5 Mistakes I Made When Transitioning Into Self-Employment (And What To Do Instead)

Published by Nela Dunato on at 09:55 in Personal, Tips for creatives, Business

5 Mistakes I Made When Transitioning Into Self-Employment (And What To Do Instead)

On September the 1st I celebrated the first anniversary of making the switch to full-time self-employment. (I survived, yay!)

I'd love to write about what I did right, and how I started earning 6 figures within 6 months, but my reality is a lot more down to Earth.

Truth be told, I find it really funny to read all the advice "how to transition into freelancing" now, because I broke pretty much every single rule along the way. And this made it more difficult than it had to be.

If I could go back, I'd try to make it easier on myself. I'd try to do whatever I could to prioritize financial security and maintaining my sanity, instead of throwing myself into the whirlpool and just hoping things would work out.

So if you're still in your day job, here's a heads-up on what not to do, and what to do instead.

(If you're already self-employed, you can nod in agreement, or feel smug because you were smarter than me. Either is fine!)

5 Mistakes I Made When Transitioning Into Self-Employment: Control your timing

1. I didn't control my timing

This is a nicer way of saying I technically got the boot.

Although I've been thinking about going freelancing full-time for a long time, I kept postponing it as long as I could. And then one day I couldn't postpone it anymore.

The start-up I worked at had financial troubles, and they stopped renewing people's contracts. I knew I would be leaving 3 months in advance, so I had some time to prepare, and even to look for another job if I wanted to.

As much as I was grateful that things worked out this way when I was too scared to do it on my own, it wasn't exactly a walk in the park.

What to do

Of course, if you get laid off, then there's no other thing to do but learn to swim in the conditions you're thrown into. But if you do have a choice, don't be afraid to use it.

Make an informed decision on when you will leave your job. By informed, I mean that this decision should ideally come when you're sure you've taken care of the other things I mention in this post, especially clients roster and savings.

Thinking about leaving your job? TIP: Control your timing (+ 4 more tips)... [Tweet this!]

Speaking of savings...

5 Mistakes I Made When Transitioning Into Self-Employment: Save money!

2. I had no savings

Yikes. Starting your own business with a literal zero in your bank account is scary. Only slightly less scary than starting with a debt.

The main reason I didn't have savings is that my pay was always a few months late, on average (sadly, that's pretty normal in my country), and since I was trusting the money to come in soon, I was still spending on things I considered important: computer equipment, a new easel, courses, books etc.

I've made the mistake to "save" what was left after I've covered all my expenses (and often there was nothing left), instead of the proper way which is to put aside some money before you even start spending.

I assumed that on the day I leave my job, I will get all my late paychecks at once, which would cover for around 5-6 months of living expenses (not bad!). It didn't happen. The money was slowly trickling in over the course of 3 months, and I never knew when it would come and how much, so I was stressing the entire time.

I had to take on a client that was totally not the right fit because I was desperate.

My plan with the savings was to focus on the kind of work I wanted to do and build a better portfolio, but I didn't have enough breathing room to do that.

When I finally did get a bigger lump of money at once, I started saving 10% of my income before I even spent a dime. After several months of doing this it's still not a lot, but at least I'm not in the panic mode anymore, because I know I can survive a month or two, even if I had zero clients.

What to do

I would advise that you start saving 10% of your income while you're still in your job. If you have any debt, make paying it off a priority.

Thinking about leaving your job? Save your sanity by saving money! (+ 4 more tips)... [Tweet this!]

If this means eating out less, buying less clothes, and postponing buying that new gadget you're dreaming of, do it. Unless the gadget is somehow making you money (ie. your computer is so old it takes you more time to do your work) — then it may be smart to invest in one because it will pay off.

There's one thing I was doing well all this time, and this is keeping an eye on my income and expenses. Every single dollar (or euro, or kuna) spent is accounted for in my budget spreadsheet.

