We all like to think about it, don’t we? Especially on days when our bosses are breathing down our backs and we’d give anything for a little peace and quiet.
Be your own boss. Do whatever you feel like doing. No more managers micromanaging every little thing that you do. No more performance reviews. Useless meetings. It’s all you, baby. You call the shots.
Sounds pretty nice, doesn’t it?
But, here’s a little secret: You need to be a very special kind of person to be your own boss.
The freedom that comes from bossing yourself around also amounts to the incredible freedom to fail if you do things wrong. Suddenly, you don’t have the company to shoulder you. To pick up the slack.
The problem with being your own boss? The buck stops with you.
Wait, before you read on: My point isn’t to argue against the notion of self-employment. On the contrary, it’s the perfect arrangement for some people. They thrive under the pressure. Be as successful as they want to be. But even though it may sound like the perfect situation, it may not be – for four very profound reasons.
The problem with “be your own boss”
Here’s the deal: Unless you are financially independent, money is still the driving force behind your career – whether you’re slaving away for some big nameless corporation or working in your underwear from your home office on your own stuff. The bottom line hasn’t gone anywhere.
That cash flow can’t just stop because you’re working for yourself.
And, here’s another little secret: You aren’t working for yourself. Unless you’re paying yourself to design a product or service for yourself, then you aren’t working for yourself.
You’re working for someone else. They are your customers. Your customers are your masters, and they’re paying your bills. That doesn’t change.
You may not have a manager in the same sense as with a traditional job, but you’re still being managed. Trust me, that part almost never goes away.
Especially those performance reviews…
1: Your new performance review
Think that you no longer have performance reviews if you’re working for yourself? Actually, you do. And, they aren’t just once a year, either. Each and every customer informally conducts your performance review. All the time.
Traditional performance reviews at typical companies are nothing more than a check in the box. You do your job, set B.S. easy-to-accomplish goals, get your performance rating that somehow “matches up” with your cost of living increase in salary and move on with your life.
Annoying, but pretty straightforward.
Things don’t work this way if you’re “working for yourself” as your own boss. If a customer doesn’t like your product or service, you lose the customer. Your salary, effectively, decreases.
Word of mouth suffers and you’re forced to play damage control depending on how angry you made your [now former] customer. Of course, your mileage may vary with how you deal with angry customers, but you get the idea.
It’s not a pleasant conversation to have.
How many times has your salary decreased after a typical performance review working for a big, nameless corporation? Probably not many. It’s never happened to me, ever, regardless of whether the company was doing well or not.
But, if you under-perform with a client, there aren’t layers of management and co-workers to help smooth everything out.
In most cases, you’ll lose the customer.
2: The buck stops with you
Make no mistake about it – when you are the boss, the buck stops with you.
You’re only as successful as your own determination to succeed. You won’t have layers of management to keep feeding you work. The work’s all on you.
You get work. You design the solution. Rinse, repeat. It’s all you, bud.
“I was completely unprepared to handle the mental shift from high-income tech worker to struggling entrepreneur,” she wrote.
“It was very humbling to realize my time wasn’t worth more than about $10–25/hr, depending on what I was doing. I was making $50/hr at my corporate job, and that came with benefits!! [As a self-employed entrepreneur], I was fighting for pennies and having to pay for health insurance.”
For a properly-motivated person, this can work great. But, it’s also not quite as easy as it sounds. This process very often takes more hours than you were putting in at your big nameless corporation. Way more emails. Cold calls. Stress. If you don’t bring in the work (or properly market your product), you don’t get paid. Nobody’s going to pick up the slack. It’s all you.
Remember that time you woke up and just didn’t feel right? You called in sick and took the day off. Great, no problem. But, working for yourself means two things:
- Calling in sick could mean a drop in revenue
- Calling in sick could mean work doesn’t get done
Again, it’s that whole “picking up the slack” thing, and when you’re the only one there doing the work, the work doesn’t get done unless YOU are actively working.
Shouldering that kind of responsibility can be a tough transition.
