5 Big Lessons I Wish I’d Learned Before I Became Self-Employed

If you’re considering becoming self-employed, you’re probably thinking how great it will be not to have a boss and all the other benefits you hope to gain by being out on your own. You may also be reading all you can about self-employment to learn what this new career adventure is going to be like.

I can tell you from personal experience that no matter how much studying and prepping you do, you’ll still face some surprises once you join the ranks of the self-employed. Some will be nice surprises, and others will present real challenges that you won’t be expecting and may be unprepared to face.

With the goal of better preparing you for this brave new world you’ll face as your own boss, let me provide you with five self-employment lessons I wish someone had shared with me before I became self-employed 30 years ago.

Lesson #1: If you don’t already have networking skills, get some fast or risk failure

Before I became self-employed, the jobs I held never required me to do any networking, let alone be actually good at it. This was fine with me because I tended to be an introvert who wasn’t comfortable striking up a conversation with a stranger over the buffet at a chamber of commerce event.

But once I was out on my own, it very quickly became clear that I was going to have to learn how to network if I wanted to succeed as a freelance public relations consultant and ghostwriter. It sure would have helped if this fact had been apparent before I was already in the thick of trying to build my business. If it had, I could have worked on this skill sooner and been better at it from the get-go.

After nearly two years of countless networking events where I chiefly took on the role of a wallflower, I finally took a step that helped me enormously in becoming good at networking. I enrolled in a Dale Carnegie public speaking course.

Learning to be comfortable speaking in front of an audience quickly helped me become more comfortable in doing what needs to be done when you’re trying to build a business—walking up and starting a conversation with a stranger or group of strangers at a networking event.

Sure, there are other marketing methods that will help you build your business. But in my experience, I found nothing to be more productive than meeting new people face to face and being able to tell them about what I do and, equally important, learn about what they do and figuring out how I could help them.

I estimate that over the last three decades, around 80 percent of my business came through networking in organizations where I was able to build relationships with people who once were strangers but who now either hired me directly or shared my name with someone they knew who could use my services.

And here’s another important lesson about networking: You can’t let it slide, no matter how well your business is doing.

Once you’ve been self-employed for a while and established a solid roster of ongoing clients, it’s very common to ease up on the networking or even stop it altogether. But that’s not a smart strategy because client defections can happen at any time, often with little notice and for reasons completely beyond your control.

A client can get sold to another company that has its own set of preferred vendors. A client can face cash flow problems that force them to cut you from their budget. A client can decide to hire someone in-house to handle the services you offer. Or the entire economy can tank and take some of your clients with it. This shortlist doesn’t even begin to cover the endless possibilities that can cause you to lose clients unexpectedly.

If any of these things happen, you’ll wish you hadn’t stopped networking because you’ll now need to get out there and quickly reintroduce yourself to contacts you’ve been ignoring for months. If you’ve been out of sight and out of mind for too long, it’s like starting from scratch again to form those close bonds that lead to business referrals.

A final note of advice on networking is this; track what works and what doesn’t work.

There’s no use spreading yourself thin by attending every single networking meeting. This approach will soon lead to burnout and turn you off on networking altogether. So make sure you’re looking at the return on investment in terms of money and time spent compared with useful contacts made.

Lesson #2: Be very, very careful before entering into any business alliance

One of the best ways to grow your business when you’re self-employed is to form strategic alliances with people in related fields. For example, graphic designers and web designers are a great source of new business for me since they frequently have clients who need help with writing brochures, website copy, or other materials.

In turn, if I come across a client who needs a graphic designer, I refer them to one of my colleagues. At the same time, however, it is important to understand if such an alliance goes off the rails, it can pose a considerable danger to your reputation and thus to your business.

With one notable exception, I’ve been very lucky with my alliances. But I have spent an inordinate amount of time sympathizing with and offering advice to friends and clients who have found themselves in an alliance from hell.

When a blowup of this nature occurs, it often leads to very bad feelings and, in some extreme cases, can even imperil someone’s business. The two lessons I have learned from witnessing these events and from one episode of my own where things went terribly awry are:

Don’t enter into an alliance with someone you don’t know really well.

Be clear from the get-go what your expectations are, especially when it comes to money and who controls what.

As I related in my book, The Self-Employment Survival Guide, the one bad alliance-related experience I have had in my freelance career came when I ignored the first rule above. It also happened to be the situation in which I took my biggest financial bath ever. It taught me a big lesson about making sure I knew who I was, metaphorically speaking, getting into bed with before agreeing to partner with someone.

