All by yourself: From safe-haven salary to self employment

All by yourself: From safe-haven salary to self employment
16 June 2013

So many businesses flounder for one basic reason; they fail to get the fundamentals right when making the leap from employed to self-employed. While it’s great to be optimistic and enthusiastic, it’s also important to follow these five principles which have stood the test of time:

Market research

Market research is a vital part of any business strategy. It helps you know that the product you plan to sell solves some particular problem for your potential customer and/or improves the way they have been doing something. Market research helps you test your product idea, research competitors and get a good idea of market potential before making the leap.  You’ll never know every aspect of your market, but grasping 80% of what’s already going down will help you understand the realities and the strategies you’ll need to employ to make your venture work out.

Business budgets

Be aware that most business start-ups cost a lot more than your first forecast will suggest and you’ll need to budget for unexpected expenses. In the UAE, for example, it is paramount that you have either a local partner or a valid trade license which can cost as much as AED40,000 a year. Build a plan with at least three scenarios, worst case, realistic probability and best case. Calculating and carefully considering the costs you will incur will stand you in good stead as you make the decision to become self-employed. But be careful not to look only at numbers that will justify your decision, the market research should give you a balanced view so you really can calculate the worst case position. Venture capitalists often say it will take double the time to start bringing in income than you forecast.

Try before you leap

This is often the hardest stage because you’ll need to have feet in both pools, working your day-job to keep the cash rolling in, while getting the business going. If your employment contract allows it and there is no conflict of interest, consider selling your product or consulting skills in your spare time and gradually build up a client list to a reasonable level so that when you do make the final decision to become completely self-employed you have built some trust. Self-employment is one of the best ways to build wealth and create the inner harmony of following your passion or purpose in life. But be rational and take the time to do the hard work before you leave the safety of a regular salary and all the benefits.

Give it time

The vast majority of successful businesses rarely make money in the first 12 months, and if any profit is made, you will often need to reinvest it to help your venture grow. It will be a while before it will ‘pay’ you that much anticipated first salary, and you will experience challenges that make you despondent. It’s important to constantly remind yourself of the end goal. If you hit a hurdle, it’s probably just a bump in the road – and it will also be an opportunity for you to learn something worthwhile about running your own venture. Remember, no experience is wasted if a lesson is learned.  

Get on your soapbox

Don’t ever underestimate the value of marketing. This can be through social media, paid advertising, PR or business networking. Ideally, your marketing strategy should be a combination of all these elements, and a budget allocated towards this will literally pay for itself a little while down the line. There is no point in having a fantastic service or product if nobody knows you exist.

Have you made or are you about to make the leap from employment to self-employment? What advice would you give?

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Author
Head of Behavioral Finance
cashy
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