5 tips on self-employment mistakes to avoid

What you need most to go into self-employment is experience and common sense. Those who want to start a business but do not have much capital must avoid some of the biggest mistakes that new entrepreneurs make.

It is generally believed that most small businesses do not last beyond their first five years. These tips, if properly followed, will help to beat that statistic.

1. Have Enough Savings
Before leaving your day job to start a business of your own make sure you have at least six months worth of living expenses in the bank. This must be taken very seriously. Undoubtedly, business can be tough at the initial stage, especially independent contract work. This is where personality comes in because personality contributes more to business success than expertise.

You must remember that there is no paid time off or sick off if you are your own boss. If you do not work you do not get paid. If you are employed consider doing your business on the side before leaving your day job, this way you will not only save cash for expenses but you will also have a cushion to fall back on in slow times. In addition to this you will have already started building up your customer base.

2. Too Much Dependent on Credit
It is possible to put business supplies on credit and pay it off eventually if you do not have cash, but if your income dwindle significantly you might have to look for work and face the problem of late payment. This might not be too good for your personality profile. This is why you must use your credit facilities minimally until you have at least 60 percent more cash coming than you spend on living and business expenses.

3. Do not Charge Less Than the Job is Worth
You must do a proper research about your chosen field before you start your business. Ask the rates of both small and larger companies. Use this research as a benchmark for charges. As a new company it is advisable to give initial discounts to lure customers in, but make clear to them what your prices for services is and when it will start. You can still under cut the bigger companies, but do not lower your price so much that you will be left struggling to make a living.

4. Minimize your Advertising Efforts
One of the most effective and excellent ways of advertising to get your business going is the word-of-mouth. But do not rely completely on this. Start with print advertisement in a local print media which will not cost much. This will not cost much and it will be money well spent. The money spent on advertising is a business risk worth taking as long as it is within your take-off budget.

5. Spend Wisely
When you begin to earn money from your business follow this pattern of distribution of your earnings:
a – your savings
b – your wages
c – needed business supplies

Your savings here can be interpreted to mean setting aside money to cover your household bills.

Resist the temptation to start spending payment from your clients as soon as you get them. Discipline yourself to make your budget work as if you have an employer who pays you weekly for your household bills.



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