If you’re fed up of the nine to five, you may be longing for the freedom and flexibility of self-employment. However, being responsible for your own income is a huge responsibility, and there are no guarantees that you will be successful.
With an increasing number of businesses embracing remote working and outsourcing to freelancers, self-employment has become a realistic prospect for many. However, it’s vital that you know what to expect before you attempt to launch your own business. Here are four things to consider before leaving your day job and going self-employed.
You May End Up Working More
Having the freedom to determine their own schedule is one of the main reasons why people go self-employed. There are obvious benefits to more flexible working, especially if you have children or are working another job on the side.
The downside to working for yourself is that for the first few years, you will probably need to work more than the average paid worker to turn a profit. You will also miss out on salary benefits, such as paid vacation time or sick leave. Essentially, if you’re not working, you’re not making money, which can certainly have its downsides.
Networking Is Essential
There’s no doubt about it, being self-employed can be a lonely business, especially if you’re used to working closely with others. However, building a network is essential for entrepreneurs, and connecting with the right people will help you to land clients and will ultimately lead to better business.
People who are introverted by nature tend to romanticize the idea of self-employment, thinking it will mean they won’t have to socialize or connect with the public. However, good business is about people, so you will need to communicate with your customers at the very least, even if it’s through social media or over email.
You’ll Have to Calculate Your Own Taxes
Self-employed individuals with an annual net profit of $400 or more must file self-employment tax. You can calculate your net profit by subtracting your business expenses from your gross profit from the past year.
Income tax laws are complicated in the U.S., so chances are you will need to seek guidance in this area if you’re going out on your own for the first time. You can either use professional tax software like Ultimate Tax or hire an accountant to prepare your tax returns for you.
It May Take Years to Turn a Profit
One of the benefits of being self-employed is that you get to take home all of your profits after business expenses and tax deductions. This means that your “salary” will be directly proportionate to the amount of effort you put into your business and how many hours you work. The downside to this is that it can take years to turn a profit in a small business, so you may find yourself worse off initially. With self-employment, you do all of the work without any of the security of a corporate job, which is worth bearing in mind before you take the plunge.
Going self-employed isn’t easy, but if you are passionate about your business, you’re much more likely to succeed. Try not to be afraid of failure; every new business owner makes mistakes along the way, and often it’s those mistakes that lead to the greatest successes.