By Kevin M

Maybe I’m painting with a very broad brush here, but I think most people would like to be self-employed—if not now then “later”. At a minimum it’s a dream, even if it’s not being actively cultivated. What keeps that pursuit from coming into being varies by person, but I’m sure that fear of the unknown ranks real high on the list.

That fear, I think, often comes from the misguided notion that chance plays a primary role in the success or failure of a business venture, and people who have never had their own business might be unsure that Lady Luck will smile upon them should they decide to venture out on their own. There’s often the tendency to believe that the self-employed get to where they are by having special skills or talents, by being in the right place at the right time, or because they have the “right connections”.

Maybe luck does play a role in some situations, but speaking for myself and for other self-employed people that I know, mindset plays a bigger role in entrepreneurial success than anything else.

I came to that conclusion while writing How Blogging Solved My Mid-Life Career Crisis, where I described my journey to go from internet idiot to professional blogger status in under three years. Special skills or talents? Nope, I was a mortgage guy before I did this. The right connections? Didn’t have any on the web—all my “connections” were involuntarily retired mortgage people. Being in the right place at the right time? Maybe, but I can tell you for certain that my failures far outweighed my successes in the first year of the venture.

No, it isn’t luck or anything special. It IS very much a mindset–how you process what’s happening and how you’ll react to it. But that mindset isn’t a single thought, but a tapestry of thought processes that drive you forward even when it seems there is no way forward. I’ve identified ten of them, but I’m sure there are more.

1. I am responsible for my own future. When we work for someone else, we might unconsciously transfer this responsibility to our employers. This can include not only a paycheck, but also promotions, bonuses, benefits and retirement security. When you work for your self you must understand that none of that can exist unless you make it happen.

2. No one owes me anything. This is actually true no matter what your professional status, but it’s impossible to ignore when you have your own business. It isn’t about waiting your turn or going through the right channels until you’re properly recognized and compensated, but about understanding that nothing good happens without your dedicated efforts.

3. My income is somewhere “out there”—I need to go get it. A self-employed attorney friend said to me over lunch one day, “salaried people don’t understand our situation because they get paid no matter what; in our world we only eat what we can kill.” Your income and success are out there for you to find and acquire. You’re either a hunter, chasing down your paycheck, or a farmer, patiently planting and tending the crops that will eventually yield a harvest of riches. You’re never on cruise control waiting for the money to come rolling in.

4. I will learn what ever it is I need to know. You want to start your own business, but you’re certain you don’t know all that you need to know to make it happen. No problem! No one ever knows all that they need to run a given business—trial and error is a constant traveling companion. You should never let that stop you! You have to have the spirit of a permanent student, always prepared to learn what it is you don’t know. The internet, and YouTube in particular, make it easy to get what ever information you need. All you need is the commitment to learn and you’ll be fine.

5. I will network with others in the same business. It’s been said that each of us is the average of our five closest friends; what that means, if you’re going into business, is that you may need to find some new friends. This is especially true if all or most of your friends are employed by others. Keeping company with people who are already in the business you’re going into is probably the best way to fast-forward the process. The learning curve on a business can be brutal, so get some help.

6. There will be problems—and I’ll overcome them all. Self-employment is often a process of solving a perpetual string of problems—get used to it. Embrace problems as “technicalities to be overcome” and part of the price to be paid for being an entrepreneur. Yes, you’ll probably face more problems in your own business than on a job, but your ability to deal with them will be much greater. Eventually, solving problems becomes “part of your job description”, and it’s no longer the boogeyman it once was.

7. I will have both bad luck AND good luck. As human beings we can easily obsess on the “power” that luck has over us. Nonsense! Yes, you can have something unfortunate happen in your business, but you’ll also have more than your share of good luck (what we think of as “breaks”). Your business needs to be driven by effort, not by perceptions of luck, whether good or bad. To a large degree, we make our own “luck”!

8. There is no security. There is no security in a job or a business anymore, nor is there any in life itself. We’re born and we die, and what we do with the time in between is mostly up to us. We can cling to the perception of security, or we can step out and try to find who it is we’re meant to be. (Guess which one is more fun?)

9. I will focus only on that which is most important. This is probably the biggest discipline issue for the self-employed. A business means a multitude of responsibilities and it can get overwhelming. Many businesses never get off the ground because the owner spends most of his time “majoring on the minors”–taking care of the urgent at the expense of what’s truly important. How do you know what’s truly important and what you should focus on most? Hint: it’s the activities that have the greatest ability to put money in your pocket. Do that enough, and you can hire virtual assistants to take care of the rest. (True confession: I haven’t mastered this one yet, but I’m working on it.)

10. I will never quit. I’ve said in previous posts that this is the single most important indicator of success or failure. It’s one thing to quit a job, but when you quit on your business, you’re quitting on yourself. Where do you go after you’ve done that??? No matter what obstacles you face, resolve that you will go forward no matter what. And here’s something I’ve discovered about forward motion—as long as you’re going forward, your biggest obstacles and problems will kind of go away. Embrace this philosophy and the deck will be stacked heavily in your favor.

 
No matter what else you may think about self-employment, it is very much determined by psychology. To be self-employed, you have to think differently than your old salaried self. If you’ve never been self-employed, you will need to change your thinking. These 10 thoughts have helped me not only to get through the rough patches, but also to see a better future.

If you don’t have any of these philosophies now, don’t sweat it. If you’re determined to have your own business, you’ll begin to take them on one by one. Actions can control and change thoughts—resolve to go forward and it’ll all become obvious.

Are there other thought processes that you think are necessary to develop the self-employed mindset?

Related Posts:

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Why Most New Businesses Fail – And How Not to Become One of Them
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By Kevin M

I’ve been writing a good bit in the past few weeks about the virtues of self-employment, based heavily on my own experience in turning this blog into a primary income generating venture. I believe that being self-employed may now be the new preferred way to “creating a career”, as opposed to the more traditional route of jumping on the corporate ladder—mainly since the ladder no longer seems to exist.

Today I want to take a look at contracting, since it’s become an increasingly common path into self-employment. For the record, I’ve done a good bit of contract work over the past few years so I won’t be talking (OK, writing…) hypothetically. And I still do take on contract work under the right circumstances.

