By Carolyn Jeffrey
If you’ve ever thought you would like to work for yourself and set up your own business, then you are not alone. A quick Google search reveals an increasing trend towards contracting and freelancing as a key employment preference in the future.
A study in America by software company Intuit revealed that by 2020 more than 40 per cent of America’s workforce were expected to fall into the contracting, freelancing and temp workers category.1 In the UK there is concern that 15 per cent of the workforce is regarded as self-employed which is being blamed for lower pay rates and a struggling economy. 2 In Australia the increasing costs associated with employing staff such as rising superannuation contributions, additional leave and flexibility entitlements, the Fair Work Act along with Payroll Tax and Workers Compensation payments is making more and more employers look towards the contractor option.
Business owners need to be aware that there are distinct differences between an employee and a contractor and there are strict rules governing which option is legally correct for you and the Fairwork website can give you more details3.
Going out on your own can be a risky step so you might like to first consider:
- Can you afford to go out on your own?: How much net income would you need to receive each week to survive and pay your bills? How much would you like to achieve? How much have you got to invest into your business? How much do you have in savings for the “rainy days” of your new business? Being employed by someone else, particularly on a full or part-time basis takes a lot of pressure off your household financially knowing you have a steady income coming in week after week.
- Do you have the personal attributes to do it?: Working for yourself and working for someone else are very different. Working for yourself requires personal attributes that you often don’t need to work for someone else. Before you leave your safety net of employment honestly critique yourself about whether or not you have the personal discipline to make it work, particularly if you are planning to work from home. You will need to be able to cut yourself off from other distractions, be able to plan and stick to the plan, be prepared to have no one around you to motivate you or share your successes if you work alone and, should your business be a success, to also be able to discipline yourself not to overdo it.
- Are you ready to lose your safety net?: Working for yourself is a little like being an acrobat working without a net. No longer will you be able to enjoy employer-funded superannuation, paid sick leave, paid holidays and paid long service leave unless you’re prepared to fund them yourself or, in the case of sick leave, you take out income protection insurance. It also means that if you are unable to work there may not be anyone around to continue with your business so either you will have to work from your deathbed or sacrifice some of your business.
- Where would you operate your business?: If you are planning to start out small and operate from home you will need to consider whether or not you have space at your home to carry out the business without intrusions from other family members or other activities. Consider too if you’re using your home as a business premises what the local government regulations might be. Is it legal to operate from home? Some of the considerations might be signage, restrictions on employing other people, parking issues if you see customers at home and if you run an operation with waste such as a hairdressing or beauty salon, there may be environmental considerations too. Many businesses can comfortably operate from home without neighbours even being aware of the activity and this usually means the council will have no problem with it either.
- What type of business do you wish to operate?: Write a list of all of your skills and personal attributes. Now, highlight those you enjoy the most. Try and frame a business around these skills and activities. You might find that starting out you need to also undertake some of your less popular activities, but you can later make it your goal to concentrate on the ones you like the most.
- Is there a market?: Conduct your own market research to find out if there is demand for your service because you don’t want to set yourself up for failure by choosing something that is already saturated in the marketplace. This doesn’t take a lot of time, money nor effort. Try these ideas:
- Contact your Facebook contacts and any local groups on Facebook (if it is to be a local service) and see whether they would use your service. Ask them if they would ask their friends too. This will soon give you a gauge on what other similar services might be out there. Make a note of those who expressed interest as you can utilise their help again later in the process when considering pricing and they are potential first customers and reviewers.
- Get involved in local relevant groups if appropriate. If you’re looking to target business owners, try to attend your local business network meeting or gathering. It will also be a valuable introduction to potential clients. If you’re targeting mothers, see if you can make contact with the local playgroup.
- If you have the time available, some businesses can also be tested first in a draft fashion eg a food or craft business might take out a market stall, a retail business can try selling items online first through Facebook or eBay.
Once you’ve worked your way through this short checklist and you think you’re ready to make the leap to starting your own business, the hard work of planning can begin. See our next post for details of how to plan for your new business.
Remember: If you need help with any of these steps professional advice is available and can be worth the small investment. Contact me through www.cjsbusinesssolutions.com.au for more details.
References:
1http://www.businessinsider.com.au/
2http://www.theguardian.com/uk-news/2014/aug/20/self-employment-uk-highest-level