I know exactly how much I spend on utilities, food, clothes, eating out, drinks, concert tickets, transport etc., and I've kept these logs since I first moved out on my own back in 2010.

The benefit of having this data is that you can make realistic saving and budgeting decisions, because you know how much you need for surviving, and where you can save money.

It would be too long to go into details of how this works in this post, but if you want to know more let me know in the comments, and I'll put it on my list.

5 Mistakes I Made When Transitioning Into Self-Employment: Ramp up freelance work

3. I took a break from freelancing in the months leading to my self-employment

For the first 6 months of 2013 I was freelancing alongside of my job on several projects at once (plus handling my personal projects). I got severely burnt out, and I needed to take the summer off freelancing to recover. I got offered some gigs, but I turned them all down and relaxed as much as I could.

Of course, if I had just gone on working, I'd be half dead by the end of the summer, and I'm glad I didn't do that. But still, if you have a say in how and when you leave your job, make sure there's some overlap.

Starting off with zero clients and zero income is not only depressing, but those clients you turned down may have had referred their friends to you.

What to do

Prepare for the long term. Don't take on too many projects at once. Set a limit of how much you can do and don't go over it, no matter how appealing it may seem.

If you need to take time off, make it no more than a month so you can still have a chance to catch the people who reach out to you.

And of course, make sure you don't get burned out. This may mean taking only one client at the time while you're still in your job, and letting other folks know that there's a bit of a wait to work with you.

Want to leave your job? Don't let burnout sabotage your new business (+ 4 more tips)... [Tweet this!]

Don't try to accommodate everyone, because it's just not worth the price you'll pay later.

5 Mistakes I Made When Transitioning Into Self-Employment: Prepare for more passive income

4. I didn't prepare for more passive income

I have some venues where I earn money on the side selling stock graphics, commercial licenses for Photoshop brushes and art prints. It's not much really, but every couple of weeks I get a little something that makes my day brighter.

My plan was to create more ThemeForest themes and more stock graphics, plus self-publish an eBook, so I could earn a more significant amount of money from digital products.

Because I have a hard time getting myself to commit to a single project for long enough to see it through, it didn't happen.

Right now I'm putting out fires with my clients and projects that have a deadline, so I'm not prioritizing products.

What to do

There's no better time to work on your digital products than when you're in a job. The job will get done, expenses will get paid, and in your spare time you can do whatever you want. So if you're able to, package your knowledge and start selling it.

Still stuck in a job? There's no better time to work on passive income (+ 4 more tips)... [Tweet this!]

It will take time to get traction, but it's a start.

5 Mistakes I Made When Transitioning Into Self-Employment: Professional relationships

5. I didn't take advantage of my professional relationships

I'm not going to say this was necessarily a bad thing, because I did this consciously.

After I left my last job, I told a friend "I don't ever want to do another white-and-blue travel site!"

I was so jaded with travel-themed websites (which was the majority of my work back then), that I really wanted a break from it all. My ideal client profile is quite different from what I used to do in my jobs. In fact, that was the main reason why I wanted to have my own business in the first place.

As I grew weary of "boring" projects and clients from hell, the quality of my work stagnated for a long time. Design became "just a job", and in my free time I focused more on art & illustration. I lost interest in following new technologies, trends, design magazines etc.

It was only a few months ago that I regained my passion for design. I suppose I needed some time to get all that bad client ick out of my system for good.

Now I'm finally experimenting, taking chances and doing the things I'm happy with. I'm finally filling my portfolio with the sort of projects I'd want to do in the future.

But the result of my attitude is that I didn't get a single referral from my ex colleagues in the past year. I don't blame them, really. I'm not the right person for most of the projects they get to work on, whether it's in terms of style, skillset or values.

Luckily, my personal connections more than made up for it! (It's really neat when your friends are also your ideal clients.)

What to do

This may seem like it's only applicable for freelancers who were employed in the same industry, but it doesn't have to be.