OK, so you enter a contract arrangement—they have you sign a thick contract filled with rich legalese, they aren’t going to withhold taxes, you’ll be issued a 1099 at the end of the year (instead of a W2) and you’ll be required to file a Schedule C—Income from Self-employment, on your income tax returns. Wow, you’re self-employed now, right?

Not necessarily. And maybe not at all.

Many contract arrangements have nothing to do with self-employment. They’re mostly watered down jobs that have close to zero chance of ever being converted into entrepreneurship of any kind. They can be a trap if you take them on, thinking it’ll make you self-employed. No only will you not be self-employed, but you’ll be only minimally employed at that. It’s important to know when a contract arrangement really is a form of self-employment and when it’s something else.

When contracting is NOT self-employment

I’m tackling this one first because I think this is the more common situation. Some of the typical characteristics of non-self-employed contracting include:

1. You’re required to work full-time
2. You’re specifically prohibited from working for the company’s competitors (translation: you’re exclusive), a restriction that can even extend beyond termination
3. The company controls where you work and the hours you keep
4. Strict adherence to company guidelines and procedures are required—you have little or no flexibility in performing your work
5. Your pay is entirely dependent on hours, not the results of the job performed
6. The employer withholds no taxes—you’re paid by 1099 and must file a Schedule C with your income tax return (giving the appearance of self-employment for tax purposes)
7. You’re responsible to a specified chain of command, including an immediate supervisor
8. Your work is closely supervised and directed by an employee of the company—there’s no element of freelance here
9. You can be fired without notice or cause, though the process may be called something different
10. Since you technically aren’t an employee, you have no company benefits
11. Since you aren’t an employee, you have no right to sue for typical employee grievances
12. Any and all contract provisions are for the protection of the employer

A recruiter friend of mine tells me that these provisions are becoming extremely common. But a contract situation with even a few of these provisions is not self-employment in any way. And though the stipulations are quite common in today’s contract job market, a situation with even a few of these elements would not qualify as a contract situation under IRS guidelines either. That’s really a job, but one in which we, as the employees, have most of the responsibility and liability.

Employers love this arrangement because it a) relieves them of most administrative functions, including collecting and filing income taxes, b) circumvents providing employee benefits, c) allows them to terminate the “contract” at will, and d) generally denies the employee the right to bring a lawsuit for unfair practices, inadequate working conditions or for wrongful discharge.

Now if you take an assignment like this because you need a paycheck—as I have myself—you certainly have my respect. Just understand that it’s usually mostly a compromised job situation and in NO way self-employment or anything that will lead in that direction.

Your “self-employment” is only in the eyes of your employer, who loves it because it gives them all the advantages while denying you the same. The 1099/Schedule C arrangement is completely cosmetic and in no way proves self-employment status. Neither does the written contract you sign because it establishes an unequal partnership favoring the employer, and is also completely cosmetic.

When contracting IS self-employment

Recognizing that the situation described above is probably the more common contract arrangement, there are contract arrangements that very much are a form of self-employment. How do you know? Here are some clues…

1. You have a written contract with a company to provide specific services that can, but don’t necessarily, require a certain number of hours
2. The assignment is usually temporary, concluding when the specified services have been delivered
3. You are free to work with competing clients simultaneously or subsequent to the assignment
4. The client does not require you to work on site, or allows a certain amount of work to be done off site
5. Though you may have regular interaction with client management, you are not supervised by them
6. You can enter the contract and be compensated under your corporate name
7. You can bill the client for expenses, such as travel, incurred in connection with the assignment
8. Payment via 1099 (no withholding taxes) is legitimate because it’s understood by all parties that you will contract with multiple clients and may have legitimate business expenses to write off
9. The arrangement can be part-time, seasonal or as-needed
10. You have complete or substantial control of how the work gets done—the client specifies what they want done, but leaves it to you as a professional to make it happen
11. The contract itself is a fully negotiated document, prepared by and agreed to by both you and the client

Contracting with these provisions is a form of self-employment. The key element is flexibility—under this kind of arrangement you have considerable flexibility because the client is relying upon your specific skill set. Compare this with the tightly controlled job-posing-as-independent-contractor in the first example and you can easily see why that one isn’t really a form of self-employment.

Why does it even matter?

Employers are concocting all kinds of ways to cut payroll costs, and contracting has become an extremely common method. What’s important is that you don’t get caught up in the employer’s claims that you’re somehow self-employed just because they hire you as a “contractor” or some similar nomenclature.

If you want to be self-employed, then you need to make sure that the contract arrangement you’re agreeing to will be a step in that direction. A contract should allow you to be free to do the work the way you need to do it, and allow you to freely solicit and work for multiple clients. That’s being self-employed.

Contract arrangements that control your time and workflow, and prohibit outside activities are just jobs by another name. If your long-term plan is to become self-employed, either through contracting or by some other method, the first situation won’t help your cause.

If you want to be an entrepreneur, you need to learn the difference between the two contract arrangements. One will bring you to self-employment, the other is really a job—and a job with less security and fewer benefits than traditional employment.

Have you ever done contract work? Have you ever been in a contract arrangement that looked a lot like the first example? How did you feel about it?

Related Posts:

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By Kevin M

My friend Jay and I were talking about jobs this past weekend and he pointed out something that I hadn’t thought about: There are no astronauts any more! That may not mean too much if you’re under 30, but when he and I were growing up being an astronaut was the ultimate “hero career”. It was, as the kids say today, “the shit” among careers.

Back then it seemed that all of humanity would eventually be going to space—to find resources, to conquer new worlds or at least to alleviate overpopulation here on earth—and astronauts would lead us there. High minded and exciting, yes, except that it never happened!

If a career as cutting edge as astronauts is no longer secure, what can we say about the far more ordinary fields most of us regular folks work in?

You’ve heard it and read it before, and perhaps you’ve even been a casualty of one of the biggest phenomena of our time–the end of job security.

We have to do something about that, but what? Individually, there’s little any of us can do to create job security, but we can gravitate toward it’s close cousin, income security. If we have income security we might not even notice or care that we no longer have job security.

What is job security? What is income security?

Let’s face it, in order to function everyday and to have some sort of certainty about the future we need some measure of security when it comes to earning a living. For at least the past couple of generations that meant having a stable job, but the times they are a-changin’. Fast.

Job security implies that your job is safe for the foreseeable future and hopefully clean through to retirement. Your job IS your income—as well as your source of health insurance, retirement and other benefits, and even your self esteem and your standing in the community. All is well, and you even have income security, as long as your job is secure.

