Alison's Money Rule

Rules for self-employment

Posted November 28, 2011
Originally Published March 2, 2010

Whether chosen or forced self-employment works best when you follow a few basic rules.

No more pencils, no more books, no more bosses’ dirty looks. You’re free! Self-employed. Out of the rat race.

Okay, so the reality is you’ve been down-sized, given a package or just plain canned. Such is the way of life when unemployment creeps toward 10 per cent and companies prune everything possible to fatten their bottom line.

But if you go about it the right way, self-employment can be a satisfying and profitable experience. Here are four steps to success.

1. Have a financial plan.

Determine your absolute minimum personal and business expenses. This is the monthly nut you must come up with in order to keep the lights on, the car in the driveway, kids in daycare and food in everyone’s belly. Add in known business expenses such as a bigger cell phone bill, paper, postage, etc.

2. Know where your cash flow is coming from.

Where is the revenue and when will it arrive? Even if you have steady work lined up, it may be 30 to 90 days before invoices are paid. Can you draw on savings or a low interest line of credit should you be caught short?

If you are still employed get a credit line approved before you are pink-slipped. These days it is difficult for the self-employed to get credit, especially when you are starting out.

3. Be disciplined.

Have a routine that includes everything from answering e-mails to chasing new business. You won’t always be able to follow it but your daily or weekly plan provides a critical framework in the absence of bosses and colleagues.

Do a self-check at the end of the day for tasks accomplished and move the rest into the next day or week. This is one way to feel good about your progress during slow periods.

Be prepared for lonely times and for days when you’d kill for a bit of water cooler chat.

4. Network like crazy.

Join like-minded groups, attend seminars, stay in touch with former colleagues and volunteer in your community. Be patient because it can take time for such contacts to germinate.

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