Collecting a T4 slip as an employee is great. But being your own boss may be the challenge you need to earn income or try something different. These tips can help make your dreams of self-employment a successful reality.
Self-employment takes work. It can be satisfying, but you’ll need the right skills, experience, and attitude to be successful. Discover what motivates you and how you want to work.
Find a mentor
It’s easier to learn from someone else’s mistakes than to make them all yourself. A mentor can give advice and may also connect you with their networks. To find a mentor, talk to those in the field or industry you want to work in.
Research the market
When you’re self-employed, you’re mostly in the business of selling. You may be selling the services you provide, such as consulting, contract editing, or work in the gig economy. Or you may be selling products, such as the wooden cutting boards you make or the vintage clothes you collect. But you won’t succeed unless someone is buying. You need to know your market.
Having hands-on experience and contacts in your industry helps. You’ll know who needs or wants your product or service and the price they will pay for it. It will also help you attract buyers quickly and stay on top of trends or changes that could affect your profits.
Depending on how big you want to go, you can pay a company to do a market analysis for you, or you can do it yourself. If you do it yourself, you’ll want to define key features of your target market, including:
- Potential customer information such as education, age, and income range
- Size and location of target market
- What potential customers are willing to pay
Next, find out about your competition:
- Who are they?
- What are their strengths and weaknesses?
- What are they charging?
Think about money
It can take several years to produce a steady income. How will you pay your bills until then? Some people keep part-time or even full-time jobs while getting started. Others borrow money from friends, family, banks, or government agencies.
Write a business plan
A business plan describes your product or service, how you will sell it, what your expenses will be, and how you will cover them. You’ll definitely need one if you apply for grants or loans. Even if your self-employment work is a sideline, putting together a business plan can:
- Ensure your plan is solid
- Highlight the strengths and weaknesses of your idea
- Help you see opportunities and foresee change
- Help you draw a roadmap and measure your progress
For most business plans, you will:
- Write a 1- or 2-page summary
- Prepare a profile of your business and the industry you’ll be working in
- Describe your products or services
- Define your market and how you will reach it
- Outline how you will manage your business
- Provide a schedule with key steps leading to launch time
- Forecast your expenses and profits for the first 3 years
Finally, think about how will you attract, keep, and grow your share of clients.
Statistics Canada, your local chamber of commerce, industry groups, and future clients may provide these details. You can also search articles and company websites and use online market research tools.
Research permits and licenses
In some lines of work, you may need a special permit or licence. For example, if you’re starting a catering service, you may need a health permit. For more information, contact your local government, or use the BizPaL online service.
Register your business
You need a business number from the federal government once you earn more than $30,000 in 4 consecutive quarters. But getting one early on offers you advantages. For example, not having a business number can advertise that your business is too small for one. You may also need a business number to interact with federal, provincial, and municipal governments in Canada.
Short-term goals can help you feel like you’re making progress. They can also be stepping-stones to long-term goals. Write all your goals down, review them often, and revise them as needed. Goals can include things like sales per year, number of clients, or number of products.
Write winning proposals
Many self-employed people write proposals to compete for work. Sometimes clients or buyers create requests for proposals (RFPs) and post them on online sites such as Alberta Purchasing Connection or Buy and Sell Canada. But you can also submit proposals without being invited. Either way, it’s good to know how to write one.
Most RFPs are laid out in a similar format that supplies you with the details of what you must include in your proposal.
Assume you have competition
Always manage yourself as though you have stiff competition, even if you don’t. It will force you to run your business better—and help you hold on to your clients if a new competitor comes along.
Keep costs down
“Overhead” refers to the cost of running a business, such as rent and office supplies.
All businesses should try to keep costs down, but it’s even more vital if you’re just starting out. You can control costs by:
- Working out of your home
- Buying only the equipment and supplies you need
That said, working out of your home is not free. You’ll still need a phone, computer, Internet, office supplies, a website, and more. You may also need to pay for a lawyer or accountant.
You can deduct many of these costs from your income tax. Contact the Canada Revenue Agency (CRA) to find out which ones.
An easy way to save money is to maintain up-to-date records. Keeping track of your appointments, deadlines, invoices, payments, and receipts means much less stress when you need to do your accounting and tax work.
Plan well and go slowly
Remember that business plan you made at the start? Before you change anything about your business, go back to your plan. Make sure there’s a good reason for the change you’re thinking about and consider all the possible consequences. Growth is good but growing too quickly isn’t. It can lead to quality problems and delays, which can cause you to lose customers and your reputation.
No matter how well you know your business, watch for new ideas. You may be a top chef, but if you don’t stay current on catering trends, your business could be overtaken by others who are more in touch. Sign up for workshops and courses to keep learning.
Attend industry events, like lunches and breakfast meetings. This is a great way to learn from others and make yourself known. Look into events hosted by your local chamber of commerce or industry association.
Don’t start something you can’t finish
A successful business needs your full attention. If this isn’t a good time for you to dive in, it may be best to wait. This is even more true if the business you want to launch has high start-up costs. Even the smallest business type is risky. For example, you may be giving up paid work only to find that the clients you found in your research are now no longer buying your type of service or product for reasons you wouldn’t have thought. Before you jump in, be sure you’re ready.
These tips apply to almost all types of self-employment. Keep them in mind—but don’t stop there. Take your research further by reading about or asking for tips that relate to your own business area. Combining general tips with advice about your own industry will set you up for success.