Are you ready to take the plunge and take on the challenge of being your own boss?
The COVID-19 pandemic and the cost of living crisis have encouraged many to make their dreams come true at last. As of February 2022, the Bureau of Labor Statistics reported that almost 10 million Americans were registered as self-employed.
Going in blind is not the correct answer, though. Here’s what you need to do before becoming self-employed.
1. Do Your Research First
It’s surprising how many self-employed people fail to conduct a modicum of research before starting their businesses. Going in blind means, you are playing Russian Roulette with your future.
Perform market research to ascertain whether there is an actual demand for your idea. Reach out to your target audience and put your idea forward. Examine the competition and see if there’s space for another competitor. Once you have assessed the demand, it’s then crucial to research how you will boost sales. For instance, if you’re planning to sell supplements, look into how adding new ranges like private label gummies can help you capture the market.
The more research you do, the better your chances of forging a successful business.
2. Take Out Self-Employed Insurance
Self-employed insurance is a term to denote varying types of insurance aimed at self-employed people. In particular, you should take out insurance for self-employed individuals to cover your health insurance needs.
Your insurance costs are tax-deductible in many cases, so you can get some of the investment back come tax filing season.
Make sure you shop around for the best deals to get a cost-effective policy that gives you all the coverage you require should the worst happen. Unfortunately, the cheapest plans don’t necessarily provide you with the protection you would expect.
3. Get Your Side Hustle in Order
Most businesses begin as a side hustle, and for a good reason. Starting a side hustle while maintaining your day job allows you to flex test your idea to see if it works without investing significant sums of money.
Side hustles require just a few hours per day to manage and can fit around a part-time or full-time job. Opting for the side hustle approach is the safest option because if your idea fails to pan out, you can easily continue with your current job without putting your family and finances at risk. In many cases, successful side hustles naturally evolve into full-time businesses.
You can decide how much time and capital you invest in your side hustle.
4. Check Your Finances
Money is the lifeblood of your business. Unfortunately, many small businesses will not turn a profit for the first couple of years, and sometimes longer, so you need to ensure you can survive during the early growth stages of your brand.
Statistics vary, but one study estimated that first-year startup costs for a small business range from $30,000 to $40,000. Do you have access to this level of capital while also paying your household bills?
If your savings are insufficient to keep you alive, create a plan for sourcing outside investment. It could include using credit cards to pay some of your startup’s bills or approaching a traditional lender, such as a bank, for a business loan. There are specific small business loans florida that can be a useful resource for start-ups, and these can be discussed with the bank so you can ensure this will help you reach your goals.
If you plan on finding financing outside, you will need to consider your credit score. Poor credit scores will severely limit your ability to secure a loan at a competitive rate.
5. Develop a Plan B
Not every business will succeed. Up to 20% of small businesses will fail in the first year, with this number increasing drastically with every passing year. Not every company that failed was poorly managed. Some couldn’t keep up with the demands on their cash flow, or the idea was not suited to the market as it stands.
Nobody wants to consider failure, but it’s prudent to have a plan B should things not go your way. Some entrepreneurs go all in and put all their assets on the line, but this is a problem and means potentially losing everything.
Set parameters for when you will back out of your business and how you will protect your most important assets, such as your home, from harm.
6. Write a Business Plan
All entrepreneurs need a business plan. These documents are not purely for filling out loan applications. Instead, they denote everything from your business’s concept to how it will primarily market itself to your target audience. The company registration process can be complex therefore a formation agent can help individuals and businesses set up new companies. Registered office addresses, mail forwarding, and compliance assistance should all be taken into consideration when formulating your business plan.
Your business plan is what’s known as a living document. It will continue to change over time. Innovative entrepreneurs regularly refer back to their business plans as the market and their brands change.
The U.S. Small Business Administration has a free business plan template online you can use to get started.
7. Determine Your Risk Tolerance
There’s no getting around the fact that you will be expected to live with an unstable income for years to come. Entrepreneurs understand that business cannot always be good. You may have one great month and then three bad months.
Different types of businesses come with alternate levels of risk. Therefore, you must determine your risk tolerance and discuss it with your dependents.
If the risk is higher than your tolerance for that risk, it may be time to go back to the drawing board and consider starting a different type of business.
8. Take the Plunge
The final step before entering the world of self-employment is to take the plunge. Incorporate your business using the structure that makes the most sense for you. You will most likely settle on the Limited Liability Company (LLC) because there are fewer obligations and paperwork to cover than a C-Corporation.
Your business plan should detail the steps you’ll take over the first six months to a year. Then, take a running jump and launch your business. Regularly refer back to your business plan and make any necessary changes along the way.
Conclusion
Self-employment is exciting and scary simultaneously. Becoming your own boss means wearing multiple hats and learning on the job. Thousands of entrepreneurs fail every year, but succeeding means changing your life forever.
Stop thinking about starting a business and get to work. Follow the above steps to give yourself the highest chance of success. Are you ready to start your own business?
There is so much good information here. It would be wonderful to become my own boss in a side venture that I am contemplating.
Lots of good info here. My niece spend a lot of time talking to her mother who owns a bar/food service. She had a lot of question for my niece to answer and then gave her home work,. Niece has been her own boss for almost a year now. So far it is paying the bills and a little extra.
These are really great things to think about. I once thought about it but did not go thru with it because I did not have good answers to all those questions. It is a big step.
I would so love to be my own boss. I really enjoyed reading this post and it has a lot of great tips thanks for sharing.