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Self-employment sounds like an exciting idea that can be amazing for your career. Surely you've heard all the various success stories of people who have gone self-employed and made a fortune? It can be such a beneficial way of living your life, particularly if you have big ideas and big aspirations. Being stuck in a dead-end job with your boss hounding you from 9-5, is always a pain. Obviously, this makes loads of people consider moving into the self-employed lane. But is this the right choice for you? Is it as amazing as you might think? It could be, but it makes sense to consider some of the main concerns before you take the plunge.
With that in mind, here are a few tough questions to ask yourself before you go self-employed. They should help you figure out whether or not this is the right choice in your life!
Why do you want to be self-employed?
What is your motivation for becoming self-employed? Do you want to do it because you're sick of working for other people? Are you annoyed at your current job and want to make a switch? While these sound like good reasons, they're often the worst reasons to go self-employed. How do you know that it's not just your current job and boss that's the problem? What if you moved to another company? How do you know if that's not the best answer to your issue?
Realistically, the best reason to become self-employed is that you have ideas and talents that you're keen to profit from. A traditional job doesn't unlock your potential, and you feel like you're being held back. Here, it makes a lot of sense to break free and go at it alone. But, if you have no idea what you want to do - and no specific services to offer - you should rethink whether or not self-employment is the right path. As mentioned earlier, a switch to a different job might be better for you.
Is there a demand for your services?
So, you have a particular talent, but will people pay for it? This requires a great deal of market research as you check to see if there's a demand for what you offer. If there is, then self-employment can be a very profitable move for you.
Naturally, if your research suggests that it will be hard to find clients for your service, you may want to reconsider this move. It could still be possible to make money with a niche idea, but it will be a challenge. This is something to keep in mind as you prepare your endeavor - budget and manage your finances, knowing that the demand is quite low. In an ideal world, you should have a high demand for your product/service if you want to see success.
Can you manage your taxes?
I would say the biggest drawback of being self-employed is that you have to manage all of your taxes. This is such a complicated process as you have loads of factors to consider. For one, you need a business account where all of your money gets paid into. Then, you need a system for managing all of your payments and keeping track of them. Typically, you will use something like the DocuWare invoice processing solution to keep everything in one place. An invoice processing system lets you avoid loads of paper receipts and provides a clear breakdown of all the payments made into your accounts. Then, you need a similar solution to track all of the payments out of your accounts! From here, you have to add things up and calculate how much tax to pay.
Additionally, you've got business expenses to consider and all the other ways of saving money on tax payments. You also have to figure out if you've paid too much, meaning you could be entitled to a tax rebate. By now, this should already trigger a headache as you read through all of this! Now, imagine having to deal with it every single year. It's a significant pain, and you might want to consider if you can be bothered to deal with it. For some, it's more appealing to stay in full-time employment and get all of your tax handled by your employer.
How will you get paid?
Following on from the last point, you need to think about how you'll get paid. Digital invoices were suggested, but this isn't the only option. Some people will get paid cash-in-hand, others use paper invoices, etc. It's important to consider how people will pay you, as this can play a significant role in how successful you are. Namely, what rules will you impose to ensure you get paid on time? When you're self-employed, you can find it hard to get people to make payments by a certain point. This can mean you send an invoice and don't get paid for a few weeks. Naturally, this has massive cash flow problems as you may spend a lot of money and not get any payments into your accounts until the next month. So, you may not have the funds to pay your rent or other bills!
Clearly, this isn't an issue when you're in regular employment. You get paid on a set date every month, while self-employment is more sporadic. My advice is to consider the best payment methods possible to ensure you get paid on-time after all of your jobs.
A big challenge for many businesses is actually collecting payment from your customers. Chasing down companies for payment is a huge time drain, and takes you away from the real work you should be focusing on while growing your business. Using automated tools, such as chaserhq.com, can help with the payment process and save you hours of work every month.
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How will you fund your new career?
A common misconception is that it costs no money to be self-employed. People assume they can quit their jobs and find work right away. Fair enough, you can find lots of freelance websites that help you find work. So, you could get some jobs right away without doing anything. Nevertheless, most self-employed individuals need to invest money to get their careers off the ground. This includes spending money on resources to help you conduct your work and things like marketing.
Consequently, how will you fund your new career? Where will you get the money from? This is a massive decision as it basically determines if you can be self-employed or not. If you've got no money in your savings and a poor credit score, the chances are you can't fund this idea. If you have lots of savings, is it a wise move to use them to fund your career? Should you get a business loan and end up in debt? There are so many different questions within this question! Consider all the other options until you figure out how you will fund this movement. It may transpire that you have no way of financing your self-employment, meaning it's not the right decision for you.
Are you financially in a position to be self-employed?
This sounds like a similar question, but there's a subtle difference. Previously, we looked at ways to fund your career. Now, we're thinking about if your current situation allows you to take the financial risks involved in being self-employed. For instance, do you have children and bills that need to be paid? If you do, can you take a chance and leave a full-time job with decent pay? Even if your self-employment is a success, it could take a few weeks/months until you start making money. This can put you and your family under massive financial stress as you miss payments and end up in debt.
Realistically, self-employment is only a good idea when you're in a strong financial position to take this risk. If you have savings that you can fall back on, then you have less to worry about. Therefore, the smart approach is to spend a few months saving money before you jump into self-employment. This may mean sticking it out at your current job for longer than you want, but it helps you avoid financial problems. You could even continue your full-time job while starting self-employment, then quit your job and go for self-employment straight away.
Is it worth it?
Finally, is it worth it? I mainly want to look at this from the perspective of all the things you miss out on when you go self-employed. We've already touched upon regular payments, as that is a huge benefit. Also, you've got employee benefits offered by companies. This includes things like pensions, health insurance, and so on. You don't get any of this when you're self-employed - you have to go out and get them yourself.
With that in mind, weigh up whether or not you gain more than you lose when going self-employed. Some of you may think it's worth the risk, while others will realize it's worth staying in a full-time job.
Overall, these questions will help you understand if self-employment is the right move to make. They should get you thinking about the different nuances when being self-employed. Of course, there's no correct answer to the underlying question - self-employment is perfect for some people and bad for others. The important thing is that you think things through as thoroughly as possible!