A print broker called me and said several people had recommended me to him as a possible writer for a marketing brochure for one of his clients. I didn’t know the guy from Adam, and I should have done more homework and gotten some references to him.

But the job was attractive and came with an attractive fee, so I readily agreed to meet with him and his client and the graphic designer he had brought into the job, who was also someone I didn’t know.

It was clear early on that the client required extra care and hand holding because he had never worked with freelancers before. That was fine; I’m used to that. We had several overly long meetings while we all worked to educate him on how this process worked.

Things seemed to be going smoothly, and it had even occurred to me that this print broker might be an ongoing source of business leads for me.

Then the roof fell in. Once my writing was done and the designer, who turned out to be a real pro, had come up with a design the client liked, I was shocked to hear that we had all been fired!

Turns out that weeks earlier while the print broker sat in the client’s lobby waiting for a meeting, the client’s personal assistant began telling him how unhappy she was in her job. The print broker generously suggested that she apply for a job at his wife’s firm. She was offered a job at a higher salary, and our client had to give her a raise to keep her!

The client was understandably upset with the idea of a vendor tampering with his staff, and who could blame him? I, too, was appalled by the print broker’s stupidity.

Although the client said he knew neither the designer nor I had anything to do with the print broker’s gaffe, the whole thing left such a bad taste in his mouth that he refused to pay us the remainder of our fee, which in my case was over $1,000. Since the contract was between the print broker and the client, I had no legal recourse. Lesson learned . . . make sure you’re not partnering with an idiot!

I’ve seen friends make the mistake of not getting to know someone well or failing to check references. But in most cases where I’ve seen friends have alliances go horribly awry, the cause has been a failure to set expectations upfront. This applies to money, responsibilities, and power. (Power in this situation refers to who is in charge and who “owns” the client relationship.)

Here are tips on how to form a successful strategic alliance:

1. Have a candid discussion about what you want out of the relationship

When everyone puts their cards on the table upfront, things are apt to go much more smoothly over the long haul. For example, I have one web designer colleague who expects me to pay a 10 percent finder’s fee when she refers a client to me. Ditto if I refer a client to her. It works well because we decided that in advance of any referrals being made, not after.

2. Make sure your personalities are a good match

You don’t want to be frequently working with someone you aren’t really simpatico with, do you? Dealing with difficult clients is maddening enough, let alone adding a difficult colleague into the mix.

Of course, the degree of care you take in choosing someone to work with will differ based on how long or how close the relationship is expected to be. If you’re going to enter into a true alliance where you’re intending to share clients over the long term and will be doing activities such as joint marketing, you need to do a lot of strategizing together about the objectives and the mechanics of the relationship.

3. Finally, it is essential to put key points in writing

This should not need to be said, but, alas, from what I’ve seen, it is advice that is frequently ignored, to everyone’s later regret. Going through the exercise of putting in writing the key points of an alliance is very helpful.

While you may not be forming a legal partnership, you still will benefit from putting down the key points, especially those related to money and responsibilities. And, of course, if you are forming a legal partnership, then make sure you have all your paperwork ducks in order on that front before moving forward.

Lesson #3: Never put too many eggs in one client basket

Some years ago, I was very worried about a friend who was a freelance public relations consultant like me. At that time her client roster included two small clients who gave her sporadic assignments and one very big client that consumed roughly 90 percent of her time and accounted for the same percentage of her income.

This is a very dangerous situation for a self-employed public relations consultant because, in our world, there are no guarantees. As I mentioned earlier, even if you’re doing a fabulous job, a client can suddenly dump you. Sometimes you have advance warning that things might go south, but often you don’t. Which brings us back to my friend’s case.

Several years into her relationship with the firm that was now accounting for the vast share of her income, a much larger company suddenly acquired her client. In such a scenario, anything could have happened to her relationship with the firm.

After my friend got this alarming news, we burned up the phone lines discussing all the possible outcomes this sudden change might have for her. As it turned out, she was given a six-month contract extension by the new owner, which actually increased the number of hours she was putting in on this client during those months. So then she had even more eggs in this one basket!

Then, at the end of the six months, she was told that her services were no longer needed because the newly enlarged company was hiring a much bigger PR firm to handle the work. This left her client roster in very sad shape and sent her scrambling to find new business.

