How to transition to being self employed.

2011-10-07

I am currently self employed but I've done the standard 40 hours a week for many years. I want to try to give some advice on transitioning into a very different life style, self employment. I learned a lot by doing things right when I stopped working for someone else and I learned just as much though by doing things wrong.

A few years ago the company I was working for was sold and I lost my job. At the time this didn't feel like a good thing, but in retrospect it forced me to try new things and take more risk than I was prepared psychologically to do at the time. Many people don't have the fortune of losing their job and getting pushed in to trying to make a way for themselves but if you are thinking about I recommend giving it a try. Unless you are about to retire in a few years, you can try, fail, and mess your life up pretty bad and still have enough time to repair all the mistakes and get back on track before retirement. And if it just so happens to work out, you may live a life you only dream of now.

My first bit advice applies to anyone, not just those people looking to start their own business. Add up all your bills for one month and make a goal of having 6 months of cash in your checking or savings. Not stocks, bonds, CDs, etc.. If you are looking to start a new business venture you'll need some time to get things started, and even if you plan at staying at your job, you never know what tomorrow brings and you need to be prepared for a layoff at any time.

This might be the most important thing and it was the biggest mistake I made in my transition. I thought "I've been working for 9 years straight and in that time I've taken off about 1 week for vacation and 5 sick days, I deserve a vacation, I'll just do nothing for 2 months.' As I learned it is very hard to transition from having nothing to do all day for 2 months to putting in 8 hours a day of hard work. My solution was to time myself and make sure I did at least 1 hour a day of work, then a few days later, at least 2, etc... until I worked up to 8. It's much better to not take any time off. If your last day of work is on a Friday, you should get up at 9am on a Monday and start whatever business or project you are intent on doing.

Keep a schedule. Do an 8 hour day with 1 hour for lunch, and take 2 days off a week. There is a reason we have this as the standard work hours. Working more than 8 hours a day like people did in the industrial revolution before labor laws were put in place will leave you with no time for anything fun. If you work much less you'll feel you are not accomplishing enough in your life and likely become depressed. Samuel Duncan Parnell said "There are twenty-four hours per day given us; eight of these should be for work, eight for sleep, and the remaining eight for recreation and in which for men to do what little things they want for themselves." I believe that is good advice.

Another thing you must do, and this can be done while still employed, is write a business plan. Write it as detailed as possible. You shouldn't have parts of it that read something like "Work on sales." It should read more like "Put ad on craigslist, write list of 25 stores you can call to sell product to, call all stores on the list" etc...

The less you have written down, the more likely procrastination will set in. If you get to a point in your plan that just says "Sales" You may think "I really don't know what to do here." When you don't know what to do you will put it off. When you have everything in great detail you'll never run into a "I don't know what to do" moment and you'll be able to keep forward momentum, doing each small step until it all adds up to great things.

This is obvious, but I'll say it anyway. After you quit, get your expenses down. Get rid of your maid, learn how to fix your toilet yourself instead of hiring a plumber, cancel cable if you're not watching it much. I wont go into many details as I'm sure you can figure out your own expenses, and if not there are many articles on the internet covering this more thoroughly.

Last, try to make your first dollar as quickly as possible. Lets say you are making some new product that you dream will be sold in every store in the world. First, make one of them and sell it on Ebay, a swap meet, a friend... If you can make that first dollar quickly, it will keep you inspired to make more dollars, and it can help you stretch that 6 months worth of living expenses out longer and longer. It can be hard working with no paycheck. You have to put in a lot of hours and not get anything in return for a while. Whatever little accomplishments you can make will keep you motivated.