal with an unhappy client?
  • Do you have a mentor to guide you? (you should have one!)
  • Do your friends and family support what you are doing?
  • Are you doing this for the money? If so, it’ll be a tough road.
  • What sort of checks and balances will you have in place to measure success?
  • What is the worst case scenario?
  • What systems do you have in place to stay on task and organized?
  • Do you consider this a hobby or a profession?
  • What do you want to learn from this?

Answering those questions can help guide you through the process to see if self-employment is right for you. Being self-employed requires a lot of tenacity, focus, perseverance and most of all faith. You have to have a strong core to handle the rocky waters of self-employment — but the view can be quite beautiful.

This post was originally published on November 13, 2014 and updated on January 5, 2021.

5 Things to Consider Before Taking the Leap into Self-Employment

1 thought on “5 Things to Consider Before Taking the Leap into Self-Employment”

  1. Another great post Eric and spot on as well. One of the tell-tale signs of a new freelancer is that their clients are treated as bosses and having 10 bosses is the absolute worst. The minute you take control and start treating it like a true partnership and value exchange, the dynamics change for the better – and if they don’t, you know it is time to leave that client behind.

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