I have been talking about starting your self-employment journey in the right manner and trying to cover some of the more unexpected elements that come along with it. Let’s talk about one of the more taboo subjects, Money.
Allow me to start with a harsh truth. Most people who are self-employed would make more money in employment. Not a popular thing to say I know. Popular media has internet billionaires with private islands and youtubers living in mansions but for every one of these success stories there’s 99 more people quietly struggling to get by. For most self-employed people I would say that making enough money to live is a reasonable and obtainable goal. You might need to swap Nandos for baked beans, but this is an accomplishment that many don’t even recognise. If you can afford a holiday…you must be doing something right!
The number one killer of small businesses is cash flow. But what is this and how can it be so destructive? I’ve often said to people that making money is not hard…making enough money, enough times is a lot trickier! The issue with cash flow falls down to one essential problem. Most of your costs for living are fixed. Council tax, Rent, Mortgage, Food, Transportation, Travel, Bills these are usually taken from your account on a fixed basis every month. This is fine if you you’re in employment and know that you’ll be paid an amount to cover these costs. In self-employment however, any number of things can go wrong. Late payment, Long payment terms, delayed projects where you can’t take on new work until this job is finished. Issues like this mean that even when you make enough money to live, you must do so in an often unreliable manner. So how can you deal with this?
Rethink your target
Straight away it’s important to change your thinking on how much you need to bring in. Don’t think that your goal is to bring in £500 for example which is the amount you need to survive. You need to bring in at least £750 so that where a project slips you still have enough money to eat! I don’t like to be a ‘pint half full’ kind of guy but its key during the early stages that you think in clear practical terms. Where possible I would advise that you always want to have a good 3 months’ worth of Rainy Day weather too. December and January can be particularly quiet and expensive depending on your industry so having a stash of savings to begin with is a smart move.
You’re not a Premium
I’m about to contradict myself massively here BUT if you’re starting out in business then probably you are underselling yourself and what you are worth and it’s important that you don’t allow yourself to be taken advantage of BUT at the same time you can’t get top buck straight away. Many young people in particularly think that because they were good at uni that means they can charge industry rates to begin with and unfortunately that just isn’t realistic. You need to build up and over time you’ll be able to charge more but your time doesn’t come at a premium on day one of running a business. I remember going through to the out for a celebratory pint because I’d managed to make £250 in a week…these days I charge more than that for a day’s work!
One of the things that I think will surprise many people starting off in business is that making money is easy. It really is. Once you understand the core concepts around how business should be done, you have a skill for life that can be applied to numerous industries. As I said above though the key question once you’ve realised this is how you can make money in a sustainable and repeatable way.