Most people seek job security because it’s a simpler way to earn a living—your employer has your job and your income “covered” freeing you to go about living your life. The downside is when your job is suddenly in jeopardy, because the entire financial component of your life is also at risk. It’s a classic case of having all of your eggs in one basket.

Income security means your income never comes from a single source. If one source fails, you have others to tap, and you can eventually replace the failed sources with new ones. You’re not overly concerned with any one income source, but with creating and maintaining a portfolio of income streams.

In the economic and employment conditions of our time, I think income security is the logical security to pursue.

Creating income security

Its one thing to know the difference between income security and job security, but ultimately it all comes down to making it happen and that’s not as easy. There are various ways you can begin creating income security and that can include just about any revenue sources you can think of.

Self-employment. This is the obvious first choice for providing an additional (or alternative) income source beyond a job. By its very nature, being self-employed is all about creating new revenue streams. If your business income is derived from several or many clients or customers (which it should), you’ll actually have a portfolio of income streams, and that’s the best income security you can have. Even if your income drops, you can still have at least some income from your business, as opposed to a job where your entire income will cease the day you’re let go.

Fortunately, the internet has made self-employment easier than ever and because it’s here and now and growing, that’s probably the first place you should look. It’s where I’ve decided to camp out and it’s working for me—and I’m not exceptional in any way, believe me.

Investment income. In an era of record low interest rates, this is more about turning small amounts of money into larger ones. There are various ways to do this and you should start investigating them. This is not about plunging into the stock market per se, but about developing the ability to identify under-priced securities that have the potential to grow well beyond conventional rates of return—then having the willingness to wait it out. It has nothing to do with get-rich-quick. It’s a skill, just like business- or job-skills are, and once you master it you’ll have created a whole new way to earn a living.

Forming business partnerships or investing in small businesses. One of the things you can do if you have a business is to partner with other businesses in ways that will enable both entities to grow. There are as many ways to do this as there are small businesses and people who own them. It can also be the middle ground between starting your own business and investing. And you can do this with skills as well as with capital.

Let’s say you have some capital but you’re spooked by the stock market; as an alternative you can invest some money in an existing small business (or several) as a way taking partial ownership of a growing business. Small businesses always need capital, but never more than now when getting a bank loan is harder than ever. Conversely, if you have certain skills needed by a small business, you may be able to join that business as an owner/partner. Marrying capital with management and skills is a time honored way for all parties to make money, and very the foundation of free enterprise.

Lowering your cost of living. Not many people think of this as an income source but it really is. When you lower your living expenses, you’re lowering the amount of income you need to earn—that’s the equivalent of a fresh income source, but it gets even better. The less income you need to live on, the less you need to earn, and the less you’ll need to pay in income taxes. That’s a double benefit. The biggest advantage here will come from lowering your biggest expenses, the ones that represent the biggest drain on your income. Less need for income means more freedom to pursue other income sources.

Jobs. I gotcha on this one, didn’t I? If there’s no job security and we need to pursue income security instead, why discuss jobs? Because jobs are, first and foremost, a source of income! The topic of income security isn’t a self-employment is good/having a job is bad debate—any legal income source is a valid one. That includes jobs. Income from a job is good, it’s the complete reliance on it that creates the problems. If you can keep a job while developing additional revenue streams, you’ll achieve income security in addition to having a job. Your job is then part of the income mix, but not the sole source.

One more point about jobs: if you intend to keep one in an era where there is no job security, it’s important that you emphasize skills over the job itself. Transferability is the key, and only a strong set of skills can give you that.

 
You’re creating income security in your life when you start receiving income from sources other than your employer. That point is important in itself—you shouldn’t quit your job to create income security—you can and should do it while you have a job. In fact it will be easier to do it this way, and your job itself can be part of the security you’re working to build.

At a time where there isn’t much in the way of job security, what steps are you taking to build your income security? Are there any ways I didn’t mention?

Related Posts:

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By Kevin M

“Better to light a candle than to curse the darkness.”—Motto of The Christophers

I mostly make my living on the internet these days but I have a confession. I never worked much with computers until three years ago, least of which the internet. Sure, in the preceding 25 years that I worked in mortgages and accounting I used computer applications, lots of them, but most of us understand the not so subtle difference between that and working in an environment in which your primary means of support is coming directly from working on/in computers or somewhere out in cyberspace.

My career as a paper pusher ended unceremoniously at the end of 2008, a time when recycled paper pushers weren’t in very big demand. Where to go, what to do? Damn computers–#%&*@$g internet—they’ll be the end of the world, you watch!

That last line is a fiction (OK, it was a deeply suppressed thought), but I chose to intentionally avoid dwelling on it. Every one who’s ever seen their career crash and burn can point to one or more big picture factors that directly or indirectly greased the wheels of their departure. We can either poison ourselves with bitterness, or find some way to benefit from prevailing changes (hence the Christopher’s quote above). Which route we take will mostly determine our future direction.

Job VS Opportunity

Here’s the thing about computers and the internet—yes, they have been responsible for the permanent elimination of millions of jobs around the world (and almost certainly more to come), but they’ve also created a sea change of opportunity. We should work to take advantage of that opportunity.

Now notice I said “opportunity”, rather than jobs—computers and the internet have created many, many jobs, most of them high paying. But they’ve destroyed more jobs than they’ve created on balance. And let’s face it, unless you’re a highly trained “techie”, getting a high paying job in the computer field is tough.

The opportunities I’m describing won’t be found in a job, but in having your own business.

Scared? Don’t be. I think it’s the wave of the future. Most people who have held jobs all their lives tend to think “job” when it comes to earning a living, but the onslaught of computers and the internet have changed that arrangement. I think that computers and the internet are the 21st Century equivalent of the return to the family farm and shop that provided income for the majority of humanity since the beginning of civilization.

What are some of the ways that computers and the internet are making self-employment more doable?

The entire world is our market

Because of the internet we’re no longer limited to the local community as a business base. Business can be developed throughout the world. The obvious advantage here is a much bigger market, but probably more significant is the niche factor. There are more niches globally than locally, and that heightens the chance of finding business success.

For example, let’s say you’re an art dealer; you can only drum up so much business in your immediate local community. But by selling on the web, you can reach hundreds of larger markets around the world, and many of them may buy proportionately more art than people on your home turf do. Even as a blogger, a significant amount of my income is derived from non-US sources. That’s the nature of the web—a market without borders.

