Transitioning from employed to self-employed: what you need to know

Imagine yourself standing on the bank of a mighty river. The ground beneath your feet is traditional employment and on the other side is the land of self-employment. To brave the current and try to cross? To leap or not to leap?

Most of us, in our minds at least, have stood there once in our careers, imagining a world personified by freedom, where you can do things on your own time. And most of us know the reality: that the self-employed life isn’t all client meetings via Zoom while you’re on the beach. Steady paychecks, someone else doing your tax and super, and paid sick days; make the transition, and watch these things vanish.

Still, if you feel ready to make the leap and prepare yourself properly, it can prove the life-changing-for-the-better decision you always hoped it would be.

So, we ask: do you feel ready? If it’s a resounding yes, read on as we cover the top five tips for making the transition from traditional employment to self-employment as smooth as possible.

1. Cover your legal bases first

While a freelancer’s career can ignite quickly, leaving you to think on your feet, there are certain things you can set in place before the first real spark. This includes considerations for the legal and structural side of your business.

For example, if you’re looking to set up your own consultancy firm, a digital agency, or any other type of business where you offer specialised services, then you must consider professional indemnity insurance. This specialised business cover is designed to protect you and your enterprise in the event you’re found responsible for defamation of your client or a breach of duty, and other operational risks.

Then there’s public liability insurance, which is designed to offer cover for businesses in the event that a client or a staff member accrues an injury on their work site, or your company is found liable for damage to private or public property. Hospitality enterprises, retailers that manage a storefront, or even construction industry firms can benefit from public liability insurance, among other types of business insurance cover.

Then there are other foundational bases that must be covered when setting up your business. This includes registering your business name, obtaining all necessary licenses for operation, and investing in your business infrastructure, like securing suppliers, distributors, third-party warehouse services, and all the other logistical considerations you need to make to get your business up and running operationally. All this preliminary admin will need to be conducted well before you start trading to ensure your business can operate safely and sustainably.

2. Build a financial safety net

The self-employed life is rarely calm sailing. You’ll have months where the wind fills your sails generously, and others where you’ll feel the doldrums will never end. The best (and most predictable) approach to this unpredictability is to have a financial buffer strong enough to weather that initial time at sea. In other words, you’ll want to make sure you start trading with a strong business budget and enough capital to invest in your company’s growth.

Even for sole traders, having adequate capital on hand is essential for being able to jump on opportunities as they come your way. This includes opportunities for promotion, like advertising deals in local and digital publications, or even just enough company money to take on larger orders without upfront payment from your customers or clients.

If you’re operating with a shoestring budget, however, you can still spend strategically to maximise your growth opportunities. For instance, while you may not have the capital for self-promotion, you can create your own DIY PR campaigns to get the word out about your services while retaining your company capital for taking on preliminary projects that are guaranteed to make profit. It’s all about being selective with how you spend your time.

3. Master time and productivity

Yes, effective time management is a vital skill for all self-employed professionals. With all the business admin you need to juggle alongside actually delivering your products or services, you’ll often find yourself wishing that there were more hours in the day. Sadly, there aren’t – but there are definitely ways you can optimise your time as a business owner.

Structure is your friend here, and structure comes with a daily schedule. Like your budgets, your professional schedule should consider everything you deem essential. Just make sure it aligns with your lifestyle and your energy levels. Are you a night owl or someone who rises when the rooster crows? Answering questions like this will help create the ideal work schedule for yourself as a self-employed professional.

And if you do find yourself needing extra support here and there, you can always enlist the services of a fellow freelancer or contractor. That way, you can outsource particular jobs with confidence, allowing you to expand on your capacity and grow your profit margins even further without adding adversely to your existing mental load.

4. Start before you quit

It’s becoming increasingly common for entrepreneurial types to keep their 9 to 5 job as they build up their own enterprise. After all, having some secure consistent work can help you build up a safety net for your business, or even just keep building your own skills as a professional.

You can use your employee position and your employer’s resources to test your ideas or even test your ability to fly solo on project management, and all without the pressure of having to get it right immediately to preserve the reputation of your budding business.

So the question here is “how do you integrate your side hustle work into your work week as a full-timer?”. If you’re freelancing, start by taking on a client or two when you have time spare.

And if you’ve just developed a new product suitable for retail sale, why not unveil it at your local markets to slowly get it out in the world?

Remember that preparation is your aim here rather than perfection. Building your portfolio, making mistakes, tweaking things project by project; with a steady job to back you up, these things carry less weight.

5. Learn to sell yourself

This last tip will either be something you love or loathe, but it’s something you must do if you’re to stay self-employed. Unless your groundbreaking new product is a word-of-mouth sensation that requires you to spend nothing on marketing, you will need to promote your business.

Networking, building a social media following, creating your own PR campaigns, and even the good old letterbox pamphlet – there are countless ways to spread the word that you’re open for business. There’s no magic solution when it comes to selling yourself; some things work, others don’t. Just be genuine and authentic, and your audience will find you.

When should I make the jump to self-employment?

The truth is, the perfect moment to make the jump to self-employment just doesn’t exist, so don’t let your progress hinge on waiting for the right timing. Growing demand for your talent, repeat clients, and a side hustle that earns consistent income; these are genuine reasons to consider the switch.

The best thing you can do to act with confidence is to take stock of your situation at routine intervals across your business development journey – and be honest and unflinching in your appraisal. Do you have the financial resources to cover three to six months’ worth of expenses? Have you performed sufficient market research to know this is the time? If you can answer these questions, then you may have all the resources and insights you need to make your first big steps with sure footing.

Remember that future-oriented transitions are strategic. So if you’re ever feeling doubt, return to your growth planning to determine if you’ve accounted for all opportunities and variables.

Lastly, be kind to yourself. Choosing the self-employed life is thrilling and frightening in equal measure, so avoid being unrealistic about your goals and expectations. Avoid burnout, celebrate the small wins, and keep at it. You’ve got this.