Becoming Self-Employed

[Vulcan Princess]

Does anybody have experience leaving the rat race and striking out alone?

I've been working in HR for about 3 years. There's no room for advancement at my company, and I've discovered that I'm paid about 75% of market rate for the work I do. When I asked for a raise, my boss said that I deserved it, that I'm doing great (her exact words were "We would be lucky to be able to keep you."), but that her hands are tied. My boss is my only advocate at the company and she's retiring next month. I applied for her job, but the company doesn't promote internally.

I finished law school last year, and I took the bar exam last month. (I won't get my results for a few more months, though.)

I've decided that I want to be my own boss. I live in Silicon Valley, so there are a ton of startups around, usually without any HR guidance. So I'm considering offering my services as a human resources consultant. Basically, I'll come in, help them write up an employee handbook, train the managers on the various HR issues, and be their HR batphone. Once I pass the bar, I'll add employment law services.

My overhead will be low - I'll work from home and visit clients in their place of business, so I won't have to rent office space. I have the skills to design my own website and stationery. I spent 4 years as an administrative assistant before launching my HR career, so I won't have to hire anyone to manage the office tasks.

But... I just finished a law degree. So I have massive (think mortgage-sized) student loans. And no savings. I'm only barely making ends meet at my current job, so it's mathematically impossible for me to bide my time and build up savings, despite living a very frugal lifestyle.

My credit score is excellent despite all of that, so I'm considering a small business loan to get me through the first few lean months until I start earning money. Does anyone have any advice?

 

[auntiehill]

^I've watched a few friends try to start their own "at home" business and they failed miserably. If I were you, I'd keep the job you have and try to do your consulting on your off-hours. I would NOT take out a loan. You already have massive debt and no savings; you have no safety net. I would also try applying to other companies, and promote the fact that you have a law degree. It certainly couldn't hurt to see if any other HR positions would hire you, and what they would pay.

I'm considering a small business loan to get me through the first few lean months until I start earning money.

What happens if you DON'T earn any money? Then you'll have a business loan on top of your student loan, and you'll have no income or savings. What then? That seems like far too big a gamble-- to me, anyway.

 

[Holdfast]

I quit a very safe & lucrative job in order to become self-employed a little over 18 months ago.

I did it because it meant something really important to me to be in charge of my own life and not an employee. I didn't do it at the drop of a hat, but consciously planned towards it for about 5 years. Those 5 years were spent acquiring the qualifications, contacts, other income streams, and various financial buffers required to make the jump possible.

Looking back, I'm delighted I made the decision.

However, I would not advise a leap into the dark either from a career or financial perspective. What I mean is that unless a) you're unhappy about being an employee (which is a very different thing from being unhappy in a specific job), b) you have a clear opportunity in which to financially exploit your skills, and c) can cope with the uncertainty self-employment brings... unless you can honestly in your heart of hearts say yes to all those points, you're probably doing it for the wrong reasons, and have a high chance of being unsuccessful.

If you can say yes, however, and are doing this in a planned way, it's a great move, and a liberating and potentially financially-rewarding experience. Just know what you're getting yourself into and don't do it from either desperation or spite.

 

[Captain Ice]

Without having any savings to livew off of while you are starting the business, I cannot advocate quiting your current job. My advice is to start the business as a part time thing and only leave your full time job once the business is established. Until then, use any income from the business to either reinvest in the business or build up your savings/retire your debt load.

 

[Tora Ziyal]

Holdfast's advice is excellent. I say that as someone who, years ago, quit a job to start my own business for all the wrong reasons. It was a very expensive mistake.

My best wishes whatever decision you make.

 

[Snaploud]

My boss is my only advocate at the company and she's retiring next month. I applied for her job, but the company doesn't promote internally.

It sounds like your biggest problem is your current employer. I would recommend trying a better company before striking out on your own (particularly since it sounds like you're branching out into a relatively new field and might benefit from some on-the-job post-bar exam legal experience).

 

[Tom Hendricks]

I would advocate the way of AuntieHill and Holdfast way. I decided to start my own Video Production business about 9 years ago. I started slowly first, taking side gigs while still working at the company I was with.
As my business started to grow, which took about two to three years. It was taking up so much of my free time, that it became overwhelming. So with the blessing of my wife, I quit my job and never looked back. Like many other on here, it was the best decision I ever made. I have been steadily busy enough to have use of others from time to time, so while I don't have any employees I have need others to help out. Which is a win-win in my book.
The only downside was the downturn in the economy seriously hurt, I would go weeks without a new client or existing ones needing additional work. However I was luckily enough to catch on with a major client during the toughest part of the downturn and it kept me afloat until business picked up again. I don't think I could ever go back to working for someone else. You situation sounds similar, not the services provided but the need to fill a niche. I would go for it, but slowly. Good luck.

 

[Robert D. Robot]

I would STRONGLY agree with what others have said here- start your consulting on the side and grow your business while you maintain the financial security of your current job (or another full-time job if your are able to get a new position elsewhere). You can then make the decision to go full time on your own when the time seems right.

It takes time to build clientele, and you don't want to jump out of the frying pan only to be scrabbling desperately for work just to make ends meet. Good Luck!

