Self-employment the “need want analysis”

Typical barriers

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 know 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 of limited company can be that simple, but all too often the excitement and joy is going off on the tangents of taking those early “steps” and discovering and subscribing to the opportunities that emerge and exist 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 that fear of will I be earning enough by the time the money is at an end? It is as if the individual wants a psychic ability!

Want need analysis

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, the need to satisfy a passing want etc.

If you are contemplating self-employment, I would urge you to undertake an analysis of your life to identify what monies you need every month and deduct those that are simply wants:

Needs:

  • mortgage/rent/council tax
  • food
  • essential travel/car
  • heating/lighting
  • essential communication
  • essential family expenses
  • monthly payment for annual costs e.g. car servicing

Wants:

  • satellite TV
  • restaurants 
  • entertaining 
  • short breaks/holidays
  • smoking

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

By undertaking this analysis, you are then able to clearly identify what you need to earn each month and it can act as a guide to what you need to charge your customers, in the absence of standard industry fees. You need to also factor in the cost of holidays and time off work through ill health. Generally, after completion of this analysis, you can see that it is easier than you thought and stripping it down to meeting your needs provides the motivation to recommence satisfying your “wants”.

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