Everyone has heard about today’s “gig” economy, but what is it? Our gig economy might be described as the opposite of workers having a 9-5 job for 40 years and then retiring with a gold watch. By necessity or choice, people are working for themselves in novel ways and making a good living at it.
Are you ready to work for yourself? First, know that there is more to it than freedom and empowerment. Being self-employed requires a change of mindset, one that might be developed while transitioning to self-employment, or one that might be adopted from the advice in this guide.
- Build Your Savings
If you are transitioning to self-employment by choice and are currently employed, you are in a position of strength. You have time to plan as well as time to save for contingencies.
Having six months or more of living expenses saved is ideal if your self-employment plan is not immediately lucrative. Nothing drains creativity more than worrying about whether you can pay the rent or buy groceries. This may seem excessive, but knowing you have six months in the bank will free your mind from financial stress and allow you to create and implement your self-employment plan more effectively.
- Budget Carefully
Again, if you are currently employed, now is the time to look at your budget and trim expenses where you can so that your self-employment plan is sustainable. If you have become suddenly unemployed, you have probably begun this process, but these tips will help you too.
First, add up your fixed expenses. These may include, among others:
- Rent or mortgage;
- Car loan or lease payment;
- Insurances;
- Child or spousal support;
- Student loan payment.
This is the part of your budget you cannot trim without significant effort or major life changes.
Now add up your variable expenses, which may include:
- Utilities;
- Groceries and household items;
- Cell phone, cable, internet;
- Fuel for your vehicle and tolls;
- Entertainment, including eating out;
- Personal grooming;
Here is where you can make choices. First, contact your utilities and ask to be put on a plan to pay the same amount every month regardless of use. They will be able to calculate what that amount should be based on past usage. This allows you to fix your monthly budget regardless of utility use.
Next, look at your cell phone, cable, and internet plan. Could you manage with a less expensive plan? Most people can. Contact your providers and ask about downgrading your plan or bundling these expenses.
Finally, fix an affordable amount for monthly expenditures for groceries, personal grooming, clothing, and entertainment. Resolve to keep spending within the budget you have set for yourself.
Knowing how much money is going out is essential to forming a goal of money coming in. Don’t forget to add retirement savings to that goal.
- Identify What You Are Monetizing
Now that you have savings and you are on a budget, think about what skill or product you will offer. Are you monetizing a hobby? Do you want to work as a consultant in your current field? Have you created a new product or improved upon an existing product?
What you offer bears directly upon the rest of your plan. Think carefully about this while you are employed so that you can lay the groundwork for a successful transition to self-employment.
If you are offering a product, who will make it? You? If so, will self-production scale to a self-sustaining business? The answer may be yes or no, depending upon variables such as time and materials needed to make the product and sale price.
Jewelry makers, leather workers, crochet artists, painters, sculptors, and other creatives who make tangible products can often make a living from selling their work, often through online platforms such as Etsy. But if you have invented a new product or improved upon an existing product, you may need to source mass production at a low cost.
Suppose you are offering a skill, such as consulting in your current field, teaching or tutoring, accounting, tax preparation, landscaping, interior design, or the like. In that case, you need to determine how you will offer these services. From home? At the client’s home? Do you need an office? If so, will a virtual office suffice? Do the applicable ordinances, regulations, or laws require licensure and insurance for the service you are offering?
Once you answer these questions, you will be able to make your business and marketing plan.
- Select Your Business Model
Many self-employed people create an LLC for their business with themselves as the sole member. An LLC is a flow-through entity for income tax purposes and serves to shield its members from personal liability for any debts or other obligations of the business. For example, if your product or service causes someone harm and they sue the LLC, you are not personally liable.
Others prefer to work as independent contractors for existing businesses. This arrangement entails a short-term employment contract, and the contracting business issues the independent contractor a 1099 tax form at the end of the year.
Regardless of how you intend to conduct your business, consider the personal liability and income tax treatment.
- Reach Your Target Market
You want to work for yourself, but how do you know whether there is a demand for your service or product? Here is where being currently employed or having savings will allow you to test the waters using various ways to get exposure and find clients or customers.
First, create your website, start a blog, and use your social media to let friends and family know what you are doing. If you have no online marketing experience, consider contracting with a professional SEO firm to get your new business optimal exposure.
Some service providers offer financial incentives for referrals when legally permitted to do so. Otherwise, connecting with other local businesses through your rotary club and joining professional organizations are ways to network and find clients.
If you are offering a product, one way to test its marketability is to create a crowdfunding campaign. You describe and provide photos or video of the prototype, sponsors pay a specified amount, and production either get funded or it does not. If funded, you produce your product and send it to your sponsors, ideally having leftover products to sell at a profit.
- Establish a Routine
Self-discipline is necessary to be successfully self-employed. You will have no boss requiring you to show up at a specific time and do certain things. Establish a routine for yourself so that your business needs are met timely and effectively.
For example, you might respond to your phone messages and emails from 8am-9am and 4pm-5pm each day. You might set specific time limits on producing your product or performing your service, say, from 9-noon and 1-4 each day. You might set one afternoon a week aside for balancing the books and paying bills.
Being self-employed gives you the freedom to do what you want when you want to do it, but establishing an effective routine in advance assures productivity and, ultimately, success.
About the Author:
Veronica Baxter is a blogger and legal assistant living and working in the great city of Philadelphia. She frequently works with David Offen Esq., a Philadelphia bankruptcy attorney.
