Personal Finance

Are You Ready to Work for Yourself? Answer These 5 Questions First

Man cutting wood in a workshop

Countless workers dream of being self-employed -- particularly those who want the freedom to set their own schedules, accept or reject assignments as they see fit, and answer mostly to themselves. But before you take the leap into self-employment, be sure you're ready logistically, emotionally, and financially. Here are a few key questions to ask yourself prior to taking the plunge.

1. Do I have a business plan?

It's one thing to be passionate about your line of work, but if you don't have an actual plan mapped out for how you'll attract clients, grow your business, and manage your workflow, there's a good chance you'll end up failing miserably. Before you give up your salary or commit to a self-employment arrangement, take some time to figure out aspects such as the following:

  • Marketing
  • Business development
  • Workload (meaning how many different clients or projects you can take on at once)
  • Finances (how much you'll spend running your business and how much you expect to make)

Only once you've thought these things through should you make your venture official.

Man cutting wood in a workshop

Image source: Getty Images.

2. Do I have the right setup?

If you're used to functioning in an office environment, going from that sort of setup to working from home can be a tricky transition. Before you dive into self-employment, make sure you have a space that will allow you to do whatever it is you're planning on. For example, if you're attempting to pursue a career as a freelance architect, setting up a small table in the corner of your studio apartment may not cut it -- especially if your work involves frequent client meetings. Nail down that workspace conundrum before kicking off your new endeavor to make sure you don't get tripped up early on.

3. Do I have savings?

Let's face it: Many new businesses lose money at first, and some can take years to become profitable. If you're starting out on your own, be sure to go in with a fully loaded emergency fund . For regular folks, this means three to six months' worth of living expenses, but if you're truly starting from scratch (meaning that you have no clients or work lined up), you'd be wise to set aside a year's worth of living costs for protection.

4. Do I have the expertise needed to pull off this venture?

Just because you're skilled in a particular line of work doesn't mean you're good at running a business. But when you work for yourself, you're required to do just that. And if you lack the experience needed to manage all of the different aspects involved, your venture may come to suffer. For example, say you're starting your own IT consulting company. You might be an expert at setting up networks and systems, but if you're lousy at marketing and accounting, you might struggle to gain clients and manage your cash flow. Therefore, be sure to have all of your bases covered before venturing out on your own.

5. Am I truly committed?

When you work for yourself, it's on you to make your business a success. Before you start out on your own, make certain you're committed to the venture you're about to embark on. This might mean plugging away after hours or on weekends and putting yourself out there to network and drum up new business. Only you can gauge your personal willingness to give your business your best effort, so be sure you're ready to go all in.

While there are lots of benefits to being your own boss, self-employment isn't for everyone. Review these questions thoroughly and answer them honestly before making your decision so that you don't come to regret it later on.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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