The Self-Employed Leap:
Your Main Considerations
For umpteen reasons, self-employed statistics have been going through the roof over the last couple of years. The era of entrepreneurism is fully upon us, which applies to countless industries. In other words, it’s not all about multi-billion-dollar Silicon Valley companies; it’s about sole traders and everyone in-between as well.
Regardless of which category you fall into, this is a gigantic leap to take. Going from a guaranteed salary to the complete unknown is a bold decision, but one that can reap terrific rewards.
If you are still sitting on the fence, today’s guide will mull over some of the main considerations you should consider before making the move.
How Much Cash Do You Have in Reserve?
One of the biggest worries for any self-employed individual is cash flow. This is especially true in the early stages of your business when you may not have any customers or clients just yet.
This is why it’s so important to have a healthy savings cushion in place before making the jump. This will help cover you during those lean months when business is slow. How much should you have? Some sources suggest six months, while others say it should be closer to twelve. If you already have a few contacts and clients in the pipeline, you could take the chance of having a slightly lower cushion, but if you’re in the opposite situation, we’d always suggest you err on the side of caution.
Have You Truly Thought About All of Your Costs?
Another big worry for the self-employed is hidden costs. When you’re working for someone else, you know exactly what your salary is each month and what your outgoings are. But when you’re self-employed, you need to factor in all sorts of other costs, such as accountancy fees, advertising, equipment, and insurance. In relation to the latter, this can be split into several categories. For example, while most businesses will need some form of public liability insurance, others will need even more related to their premises and stock.
Make sure you have a realistic idea of your costs each month and build this into your business plan. This way, you won’t be caught out by any nasty surprises further down the line.
What About Your Time Off?
One of the best things about being self-employed is taking time off when you want. You’re not beholden to anyone else’s schedule, and you can take a break whenever you feel like it.
But there’s also a downside to this – you won’t be earning. While employees receive a statutory amount of annual leave and get paid for it, these rules don’t exist for the self-employed. Will you be able to afford to have a rest?
How Do You Feel About the Paperwork?
One of the less glamorous aspects of being self-employed is the paperwork. From keeping track of your expenses to issuing invoices and filing tax returns, there’s a lot of admin to be done. This can be a bit of a headache, but it’s something you’ll need to get used to if you’re going to be successful as your own boss.
Some budding entrepreneurs will be in their element with this, but others will despise it. If you fall into the latter category, you can get outside help, but make sure you account for this.
