If you are considering making a jump from being an employee to being self-employed, the following article will help you make the transition.

I am often asked how I made the transition from being an employee to being self-employed. In my situation, I was able to find a speaking gig that paid enough money for just two weeks of work that kept me alive and paid my bills. Of course, this was when I was young and single and so I did not have many expenses. This left me two weeks to work on other jobs and build my consulting practice. While my situation may have been unique, there are some fundamental principles that you should follow on your road to self-employment. In this article, I will discuss many of the basic tenants that you should follow.

Money Management

Don’t under-estimate how much money you need to get a new business started. You should have at least six months of your salary put away, plus whatever capital you need for the business. I am assuming that you are living on your salary now and not living beyond your means. If you are one of these people that live beyond their means, then you should not even consider going into business for yourself. Good cash management is essential to a sound business. Make sure you have all your credit card debts paid off, and as many other debts as possible.

Don’t under-estimate how much money you need to get a new business started. You should have at least six months of your salary put away...

You need to set financial goals for your new business. How much do you expect to make in month 1, month 2, etc. How much money do you need to make to support yourself in the same lifestyle that you have as an employee? Remember that you have to now take care of your own Social Security and self-employment tax (approximately 7% more than you pay as an employee). You have to take care of your own health care costs, your own marketing, and many other expenses. It is not enough just to bring in the amount you were making as an employee; you must earn this additional amount, too. You also need to factor in additional costs like putting money away for retirement, college education for the kids, and vacation time for yourself.

Make sure you plan accordingly for these additional costs. Research these costs before you start your business and figure out what these costs will be. Talk to a tax accountant and/or financial planner about how much you need to make. Do not try to do all this research on your own-get a professional’s advice.

Time Management

Lack of time management skills is the biggest killer of productivity. This not only applies to the self-employed but also regular employees. We are so “in-touch” with everyone in our lives through e-mail, text messages, social media (Facebook, Twitter, etc.) that we do not realize how much time these things waste. As a self-employed person, you need to be extra diligent in the management of your time.

Lack of time management skills is the biggest killer of productivity.

Calculate how many hours per day and hours per week that you need to work in order to meet your financial goals. Make sure that you can get enough billable work done in a normal work day and plan time for the other tasks that you now need to perform to be self-employed. You need to plan for marketing time, meetings with customers (and potential customers), doing invoicing, going to the bank, learning new technology, and the myriad of other tasks required to be in business for yourself.

As an employee, you may not have realized that you really did not work on your job for eight hours per day. You would normally work anywhere from 6-7 hours within the eight hours you were supposed to work. You need to include time spent in meetings, lunches, personal time you take, etc. It was nice as an employee because your employer absorbed those hours. However, once you are on your own, you will typically need eight hours of “billable work time” plus the additional time to cover those extra meetings and other things I mentioned. Or, if you only want to work eight hours, then you will need to raise your billable rate to give yourself the income needed to support the lower hours.

You not only need to set a minimum amount of time you work, but also a maximum time. You need to take into account the time you need to spend with your spouse and your kids. If you have health problems, you need to calculate in the time you need to go to the doctor. You need to set boundaries so you do not spend too much time in your work and neglect your health, your spouse and your kids.

I have seen too many folks try to go into business for themselves only to find that they end up spending too much time with their kids or running errands. I also find the opposite, where folks are so consumed by their work that their personal/home life suffers and they end up having a lot of personal problems. In one of my roles as a counselor to small business owners, I have seen these situations many times. With just a little work we are able to work out a reasonable schedule that makes everyone involved in the self-employment process happy.

You should set regular office hours, even if you are working at home.

You should set regular office hours, even if you are working at home. During these hours you should not be disturbed by family except in an emergency. These rules need to apply just like you are working at a regular job.

Partner Buy-In

In addition to the time required and financial means necessary to start a business, it is very important you get your partner’s buy-in. Set a goal with them about how much time you are going to give this self-employed venture until you have either met your financial goals, or you decide that this new way of working just does not suit your lifestyle. Remember, not everyone is cut out to be self-employed. Many decide they do not like the long hours, they don’t know how to market themselves effectively enough to get new jobs, or the stress of never knowing where you next job is coming from gets to be too much.

Sometimes the time required to work on billable hours is just too much and it cuts into a healthy lifestyle. This may be the time that going back to being an employee might be the right step. Again, be sure you write down these goals prior to starting so you can use these goals as a checklist and measure your progress to ensure you are on-track.

