Had a lunch with an old friend yesterday and he was talking about wanting to start his own small business, but he wasn’t sure how to make the transition from employee to freelancer. Here’s how I did it, and it may work for you: Whatever role you’re performing as an employee, simply think about that function as a stand alone business. Offer the service to your employer as a 1099 (contract) worker, instead of as a W-2 (wage) worker. Assuming you’re good at what you do, your employer will likely (sometimes reluctantly) agree to these terms. Even at the same salary rate, it will save them a little (and cost you a little, so budget accordingly) in payroll taxes and benefits. The natural tendency of the employer will be to start reassigning your tasks in-house, so don’t be surprised when your job shrivels up to nothing. The intention is to give you enough time to declare yourself independent and begin taking on other gigs. This is for the best, anyhow, because any additional clients you bring on will certainly be at a higher per hour rate than what you’re receiving as an employee-turned-freelancer. The difference, of course, is the amount your former employer was keeping as payment for the risk it shouldered by employing you and also as profit on your activities.
Objection: “But I manage people and it won’t work for me to manage off-site or as a contract worker.”
This method won’t work for everyone, but there are usually creative solutions. For example, you can agree to be on-site for 3 or 4 days out of the week or take a pay reduction commensurate with the responsibilities you relinquish as you transition roles.
Objection: “I need the group health insurance provided by my employer.”
This one is tricky. When I became a freelancer, I contacted a local friend who has a small insurance brokerage and he was able to set up a teeny tiny group policy for my wife and I as separate employees of our company. It isn’t all that expensive, but I’ve talked to lots of people who have had considerable difficulty for one reason or another. On the other hand, I’ve talked to lots of people who have had great success with individual policies, which are often less expensive than group insurance. We had some pre-existing conditions and wanted the ability to offer benefits to any future employees, so were pretty much forced to go the group route. My best advice is to find someone who knows or sells health insurance and go through some scenarios with them.
Objection: “I’ll need to set up a website, design business cards, market myself, etc. Also, I’ll have to perform all business functions; sales, admin, support, etc. That would be too hard, too much time, too little pay.”
This is all true, but the real objection here is usually, “I’m scared. I’m scared of doing something meaningful, of putting my ego on the line, of attempting to make an impact on the world, and failing.” Yep. That’s the risk. It’s worth all the frustration, all the anxiety, and all the heartache, but you can’t know until you try it for yourself. There’s a whole world of excitement and opportunity that never reveals itself until you break out of the corporate grind and start controlling your own time. That’s what it all boils down to. Time is by far the most precious commodity all of us have – why give it away unnecessarily?
