What to Do Before You Quit Your Day Job
Developing a robust professional reputation online does not require you to quit your day job (quite to the contrary).
Should you want to be a full-blown entrepreneur, however, you will need to make more of a commitment. Consider working as a freelancer before dropping steady employment. Doing so enables you to accrue experience, savings, and a client base. Ideally, you will not leave your part time or full time job until you are earning enough money to support yourself through your independent venture. Should you not be able to wait, at least have enough money saved up to support yourself for about one year.
Don't choose a life of entrepreneurship because you think it will be easy or lead to mass riches. Starting and running a business takes more time and effort than you can imagine. Start your own business if you love your work so much, you would be willing to pull 11+ hour days seven days a week to make it work.
Be smart about your business's finances. Don't take the plunge until you have put together at least basic financial projections addressing costs, projected earnings, the size of your target market, and important trends that might affect your business's growth and viability. If you are not willing or able to put together basic financial projections, you are not likely to be able to handle your fledgling business's basic finances.
Potential Career Paths for Online Professionals
The primary paths taken by professionals and entrepreneurs include:
- Full time work for an established business
- Part time work for an established business
- Full / part time work plus freelancing
- Full / part time work plus passive income
- Full time freelance work
- Full time work on one's own business
- Part time work on one's own business
- Full /part time work on one's own business plus work for another company
It is common to switch from one path to another over time. Amongst those we have interviewed, passive income is most commonly earned through book sales. Freelance work done in concert with full or part time work is most commonly obtained through colleagues and clients met through "official" jobs. This side work is often a means through which professionals transition from work for an employer to entrepreneurship.
Income Levels to Expect as an Online Professional
Because an online professional or entrepreneur can do any sort of work in any sort of industry, we can do little more than provide very broad estimates when it comes to income.
SimplyHired claims average entrepreneur salaries to be $111,000. From what we hear from actual entrepreneurs, the amount seems a bit high (though depending on one's speciality and industry, it's well within reach).
The Houston Chronicle, reporting on data from a PayScale survey from 2010, shared more specific figures:
- With regard to experience: "small business owners with less than one year of experience in running an organization earn an annual salary ranging from $34,392 to $75,076. Those with more than 10 years experience, on the other hand, earn upwards of $105,757 per year."
- With regard to gender: "men who own small businesses earn a salary that ranges from $42,575 to $96,111. Women, on the other hand, only earn $31,380 to $71,140 every year."
- With regard to industry: "entrepreneurs who owned electrical contracting businesses make salaries that range from $49,910 to $114,000 each year. Child care providers, in contrast, make anywhere between $19,792 and $61,674 annually."
- With regard to skill: "Those with accounting skills, for instance, earn an average annual salary ranging from $38,884 to $81,313, while individuals with sales management experience earning income ranging from $45,000 to $104,762."
- With regard to region: "Entrepreneurs in New York, for example, earned a median yearly salary upwards of $125,185, while those in Georgia top out at $75,500."
Generally speaking, you can expect higher income levels as a part-time freelancer or entrepreneur if you provide specialized, technical services or products or services to corporate clients. Should your work require less "rare" skill and/or be oriented around individuals or a broad range of general consumers, you will likely need to be able to sell a larger number of products or obtain more clients to enjoy a similar income level.
Primary Sources of Income for Online Professionals
The following revenue sources have all been named as primary sources of income amongst different entrepreneurs and professionals we have interviewed:
- Full time or part time work for an employer
- Book sales
- Product sales
- Service sales
- Training and seminars
- Speaking engagements
Establishing Financial Security as an Online Professional
Nearly every professional's recipe for financial security consists of some configuration of the following factors: diversification, an exit plan, and savings.
Diversification comes in the form of multiple income streams, such as full time work complemented by occasional speaking engagements, or entrepreneurship combined with passive income generated by software royalties. Exit plans typically manifest themselves as side jobs that can be scaled up as needed, such as consulting work done during one's nights and weekends, or web design work done to complement one's graphic design business.
The more one earns at any given time, the more one can save (so long as one does not proportionally raise one's living costs along with one's income). To earn more, hone in on products, services, employers, and clients that pay the most. Many entrepreneurs get caught in the trap of treating all clients and customers equally. By redirecting 80% of one's resources to the 20% of clients who ultimately generate the most income for your business (or freelance ventures), you can create much better odds of boosting your earnings. Following this same line of reasoning, it makes much more sense to devote resources to augmenting and developing high margin prodcuts and services than it does to cultivate low-margin offerings.