Free and cheap marketing

Every business needs to market, otherwise there is no business. But marketing can be the mortal enemy of a small business, especially a start up. Advertising in the traditional media (TV, radio, mailers and print) is expensive. The big players can and do play this game, and play it well.

Marketing on the internet is far cheaper (and often free) than it is in the traditional media. You can place ads on large websites for less than the cost of advertising in a local newspaper, or you can market for free on the social media, like Facebook and Twitter. Just having and growing your website or blog is a form of advertising.

Networking gets larger—and more important

Networking opportunities are wide open–people are helping people on the web. Most web businesses are small, often one-man or woman shops, so you can market your products through another online business while they market their product through yours. You can also swap business strategies and gain access to valuable information. Networking is the life’s blood of the internet—which is why it’s called the “web”.

More product lines

Product lines are available to us that once were known only to “insiders”. Everything is being sold on the web and that presents some opportunities. Many companies will offer affiliate sales arrangements, in which you get paid a commission to sell their products. And since it’s what they do, the process of signing up and is usually pretty simple. It goes without saying that any sort of import/export business will be easier to build, since it’s all done online.

Online sales are on the rise

Online sales of nearly every product or service you can imagine are rising steadily. What this means is that the resistance to buying online is much lower than it was just a few years ago. More people being more willing to transact business online is a win for the small business. Where you once needed an attractive storefront or office suite to get people to do business with you, now all you need is a good website.

Free, online training

Information on any business you can think of is no farther away than a Google search (YouTube is another excellent source). Most businesses are “seat-of-the-pants” affairs—you learn by trial and error. If you’re tooling along in your business and you hit on a snag, you can usually find the answer somewhere on the web. It’s been said that because of the internet, the average person today has access to more information than kings and business tycoons had 50 or 100 years ago. Use that to your advantage.

Inexpensive staffing

Next to marketing, staffing is usually the most expensive outlay for a small business, but the web can even help you with that. You can find inexpensive outsourcing help with virtual assistants (VAs)—no need to have formal employees. VAs can perform everything from simple administrative tasks to complicated computer applications, and they usually cost no more than a few dollars an hour. There are talented people in less developed countries who are willing to take on some of your work for not a lot of money. That means no W2s, no employee benefits and no employee lawsuits. There out there on the web, waiting for work.

Building a portfolio of businesses

If you can start one business on the web, you can add a second, a third, or as many as you want. You can enter one business and move seamlessly to another—everything just works faster on the web. Web entrepreneurs are a growing phenomenon—once you overcome your apprehension about the web, the sky is truly the limit. This adds an income diversification that a traditional job can never provide. I’d take that over employee benefits and a loose promise of job security any day!

Servicing the online “establishment”

As more businesses develop on the web, so do the opportunities to provide support services for them. If you have computer-, social media-, marketing-, writing- or administrative-skills, there are internet businesses and blogs who could use your services. For example, blogs often use outside services to write articles, manage content, social media marketing and technical support. Any such niche could be the beginning of a new online career if you have such skills.

Start small, grow large

Here’s one of the best parts of working on the web: you can start as a side business until you grow into full-time. That means you can plunge into an internet business without having to quit your job, and you can continue doing so until you’re ready to take it up to full time. This lowers the risk of starting an internet business substantially. This is possible in large part because internet businesses are talent driven, not capital driven as so many bricks and mortar ventures are. You don’t need inventory, employees or even office space, and as discussed above, marketing is incredibly cheap.

All of these advantages make a strong case for the unemployed, under-employed, disenfranchised (that was me three years ago) or even the currently employed to consider some sort of internet-related income generating venture. And because doing it doesn’t require much money, you can try, fail and try again all you like—until you get it right.

This is after all, a new age—the Internet Age.

Have you thought about starting some sort of internet based business?

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7 Reasons Why Self-Employment is More Secure than a Job

By Kevin M

Last night my wife learned something disturbing—not for herself but for some of her coworkers. She has a part time job with a company that just announced that fulltime employees are losing their benefits and being converted to part time status.

Now the optimist may say, “it could have been worse—at least they didn’t lose their jobs”. And while there may be a grain of truth to that assumption, the bad news outweighs the good here, and I’d say by a wide margin. First of all, part time isn’t full time—it’s part time. That means even if you keep your hourly rate of pay, there’s no guarantee of 40 hours a week, or even of 30 or 20. That looks an awful lot like a pay cut to me.

Second is suddenly going from a job with benefits to one without—that includes health insurance. Charles Hugh Smith has made a strong case that the middle class isn’t middle class without health insurance coverage, and I think that point is beyond debate. What we’re looking at here, in addition to the pay cut, is the loss of socio-economic class status. They’ve been demoted to “the working poor” without ever losing their jobs. That’s pretty radical.

There ain’t no more job security

The example on my wife’s job isn’t isolated either. More employers are moving toward some variation of this all the time. Here’s the bottom line: from day to day, you can never tell what will happen with your job. A full-time job can turn into semi-employment with a single policy decision by people you don’t even know. It isn’t just layoffs anymore; its hours and schedule, pay cuts, job re-classification, job stagnation, loss of benefits—you name it. I’d even argue that the unemployment rate issued by the government is now mostly irrelevant.

Employment Realty #1 is that employers are figuring out ways to eliminate people and payrolls through a relentless shift to cheaper workers offshore, the latest computer technology or a combination of both. Translation: as much as we want to buy into the economy-is-recovering projections, it’s becoming painfully obvious that if that is happening, it’s fully capable of doing so without employees. The stagnant employment picture has less to do with the state of the economy than it does with the progression of options available to employers.

At least since World War II job security and benefits have always been major reasons why most people prefer to work for someone else rather than for themselves. Job security means insulation from the ups and downs of both the economy and the employers business, and benefits provided the safety net protecting against many of life’s uncertainties. Who wouldn’t want that if they could get it?

Now that neither job security nor benefits are guaranteed through employment, has the playing field been leveled, is there now less risk in being self-employed than there has been in the recent past? I think so.