It had been a very good couple of years financially, but now the lean times were upon her. And given that at this point the country was in the midst of the Great Recession, lining up new business proved to be very hard.

Having too many eggs in one basket, of course, is not just a problem for those of us who are self-employed. Manufacturing companies, for instance, can also face big problems if they become too heavily dependent upon one or two large customers. Without a good diversity of customers, it is all too easy for a business to be totally rocked by just one or two customer defections.

Throughout my years of self-employment, I have tried to make sure I never had too many eggs in one basket. I had adopted this philosophy after having had my biggest client tell me in about year two of my business that I either had to accept her latest job offer or they would hire someone in-house to do all the writing I was doing and I would be out a huge piece of business and almost starting from scratch again.

I gave in and accepted her job offer, which was possibly the biggest mistake of my career. I lasted for nearly three years and they were three very uncomfortable and unhappy years. I left and went back to self-employment and swore to myself that I would never again let any client become so big a part of my business that losing them would represent a disaster.

The reality, however, is that it can be difficult to follow this philosophy, especially if a client is handing you more and more well-paying business, as in my friend’s case. She certainly didn’t start out working for them with the notion that they would become almost her sole client, but on the other hand, once she got really busy with them, she stopped pursuing other prospects.

Ignoring the dangers of such a situation is very risky, and before you do likewise, I encourage you to consider the possible negative consequences.

Having a diverse client or customer base is fundamental to long-term success.

So check your basket regularly, and if too many of the eggs are from one client, see what you can do to change that situation.

Always keep track of where your money is coming from. I’ve always tried to have a handle on what percentage of my income is coming from each client. Once I was anywhere near a point where more than 40 percent came from any one client, I knew it was time to get serious about generating new clients.

Of course, if your dance card is already full, the question becomes how do you find time to do all the new business activities required to generate new clients, let alone do the work they will bring with them? The answer is that you need to have people you can offload work to. I’ve always had at least one subcontractor involved in my work.

In the really good years, I’ve had as many as three subcontractors working on different projects. An alternative is to begin to hire employees and build a company. For my tastes, this is not what I wanted to do because I didn’t want the worry that comes from having to meet payroll each week. But you can gain many of the same benefits from hiring subcontractors who are available when your plate becomes overfull.

Lesson #4: Realize that it’s okay to fire a client

Here’s a lesson it can take a long time to learn, but it is essential that you master it if you want to be happy in your self-employed life. Let’s say you made a mistake and ignored the red flags that were warning you that a prospective client might not be a good client for you.

So here you are with this terrible person on your roster. What do you do? The answer is simple. You fire that bad client and move on to find someone with whom you can have a rewarding and productive working relationship.

Yes, I understand all to well that when you’re first getting started, the notion of firing a client may seem nonsensical. But one of the most important lessons I’ve learned is that firing a client is often the best thing you can do to move your business forward.

The worst thing you can do is hold onto a business relationship that torturous or unproductive. All this does is drag you down and drain your energy, something that you can’t afford to have happened.

I’ve fired a number of clients over the years. It always produces a feeling of exhilaration and freedom. And I’ve always known instantly that I had done the right thing. It just feels right.

How do you know when it’s time to cut a client loose? Here are surefire signs that this person’s business is more trouble than it’s worth:

The person doesn’t respect any boundaries

If you’re getting client calls at any hour of the day and weekends, too–even when you’ve explained that you don’t work on Sundays or that you prefer not to be called after a specific hour–then you’re dealing with someone who is not respectful of your personal time …and thus not respectful of you.

This behavior usually accompanies unreasonable demands for project turnarounds since a person who would call you at 7 a.m. on a Saturday morning (yes, that has happened to me) probably is positive that whatever you’re working on for him/her is THE most important thing in the world and needs to be done immediately.

Every budget discussion is preceded by a description of just how bad the client’s business is and about how little money they have on hand

This person is just setting you up for a negotiation in which they will try to talk you down on your price. If you let this happen, their money problems will become your money problems once you agree to a price that is below what you should be charging. Steer clear of such bottom feeders.

You have to chase your money

This one often goes hand-in-hand with having a client who always cries poor mouth when it comes time to set a budget. First, they talk your price down and then they are slow to pay that price.

Wondering when you’re going to get paid and even if you’re going to get paid is such a tiring exercise. If you have to chase your money once, that’s one thing, but if you’re constantly having to make dunning calls and if you’re told the check will be mailed today and it isn’t, then it’s time to cut ties.