Administrative Tips for Online Professionals
Keeping Information Up to Date
In addition to auditing your digital footprint and developing a plan to improve your online reputation, it would be wise to schedule monthly (or so) online presence checkups in which you review your online presence (simply by searching for various iterations of your name) and make sure it is working in your favor.
Consider creating a document related to your online brand in which you keep standard messaging (such as a short, medium, and long bio) as well as information about your goals, background, specialties, and unique value. It can serve as a helpful reference point as you review various online properties, plus should you decide to update some of your messaging, you will be able to easily refer back to a central document when you come across a profile that contains out-of-date information.
Hiring employees is not easy- especially if you are an independent entrepreneur (at least most professionals have the support of an HR department or manager to help with job postings and applicant screenings). Many of the entrepreneurs with whom we have spoken hire people who they have already known and worked with. With this approach, one at least knows what to expect.
Craigslist is popular avenue through which many companies- startups and corporations alike- post job listings. Jobs posted on Craigslist typically generate a lot of inquiries from unqualified applicants, but still yield valuable assets.
Should you wish to screen job applicants with online tests, consider using Smarterer. The site boasts over 900 skill tests that can be combined into "SkillSets," a series of tests that can be linked to from job applications. Smarterer tests address everything from HTML5 to email etiquette. You can get 15 scores from applicants for free; paid packages start at $100 (which gets you 100 scores); individual score prices drop as you purchase larger packages.
When determining what to offer to new employees as a fledgling entrepreneur, use sites like Glassdoor to research wages for different job types. Pay fair wages; you don't want to become known as a cheapskate company that doesn't value its employees.
Beyond paying people well, you should also be prepared to effectively win employees over. Get prospective employees excited about your business, give them a reason to want to contribute, and provide evidence as to why your business is likely to succeed.
Again, it is essential that you create basic financial projections before going out on your own (should this be part of your professional plan). For some tips on getting started, swing by the Small Business Association's website.
If you provide services, do not offer discounts. Clients who receive discounts will be just as demanding as clients who pay full price for your services, though you will be less incentivized to cater to their needs as you know you are not being fairly paid. Lackluster work produced for discount clients could lead to negative reviews and a damaged reputation. What's more, providing discounts to some and not to others can lead to resentment, and giving people the idea that you are "cheap" may make them less likely to accept your regular fees.
Instead of providing discounted products or services, consider offering streamlined packages to clients who would like lower prices. Let us say for example that you are a career coach who provides a service package featuring five hour-long calls, unlimited email responses, and three ebooks providing helpful information. Should a client ask for a discount, offer instead a pared down version of your normal package: Three hour-long calls, one ebook, and three responses to email queries. This pared down package enables your client to save money and spares you the indignity of working for anything less than your fair wage.
Should you be tempted to discount services in an effort to build up work experience or get a foot in the door with potentially valuable clients, offer to do pro bono work (with clear boundaries and a discrete end point) instead. Clients who receive free services are less likely to be overly demanding, and you may have more leeway to be experimental.
Do not be afraid to charge high prices for your work. Doing so can:
- Enable you to do higher quality work for a smaller number of clients or customers
- Weed out low paying customers who end up milking your resources for all they're worth
- Eliminate customers who are not truly committed to utilizing your services and following through with your advice
Should you opt to post your prices publicly, you may save additional time by turning away those who would not be willing to pay for your services anyway.
It is up to you whether an accountant, accounting software, or an old-fashioned spreadsheet will be best for you and/or your business. No matter what support system you choose to use come tax season, be sure that you:
- Keep track of your income and expenses (especially those which are deductible) year round
- Maintain records of payment (invoices, checks, etc.) and expenses (receipts) in a centralized, safe place
- Regularly update your records of income and expenses in whatever format ends up being used for filing taxes (e.g. quicken, a spreadsheet, etc.)
- Familiarize yourself with the tax forms relevant to your business and professional ventures ahead of time so you know what information you will need come tax season
- Hold on to receipts for at least three years
For more guidance with managing taxes, check out the following resources:
- Guidance to starting a business from the Internal Revenue Service
- Tax tips for startups from Inc.
- The Small Business Administration on Filing and Paying Taxes
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