I spoke with Chris Durheim of Keep Thrifty after he made the switch to self-employment. “The biggest challenge has been owning all the responsibility for securing my own income,” he said. “There’s a lot of validation in the stability of a bi-weekly paycheck. When that goes away and your daily actions directly determine whether you’re getting paid or not, there’s a lot more pressure.”
Michael Dinich said “When you own a business you will deal with some rejection. Someone may turn down your service and/or product and it can be hard to not take it personally, especially when you have dedicated so much of your energy and effort into the venture.”
Jack from Duke of Dollars told me that scheduling his time was one of the toughest nuts to crack. “I am aggressively anti-schedule,” he said. “I do what I want when I want. Even when I was an employee, my bosses learned to cope with my rebellious scheduling.”
He continued, “Recently that mindset resulted in me staying up 30 straight hours to work, game, and socialize (in that order). Right at the 30 hour mark, I /r/stoppedworking via grand mal seizure right at my dinner table, my first and only such episode. That was, uh, a wake-up call. I gotta do better managing my time.”
3: Can you drum up your own business?
Unless you’re a natural salesperson, self-employment entails finding your own customers. Sometimes, those who quit full-time work to pursue self-employment bring customers with them through their network relationships built over many years of traditional work. This helps. But, what about the rest? If you don’t have a group of potential clients before you begin your new working lifestyle, how do you drum up business? Could you sell ice cubes to an Eskimo?
If you build it, they won’t necessarily come.
Generating business requires some sort of a plan. Marketing. Advertising. In some cases, cold calling or cashing in favors. Getting yourself out there by networking. Things like attending conferences or seminars help, passing out business cards in a way that’s entirely NOT annoying, mastering your “elevator pitch” to succinctly explain what you do at a moment’s notice.
Are you one of those people? For the record, I’m not. Not even close!
4: Can you deal with the paperwork?
In traditional jobs, most of the business paperwork is done for you. The accounting department worries about the books. The payroll team figures out the system that keeps their staff paid with retirement accounts funded. HR works out healthcare options and petty staff problems. The legal team worries about operating within the law. And depending on the company, they may also have lawyers on retainer in case a customer sues. Or injures themselves on your premises or otherwise wants to make life harder for your company.
You get the idea – the basic requirements of operating a business are all done for you working for a traditional company. Make a few selections when you’re hired, sign some paperwork and send it back for processing. You just need to worry about getting your job done and remaining sane while doing so. Someone else handles the rest.
Naturally, this isn’t the case with self-employment. That’s all on you. What happens if someone sues you? Or you spend a month without any work? Or want to completely disconnect and take a vacation out to the Galapagos Islands? What happens with your business?
Are you ready to be your own boss?
Like I said at the beginning, my intent with this post isn’t to dissuade you from going into business “for yourself”. Rather, it’s about managing expectations appropriately. Be your own boss sounds wonderful (and for some people, it truly is), but it also demands a whole ton of work. Work ethic. Discipline. A strong desire and motivation to succeed.
Are you one of those “self-starters”? Seriously, be honest with yourself.
Think of it this way: If you’re working for a traditional company and harbor a desire to work for yourself, could you:
- Run the entire company by yourself?
- Build a relationship with its customers?
- Deal with angry, litigious clients?
- Travel (perhaps globally) at a moment’s notice?
- Work day in and day out to be successful?
If you could honestly answer “Yes” to all those questions without hesitation, then hey, you might have a new career on your hands!
Should you work for yourself?
I stumbled on this nice infographic that I just couldn’t help but share with you guys. Things to consider before quitting that traditional full-time job:
- Do you actually have an idea and business plan?
- Do you need absolute job stability (this answer needs to be ‘No’)
- Are you strongly self-motivated?
- Can you actually sell your product or service?
- If everything fails, do you have a backup?
Here’s the infographic:
For those who already work for themselves, what was your biggest challenge in making the transition from full-time work with a traditional company to self-employment?
Steve is a 38-year-old early retiree who writes about the intersection of happiness and financial independence. Steve is a regular contributor to MarketWatch, CNBC, and The Ladders. He lives full-time in his 30′ Airstream Classic and travels the country with his wife Courtney and two rescued dogs.