Is self-employment right for you?

Working for yourself can bring many rewards - freedom, flexibility, and the chance to follow your dreams. But it can also bring new risks and uncertainty that may not be suitable for everyone. Careful research and sound planning can help you meet these challenges and make the most of your business idea.

   To find out if you're ready to be your own boss, and for many helpful tips to help you succeed, click through the links below:

•  Do you have what it takes?
•  Setting up your business
•  Your financial affairs
•  Resources for the self-employed


Do you have what it takes?

    Striking out on your own can bring numerous rewards, but also a host of challenges. A recent Survey of Self-Employment in Canada identified the following disadvantages to being self-employed: uncertainty, insecurity, long hours, income fluctuations, a lack of benefits, and stress.

    To find out if you have the right temperament to deal with these challenges, ask yourself the following questions (hint: if there ever was a time for honest self-assessment, this is it):

•  Are you confident that you can succeed?
•  Are you willing to take risks?
•  Are you a good decision-maker?
•  Are you organized?
•  Are you flexible?
•  Are you willing to market yourself and your product or service?
•  Are you willing to work long hours?
•  Are you willing to take responsibility for all aspects of your business?

    If you answered no to more than a few of these questions, you may want to reconsider if self-employment is right for you, or complete a more detailed self-assessment by visiting the Human Resources Development Canada Web site. If your desire is now burning even brighter, then read on.

Are you lonesome tonight?

    Many who become self-employed initially start off working from their homes. Technology and instant communications have made this possible, particularly for information-based services such as accounting, graphic design, and consulting. But if you have been in the workforce for some time, working from home will require some adjustments.

    One common complaint among those just starting out is the lack of social interaction. No one will be there Monday mornings to ask about your weekend, or to toss around ideas when you're stuck on a problem.

    Tips: Consider joining a professional association in your area of expertise. Joining a group of like-minded individuals can help you stay on top of industry developments and make contacts.

    Another good idea is to take the time to schedule lunches or coffee meetings with former colleagues or friends outside of your home - particularly if you're just starting out.

Setting up your business

We've started by highlighting the significant challenges of being self-employed to help prepare you for what you might face. Successful business people embrace risk, but they are also realistic. Part of their planning involves taking steps to mitigate uncertainty. Here are a few things you can do to put the odds in your favour.

    Write a business plan. Even if you will be working from home, developing a sound business plan can help you organize your thoughts and give direction to your energies. And if you ever expand and need financing, it's a necessary document.

    There are a number of books on the subject, plus a host of Web sites that can help (see "Resources" below). If you are ready to take your business to the next level, consider getting a professionally developed business plan.

    For help in getting started, try Scotiabank's free, easy-to-use Scotiabusiness Plan® Writer. It takes care of the math so you can focus on your business goals. Watch for updates to this feature in coming months.

   Tip: Check your local college or university to see whether students in their business programs offer strategic help with business plans.

   Separate your finances. If you are working from home, it may be tempting to use your personal credit card for day-to-day expenses. But this can complicate potential tax deductions. Better to keep your business and personal finances separate. Consider taking out a credit card for your business and opening a separate bank account.

   Keep good books. Tracking income and expenses, saving receipts, and paying bills and invoices on time will give your business a professional edge and make it easier if you decide to expand. It will also help you take advantage of the numerous tax deductions available to the self-employed.

   Stay current. Training and continuing education are very important for the self-employed. First, you should keep up to date with changes in your profession (particularly important if your work depends on software technology, for example). As well, you'll need to educate yourself on the skills needed to run a business. The good news is that there are many government programs that can help (contact a Canada Business Service Centre or a Canada Employment Centre). And any such courses can be tax deductible.

Your financial affairs

FIf finances are not your strong suit, it may be a good idea to seek out some professional help, including an accountant, insurance agent, personal banker, and financial planner. If you decide to look after these matters yourself, keep the following in mind:

    Insurance. Getting the right insurance coverage is critical. Unless you're covered under your spouse's plan, you are now responsible for supplementary health, dental, and disability insurance.

    The Survey of Self-Employment in Canada found that only 40% of the self-employed had disability coverage. The top reasons given for not having this coverage were the cost and that they hadn't thought about it. We recommend that you do think about it. It may be the difference between making a living and having no income source.

    Tip: Many professional organizations and university alumni organizations offer group discounts to the self-employed by pooling the resources of like-minded business owners.

    Retirement Savings. Moving from full-time employment to being your own boss may mean the loss of a company pension plan. The onus is now fully on you to save for your retirement. Even though this is a reality that many of us face, the fact is that necessity will often tempt you to invest as much as you can into your business, leaving little time for the long term.

    Tip: A regular investment plan may be a good solution. These plans allow you to put aside a small amount each month - often as little as $25. And you can arrange to have the money come out of your bank account automatically. Speak to your personal banker or financial planner about the best way to ensure the priority of your retirement savings in the face of competing claims.

   Tax deductions. If you run a home-based business, there are numerous deductions available to you. Let's say your home office takes up 25% of your total floor space. You can deduct 25% of your utilities, home insurance, mortgage interest, and maintenance costs, for example.

   Expenses directly related to the business, such as supplies and your business phone line, are also deductible. It's a good idea to speak to your accountant or tax advisor - and to keep accurate records - to take advantage of all potential deductions.

Resources for the self-employed

The rise in self-employment has created a huge literature that covers all aspects of going it alone. Check out your local bookstore's business section. It's also a good idea to investigate trends in your field of expertise by researching periodicals, newspapers, and relevant Web sites.

   Here are just a few of the many Web sites devoted to self-employment:

•  Canada WorkinfoNet
•  Online Small Business Workshop
•  Self-employment service