Even if you're a former IT support technician that now sells knitted crafts, all the people you've met in your workplace might prove useful in some way or another. They may not be your perfect buyers, but they may know someone who is and refer them to you.

In any case, don't burn any bridges, unless you're absolutely certain you will never, ever want to see those people again.

Quick recap of lessons learned

  • Plan when you're going to leave, and prepare well.
  • Save money for at least 3-6 months of living expenses so you can sleep better and won't need to take on projects you really don't want to.
  • As you're getting closer to your quitting date, keep the momentum of working on the side and make a waiting list if you're able to.
  • If you know something that can be packaged and sold (whether it's art licensing or a tutorial), do it while you're still in the job. You'll be "too busy" to do it later.
  • Use your professional relationships, even if you're transitioning to a different industry.

If you enjoyed these tips, please share them with others who might need them:

Thinking about leaving your job? Avoid these 5 mistakes! [Tweet this!]

Over to you

How did you transition into self-employment? What advice would you give to your former self?

Or if you're currently thinking about quitting your job, what questions do you have about transitioning?

Let me know in the comments!

Nela
Nela Dunato

About Nela Dunato

I run a boutique design consultancy that helps creative businesses evolve into premium brands and connect with their dream clients, by crafting extraordinary visual experiences.

On this blog I write about art, design, creativity, business, productivity and marketing, and share my creative process and tips. Read more about me...



Your comments

  • Mihovil

    Mihovil
    2014-10-28 at 12:48

    Great article! And in right time since I'm planning to open my own company in the autumn of 2015. Although I'm a full-time freelance web developer for 4+ years now this is a big step for me. It is not nearly as scary as getting fired from a full-time job and starting your own business more or less from the scratch though - good job on that! :D

    Anyway, great and useful points were made in this article and everyone, beginner or a veteran in the self-employment waters can learn something from it.

    For me, personally, the strongest sentence in this whole article is this: "Don't try to accommodate everyone, because it's just not worth the price you'll pay later." Just recently I've learned that the harder way. Stuff like that can be deadly for your self-employment business. Say your price, do what you do best and say "farewell" to clients who are not right for you before you find yourself in the mental "quicksand".

  • Nela

    Nela
    2014-10-28 at 15:30

    Thanks, Mihovil! :)

    It's great that you have such a long-term plan, I hope you won't chicken out when the big day comes, haha :D

    Seriously though, chickening out was what got me to postponing going freelance full-time for so long, and the timing was just never "right".

    I had so many opportunities to say goodbye to my job before that, but I never did it because I was "fine".
    But "fine" is not the way to live.

    Yeah, it's not surprising it's a difficult lesson for everyone.

    When just starting out, I walked into a deal with a client that I regretted later, but at the time I saw them as the only straw of hope and was afraid to walk out, and too drained to look for anything better - the mental quicksand you mention.

    The day after we parted ways I got two new gig offers, and everything started going for the better.

    It's crazy how that works every time. I still need to remind myself that better projects are just around the corner.

  • Mihovil

    Mihovil
    2014-10-30 at 11:51

    Haha, I hope so too. :D Well, it is an interesting thing that I left my old company (not related to web whatsoever) by myself (kamikaze-style) just to be a freelance web developer (I had some extremely basic web knowledge back then and I was aware of that). One would think that after 4 years of experience and nice number of clients, opening a company would be a simple thing compared to that, but still, it is a lot scarier than leaving my steady job just to become a freelancer. At first this doesn't make any sense but when I think about it, when I went freelancing I had nothing to lose, in case that failed, I would simply find another job. But now I don't want to go back in any way. :)

    Yes, something similar happened to me recently. I took a project (probably the worst one in my life) just to "fill-in the gap" until another projects come. Two weeks later, I got some projects from foreign companies. But guess what, "my worst project of all time" is still not finished and it is driving me crazy, which also may affect these new projects (hopefully not). And it hurts to think about what I could have done instead in the meantime (writing, improving my own website, find new and great clients for the future, improve my programming skills etc.). LESSON LEARNED !!! :D

  • Nela

    Nela
    2014-10-31 at 18:08

    Ah, I get that completely.
    (It took me a year from parting with the last company until I registered my business)
    But I still think the same. In the worst case, I'll still be able to find a job. Will I *want* a job? Probably not. I consider myself what they call "unemployable". Too much of a free spirit to fit into corporate culture.