Job security and self-employment

Here’s why I think that the case for self-employment is growing all the time, and why it may be the ultimate solution to the employment meltdown of the 21st Century:

1. As discussed above, jobs no longer carry the promise of stability or benefits
2. Self-employment was the primary income source of most people for thousands of years prior to the 20th Century—it is entirely possible that after nearly 100 years of large scale employment by large organizations, conditions are now returning to the historic norm of the family farm or shop (though it won’t look that way)
3. The same computer technology that’s putting people out of jobs is also making it easier to start your own business—we’ll spend a bit of time on this one in a minute
4. As the number of people who are self-employed expands, so will networking opportunities. The way you used to job network with people at other companies coverts to networking with those in the same or related businesses
5. The same instability that is making the job market less secure also opens up opportunities for part time, seasonal or contract work that can be used to supplement self-employment income—in the start up phase and later on an “as needed” basis
6. Employers who are reducing staff are often subbing out the work once done by employees—that’s an opportunity for a small business
7. Because you’re smaller and have much greater freedom in a small business you may be in a better position to react to changes in the economy, such as the ones we’re seeing now

This really is a “glass half full” situation—if we recognize what’s really happening and learn to use it to our advantage. Reality is going where reality is going; we can either embrace change as an opportunity, or let it roll over us while we look to the past for answers.

How the internet helps the self-employed

Many might curse computers and the internet for the negative affect they’re having on employment, but that’s the wrong approach.

In #3 above we touched on how computers are making it easier to be self-employed and that’s absolutely true. I’m an example of this. Earlier this week, in How Blogging Solved My Mid-Life Career Crisis, I spilled my guts about being disenfranchised at the age of 50. I was a textbook case of an economic casualty. But I chose to embrace the change rather than fight it.

Here’s the thing…people are making money working from home on their computers, and I decided that I needed to join them. Difficult? Most certainly. Impossible? No way!

Yes, there is more than enough get-rich-quick-on-the-internet snake oil being peddled out there, but beneath the phony claims, thousands of people are making a living (or better) on the internet.

I’m not saying that everyone could or should blog like I and many others are doing. But at a minimum you can use the internet to grow a local “bricks and mortar” business, in a way that wasn’t available even ten years ago. One of my best friends is running a very successful trash hauling business here in my neck of the woods and gets nearly all his business from the web. I believe that’s increasingly possible for most businesses.

If you have any idea for a business, fully investigate how you can use the internet to make it work. And if you don’t have any, look closely into ways you can make money on the web. Some ideas include blogging (my favorite!), freelance blog writing for other sites, and providing marketing, technical and administrative support to the many commercial websites and blogs that are out there on the web.

Because of the internet, nearly any skill you have or can acquire can be converted into some form of self-employment, if only as a side business. And these days, that’s looking a lot more secure than the average job.

Have you considered starting some sort of internet business? If not, what’s stopping you?

Monday’s post: Self-employment in the Internet Age

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Starting a Side Business – Why Now is the Time

Guest Post

If you’re thinking of starting up a small business or are already running such a venture then one of the biggest considerations is generally the area of where to base your day-to-day activities. For many people who run very small operations, the obvious way to go is to work from home, which is all well and good, but it does have limitations.

After all, running a small business from the spare bedroom, a study or even the garage, might seem like a cheap and convenient option, but it can be a solitary existence. There’s also the issue with a lack of networking opportunities, plus interruptions from family and friends can also be counterproductive.

Move on up

Other small business ventures meanwhile, tend to go for the purpose built location, but this used to be an expensive route to take. However, since the economic downturn has hit many landlords who own office buildings, the market for renting the likes of desk and office space has become much more weighted in favor of the small business.

Landlords, even in the prestigious inner city and purpose built business park locations, are keen to maximize their dead space and, as a result, there are rich pickings to be had. If you’re prepared to spend a little bit of time doing your homework then you’ll find everything from serviced offices through to office rental options that fit every kind of requirement.

Great on price

The best thing about this wealth of desk and office space for rent is that costs are at an all time low, with many deals and offers available on some of the best locations. If you’re a freelancer, a one-man band or just need a desk to rent somewhere, then this simple option can prove very cost-effective. Rents are short-term and generally on a rolling basis too.

It’s a similar story for the more sophisticated options, such as the serviced office, which will give you plenty of space to keep yourself and any employees that you may have. You may also get receptionists, IT support and post services too. Of course, having all the trimmings like this will obviously cost a little more, but it’s still possible to bag a great deal on this front too.

Building profile

The great thing about going down the desk or office rental direction is that, alongside of being cost effective, you’ll also be able to obtain a credible business address that will also look pretty impressive on stationary and your website too. Added to this is the fact that it will open up lots of new networking opportunities, and also make great place to entertain existing clients as well as being a prime place to hook up with potential new customers too.

Add all of this together and it’s easy to see why desk and office space rental is becoming so popular. What’s more, it’s also pretty easy to find the location of your dreams, thanks in the main to a number of comparison websites that have sprung up in recent years.

These take all of the stress away from the process and allow you to find a deal or office in much the same way as you’d shop for a broadband or mobile phone deal.

About the author: Rob Clymo writes on behalf of officegenie.co.uk, the UK’s first proper online marketplace for desk space and shared office space.

If you have a business, or you’re thinking about starting one, have you thought at all about renting your office space?

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7 Ways to Improve the Success of Your New Business

By Kevin M

Quick—you want to start a new business—what’s your biggest fear?

If you said “failure” you’re close, but you’re confusing cause and effect. It’s the inability to make money—also known as the loss of a steady paycheck— that would be the cause of the failure that’s at the root of your deepest fears. Failure will merely be the result—or the effect—of the inability to make money.

But there’s a way to reduce this fear, by breaking the income process down into smaller steps. The point of breaking it down is so that we can approach the income hurdle that all small businesses face into a series of manageable blocks. What we want to do is to convert the self-employed income hurdle from an obstacle to a transition process.

You want to try to engineer the transition in four steps:

Step 1—Start with a Full-time job/Part-time business arrangement

It’s much easier to start and run a business when you aren’t relying on it to pay your bills. Having a full-time paycheck (and benefits never hurt) can take the risk and income insecurity out of starting a business. Most business ventures take months or even a couple of years to make a profit, so getting started while you’re on someone else’s payroll will take the uncertainty out of it as well as buy you time for making mistakes (you’ll need this!).

Once you’re seeing a steady cash flow—even if it’s small—it’s time to explore other options.