Getting Jobs

So, how do you go about getting jobs for your business? This will vary from business to business and from person to person. However, there are some very tried and true methods that you can do to find jobs for your new business. First and foremost, always market yourself and your business. Some of the various things you can do are the following:

  • Create professional business cards.
  • Have professional brochures and flyers that you can hand out to potential clients.
  • Join your local chamber of commerce.
  • Join local networking groups like Toastmasters International.
  • Sign up on various job sites and offer your services as a contractor.
  • Work freelance for your former employer.
  • Use your network of friends and former business associates to get new jobs.
  • Use social media tools such as Facebook, Twitter, MySpace, and blogging.
  • Get testimonials from former clients/employers.
  • Write articles for trade journals in your industry.
  • Speak at local user groups and events.

Your top priority when running your business is to always look for your next job. Even when you have a six-month contract, you never know how long that job will really last. Market your services by constantly doing all the activities outlined in the list above.


The people that make the most money in any industry are those that have something very unique to offer. If you are “just another programmer” then you might be better off to stay an employee. Programmers are a dime-a-dozen. I don’t say this to be mean, I am just telling you like it is. However, if you are someone that specializes in XSLT programming, Silverlight, BizTalk Services or Reporting Services, then you stand a better chance of getting the job over someone who is just a jack-of-all-trades.

To prove that you are a specialist you better have some great references to back this up. This typically means that you are an MVP in that specialty, have written books or articles on the subject, or can otherwise prove that you are an expert. Getting testimonials from previous clients are gold and you should always ask for testimonials immediately after completing a job.

Give Away Some Time

People love to get things for free. Part of your marketing effort should include “free” time. This could be an offer like the following: “If you hire me for 40 hours of work at $100 an hour, I will give you 4 hours for free; this is like getting me for about $90/hour.” What this does is gets your foot in the door. You now have 44 hours to prove that you know what you are doing and that they are getting a great deal by paying you the $100 an hour thereafter. The same goes for speaking at your local user groups or other events for free. Anytime you have the chance to get up and prove your knowledge in front of a crowd, do it! You never know who is in the audience that might want to hire you.

People love to get things for free. Part of your marketing effort should include “free” time.

Keeping Up to Date

In the IT industry you can never rest on your laurels. Yes, sometimes, you can do FoxPro forever, but those types of jobs are hard to find. Most often you have to keep up with the industry. This means that part of your daily or weekly schedule must be devoted to learning new technologies. Remember that while you are learning these new technologies you are not being paid (at least not usually). So you must build that time into your hourly rate. Part of your hourly pay needs to be put away for taxes, some needs to be put away for “down time” when you don’t have any work, and still other money needs to be put away for learning.

Tracking Time

It is very important to track ALL of your time. I am not just talking about the time spent working for a client. That, of course, needs to be tracked for accurate billing. I am talking about time spent on marketing, billing, paying taxes and bookkeeping. This will help you in a couple of ways. It will help you keep track of how much billable time you need versus how much non-billable time you need. After a few months you will start to get into a rhythm of how much time you need to devote to each. This will eventually help you know how much your billing rate needs to be to cover this “overhead” time.

Another aspect of tracking your time is that it helps you bid your next job. If a new customer asks you to create three screens for them, and two of them are like screens that you did for a previous client, you can go back to your time tracking system, look up how long it took you to do those for the previous client, and now you can give a better estimate to the new client. This makes you look more professional, and may help you keep this new client longer.


At some point you need to do billing for your client. Keep very accurate records and break everything down into individual tasks. Use a professional system like QuickBooks for all your invoices. Record these tasks on your invoice or include a separate document that outlines each hour spent on each task. Include this with your invoice each month. Here is the reason why… If a client receives a bill from you for $5,000 and they don’t see the value in that $5,000, they will end up complaining about the entire bill. However, if you show them the 30 tasks that made up the $5,000, now they will only argue over those one or two tasks that they think took too long. Since these tasks will only be a few hours each, you will most likely only have to give back a few hours to keep their good will. This is better than having to give them a discount on the whole $5,000. Believe me, this works. I have seen this many times in over 18 years that I have been in business. I started my consulting business in 1991, and this technique has worked for all these years.


There is no magic bullet for starting your own consulting business. Some people might be able to make it for a year, some for many years, others might only last a few months. There are definitely some nice rewards with self-employment, and not all of them are financial. The best time to start a new business is before you have a lot of debt and a lot of extra things in your life such as a spouse and kids. It is not impossible to do once you have a house, spouse and kids, but it does take much more discipline. Sometimes you end up with more time to spend with your kids or your partner because you are able to work on your time schedule and not a normal 9 to 5 job. Sometimes the financial rewards can be much more rewarding than working for someone else. You need to decide what you are looking to get out of self-employment and work toward that goal. Good luck!