(Of course, you don’t do this until all your money is in your pocket because the type of person who would constantly be late in paying is also a person who will decide not to pay that last bill if you tell them you’re no longer going to work with them.)

1. No project ever goes smoothly, mainly because the client is unable to make decisions and stick to them or doesn’t meet their own commitments for the project.

Sure, things do come up unexpectedly that require changes midstream, but if this always happens with a client, something is wrong. If you consistently feel more frustrated than fulfilled in your work for a client, it may be time to call it quits.

Also, if these unexpected shifts mean that you lose money because you’re working on a project fee basis instead of being paid for the hours you actually spend on the job, this is definitely a sign of a client who needs to be fired.

2. You hear plenty of complaints but nary an apology or a thank you.

Clients who hand out verbal abuse but never any kudos are the worst. Why put yourself through this? Sure, anyone can fly off the handle now and then under the pressures of business, but if no apology follows when the person has calmed down and if this is a constant fixture of the relationship, it’s time to say adios.

Sometimes you can spot problems even before taking on a prospective client. At such times, it’s important to go with your gut and gracefully decline the business. Of course, this isn’t always easy to do if your bank account is looking anemic, but experience has shown me that once you say no to a piece of business, sometimes better almost invariably shows up. So trust your instincts on this and on when to fire a client.

Lesson #5: Have a backup plan in case your health lets you down

When I had been a consultant for just a few years, I faced one of the biggest perils of self-employment: a medical crisis that puts you out of work while simultaneously generating big medical bills.

I suffered a badly torn retina in my left eye; the damage was severe enough that it required a four-day hospital stay. I had health insurance (this is a must if you’re self-employed), but the deductible was high so I was immediately facing financial woes.

But things got much worse when my eye surgeon advised me to take it easy and not plan to work for a month to six weeks. This presented two big problems.

First, I was in the middle of organizing a major community event for one of my biggest clients. I did have a subcontractor who was helping me with the work, but I was the one doing all interacting with the client and with the public schools and the local newspaper that was involved in the program.

Second, I had no emergency fund to tide me over. I had started my business a few years earlier just as the economy entered a significant recession from which we were just recovering. Those first years I hung on by my fingertips in terms of finances, and I was finally beginning to see light at the end of a long tunnel, but I had not yet been able to build up significant savings. So, as far as I was concerned, not earning any income for a month or more wasn’t an option.

The afternoon I returned home from the hospital, I was on the phone assuring the client that all was well and that there would be no interruption in the planning of their event. I took things fairly easy for a few days, but by the next week, I was working a normal schedule.

I was lucky in that the type of work I do rarely involves anything truly strenuous. Once I got a few nights of good rest after the hospitalization, my energy level was back to normal. I could easily manage sitting at my desk all day writing and making phone calls.

The only real physical challenge I faced was that my good eye got really tired if I stayed at my computer for too long. I tried to manage this by taking frequent breaks during the day.

The risk of having a significant gap in my income didn’t materialize, but only because I completely ignored the doctor’s order to not work for a month. But, of course, with many medical problems or injuries, it is not possible to ignore a physician’s order not to work.

Obviously, if your line of work requires physical labor or frequent travel, you could be limited in your ability to continue working if any significant medical woes arise.

So before embarking on self-employment, you need a plan for what will happen if you faced the double whammy of medical bills along with not being able to earn any income for a while. Do you have enough savings or another source of income such as an employed spouse or partner to help you make it through a period of inactivity?

These are things to think through in advance, and particularly so if you have any type of recurring medical condition. And even if you have no health challenges, it is wise to remember we’re all one slip on an icy sidewalk away from potential disaster.

Final words

Consider these five lessons carefully as you prepare for self-employment. Not all of them may seem pertinent as you launch your new business. But I can almost guarantee that sooner or later you’ll face challenges where this advice will be helpful.

Good luck out there on your own. Always remember that others have successfully walked this path and you can do it too if you’re willing to do the hard work and make the tough choices that are sometimes necessary to thrive as your own boss.

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Website: SucceedingInSmallBusiness.com

Jeanne Yocum is the author of The Self-Employment Survival Guide: Proven Strategies to Succeed as Your Own Boss, published by Rowman & Littlefield.

Her book is based on her nearly 30 years of experience as a freelance public relations consultant and ghostwriter of business books.