Published On: Fri, Jul 12th, 2019

How to Become a Self-employed Contractor

For many people, being self-employed is the ultimate professional ambition. They have dreams of being their own boss, having flexible working hours, and taking control of their future. People who are skilled in a trade or service are often best positioned to make the move into self-employment as long as they have the experience and business acumen to back them up. While being a self-employed contractor can have many benefits, the success only comes after a significant period of hard graft, long hours, and some personal sacrifice. If you are considering becoming a self-employed contractor, here is what you need to consider before taking the plunge.

Is self-employment right for you? 

Being self-employed is not an easy option, so if you have the opportunity to be employed with a reasonable salary, benefits, and security, think long and hard before you start your business. A steady paycheck makes finances, vacations, paying bills, and planning for retirement a lot more straightforward. Examine your finances, your lifestyle, and discuss your plans with your partner and other family members. You will need to cope with a lot of pressure and responsibility and may have some tough financial times in the early stages, so be honest with yourself – can you handle the stress?

Funding

It’s likely that you will need funding to buy equipment, machinery and/or premises, and you may also need some capital to cover upfront business (and personal) expenses. This funding could come from savings or a loan from family, but many people take out business loans or try to secure investment from an equity investor. To secure funding, you will need a detailed business plan.  

A business plan outlines how your business will operate from market research, funding, day-to-day/monthly/annual budgeting, marketing strategies, staff, and financial projections. 

Register and Insure Your Business

You will need to register your business name and decide whether to incorporate or be a sole-proprietor. It’s essential that you insure your business adequately, which may include general liability insurance or more specific contractor insurance. If you are not insured and you face legal action from a client, it could be devastating to your finances.

Advertise 

Starting a business as an independent contractor can be difficult when it comes to finding your first customers. Ideally, you will have potential customers already lined up either through your previous employment or contacts, but if not, you need to be prepared to advertise. Set up a website which tells customers what services you provide and promotes your unique skill set and your level of experience. Social media can be an inexpensive and effective way to increase awareness of your business in the community, or there are more traditional methods such as newspaper advertising, flyers, and placing business cards in local stores.

Bookkeeping 

In the early stages of your business, you can save money on bookkeeping fees by taking the job on yourself. It’s easier than ever to manage a business’ finances thanks to accountancy software like Zoho, which has specific offers for self-employed contractors. When you become busier and are making more money, you may choose to outsource this to a professional accountant. 

Don’t take on too much 

If all goes well and your business becomes so busy you aren’t able to fulfill demand, don’t spread yourself too thin and sacrifice the quality of your service. Consider outsourcing some aspects of the operation which aren’t your strong points so that you can focus more time on the actual work. Family members may be able to help with some areas, and their wages can be deducted from taxes as a business expense. Hiring official employees is an option, but you need to be sure that their appointment will result in higher profits despite their salary. 

 

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