Thursday, December 1, 2022

How to Start a Business: From Full Time to Freelancer in 5 Steps (Without Burning Out and Going Broke)

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SO many of us are done with the traditional 9-5 – but before you quit in a blaze of glory, heed these words from someone who has been there, done that! Guest writer Ellen Mackenzie on how to become a successful freelancer and how to start a business.

Done with your J.O.B.? Thinking of leaving your full-time job and starting your own business as a full-time freelancer? Finally, have a quit date circled in your mind?

Good for you and well done! But before you pop the champagne cork, wait!

Because transitioning from a 9-5 corporate job into full-time freelance is no small change; starting a new business is nothing like starting a job. You’ll need a strategy beyond dogged determination if you want to avoid burning out in year one. 

Before you bravely head out into the unknown, you should make a full-time to freelance transition plan and pave your financial runway BEFORE you hand in your notice.

If you are ready to change things up, you’re not alone. In 2021,  “how to start a business” was searched more than “how to find a job”, according to Google’s Year in Search.

And 2022 continues to hold down the fort, with another 4.5 million quitting their jobs as of January 2022, in addition 2021’s staggering ‘quit-rate’ of 47 million.

With the concept of freelancing now mainstream and the competition pool crowding, a transition plan can help your business survive common entrepreneurial pitfalls so you can come out on top after year one.

The truth is, more than following your bliss, you need to follow the money and more than your passion, you need a plan.

Before leaving your job in a blaze of glory, make sure your transition plan is solid

Ellen Mackenzie

How to start a business: Your 9-5 Transition Plan – 5-steps to becoming a full-time freelancer 

A transition plan is your corporate escape plan, diligently mapping your business goals, budget and expenses so that you have a solid financial footing to keep your business afloat and your sanity intact. 

It should outline economic fundamentals like your current financial health, expenses, budgets and profit projections, along with more strategic considerations like your business model, your audience, the services you offer, price point and most importantly, your reason why.

Essentially, it’s your five-step entrepreneurial starter kit made up of a series of audits and assessments, with considerations like:

1. Your starting Point: (What’s at stake and how much can you risk?)

  • Look at your current finances? What is your current debt level?
  • What other financial obligations do you have?
  • Do you have additional resources/financial support?
  • How much can you save?

2. Your Budget: (What are your expenses & how many ramen noodles meals are you willing to eat to stay within your budget?)

  • What are your business expenses budget and your living expenses budget? 
  • How strict (or flexible) will you be? How much wiggle room do you need?
  • Do you have access to other savings/liquid assets to offset unexpected costs?
  • Other income streams: It’s not necessarily a good idea not to go cold turkey from consistent income to zero overnight. Additional funds will take the stress off and give your budget some breathing room. 
    • Pick up part-time retail or service work. Too often, the optics of leaving our full-time job for a part-time cafe job stops us from the very thing we need most – stability.  
    • Picking up a flexible, low-maintenance job provides reliable income and staves off overwhelm, creating a positive feedback loop. Bonus points for mental health: it can also help our mental health because it gives us a temporary break from the isolation of solopreneurship. 
    • You could also look into temporary work as a subcontractor, part-time VA or take on overflow work for bigger teams.

3. Timeline: (aka:  How long until you start raking it in?)

  • How long will it take to become operational? When do you expect to start earning?
  • How many billable hours are you available to work?
  • What is your learning curve and the realistic timeline needed to feel confident in the services you want to offer? What services can you provide out of the gate?
  • How long do you need to save while at work? 
  • Do you need 3 months business and 6 months living expenses? 

4. Transition: (leave gracefully AND prepared)

  • Don’t want to burn your bridges. Give proper notice, stay focused and continue to make your in-house job a priority until your last day.
  • Test the waters. It’s always a good idea to take on a side-hustle or beta client WHILE you’re still employed to see if freelancing feels like a good fit, get a sense of the flow and even start to prime client relationships.
  • Be loud and proud! Talk about your new business; make your excitement infectious and pique curiosity. Your work colleagues will (usually) be rooting for you, so share what you do and encourage referrals.

