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There’s no doubt that if you can manage to make working for yourself “work”, it is a great alternative to the traditional 9 to 5. But I’m here to tell you their is a romanticism to working for yourself that can lure many people in, only for it to turn out much more stressful and difficult than their regular job ever was.
Many of us like to think that we can simply take care of business, pay our taxes and ensure our customers pay us and then sit back and watch the money roll in. If only it were that simple, everyone would be doing it.
If you’re thinking about becoming self-employed, here are a few costs that you will need to consider.
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The thing you can’t charge for
What often gets people started in thinking they can work for themselves is doing a little freelance work on the side.
Someone comes to them with a project, they cost it out and complete it and then get paid a little bit of extra cash.
Then their mind begins creeping. They work out how much they made on the project per hours they worked. Then they work out how much they could be earning per week if they did the same sort of work full time and… WOW, they just doubled their salary.
But if that is what they expect they’re in for a rude awakening.
Unfortunately jobs rarely fall into your lap. You have to work hard to win them – that’s time you can’t charge for. Pitches, meetings, phone calls – all this time and you might not even end up winning.
Then, even once you’ve won the work, there are things like: billing, emails and more meetings. You can’t bill for those either.
In fact when you first start working for yourself you should start getting used doing a lot of things for no monetary return. So you have to work out the true value of your time. Will you need to charge more? Will that affect the amount of work you will get? All these questions begin to creep out once you really start going out on your own.
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Slow periods and dry spells
There is no guarantee in income when it comes to working for yourself. One month business could be booming and the next you might be struggling to pay the bills. It’s the nature of business.
This makes it tricky to plan ahead and grow your business in the early stages. It also makes it hard to save and invest in your personal life. Working for yourself may seem like the dream when you’ve got a boss but be prepared to learning the life of the frugal and learning all the different ways you can save money in the first few years of working for yourself, because you never know when you might lose a contract and have to tighten the purse strings.
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Holiday time and sick days
When you work for yourself, all leave is ‘leave without pay’. There is no such thing as holiday pay or compensation when you can’t work because you are sick.
You either need to figure out how to continue making money if you need to take time off or you will need to set aside an emergency fund to ensure you have money to pay your bills. Of course, if you want to hire someone, you will need to pay them, which is an extra cost that you need to consider but get used to the idea that holidays are off the cards for the first few years of starting up your business.
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Professional development
When you work for an employer, they are often committed to seeing their employees grow and evolve into their roles. The balance when you work for yourself though can be less clear.
Getting better at what you do is more important than ever, but when you’re investing in yourself for the long term you’re not achieving anything that will provide for the short term.
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Computers and other resources
Laptop, cell-phone, internet connection, these are all things that your employer is likely to provide you with when you are are working for them. Now granted, these are all things that many of us possess for personal use, even when we are working for an employer. The problem comes when one of these necessities bombs out or becomes outdated or slow, and you need to pay to fix or replace them.
You can’t run to the IT guy to fix your problem or demand that your boss buy you new equipment so that you can do your job properly. You are the boss, your own boss, and the buck stops with you. You’d be surprised how often you need to fork out extra cash to upgrade and replace essential work items. You also need to make sure that you have a top-quality, reliable internet connection.
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Marketing and promotional material
Marketing and promoting a company is practically a non-stop task. It’s something that you need to be doing continuously if you want to be successful. Digital marketing is the base for many new start-ups to attract and retain customers. This is done through paid advertising that allows you to be visible for related keyword terms within major search engines.
You will need to invest money in your brand, but more importantly, you need to spend your money in ways that actually make a difference. The most fundamental example of this is your website. I work with a lot of people to get their website performing better and I am constantly surprised at the number of businesses that thought just having a website was enough. It is important not just to have a website but to have a website that converts.
On one level I get it because, most people want to get on with the actual work of running a business but improving your conversion rate is the number one thing you can do to get more business immediately.
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Insurance costs
Every type of business will have slightly different priorities in terms of risk protection. But it’s important to note that having the right insurance policy in case of any damage to your business or even legal problems, is important. A solid business insurance policy can help protect your business should anything go wrong, ensuring your costs are covered, for example damage, legal and investigation costs.
Some insurance to consider include:
- Workers compensation insurance, which may be a legal requirement if you have employees;
- Professional indemnity insurance, which will cover you in circumstances where a claim is made against you for negligent services or wrong advice you may have provided;
- Public and product liability insurance which will cover your business if one of your products causes injury, or someone is injured or suffers property damage as a result of you going about your business; as well as,
- Business insurance which covers the value of your workplace building and contents.
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