Running a business is not an activity for everyone. Surely, we cannot all be business men and women. There’s a place for contributing excellently well as an employee and working professionally to ensure the steady growth of your organisation and that is something we should always remember. If you do very well, you can, in your own right, become a CEO of your business unit because you think and act like a CEO. However if you feel you have a call to start something of your own, then why not? Being your own boss is also a great idea!
But is giving up your status as a regular employee the right choice for you? Can you run a successful business that adds value to your economy? Amy Gallo has a few thoughts to share. You might want to note them before you set out.
What the Experts Say
“There are many reasons why people choose to go freelance,” says Steve King, partner at Emergent Research. “We’ve studied this for many years, and it really boils down to autonomy, control, and flexibility: the autonomy to work in the way they want to, control over what they do, and the flexibility to work when and where they want.” No matter the reason behind the decision, people generally don’t look back,” says Sara Horowitz, the head of the Freelancers Union and author of The Freelancer’s Bible. In fact, a study by the Freelancers Union found that 88% of people say they wouldn’t return to a full-time job. Horowitz says that most are happy to be done with “the brutal schedule, the way work is organized, and office politics.” Still, freelancing isn’t without its challenges. What people envision and reality are often very different. Here are the questions to ask yourself before making the leap.
Do you have a marketable skill?
“The first step is to make sure that you have a skill that’s in demand,” says King. These are typically specific, functional abilities like project management, web development, financial analysis — or advisory skills that come from years of experience. “If you’re 22 and you’re not a web developer, you probably don’t have marketable skills,” he warns. The media and technology sectors have traditionally been the biggest employers of freelancers but the good news is that “almost every industry is expanding their use of contingent workers,” says King. If you’re not sure whether you have skills that potential clients would pay for, consider testing the market by doing some moonlighting while you are still gainfully employed. (More on that below.)
Do you have a robust network?
“Freelancers who are connected to others tend to do best economically,” says Horowitz, because those connections become a significant source of business. But don’t despair if you don’t yet have an extensive professional network. You can build one even before you leave your job by attending relevant conferences, reaching out to people through LinkedIn or Twitter, or joining a group of freelancers or small business owners in your area. Go beyond work contacts too; “think about your friends, neighbors, and other people you know,” says King. Let them know when you go out on your own and encourage them to spread the word. Remember also that your network isn’t just about drumming up business. “The most successful freelancers know how to use their network for all sorts of things, like outsourcing work when they have too much,” Horowitz explains. A critical component of your network is a friend or former colleague who is already freelancing and can point you to resources. As with any career transition, it’s important to seek advice from those with more experience and expertise than you.
Do you have the right temperament?
Do you have a financial cushion?
“If you can’t go without income for three to six months, don’t even think about it,” says King. Horowitz agrees that you need a financial buffer to weather any lulls in work. “Really tear your expenses down. Assess where you live. Don’t set yourself up by having a ton of overhead,” she advises. “You should build your expenses in a way that if you hit a dry patch, you’ll be ok — and the more cushion, the better,” says King. This is especially important for people who don’t have the financial support of a spouse with a more stable job and benefits. Freelancing can come with a lot of uncertainty — you may not always know who your next client is going to be or how much you’re going to earn in the coming year. “You have to be able to deal with ambiguity,” says King. Horowitz says that you need to be able to put away 40% of every paycheck to cover your taxes, health and life insurance, vacations and retirement. Underestimating costs that employers typically take out of your paycheck or cover is “the biggest thing that bites people,” she says. Consider which perks you want to keep and how you’ll pay for them.
Are you disciplined about work?
Some people do best when they have a manager to answer to or structure to their days. If that’s you, freelancing is probably a bad idea. “You need to be self-motivated, have good organizational skills, and a strong work ethic,” explains King. And you must be comfortable doing all sorts of things that aren’t directly related to your work. When you’re on your own, you’re your own boss, IT person, HR representative, benefits administrator, head of sales, and administrative assistant. You also have to be familiar with the laws around taxes and legal liability. You need to be OK filling all of these roles, even the ones that aren’t glamorous or your cup of tea. Sure, you may eventually be able to outsource some undesirable tasks but at least at the beginning, they will fall to you. You have to think of yourself not just as a contractor, but as the head of a small business.
Can you try it out?
If you’ve answered yes to all the questions above, Horowitz suggests experimenting with freelancing before you quit your day job. “It doesn’t have to be an on/off switch” — one day you’re a full-time employee and the next you’re on your own, she says. You can ease your way into the freelance life. In fact, “most people explore on the side” to get a taste of what the work will be like and test out their business plan, King says. If you decide to go for it, you’ll already have your business set up and some clients in the queue. But do make sure you’re not violating any of your current company’s policies or your employment contract.
Can your current employer be your first client?
“A good chunk of independent consultants — 20 to 25% — report that their first customer is their current employer,” says King. So consider whether there’s part of your current job that you could do as a freelancer and feel out those possibilities before you give notice. “If you have good rapport with your boss, tell him that you’re considering going out on your own, then ask, “If I did that, is there some way that I could continue my relationship with the company?’” King suggests. Some employers, especially large corporations, won’t let you work as an independent contractor immediately after leaving your job because of their interpretation of IRS rules. “Many have a waiting period of six months to a year,” King says. But you can still keep the relationship on the back burner while you line up more immediate revenue sources. And even if your former employer doesn’t ever become a client, it’s important to maintain a positive connection with your old colleagues. “They are a really important component of your network,” says King, and you never know who might want to employ you down the line.
Principles to Remember
- Make sure you have a strong network of people who can help you find work
- Give yourself a financial cushion before going out on your own — you need to be able to weather any dry spells
- Be prepared to take on tasks that aren’t directly related to your work, such as handling IT issues, sending invoices, and selling your services
- Assume that your skills and experience are something that clients are willing to pay for — consider testing the market before officially going freelance
- Go freelance if you’re not self-directed or comfortable with ambiguity
- Leave your job until you have a plan in place, even if it’s not 100% certain