Plan ahead before you leap into self-employment

For a long time you’ve been considering leaving your lucrative corporate job for the sunnier side of the street called self-employment. There are a few things you need to consider before making such a drastic step.

In 1997 Daniel Pink wrote about what he called the “free agent nation,” which was emerging as an alternative to traditional employment. This movement came primarily from workers who were downsized or otherwise found themselves with fewer employment options due to the economy. After all, working for yourself has to be less risky than working for someone else, right? Not necessarily.

Working as a soloist is riddled with distractions that are easily overcome in more traditional companies where the infrastructure is in place to handle practically every aspect of business. The convenience of an in-house or even an outsourced IT department, for example, allows a worker to concentrate solely on the tasks at hand rather than on the distraction of fixing a virus-laden computer or downloading the newest software update. Not so for the blissfully self-employed.

In that brave new world, the soloist rapidly adapts to being a jack of all trades and finds him or herself acting as the CIO, CFO, CMO, CHRO, or any number of other Cs simultaneously. It leaves one to wonder how there’s time to do the actual revenue-generating work.

A solid business and financial plan is a critical early step when considering the seemingly greener pastures of self-employment. As a financial advisor, I recommend to clients who are tempted to make the leap that they have at least six months of working capital to help fund their early months as a free agent. I also suggest they familiarize themselves with the tax advantages and disadvantages of self-employment. Health care is another big ticket expense to hit the self-employed and daunting government regulations seem to be scaring more away from this career path than it is attracting.

Self-employment can prove to be a financially viable alternative to traditional employment, but as in all ventures, it’s best to look before you leap.

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