Important Things to Consider Before You Become Self-Employed
By: Melanie Shires, PCC
There are obvious reasons why people dream of owning a business or leaving their place of employment to become part of the growing number of the “Me Economy”- the self-employed. I mean, who wouldn’t want the freedom and flexibility and potential wealth that can accompany being your own boss? The question that you should ask yourself when dreaming is whether self-employment or entrepreneurship is really what you want…really?
I am in the business of helping entrepreneurs build, launch and grow businesses they love and what I come across often are aspiring entrepreneurs having the misconception that if they have a good product or are extremely passionate about their idea or if they implement a process or template that worked for a popular online marketer, they will be successful. They are prone to only consider the glitz and glam part of entrepreneurship…the money, travel, short work week and plenty of time to spend with their family and on things they enjoy, not to mention loving what they do for a living. Yes, these are all possible perks for the self-employed, however What they do not consider is the incredible amount of upfront planning, work and patience it takes to validate that their business concept is viable, launch and then grow.
For many aspiring entrepreneurs just getting started seems a daunting task. However, understand that everything doesn’t have to be completed at once and there is available help if the proper research and vetting is done. There are three important things to take into consideration and focus on one step at a time: Skills and Knowledge, Preparation and Foundation, and Building Awareness for Growth.
Skills and Knowledge
One of the most important requirements for self-employment is having the technical skills and knowledge you need to do the work you want to do. For example, a graphic design freelancer needs to know color theory and how to use design software. It’s not wise to start a business in something you don’t understand well.
Other technical skills, such as basic accounting and marketing, are helpful for operating a business. These skills can be learned in a class, with the help of a mentor, or can be handled by an independent contractor who is a paid expert and considered an extension of your business team.
In addition to having technical skills, I suggest anyone who will be self-employed and responsible for running a business focus on improving soft skills, such as time management and people skills. And, regardless of what you do, having a passion for the work is key.
Time management. Entrepreneurs often have multiple responsibilities and keep long hours. Being able to manage time efficiently through multitasking and scheduling, is crucial. These skills help determine how much time you need to complete tasks and whether you can take on additional work.
People skills. Good people skills, such as communication and customer service, help entrepreneurs attract and retain both clients and employees. As an entrepreneur you are your business’s chief salesperson and need to sell people on your abilities and the value of your product or service.
Passion. Passion for what you do can give you the belief, motivation, and commitment you need to overcome the challenges that self-employment may present. You must enjoy and be committed to what you’re doing, or you are likely to give up when you hit bumps in the road.
Preparation and Foundation
No matter how skilled and knowledgeable you are about the product or service you sell, you still need to prepare to ensure success in self-employment. I recommend that before you invest any money, you take time to figure out what motivates you to become self-employed, do your research, and seek the help of experts as you plan your business.
Understand your why. New entrepreneurs often feel discouraged, especially when just getting started. Understanding your motivations for becoming self-employed can help sustain you in times of struggle. The reasons why are the catalyst that will push you forward and help you overcome the moments of doubt.
The reasons for becoming self-employed differ for everyone. Consider what your reasons are and write them down. Then, refer to them when you face challenges, to remind yourself of why you pursued self-employment.
Do your research. Researching your potential business is a way of evaluating whether your concept is marketable. Through research you will learn more about your potential customers, competitors, and collaborators. Examining the prospective market for your product or service is key to help you answer essential questions, such as the following:
Who and where is the customer?
How can your potential customers benefit from the product or service you are offering?
Who are your competitors?
What will set you apart from your competition?
Keep in mind, not every business concept is a winner. I suggest moving on when your research shows that an idea won’t work. Your next one might be the right one.
Write a business plan. A business plan should explain in detail every part of your business and be used as the cornerstone for all business decisions you make. Use your research to set goals for the business within specific time frames. Think about your business values and use them to help you create a mission statement. These key steps are essential in building the foundation of your business plan.
Business plans are necessary when seeking funding, which may include loans and grants. Most reputable creditors require applicants to have a business plan, a solid credit score, and a criminal background check before agreeing to lend or invest money in a business startup.
While there are plenty of free resources available to help write a business plan – for example, you can find step-by-step guides and templates online or at your local library – many new entrepreneurs find the benefits of individual business coaching and peer collaboration that accompany creating a business plan through my workshop series Smart Business Builder invaluable. They reach their goals and achieve results much faster than going it alone.
Ask for help. Many of the principles of business are the same, so people who have already had success with self-employment are often good sources of information to those who are considering it. They may share tips and mistakes or make valuable suggestions you hadn't considered.
Another possible advantage in asking for help is finding a mentor: someone who offers guidance, encouragement, advice, and emotional support throughout the life of your business. You may meet a potential mentor informally or through a business organization.
Prepare financially. A primary difficulty for being self-employed is a lack of money early on. Experts suggest that, before you get started, you should save up enough money to last a couple of years so that you avoid financial pitfalls. Even if you do not have a few years of savings accumulated, you should at least have a financial plan in place to ensure you have money to offset times when business is slow or income scarce.
Building Awareness for Growth
After you’ve completed the necessary steps for entrepreneurship, you’ll need to focus on growing the business. Networking, staying competitive, making necessary adjustments, and working through challenges will increase your chances of success.
Network. Networking is one of the best ways for self-employed people to spend their time. Among other benefits it provides, networking offers opportunities for entrepreneurs to reach potential clients, meet business mentors, and test ideas to gauge interest. You have to make yourself visible to your market because people can only do business with you if they can find you first.
People usually network at business events and meetings. Volunteering with a professional organization or serving on a community board can also be useful. And networking doesn't have to be formal. I facilitate two entrepreneurial communities, CO-LAB & Coffee and Coaches Lounge where entrepreneurs get together over coffee with their peers to share ideas and collaborate.
Stay competitive. Competition is a part of being in business. To stay competitive with other businesses that are like yours, you need to stand out in areas such as price, quality, and service. I always tell my clients, “If you can’t define what makes you better than your competition your customers certainly won’t know, and they will take their business elsewhere."
Updating your research will help keep you informed about competition in your market. Ask potential clients what they like and dislike about their existing service at a competitor business. Use their feedback to improve your business.
When trying to set yourself apart from other small businesses, don’t compete on price. Large businesses often offer lower prices because they have some advantages, such as the ability to buy in bulk at reduced cost, that small businesses do not. Lowering prices also reduces profit, which makes it harder to stay in business. Remember, there’s always someone willing to undercut your prices. Be better in other ways.
Make necessary adjustments. As your business evolves, it may outgrow your original vision. Keep up with developments by making the necessary adjustments as necessary. This is why your business plan is a living document. It is meant to adjust with your business. For example, you may have planned to run your business from home for several years, but brisk sales allow you to rent office space sooner than expected.
I recommend adding workers to your payroll as one of the first tweaks you make after your business is established. Hiring people to help you as soon as you can afford them will free up time for you to work on your business, not in your business.
Persevere. Working for yourself is not easy. The business might take longer than you expect to turn a profit. I tell my students and clients alike, being self-employed takes lots of preparation, determination, and time to achieve success. This is not a sprint, it’s a marathon. Temper your expectations, take things one step a time, and don’t give up."
The most important thing to remember before becoming self-employed…you don't have a chance for success unless you take the first step.
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