    I can't say I feel very different now that I have proper invoices, a stamp and a VAT number... :D just the process was a little bumpy because we live... where we live.

    Oh, I'm so sorry to hear you're still struggling with that project! :(
    That seriously sucks.
    I hope you'll finish it soon and wave that client goodbye!
    Yes, sometimes your time is much better spent working on your own projects. I started enjoying the "dry" months and use this time to do my own thing.

  • Kathryn

    Kathryn
    2014-10-31 at 19:44

    Thanks so much for sharing your journey into freelancing! You've outlined some excellent considerations for anyone contemplating making the transition!

  • Beth

    Beth
    2014-10-31 at 19:55

    I can relate to not leveraging any professional contacts. I think I visibly shuddered when my former boss asked me if I wanted any contract work. Great tips, and I second the savings and the passive income streams before quitting if at all possible!

  • Chris

    Chris
    2014-10-31 at 23:18

    Great tips for things to do when you are starting out. Thanks for sharing them! I look forward to future posts on this subject.

  • Caroline

    Caroline
    2014-11-01 at 04:07

    Thanks for sharing. I am in the process of doing the passive income stuff while working. So nice to know I am on the right track with that one even if I am definitely struggling with some of the others.

  • Nela

    Nela
    2014-11-02 at 23:59

    @Kahtryn: Thank you, glad you like it :)

    @Beth: Haha oh my, I so get you...
    But I do think it's helpful to be on top of the heads of your ex colleagues (who think positively of you) when their friends need a recommendation.
    I'm the kind of person who just waits for it to happen naturally, but the brave thing to do would be to write a personal e-mail to a few asking for referrals.

    @Chris: Thanks :) I hope other posts on this subject will be more in the "what I did right" category.

    @Caroline: I'm so glad to hear that, that's awesome!
    You don't need to get it all 100% right. That's just an ideal to strive for, but often doing one of the 5 *really* well will over-weigh the lack of other 4.

  • Tihana

    Tihana
    2016-08-22 at 13:35

    tvoji tekstovi su odlični, čitam, čitam i čitam! osobno se trenutno nalazim u užasnoj situaciji, prisiljena sam zbog mobbinga napustiti posao. planirala sam svakako otići, ali nakon što sredim financijsku situaciju i osiguram si tržište. ovako...baš počinjem s dna! u jednu ruku, vesele me mogućnosti koje se nalaze preda mnom, a u drugu, jede me strah od neizvjesnosti. budući da uz posao jednostavno nisam imala prilike (čitaj: vremena, energije) okušati se kao freelancer, ne znam kuda da se okrenem, ali uz pomoć ljudi kao što si ti, koji dijele svoja, kako pozitivna, tako i negativna iskustva, s nama ostalima, neopisivo je lakše! puno ti hvala!

  • Nela

    Nela
    2016-08-23 at 12:22

    Hvala ti na lijepim riječima, Tihana! :) Drago mi je da ti je ovo bilo od pomoći.
    Jako mi je žao što si se našla u tako groznoj situaciji. Član moje obitelji je također godinama trpio mobbing na poslu i cijela obitelj je patila zbog toga, tako da shvaćam tvoju potrebu da se što prije makneš odande i nadam se da ćeš što prije to uspjeti.

    Strah nas je svih kočio na početku, to je normalno. Moj savjet je svakako iskoristiti postojeće kontakte – prijatelje, bivše kolege, rođake – da ti pošalju prve klijente jer je tako najlakše započeti.
    Sretno! :)

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