Overcoming the barriers to self-employment

In the last 10 years, more and more people have expressed the intention to work for themselves. Despite being well qualified for the intended role or having a good idea, they often appear to be "stuck" and unable to take those first steps.

I am always reminded of the quote from Lao-tzu that "a journey of a thousand miles begins with a single step". Too many people will not act until they know their intended course of action will be successful and that they will obtain the outcomes they desire within a specified time frame.

The truth is that the journey into self-employment as a sole trader or limited company can be that simple, but all too often the excitement and joy are lost by focusing on certainty rather than taking those early "steps" and discovering the opportunities that emerge for a new business.

The most common underlying obstacle that keeps people stuck is whether or not they will have a sufficient salary each month. This is slightly easier to overcome if you have recently received a substantial redundancy payment or windfall, but even then there is the fear of, "Will I be earning enough by the time the money comes to an end?" It is as if the individual wants a psychic ability!

Needs or wants?

The "need" or "want" analysis is critical at this point.

All of us tend to live our lives based on the money we have at our disposal and what we want, rather than what we need. This can be evidenced by the overuse of credit, the acquisition of possessions which are often unnecessary or underused, and the desire to satisfy passing wants.

If you are contemplating self-employment, I would urge you to undertake an analysis of your life to identify what money you need every month and separate those costs from things that are simply wants.

Needs

• Mortgage, rent and council tax.
• Food.
• Essential travel or car costs.
• Heating and lighting.
• Essential communication.
• Essential family expenses.
• Monthly savings towards annual costs, such as car servicing.

Wants

• IPTV.
• Restaurants.
• Entertaining.
• Short breaks and holidays.
• Smoking.

These are only a flavour of the typical "needs" and "wants".

Taking the first step

By undertaking this analysis, you are then able to clearly identify what you need to earn each month. It can also act as a guide to what you need to charge your customers, particularly where there are no standard industry fees.

You should also factor in the cost of holidays and time off through ill health.

Generally, after completing this analysis, people discover that starting is more achievable than they first thought. Stripping things back to meeting your essential needs can provide the confidence and motivation to take those first steps, while giving you something to build on as you begin satisfying your "wants" once again.