Thinking of Becoming Self-Employed -
Things to Consider First
In the UK alone there are four million self-employed people, a number that is growing steadily as more of the population consider becoming self-employed. We all remember the feeling of handing in our resignation letter to a job that we despised; it is the most liberating feeling in the world. Similarly, so is becoming self-employed, provided that you’ve put a lot of consideration into whether going freelance is the right career move for you.
Becoming self-employed is a career move that enters many people’s minds, whether it’s working for yourself, starting your own small business, or a little bit of extra work on the side. It can also be a tremendous asset to your working life, providing that you’ve done the research and weighed up your options.
In light of this, we’ve compiled a list of things to consider when thinking of becoming self-employed in the hope of helping you to make the switch. Continue reading to find out more.
Are You Motivated Enough?
When you’re self-employed, you have to manage all the departments that make up a business, whether this is HR, research and development, production, or accounting and finance. You won’t be receiving any daily guidance, mentoring, or coaching from a superior, and you certainly don’t receive any encouragement from teammates. If you’re feeling ill or just generally having a bad day, only you are at fault, and that can be a lot of responsibility to take on both emotionally and mentally. When you are self-employed nobody else is responsible for your success apart from you.
In light of this, you need to be able to motivate yourself - which involves forcing yourself to do tasks that you’d usually avoid and at times push yourself out of your comfort zone. Whether that consists of speaking on the telephone to pitch to new clients, or dressing formally every day, you’ll have to keep yourself motivated as you’re the single driving force that keeps the business going.
Do You Have the Start-Up Funds?
The start-up costs of launching your own business can vary greatly depending on what type of industry you’re working in. As such, you need to research the type of industry that you’re moving into and the costs you might incur. If you’re looking to become a business coach, a common role for self-employed individuals, then you can check out valuable resources online.
You’ll also need to set your day rate or hourly rate; you’ll need to look at what rate you can charge and how many hours a day you’ll have to work. Remember to make allowances for weekends, bank holidays, and other times when you won’t be earning any money; it’s essential to factor in these days when you’re self-employed as you don’t get paid for days when you’re sick or on holiday.
Some months might be tighter than others, and you need to make sure that you’ll be okay with that prospect, especially in the months when you’re not earning as much. If you are worried about finances, we recommend having some savings in the bank before becoming self-employed so, in the more challenging months, you’re able to keep yourself afloat by paying bills, rent, etc.
Have You Properly Prepared to Become Self-Employed?
Even if you despise your corporate job, it is nonsensical to hand in your resignation if you've only got a month's worth of self-employed work in the calendar. Consider what work is available to you immediately after leaving your job, what you've already secured and how long that is likely to go on. It would be best if you got as much work lined up as possible, as you don't want to be stressing about your workload once you've left your corporate role. We recommend browsing online marketplaces plus recruitment and freelance job sites to help you get started if you don't already have connections. You could also attend networking events to bolster your business and meet prospective clients. Also, think about any future commitments or events that might be coming up in the not-so-distant future and whether you'll still be able to finance them once committing to self-employment.
Should You Become a Sole-Trader or a Limited Company?
Now that you’ve decided to become self-employed, you’ll have to choose whether to be a sole trader or a limited company and understand the differences between the two. Sole traders are in charge of every business element, including bookkeeping, invoicing, and cash flow. The benefits of which are that you’d answer to nobody and have free reign over any business decisions, however both your business and personal finances are rolled into one, so if your business is in financial trouble, so are you.
On the other hand, a limited company operates separately from your personal finances. On the plus side, this makes owning one much more tax-efficient; however, a negative is that you will be required to deal with much more complex reporting requirements. You can choose to manage this yourself, or find an accountancy service to do so on your behalf. Many self-employed people prefer to start as a sole trader to allow them time to get established and form a client base and then move on to create a company when the business is established.
In conclusion, if you’re thinking about going self-employed, there are many factors to consider, and it’s certainly not a career move for the fainthearted. From the beginning, you will have to invest all of your time and money into getting your business afloat and established and managing aspects of business that you might not have encountered in your corporate jobs, such as bookkeeping, marketing, and everything else that goes hand-in-hand with being your own boss.
Becoming self-employed is hard work, but providing you rise to the challenge and commit yourself to all aspects of your business, you will soon see your hard work start to pay off. Ultimately the more effort you put into your business, the more you’ll get back in return, and the more likely your existing client base and potential customers will take notice of the services or goods you provide.
About the Author
Zoe writes articles for a wide variety of career websites, blogs and magazines, has a strong understanding of current business trends, and a passion for entrepreneurism.