Step 2—Business income grows—reduce job to less than full time

When the business starts making money on a steady basis it’s time to start clearing your schedule a bit. If you’re working in a full time, permanent job, you’ll probably find that it will be very difficult to grow your business with very part time hours. Most businesses require more time in order to grow, but if you’re not in a position to quit your job and go full-time in your business, you’ll have to get creative.

Try some of these to help you carve out more time for your business:

• Approach your employer about working from home. It isn’t a perfect solution, but it will eliminate the time you spend commuting, and may enable you to be available to handle at least light functions with your business during regular working hours.
• Approach your employer about cutting your hours back. Given the weak state of the economy, some employers might welcome the opportunity to cut payroll expenses. A reduction in hours from 40 to 30, or even 35, could benefit both parties.
• If your employer won’t budge on the hours, try to find a position with a competitor who might entertain either arrangement. Economic reality if forcing many employers to do things they wouldn’t have considered a few years ago.
• Move into contract work. Many contract situations will provide greater flexibility than a full time, permanent job, primarily because you’re a fringe worker and not a regular. Because of the absence of both permanence and benefits, the pay is often better as well.

I chose the contract route at this stage of the game and I had several. I had one that was on an “as needed basis”, and it paid well enough that I didn’t need to do it on a steady basis. Another was temporary—it lasted three months, but again the pay level floated me for an equal amount of time after it was over. Then I also have a seasonal contract gig that I still keep. It’s also part-time so it blends well with my business schedule.

There are all kinds of contract arrangements out there, so try to find one that works best with your particular situation. You’ll need to be flexible and fully prepared to step outside your comfort zone with some, but it will be well worth it.

Step 3—Business income reaches the level of a “living wage”–almost

This is probably the first level at which you feel truly “self-employed”, but it can also be the most stressful. Your business is starting to make money, but you’re hardly home free. At this point, you’re probably making just enough money to survive, but not much extra and, just as important, you haven’t yet withstood the test of time. There will be a temptation to quit your regular job and go full tilt at the business, but you feel some hesitation—that’s probably good.

This is the make or break point, but you might still want to have at least a bit of a parachute, just in case. Or at least, just some extra money!

A part-time job would probably be ideal. Not only can you make the needed extra income, but because it’s only part time, you can phase it out as you need to simply by cutting back you hours.

Still another way to navigate this late stage is by doing contract work for your new competitors—as in people engaged in the same business you are. Nearly all businesses have functions that the owner doesn’t have time to handle, but they may also be so specific that hiring someone off the street isn’t workable. As a member of the same industry, you have the skills that others in the same field need.

So you’re not working for direct competitors, you can offer to do contract work for businesses who are in the same business, but in different niches. Sometimes you can do this by contracting for competitors who are in different geographic locations. Think of a newly self-employed attorney who may do legal research work for a larger firm to help with cash flow early on. Find something you can do in your own business along the same lines.

Step 4—You’re “there”!

You’re finally earning enough money from self-employment to support yourself or your family, and you’re feeling confident in your ability to keep it going. Since you no longer need a job—full-time, part-time, contract or otherwise—you can now devote 100% of your working hours to your business. This is the time to grow it, streamline it, make it better and make it more profitable.

This is also the time to kick back and enjoy life right? Not when you’re self-employed!

Not only do you need to constantly grow your business and stay abreast of new developments, but you also need to shore up your finances. Having your own business isn’t like a steady paycheck—you typically don’t have a stable income. Self-employment has an unstoppable feature of roller coaster income.

That means you’ll need to save money for the down times! A person on a salary never has to worry about his or her income level, but one of the challenges of the self-employed is to create something close to a steady cash flow. The best way is saving money during the good times to be ready for the lean ones. If you’ve never been a saver up until this point, you’ll need to become one.

One of the best ways to do this is to save money while you’re doing double duty—building your business and working outside jobs or contract arrangements. And once you cross over into full time self-employment, you’ll need to continue with the saving habits you developed while you were holding multiple occupations.

Is it worth it?

In a word—YES! It reads like a long process, but the purpose is to remove the uncertainty of a steady income while you’re building your business. It’s a tough economy out there, and you’ll have your hands full just building your business. Keeping a steady paycheck while you’re building it will not only remove the survival dilemma, but it will also give you the financial strength you’ll need to get through the upstart period successfully. And dealing from strength is ALWAYS the way to go!

Are you starting a business, or have you done it recently? What did you do to keep money coming along the way?

Finding the top dividend stocks isn’t easy. Dividend Stocks Online sorts dividend stocks by yield, growth and performance.

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”Retiring on Business Income

By Kevin M

We all know about the importance of investment diversification, especially it comes to retirement planning—today I’d like to focus another type of diversification, one that’s even broader in scope. It’s income diversification, and it could quite possibly be the most neglected part of retirement planning.

With investment diversification you’re looking to create a portfolio that has the right mix of mutually exclusive investments that will improve performance by lowering risk. Fair enough. Income diversification is the process of creating income streams from several sources which not only increases cash flow, but also lowers the reliance (risk) on any one of them.

With retirement, this can be done with investment earnings and Social Security, but if you want to create a third income source, you can do it through a retirement business.

It’s even entirely possible that an income stream from a business may provide a more secure retirement than a large nest egg (more on that later). And the combination of a business and a nest egg and Social Security may provide the best retirement plan possible—especially if your retirement savings aren’t where they need to be. It’s something to plan for.

A Million Dollars is A LOT of money!

Let’s cut to the chase—in order to fully retire, and have enough income to pay your living expenses, and have enough money to cover contingencies, and have some left over to continue to grow your investments so they don’t get wiped out by inflation—you’d have to have at least a million dollars saved up at retirement. More probably two or three million, given inflation. I’m just being realistic here—it truly is a tall order.

Do you think you can do it? If not, you need to be making other plans.

Holes in traditional retirement planning

While it is possible to save up a million dollars (or even more) over 30-40 years, it won’t happen for most people—that’s a statistical fact. Investment models produce pretty results, but let’s face it, life doesn’t always cooperate with our plans!

