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Why Everyone Needs A Business Plan

Posted on 12/5/2013 by EDTP Coordinator in Small Business & The Economy

If you work in corporate America, you probably spend a lot of time thinking like a chess player. What happens if raises this year are terrible? Should talking to a headhunter be your next move? How will you outmaneuver the merger that just got announced? You may not be spending enough time thinking about a whole other scenario that could make or break your career and finances: Self-employment.

Whether you want to be your own boss or not, you may have to be at some point–and if you’re prepared for it, you’ll end up in a lot better shape. Fifty percent of the private workforce in the U.S. will have spent some time as independent workers by 2020, according to the latest State of Independence in America survey by MBO Partners, which provides business infrastructure to independent professionals. Thanks to corporations’ desire for agility, more people are going to find themselves getting replaced by new technologies and workers with more flexible relationships to the company, such as outside contractors. That doesn’t mean these displaced corporate workers may never work again in a traditional job, but it suggests there will be periods where they have to figure out how to generate an income on their own.

“Everyone should think about what they will do if they become self-employed,” says Steve King, partner in Emergent Research, the Lafayette, Calif. firm that conducted surveys for the recent report.

MBO Partners-which counts temps, freelancers, contractors, consultants, solopreneurs and owners of microbusinesses with up to three employees in its tally–found that while 8% of those in the private work force now are independent professionals, another 32% have been independent at some point in their careers.  (The study focused on those who work 15 hours a week or more, with most working full time).

And these folks have more company than in the past. This year, the researchers counted 17.7 million independent workers, up 5% from 2012 and  10% from 2011.

Contrary to what many Americans think, flying solo doesn’t mean living a shaky existence where your family subsists on ramen, while bill collectors bang on the door–unless you let yourself get caught unprepared.

In fact, the research shows that a growing number of independent professionals are making six-figure incomes.

About 2.5 million of these free agents–14.3% of all independent workers–now bring in more than $100,000 a year. Their median annual revenue is $149,000. In 2012, 2.2 million of those surveyed bringing in six figures.

As you might expect, they’re very happy with their careers. Among six-figure earners, 79% are highly satisfied with their work, and another 10% are satisfied. Only 3% plan to apply for a regular job. Many love the control over their work and flexibility self-employment gives them.

It’s not just the highest earners who are happiest. It’s those with the most entrepreneurial mindset. The folks who are doing best fit MBO Partners’s definition of “Job Makers.” They view what they are doing as a business and actively take steps to build a pipeline of work that fits their skills and interests. Among the Job Makers, 86% are very satisfied or highly satisfied with their careers. Only 4% plan to return to traditional jobs. Some are even creating work for others. Some 26% of the entire sample in the study hire outside contractors for help.

The most miserable free agents are folks the report calls “Task Takers.” These are temp workers, on-call workers and fixed-term contract workers who rely mainly on doing fixed tasks from a source like an agency, instead of actively generating work themselves.

As the report puts it, they “effectively work as employees yet without an employer commitment to reliable work schedules, benefits and income. They have little control over where, when and what they do and feel neither empowered nor independent.”  Not surprisingly, 49% are dissatisfied, and 54% would rather have a traditional job. Many of these folks didn’t become independent workers voluntarily. They couldn’t find a job or lost one.

So how do you prepare yourself for the possibility that you may be a freelancer someday–and not end up as a “Task Taker?”

Learning how you might market your most valuable skills before you become self-employed is important. My number one recommendation is to get to know free agents in your field–perhaps the folks to whom your company contracts work–and learn how they find clients.  You need to figure out the most efficient and profitable way to find gigs, not the most common way. In some fields, cultivating word-of-mouth referrals may be more important than participating in online freelance marketplaces, for instance.

Pay attention to how the youngest workers you know are managing their careers and learn from them, advises King. They don’t have an underlying assumption that an employer will take care of them their whole life, the way earlier generations did, and conduct their careers accordingly.

“They accept that this is where the world is now,” King says. “They’re assuming they’re going to spend some time working on their own. They’re going to have multiple jobs and careers. Because of that, they are starting to understand the role that networking and your personal brand play into that.” Simply maintaining a strong presence on LinkedIn, which employers often use to find both employee and freelancers, is a good first step–and one he still sees professionals failing to take.

Even if you’re not planning to leave your job any time soon, its important to stay on the lookout for opportunities you could pursue if you were to become self-employed. Many independent professionals are discovering that they can build thriving businesses tailoring products and service to those at the top of the income scale, notes King. That could mean building a business that gets you outside, like a dog walker, or selling amazing vacation trips.

“This wealthy class, which is growing very rapidly, wants experiences and unique things,” says King. “They need to outsource all of the stuff they don’t want to do. They don’t have a lot of time. They have money.”

If you end up self employed, you may be surprised by how well you do and not want to go back. While 54% of traditional employees think self-employment is not as secure as a traditional job, only 34% of active independent workers feel that way, according to the report. Independent professionals understand that corporate jobs promise little more security than freelancing does, other than the knowledge that paychecks arrive on a certain day. In fact many feel more secure relying on themselves to stay employed.

“They all say the same thing: Capricious acts of a corporation can’t affect me,” says King. “I have multiple streams of income. If I had a job, I could be flat out fired and lose it all.”