joining the staff of Forbes in July, I was happily
self-employed for 23 years. For much of this time my husband
and I ran two mostly unrelated home-based businesses. He
worked in his office in the front of the house, while I was
in mine across the hall. Our office doors were usually
closed and we knocked before interrupting each other. Until
our son was old enough to go to school, we had a full-time
babysitter to take care of him downstairs while we worked
upstairs. Our only break during the workday was to eat lunch
with our child.
Upon observing our traffic patterns, our house painter once
said, “It’s like you’re in an office!“ Others remarked about
our discipline. We didn’t have a choice. If we didn’t
produce, we didn’t get paid, and we needed that money to
live on. So for all the flexibility about setting our own
hours and balancing work and family, we didn’t vary much
from the routine. If we took time off to see the class play
or take our son to the pediatrician, we made up for it in
the evening or on weekends. Come to think of it, we worked a
lot of evenings and weekends anyway.
With widespread layoffs pushing many people into business
for themselves, we hear from a lot of folks who are
wondering how to set up shop and structure their new work
life. We tell them that self employment can be a bit of an
emotional roller coaster, with higher highs and lower lows
then you’re probably used to. Whether you want to start
something on the side or say goodbye to corporate life
forever, here are some tips for starting your own business.
Leave yourself a financial safety net.
While creditors require you to pay promptly, most of your
own clients won’t rush to compensate you. Even if you write
“payment due in 30 days” on your invoice, it’s a rare client
that sticks to that time frame. Schedules of 60 or even 90
days are all too common. Complaining about tardy payment or
imposing a late charge could drive business away. To
minimize tensions while you wait for the work to come in —
and then wait to get paid — set aside enough money to cover
six months of expenses (a year is even better).
Do what you know.
Don’t waste savings on buying an existing business or a
franchise. Instead, get ready for what Arlington Heights,
Ill. new-business consultant Jeff Williams has dubbed the
“scratch startup.” Williams counsels “desperation
entrepreneurs”—laid-off employees who aren’t likely to get
back into the corporate world. He tells them to sell a skill
or a product they already know.
Ken Proskie, 59, is a Williams client who was laid off in
2004 from his job as a health and safety manager for a large
manufacturer. Working from an office in his Evanston, Ill.
home, he began pitching his services to a network of 300
colleagues from professional associations. After three
years, Proskie says, he matched his corporate salary and
today has more than enough work. “Now I wish I had made the
transition five or ten years sooner,’’ he says. It would
have given him time to take on employees and expand.
Don’t bet your savings on a long-shot new venture either.
New York financial planner Karen C. Altfest says she has one
70-year-old client who can’t retire yet because she sank all
her money into a perfume business startup—in her 60s.
Although she worked very hard in the enterprise for two
years, going from store to store, it bombed; turned out not
enough people liked her scents.
Find a comfortable workspace.
It’s important to choose a spot where you won’t have a lot
of interruptions and distractions. Working at home avoids
the need to pay office rent and makes you eligible for tax
write offs. But you must jealously guard your work time,
which means limiting trips to the refrigerator, telling
friends and family you can’t chat during the workday, and
explaining to the UPS guy that you won’t accept packages for
neighbors. If you find you are unable to be productive at
home, consider working from another location.
Spend judiciously. New technologies and social media
continue to reduce the costs of starting and operating a
small business. Put seed money towards equipment that can
help you embrace technology: laptop, iPad and smartphone.
You’ll want to buy a comfortable work chair, if you don’t
already have one, but there’s no need to pay top dollar for
other furniture. With so many companies scaling back, there
are plenty of good deals on secondhand equipment. Try
auctions (live or online), going-out-of-business sales and
used office furniture stores.
Create digital footprints.
These days if people can’t find you on Google, they might
decide you don’t exist. Build a Web site. Then get busy
online. Social media like LinkedIn and Twitter, along with
the websites and Listservs of many professional
associations, make low-cost networking and business-building
far easier. If you’re already using Facebook for your
personal life, think about creating a separate page for your
business. While some business owners limit their tweets to
shop talk, others use Twitter to develop a broader persona.
For professionals, there are a few sites that rival
LinkedIn. Write your profile, join groups in your field of
interest. Then chime into the discussions. Being the boss is
not a job for people who are shy about blowing their own
horns, but self-promotion shouldn’t be all you do. As with
networking in person, helping other people is part of the
Present a professional image.
Answer all phone calls by stating your name or the name of
your business. Avoid referring to yourself as a
“freelancer.” (Instead, use your company name, say you’re a
consultant, self-employed, or in business for yourself.)
When you finally meet in person, follow these tips to make
sure your body language reinforces the good impressions
you’ve already made.
Go after more work than you can handle.
In the early stages, running your own business is a lot like
being a lonely Maytag repairman who’s always waiting for the
phone to ring. Many of your marketing efforts won’t lead to
business right away, and even promising “nibbles” may not
pan out. So hedge your bets by pursuing many avenues at a
time. Once you’ve landed an assignment, you can juggle
deadlines and delegate some of the work if necessary.
Charge what the market will bear.
While eager to bring in work, you don’t want to sell
yourself short. Yet you know that bidding too high could
drive away business. If you can roughly estimate the time
you’ll need to spend, charge a lump-sum. Lump-sum fees are
potentially more lucrative, especially if you’ve done the
kind of work before and don’t need to reinvent the wheel.
Another advantage is that clients don’t know exactly how
long the project takes you. Therefore, they may be willing
to pay more, in effect, than if you charge by the hour.
On the other hand, lump sums are risky if you don’t know —
or have no control over — how much time you must put in.
Here, the risk is that the client may demand more work (like
endless changes). What sounded like good money when you bid
on the job can quickly turn into slave wages.
So if you’re unsure about the scope of work, charge by the
hour. To figure your hourly rate, take your most recent
salary and divide it by 2,000 hours/year (that’s 40 hours
per week for 50 weeks). Increase that sum by 30% to cover
your expenses — most notably health insurance.
Once you put your price on the table, be open to
negotiation. If the client objects to the fee and you really
want the job, you could say, “I don’t want price to prevent
us from working together. What’s your budget?” Meanwhile,
ask yourself whether there are other advantages to the
project. Your first goal, especially the beginning, is to
gain experience and build relationships. Do good work that
keeps clients happy and, chances are, they’ll send more
business your way. At that point, you’ll have plenty of time
to raise your rates.
Get help as you need it.
By hiring subcontractors when you don’t have time to do
everything yourself, and bringing in consultants if your own
expertise falls short, you free yourself to go after other
money-generating pursuits. Call upon extra hands (including
students and hourly workers) for time-consuming chores. You
can put together a virtual staff to handle everything from
research to Web design.
Build a support team.
Exchange ideas and leads with other business owners in your
area. Surround yourself with people who believe in your
ability to be successful. Be prepared for the inevitable
downswings: you will want to have an optimistic friend or
family member around who can be your cheerleader during
Keep in mind that there is no preset formula for success.
You may need to modify your plans – and your expectations –
until you find what works best. No matter what, though,
you’ll have the satisfaction of knowing that you’re in
charge. And when You & Co. does better than you ever
dreamed, you’ll have yourself to thank.