Why Do You Want To Be Self-Employed?
First things first, you need to get your motivation down right. If you’re not properly motivated, you probably won’t make it. So before you start dreaming dollar signs, take some time to compile a list of things that being self-employed will bring you – ways it will make your life better.
Financial Freedom
There are ups-and-downs related to the finances of working for yourself and it’s definitely not always easy. But I live somewhere that has a slightly less-than-stable economy. Friends and family members are constantly being laid off as the economy turns over. So for me, even though being traditionally employed means getting a steady paycheck, it also means giving someone else the chance to control my future. It’s a terrible feeling to walk into work one day to find out you don’t have a job. But with self-employment, my income comes from a host of sources that each provide reasonably sized chunks, but nothing that will put me under if I lose a client.
Freedom of Time
My second big motivator for becoming self-employed was the fact that I wanted control of my time. I’m the kind of person that wakes up at a decent time, does a few hours of work then spends the afternoon running errands, playing with the dog and reading a book. The bulk of my working hours happen between 7 pm and 3 am… I kid you not. Because that’s when I find I work best. Having a traditional job does not bode well with the 7 pm to 3 am hours that I like to keep. So for me, I was dead set on setting myself up with clients who needed work but didn’t need it done during certain set hours.
The Ability to Travel
There is so much to explore out there and I have seen but the smallest, tiniest fraction of it. Traveling was one of my big motivators to becoming self-employed. While I’m not rollin’ in the big bucks, I do have a few trips I’m saving for next year. I’ll be attending Mexico with my extended family, my Master’s graduation in Victoria, B.C., Seattle in June and I have half a mind to check Disney World off my list if I can make it happen. Granted, traveling doesn’t work for all the self-employed as it’s highly dependant on your field and whether you need to be in a certain place or time to do the job. But for me, it’s a great motivator!
Freedom of Mind
My final reasoning might be a little abstract for some but I’ve always been a dreamer. My mind has constantly wandered away from my present self, and working for yours truly has allowed me the ability to free my mind. Because of the flexibility, if I’m working on a project and get the sudden urge to explore something slightly unrelated, I do it! Not only do I have the time, but some of the articles that I’ve written or projects I’ve started are sole to be blamed on my wandering mind.
How to Become Self Employed: Understand Your Financial Needs
Once you have your why set up it’s time to start thinking about the practical side of things. The first being, how much money do you actually need to live. I’m not going to lie to you, working for yourself doesn’t always mean a steady cash flow. You can do $1,000 of work in a week and not see that money for 30-plus days (depending on how speedy people are at paying you). That means you have to be prepared to stretch your funds more than you have to with a traditional job and paycheck.
It’s time to make a budget. I know, I know but it’s completely necessary. The purpose of this budget is to figure out what the absolute bare minimum that you need financially to be able to pay your bills and live. Make sure to build in a little money for expenses like groceries, household supplies and possibly a date night or two! For me, this number is $3,000. I’m by no means living a fancy life, but it’s comfortable and everything gets paid at the end of the month. Once you have this number you know how much you need to make before you can actually work for yourself. Anything less than that and you’ll risk not being able to make your monthly bills.
Figure Out What You Need To Charge
Figuring out what you need to charge is a bit of a challenge. We tend to undervalue ourselves, underestimate the time it takes to complete projects (we forget to build in client communication) and underestimates the time we’re going to need to put towards other non-billable work. When decided what you need to charge, figure out how many hours you are able (and willing) to work. This number cannot be 12 hours a day, 7 days a week. That is WAY too much, so here are a few things you should take into consideration:
Days Off
As an entrepreneur, you absolutely must take days off. This is non-negotiable. It’s really easy to fall into the “just one more thing” trap and end up working all day and all night. Seriously, as I write this I’ve been in front of the computer for close to 10 hours… it’s really easy to get caught up. Here’s a rule that I use that might help you. I take one full day off every two weeks. That means no work, no email, no clients. Nothing. Then every week I have two days that I work with a lighter workload, usually working 2 to 4 hours. I also take an hour-long walk at lunch and an hour-long walk at dinner time.
Business Development
Besides calculating time off, you need to make sure that you build time into your schedule to find new clients, customers or work. I spend at least two to three hours per day searching for and communicating with new potential clients. That means every week I’m looking at 10 to 21 hours strictly for acquiring clients.
General Administration
Finally, you need to take into account the general administration that you need to do. Answering emails, updating your books, project schedules and basically anything that you might need to do. I typically estimate two hours a day for administration, which is on the high side but I’d better be safe than sorry. With that number, you’re looking at 14 hours a week.
Calculating Your Time
Once you’ve figured out what time you need off, it’s time to calculate how many hours you actually have. Assuming you sleep 8 hours like the average human being and need another 3 or so hours per day to do other things (like eat) you’ll have about 90 hours of potential working time per week, 360 every four weeks. You then take your 360 hours and minus your already allocated hours of business development, general administration and vacation time.
For me, my approximate calculation looks like: 360 – (21 [business development] +14 [general administration]) = 325 – (2×10 [vacation] + 6×7 [shorter days]) = 263 maximum hours. Once I have the maximum hours I take away 20 percent because expecting to work the absolute max time is a little unrealistic. Once that is done, I’m left with approximately 210 hours. To calculate the minimum amount you need to charge take your minimum monthly costs and divide them by your hours, for me that looks like: $3,000/210 = $14/hour. Now double it, that is the bottom that I would suggest you charge if you are just starting out. Other factors like your experience, education and any specialties you might have will cause this to fluctuate.
Design Your Ideal Client
Once you know how much you need to make, it’s time to decide what kind of people, companies, and organizations you want to work with. It’s time to design your ideal client. One of the best things about being self-employed is choosing who you get to work. I practice in a few specific areas and industries (which I don’t recommend when you first start out) but an example client of mine might look like:
- Small to mid-sized law firm (under 10 lawyers)
- In practice for 5 years or less
- Urban center clients
- Practice areas: family, criminal, insurance or personal injury
- Flexible project hours (no 9-to-5 work)
- 1 decision maker
- 5-day minimum deadline
- 6-month minimum work need
You’re looking to define what kind of company and culture they have, how they like to work and how many people you have to deal with. Your ideal client scope can be as detailed as vague as you want but make sure it exists. When it comes to evaluating new clients don’t take just anyone makes sure they check your boxes if they don’t move to the next. More will come.
Do You Still Want To Be Self-Employed?
Figuring out these four things will go a long way to figuring out if being self-employed is really for you. It’s not for everyone. And, I’m not going to lie, it is a lot of work. But at the end of the day, I think it’s worth it. Are you dreaming of being self-employed? Tell me what you want to start in the comments below!
Looking For More Financial Insights?
- Start Your 2019 Budget Today. Here’s Why
- Plan Your Next Getaway Today: Tips For Saving For Vacation
- Can You Make Money Podcasting? Here’s What You Need to Know
Tae started out as a journalist before following the money into the corporate world. But it turns out that the grass isn’t always greener and now you can find her spending most of her time writing about all the things she loves. Namely, money, travel and business with a hefty dose of self-deprecating humor. She is a podcast fanatic, blogging aficionado and loves to find new ways to turn passions into cold hard cash!