A Guide to Self-Employment

Advice for recently laid-off workers considering going into business for themselves.

So you lost your job. Now what? As an employee, you had a daily routine, health insurance coverage, and a regular paycheck. You liked the security—while it lasted. And if you sometimes daydreamed about the freedom of working for yourself, leaving a full-time job never seemed worth the risk.

But now, laid off into a recession and the worst job market in decades—2.6 million Americans lost jobs in 2008, with 524,000 eliminated in December alone—you may be thinking self-employment sounds like the best path out of unemployment. Rather than try to land one of the few open jobs out there, maybe you could work as a freelancer or consultant, at least until the job market recovers. You're in good company: There were nearly 9 million self-employed workers in December, according to the Bureau of Labor Statistics. But if you're among the thousands of unemployed now trying to go it alone, where do you start?

First, step back. Decide what your goals are and how freelancing will help you achieve them, says Pamela Slim, author of the Escape From Cubicle Nation blog and a forthcoming book of the same name. "It's obviously very easy at the point of being laid off to really come from a position of fear and desperation," she says. Thinking about long-term goals from the start will keep you grounded and help you determine how to proceed. Once you're clear on your goals, Slim says, you should ask: "What are the specific skills, knowledge, money, resources, information, and contacts [you] need to bring that picture to life?"
Health Care

There are plenty of nuts-and-bolts concerns that can overwhelm first-time freelancers, especially those who suddenly lost steady jobs. Chief among them is health care. The health insurance system does not accommodate independent workers well. If you can't get coverage through a spouse's plan, you can continue your old employer's plan at your own expense under COBRA. You may also be eligible for group health insurance through a group like New York-based Freelancers Union, which launched a health insurance company last year offering plans in 31 states.

Freelancers Union's executive director, Sara Horowitz, suggests checking with local chambers of commerce to see if they offer plans for sole proprietors. She also points self-employed workers to local health insurance information on a site run by the Actors' Fund called Access to Health Insurance/Resources for Care. Whatever option freelancers choose, Horowitz says they should avoid going uninsured for even a month, even if they buy high-deductible plans. "So many states have preexisting-condition clauses. If you go and buy the most catastrophic plan, you will not have a break in coverage—and if you get another plan it will all be counted," she says.

Another hurdle for any new freelancer is how to land your first gig. Slim suggests looking to former employers, even if you have been downsized. "Many times, strangely, the same companies that lay people off do hire them back on a contract basis," she says. You can use that first client to show others that you're capable of delivering value as an independent contractor.
Network Full-Time

In addition to maintaining ties to your old company, you should prepare to make networking a full-time job. But realize that the people who can help you succeed may be different from the contacts that helped in the corporate world. "Freelancers, it's kind of an underground culture, and once you tap into it, people know everything about where to go for what," Horowitz says.

One of the most important referrals you can get is for a good accountant. Knowing what to write off as business expenses can save enough on your tax bill to make hiring an accountant worth it, Horowitz says. Still, be prepared to write hefty checks to the IRS. Since your employer isn't withholding taxes anymore, you'll need to pay estimated taxes four times a year. You're also on the hook for the employer's contribution to Social Security now. Horowitz says freelancers should set money to pay taxes aside in a separate bank account. "Nobody ever puts away enough," she says. "That's the biggest way that people get themselves in a hole."

Besides paying taxes, finding health care, and landing clients, self-employed workers face another big challenge: motivation. It's easy to procrastinate when there's no boss looking over your shoulder. Slim suggests freelancers establish a schedule and put themselves in environments where they know they'll do their best work, whether that's having a clean home office, going to a co-working event, or plugging in at the local coffee shop. Regardless, she says, the newly self-employed have a powerful incentive to deliver, particularly in a tough economy: "There's nothing more motivating than knowing that if you do not complete your work you will not get paid."

BLOGGING IS SERIOUS BUSINESS

Indian bloggers are mastering the art of making money by linking up with advertisers. Its too early for them to leave their jobs, but many professionals have become full-time bloggers. Heres how it works.

BLOGGING is no longer seen as a favorite pastime of the geeks alone. With the spread of high- speed broadband connections and the new media, the guy- next- door to business tycoons to Bollywood stars are blogging seriously. Who doesn't know about Big B's latest venture in the online medium to reach out to his audiences or Aamir Khans day- today scribbles ( even a little of mudslinging), for that matter?

Apart from being an easy outlet to express oneself on just about anything, blogs today have also become a means to earn money. All one needs is a domain name and a space in blogosphere. This is how you can make money out of your blog. Once your blog has a certain number of hits, which you can track through free softwares like Siteometer installed in your blog, you can register for Googles AdSense in Google.com/adsense. There you can see a directory of companies which want to place ads in blogs.

Suppose you have a travel blog, you choose some of the travel- related companies you want and put that companys link in your blog. If, say, ten viewers who came to your blog click on that link, then you get a portion of the money that the company pays to Google. Every now and then you will be surprised to receive money from Google, which is your share of the money that the particular company has given to Google. How does this work? Anyone of you who has a Gmail account can see on the right side of your page adverts of various companies.

Suppose you get an e- mail from a friend inviting you to Rajasthan for a holiday. When you open that page, on the right hand side you will see links to various hotels and travel agents in Rajasthan. If you click on any hotel which has a link there and book rooms, then that particular company pays Google some money. The same works for blogs though the methodology could be different.

Many Indian bloggers make over a lakh of rupees a month. It is quite easy for travel bloggers who update regularly to get about Rs 10,000 a month. To increase revenue from ads, the blogger needs to keep on adding company links on his blog. How much you earn depends on a number of factors including how many clicks an advertiser gets from your blog . Youll receive a portion of what the advertiser pays. The best way to find out how much youll earn is to sign up and start showing ads on your web pages. The payments come to you through electronic fund transfer, or sometimes through cheque.