Here are a few examples:

1. Assumed rate of return on investment (ROI) may not support projections
2. In the pursuit of an ROI that will support our retirement needs we may take on too much risk and get burned for the effort
3. A future stock market crash could nullify years of retirement savings especially if it happens near or during retirement
4. People DO make investment mistakes; so do financial advisors—we’re all human
5. Job instability may lead to erratic retirement funding
6. Long-term unemployment means retirement isn’t being funded
7. The unemployed are often forced to draw down retirement savings
8. Interest rates on fixed income investments are far too low to provide a viable alternative to equity investments in volatile or falling markets

In the financial world it’s an article of faith that we can invest to cover what ever needs we’ll have in retirement but little is said about the real life that takes place between now and then and often gets in the way of the best laid plans. In looking at the list above it’s unlikely we’ll be able to invest around any one of these, let alone a combination of two or more.

The ultimate reality is that life is not perfect and for that reason alone we need to have back up plans.

Creating income streams may be more important that retirement savings

That reads like an exaggeration, but here’s why I feel confident in saying it: it takes a lot of money to create income streams from investments. For example, the convention on the “safe rate of withdrawal” on retirement assets is 4%–you can withdraw 4% of your investment value each year and still maintain the value of your investments. I think that’s more of an assumption than it is a convention.

If you withdraw 4% for living expenses, and inflation is running at 4%, you’d have to earn 8% on your investments in any given year. With interest rates hovering around 1%, that pretty much means you’ll need to have most of your money in the stock market in order to accomplish that (see items #2 and #3 in the previous section). Can you really do that?

Sometimes…sometimes not.

To take it a step further, let’s say you project a need for $40,000 in investment income in retirement—how much money will it take to “buy” that income stream? One million dollars. Again, that’s a lot of money, and most people are unlikely to have it. And, thanks to inflation, the further you are from retirement, the bigger that number will be.

A “retirement business” to the rescue

A business is dynamic—the income from it will adjust to what ever future price levels will be. You can grow it through your own efforts. It doesn’t depend on the ebb and flow of interest rates or of the performance of the financial markets. And it won’t require a million dollar investment!

That last point is critical. You can create a $40,000 income from a business without putting more than a few hundred or a few thousand dollars up front. That’s truer in the Internet Age than ever. The growth will be driven by your time, effort and talent, not by your capital contributions. Best of all, when you’re finally ready to move from semi-retirement into full retirement, you can sell your business and have more money to add to your nest egg.

What kind of business?

This is really the foundational question. You probably don’t want it to be related to what you’re now doing for a living, but rather something you can enjoy. Think about a business you’ve always thought of having—maybe your dream business. Retirement should be a time to pursue dreams that weren’t possible earlier in life—seize the opportunity!

On a more practical level, here are some criteria to consider:

• The business shouldn’t be capital intensive—it should be skills-driven and thus easier to grow and to leverage
• It should be a business that you have the talent, desire and skills for—or the willingness to acquire them
• It should be a business that doesn’t have age restrictions
• It should be a field that has room for growth (avoid declining industries)
• It should be in an industry that affords a lot of flexibility and is driven by innovation (rigid industries are usually the ones that work purposefully to limit competition)
• If it’s the kind of business you’d like to have even if you didn’t make any money doing it, you’re probably looking in the right place!

Here’s my real life example…I always wanted to be a writer, but 20 years ago when I first gave it a try I found it impossible to get past the “gate keepers” who kept tight control over the industry. I spent most of the years since working in the mortgage business—and everyone knows what happened in that industry. I exited at the end of 2008.

But something was different in early 2009 then it was in the early 1990s—we now have the internet and writers are needed all over the place. Goodbye gatekeepers, hello opportunity! I’ve been running this blog and freelance blog writing for others, and while I’m not getting rich (yet!), I am making a living. And that’s in under three years (2.5 this month to be exact!)

You can do the same. It requires a certain relentlessness, but it IS doable.

What about my retirement—do I ever kick back and enjoy a life of blissful nothing?

Here’s something I learned both from having my own business and from knowing dozens of small business owners during my public accounting career: the self-employed seldom want to retire as much or in the same way that salaried people do. I’ve known many self-employeds who have worked into their 70s and even 80s.

Employed people sometimes “put in time”, which is especially true in the last years before retirement. Self-employed people don’t sense the imperative to retire at all. If you own the business, it’s a part of who you are and you aren’t so anxious to abandon it. You also have the option to ratchet things down a bit, to take it easy if you choose. I have a lot of self-employed friends and the topic of retirement seldom comes up. Maybe it’s because they see it as quitting on themselves. Taken that way, retirement can and does look a lot different.

If you start running your own business there’s an outstanding chance you’ll feel the same way.

How do you make it happen?

How do you create your own business? One step at a time is always best. If we’re talking about a business you’ll have in retirement, the process will be even easier. Since you probably have years before you retire, you can start a business now as a hobby business and grow it over the years just as you would a retirement portfolio.

Don’t put this off however, thinking that you can wait and do it a year or two before retirement. A business isn’t like a job that begins providing an income immediately; it could take years to reach that point. Also, your first effort could fail and you’ll need time to try again (and still again if necessary!).

Another important point: since you want any retirement business to be on the easy side, the sooner you begin, the more time you’ll have to fine tune the business and become “accomplished”. When you reach that level, businesses are often easy, or at least easy–er–and they blend a lot better with semi-retirement.

Have you considered starting a “retirement business”? Do you agree that this could be a viable option for people who have inadequate retirement savings?

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Preparing for SEMI-Retirement

Guest Post

A business start-up requires a great deal of work and financing to be successful. Not only do the initial start-up costs have to be accounted for, but the ongoing costs of doing business need to be handled until the company starts sustaining itself with its own revenue. Before you start writing checks to cover company start-up costs, you need to understand the costs associated with starting a business.

Banking – Business banking accounts often work differently than personal checking accounts. Business checks can cost you more money to order than personal ones, and some business checking accounts charge you fees for the number of transactions make.

Some banks offer services such as helping you track company spending and generating monthly reports that include copies of canceled checks. But remember that all of these services cost money, and, unless you really need that information, you should refrain from using those services when you are just getting started.

Office Equipment – A new company needs technology to run all of its important business functions such as inventory, payroll, and customer management. Not only that, but your company will also need data storage and Internet gateway equipment as well.

You can save money by leasing, renting or buying used items rather than financing purchases of all new equipment. To help you keep costs down, you should consider the advantages of leasing. You pay a small monthly fee, the leasing company pays for repairs and also standard upgrades. That can save you a lot of money in the beginning.

Office Supplies – Entrepreneurs get so wrapped up in getting their new company off the ground that they forget the cost of office supplies. Pens, paper, tape, staples and address labels can all add up over time.