Decide on your milestone and set a savings benchmark.

Your financial situation + your timeline = a clearer picture of how long you have to make your freelance business work and when you should give your notice. 

5. Maintenance Mode: (how to keep things running]

  • Self Care. Beyond financial readiness, it’s also critical to prepare yourself mentally and emotionally. As an entrepreneur, it’s easy to lose all sense of balance and make chronic stress your new norm, but your health is essential to grow (and maintain) a new business. Whether it’s meditation, journaling or something more social, consider including self-care as a must-have in your transition plan. Remember if you neglect your health you are compromising your ability to maintain and grow your business.
  • You’ll want to leave a buffer in your budget because needs evolve and additional expenses will always crop up. With things like:
    • Software Subscriptions & Premium Upgrades
    • Private Niche Group Community Fees
    • Systems – everything from payment processors to a CRM
    • Website registration & hosting
  • You’ll also want to set aside some money for professional development expenses and training. Having a set allocation of funds for training will lessen the sticker shock and help you to be more discerning when choosing between a myriad of programs, courses, retreats, mentorships and masterminds. So you can confidently decide on the right program without falling into debt and your business can level up quicker.

Other considerations: (Stuff adds up!)

  • Tax-time ramifications? Are you considering what tax time in your region means for you?
  • Extra utilities? Are you factoring in additional costs in being at home all day (gas, electricity, heating)?
  • Insurance considerations? Not only coverage & access to health care, but some regions have caveats to what entrepreneurs can claim and premiums for home and auto insurance.
  • Are you already working with clients? You can discuss opening up more time in your calendar after you transition, priming existing clients for additional support and consistent income.
  • Extra support service. Can you think of any additional support services (tech or a VA or programmer) you will need now or in your first year?

How to start a business 101 – have a transition plan

Your transition plan enables you to work your first year without chronic distraction, indecision and intense stress… but it also saves us from ourselves. 

So, why bother with a transition plan? Because YOU are your businesses’ biggest liability.

All seasoned entrepreneurs know that we are our biggest liability.Prone to consistently getting in our own way with course binging, shiny-object syndrome, undercharging, overworking and the all-star problem child – imposter syndrome.

Nothing says “roadblock” more than feeling spread too thin, dwindling bank statements and a schedule full up with low-rent clients. Most entrepreneurs are typically creative, passionate “ideas” people, which means we predictably underestimate the time things take and overestimate our energy to do it all. 

Your transition plan is your financial safety net, but your safety net from entrepreneurial myths because… ‘the boss’ lifestyle needs a reality check

The laptop lifestyle perpetuates the myth of not needing any money to start your own business. Conversely, on the other end of the spectrum is the quasi-romanticised myth of the passion-led boss-lifestyle that hinges on inevitable success.

Reality check. Your business DOES have overhead. 

You need more than a laptop and no, you can’t have all the bells and whistles and invest in VIP Gold Masterminds all.of.the.time. According to Business Insider, 20-22% of new businesses fail in their first year. And that’s just registered businesses.The number reason cited? Cash-flow problems. Low overhead doesn’t mean zero overhead when it comes to how to start a business.

Your freelancer life is not going to always be a sangrias & gin cocktails at the beach. It’s far more than a heavily stylised boho-esque office scene creator could ever begin to convey. It’s often equal parts overwhelm and monotonous number crunching. 

You should have an eyes-wide-open understanding of what it costs to run your business, what to budget and how to grow a profit-healthy business. 

Upgrade, support calls, training, invoicing software, proposals and fees and figuring out the ins and outs of systems and tools, not to mention your time – all of it adds up.

We need to acknowledge that leaving the comfort of your job is risky when only 5% of freelancers make over $100k a year.

Your online business may not have the same constraints as your 9-5 job, but there are limits to freelancing and you should understand what they are before handing in your notice.

Read Ellen’s other career stories HERE

Ellen Mackenzie is a social media strategist and business coach from New Zealand. She now helps other women break free of the 9-5 grind and start their own social media agencies with her program, The Dishing Up Digital School. You can stay up to date with her journey over on Instagram @ellenmackenziee.

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