From Employee to Self-Employed: How to Manage the Transition

April 3, 2013 | By | 1 Reply More

Many home businesses get their start when the entrepreneur is still working full-time at a job. Perhaps it is the longing for satisfaction of creating their own job, or being their own boss that lures these people to try out self-employment. Or it may be the need to carve a venue that allows them to be creative and test out their ideas. They want to have the chance to be able to follow their own interests; as well as control their day and working conditions.

However, starting a business is not easy. It takes time to find clients. It takes even more time and hard work to show profits. Many of us cannot afford to sacrifice the security of a regular paycheck and benefits like health insurance and retirement plans to face the uncertainty of self-employment. Not all of us have the resources and guts to simply quit our jobs, and start a new business the next day.

employee to self employed

Should you decide to take the plunge and leave your job to start a company, you will be faced with hundreds of questions, foremost of which are “How will I manage the transition?” and “Will I survive financially without a stable job?” You will face significant challenges and adjustment as you change your career track. The transition needs to be managed carefully, lest the potential success of the new business be nipped in the bud; or the career advancement opportunities in the workplace go up in smoke.

There are a number of things to remember as you transition from an employee to a self-employed business owner, including:

1. Know what you are getting into.

This seems to be a simple enough advice, yet many people make the fatal mistake of not thoroughly understanding what having a business means and the kind of work that it entails. There are a number who do not even understand the nature of the business that they are getting into.

If you are going into the video rental business, for example, you must know that this is a low-margin high-volume business that will require you to constantly without fail update your inventory. Then think of how this information can affect your business strategies and what you need to adapt to ensure success (e.g. you need to choose a high traffic location, etc.)

Make every effort to learn about the business ­ from the skills that you need to have to the market that will patronize your business. Do thorough research of the market and the business. Research is not a difficult task ­ it can be as simple as asking existing customers or the business owners to buying books or reading trade magazines on the topic. You need not spend thousands of dollars to conduct your own marketing research.

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2. Set clear directions for your business.

A crucial element of direction setting is writing the business plan. However, many new entrepreneurs avoid business planning like a plaque. To them, business planning is simply the process of creating and slaving over a voluminous document that you need to present to a banker or investor, only to be shelved for the rest of eternity.

Not necessarily. A business plan is extremely useful in clearing your ideas about the venture and understanding the factors that would lead you to success. Whether you will use it in your search for capital or not, the business plan can help you define your goals and clarify the steps that you need to take to achieve your goals.

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3. Obtain the funds you need.

As you move from a salaried life to an entrepreneur, make sure that you have adequate funds to cover the capital for your new business; and the money you need to keep you and your family afloat as you build your business. Without a steady paycheck, you must have enough resources to fund your business activities and household (experts advice that you should have a nest egg of at least 6 months to one year).

There are several ways to get the resources you need:

a. Your own personal resources. If you have savings, recently received some money such as an inheritance, or arranged a small business loan, you can manage your transition more easily.

b. Moonlight. If your savings are not enough yet you still want to leave your full-time employment, try moonlighting or working part-time. You can work on your business during the day, and then get a part-time job at night. The extra income can help tide you over some of your business and personal needs.

c. Rely on your spouse. Get the support of your spouse as you build your new endeavor. Your spouse can work full-time, and bring the regular income that could support your family and even your business. A working spouse can also provide you with the health insurance coverage that can be quite expensive for a self-employed individual.

d. Work with your former employer. Even if you resigned from your job, you may still find some work opportunities with your former employer. If you are in the same business together, request that you be enlisted as a subcontractor to work on their overflow of projects. This will allow you to gain more experience in your field, develop your experience, and work with clients. If your businesses are unrelated, you can approach your previous employer for consultancy assignments to do the tasks that were previously part of your job. This will provide you additional income as you jumpstart your business.

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4. Get the help you need.

Make a list of people who may be able to help you ­ from potential advisers to investors. Your advisers can help you develop and fine tune your strategies, while sharing with you the wisdom they have gained about the business.

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Recommended Books Managing the Transition from Employee to Self-Employed:


George Rodriguez

George Rodriguez is a writer for An entrepreneur with experience in running several businesses, he writes on various topics on entrepreneurship and small business.

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Category: Entrepreneurship

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  1. MicroSourcing says:

    The last piece of advice is important because starting a business requires entrepreneurs to examine their network of contacts and see who can help them with funding or management.

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