One of the ways to reduce the costs of office consumables is to buy in bulk from local suppliers. You can get a discount on bulk purchases that will save you money in the long run. Another option is to compare pricing on the Internet and always buy at the lowest price.

Office “staff” – One of the dilemma’s faced by small start-ups is staffing, or at least the ability to use the services of specialists needed to help insure a smooth start to the business. As a new venture, there probably won’t be money to pay for people to get the work done that the owner lacks either the time or the expertise to handle. But there are at least two ways to get around this problem.

The first is a site called ODesk.com. This site has contractors available for just about any job you can imagine, but especially in the areas of IT and web applications. You can find someone to help you on just about any job and since many are overseas they will work for far less money than you might imagine—like less than $1 an hour. You can also find people who can handle business proposals, writing assignments and even ad copy, and best of all, they’ll be contractors, not employees. This will also remove any burden of maintaining a payroll system, withholding taxes or employee benefits.

The second way is to partner with others. Find other small business people who are specializing in the areas you need coverage and sub the work out to them. You can even work swap deals by offering your specializations to them. In this way, both businesses can grow without having to hire on and maintain costly payrolls. When any service isn’t needed, or if you reach a point of being able to afford to actually hire employees you can end the partnering arrangements.

 
When you are getting a start-up company off the ground, you really need to keep an eye on your expenses. You should spend each penny wisely and after considerable research. If you do not monitor your start-up expenses, then you may find that your company has little hope of sustained success. A little bit of flexibility can go a long way!

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By Clair Schwan

Okay folks, this is the home stretch for this four-part series on starting a consulting company on a shoestring budget. We’ve looked at startup considerations and how to handle them, expenses associated with running the business, and the many and varied hassles that really are more imaginary than real. In this last portion of the series, let’s look at income – the fun part. If you’ve done your planning well, and are mindful to minimize expenses, you ought to be able to make a decent return on investment.

Let’s take a look at what one might create for themselves, but let’s also be cautious and realistic.

Waiting for Income

If there’s one thing a frugal person is good at, it’s handling income and building wealth. Before we start rolling around and giggling amidst our big pile of cash, there are some realities that need to be faced.

First, the bad news. Unless you’ve cultivated your first few jobs, you’ll have to hold your financial breath until you land one. That could happen in a few weeks, or it could take a couple of months or more. Plan on at least a couple of months for the cycle of business development, focusing on prospects, writing proposals, getting a contract signed, and then getting the work scheduled to start.

Even then, you’ll work for 30 days, invoice a couple of weeks later, wait at least 30 days to be paid – probably more like 45 to 60 days – and that means your first dollar will come through the door about three months after you start your first job, and that might be six months after you start your business. Now, it’s clear to see why careful startup planning can be both wise and frugal.

To weather this portion of your career change, you’ll need a pile of money. That money will need to cover your personal and business expenses for about six months, and then you ought to have some working capital set aside in addition to that so you have a financial comfort zone. You don’t want to be distracted in your new business because you’re worrying about getting down to the bottom of the peanut butter jar.
Once you build a relatively steady stream of revenue, you’ll be able to relax a bit. After a year or so, the business development, customer work and billing cycle will become much more clear and you’ll be better able to predict revenue. You’ll also be able to project expenses with much more accuracy, and that will allow your return on investment to become clear. Only then should you start counting your money.

Enhanced Income

The good news is that all of the overhead built into your previous billing rate as an employee is now yours as gross revenue, much of which can be turned into profit. For example, let’s say your billing rate at your previous employer was $130 an hour. That means you probably were paid about $65 an hour for your time. That additional $65 per hour went to overhead expenses like management, administration, property rental, and unapplied time associated with business development. Now, you have an important choice to make – what to do with the additional $65 per hour that your customer is accustomed to paying for your services.

Here’s my suggestion. Lower your billing rate to $120 per hour and your customers will enjoy a break in the price of your services. At the same time, you’ll enjoy a $55 per hour increase in your income. That’s nearly double what you were making. So, you make a lot more, and your customer enjoys a price break. You’re “a deal” in the marketplace, but you didn’t have to take a financial hit to make it happen. Over the next couple of years, you can inch your rate back up to $130 per hour, and now you’ve doubled what you were making back at Acme High Management Overhead Inc, and you’ll still be offering a lower rate to your customers because the folks at Acme will have cranked up their prices as well.

If you do it right, what you’ll quickly find is your ability to accumulate wealth will take a giant leap forward. This means you’ll have plenty of cash to carefully invest in the business, because you’re frugal, and you’ll be able to engage the services of an investment advisor to help grow your nest egg. You can see it now, early retirement is on the horizon. You won’t need to remain part of the rat race until you reach “official” retirement age according to the government. Oh boy, this is going to be good.

Cash Attracts Others

Of course, there are others who have their eyes on those bushel baskets full of money you’re making. It’s our friends at the Internal Revenue Service. And, they’re out to provide you with a type of “service” by helping themselves to your enhanced revenue streams. I’m reminded of the song, This Isn’t What the Governmeant, by the 1970s group Bread. They sang, “The more you make, the more they take, you never seem to get ahead.” It’s true, so you’ll need to know how to minimize taxes on what you earn by investing wisely inside and outside of the business, and maximizing useful deductions.

Generally, anything that you regularly and exclusively use for your business is tax deductible. And, you’re in charge of the business, so you’ll decide what array of things are required for business success. Things like laptop and desktop computers, special software, still and video cameras, a GPS unit, a color laser printer, and other fancy gadgets might be necessary to do your work and win more billable work. You’ll also need to remember that paper, batteries and mileage are all deductible as business expenses when they’re put to work to earn you more income.

Wrapping it Up

So, the income earning potential of your own consulting business can be very attractive, but you need to be aware that it won’t come immediately, it doesn’t necessarily come regularly, and others want their share of your entrepreneurial efforts. Just because you have rid yourself of the corporate money leach doesn’t mean you’ll be successful at avoiding the long arm of the government. Take heart, you’re in good company among those who know how to create wealth. If only someone would start an enterprise that gets rid of those who simply consume wealth, now that’s a job I want to put in for.

Clair Schwan hosts Self-Reliance-Works.com where he encourages others to live a more self-directed and self-managed life focused on their own self-interests. It’s just the kind of spirit that makes for a good entrepreneur.

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