 

[Captain_Nick]

I'll echo what the others have said. Going it alone because the job you are in right now isn't paying you as much as you think you deserve is setting yourself up for failure. But there is nothing stopping you from taking on little jobs on the side! Especially if you find a way to work on these jobs while you are at work - that way you are getting paid twice for the same period of time.

 

[Tom Hendricks]

! Especially if you find a way to work on these jobs while you are at work - that way you are getting paid twice for the same period of time.

I don't agree with this at all. You should never do side projects at work, it's a quick way to be fired.

 

[Captain_Nick]

That's true. So don't get caught.

 

[SmoothieX]

! Especially if you find a way to work on these jobs while you are at work - that way you are getting paid twice for the same period of time.

I don't agree with this at all. You should never do side projects at work, it's a quick way to be fired.

Agreed - I'm starting a new job May 1 and one of the things the specifically had me to was sign a no moonlighting clause, much less while on the job. I'm a civil engineer. If I wanted to be a dog walker on the weekend or something like that, they wouldn't care. If I was designing a septic system on the side, I'd be in hot water.

This one guy I used to work with double dipped it all the time. He was an engineer, but had construction experience, so he'd design and then build his own small projects.

He was somehow billable 40 hours a week, but he'd leave a note on the sign out board that he was off to some job site, then you'd drive by someplace else and see him grading a site in his excavator. He had one of our drafters (a robot who would blindly copy everything on your plan right down to your typos into the computer) doing his plans on company time and plotting them on the company plotter.

He never got in trouble for it though, as he did some work on the boss' house for a real good price at one point.

 

[Holdfast]

I'd echo those being very leery indeed of the idea of doing side jobs on your current employer's dime/time. Keep it out of company hours, and don't use company resources.

But provided your contract doesn't exclude you doing other work in the same/similar field at evenings & weekends, those times can represent a great opportunity to build up a client base and increase your experience, as well as testing out business models and price points.

One final point on this area: do not leverage company client lists to get your external side work. This is a very easy (and therefore tempting) thing to do in many businesses, but it's an outright cannabalisation of your employer's income stream as you will always be able to undercut them. If they catch you, they'll immediately fire you (or bring proceedings to do so, if they can't do it on the spot).

 

[SmoothieX]

Some companies require you to sign a non-compete clause saying you won't strike out on your own and poach clients for a certain period of time.

This happens all the time in my line of work. Clients establish a relationship with John Doe over time, not necessarily ABC Corp.

I'm not in a spot to start my own firm, nor do I wish to at this time, but I've got a large client that keeps me busy 2/3 of the year on various projects that I could likely keep with a lower overhead rate on my own.

 

[Holdfast]

^ Yup, that's why she should check her contract closely.

IIRC, in the UK, employers can't actually use NCCs; at most they can implement a Restraint of Trade but this can only apply if there's a specific business conflict of interest. They can't simply cite competition... but they can prevent you e.g. using client lists acquired at the initial company.

As I understand it (might be wrong; never had to sign an Restraint of Trade clause myself), this leads to a convoluted situation whereby if an existing client just "happens" to follow a person elsewhere that's technically OK, but if they were at all encouraged/persuaded to move that's not OK. You can probably work out the legal complications of proving matters one way or another...

 

[SmoothieX]

That's one of the big things, at least in my line of work in the US, particularly in the small time consulting world where I work, is that if one or two guys with a few relationships with long term clients branch out, the clients tend to follow.

I'm in tight with two or three higher ups at this branch of a particular architecture firm. We sub out civil work for them all the time. My job description is basically to keep them happy. I'm their first point of contact, the guy who sends them the plans and whatever else under his seal, the one who comes in early/stays late/works weekends/drops everything to go to meetings with no time to prep, etc.

It's a professional relationship where the one they personally trust is me. I'm leaving in a month to pursue other opportunities, I can assure you it will take them a while to build the same rapport with my replacement.

I would much rather take the time to work my way up and take a stake in a firm as partners retire or move on, and I think I will have this opportunity. No bridges burned anywhere this way.

 

[Brolan]

^I've watched a few friends try to start their own "at home" business and they failed miserably. If I were you, I'd keep the job you have and try to do your consulting on your off-hours. I would NOT take out a loan. You already have massive debt and no savings; you have no safety net. I would also try applying to other companies, and promote the fact that you have a law degree. It certainly couldn't hurt to see if any other HR positions would hire you, and what they would pay.

I'm considering a small business loan to get me through the first few lean months until I start earning money.

What happens if you DON'T earn any money? Then you'll have a business loan on top of your student loan, and you'll have no income or savings. What then? That seems like far too big a gamble-- to me, anyway.

This is sound advice.

 

[Holdfast]

No bridges burned anywhere this way.

Your civil engineering background is showing through.

 

[Vulcan Princess]

Thanks for the advice, everyone. I can't work on consulting on the side because my potential clients would most likely be competitors of my current employer. I can take on unrelated side work, but this is a bit too related.

I've been looking for a new job for a few months, and so far I haven't had any luck. But one of my friends who works at a nearby tech company just let me know of an opportunity in her organization that would be good for me. So I'm going to pursue that and see what happens there. It would pay enough extra that I can start saving money so that if I decide to revisit self-employment I'll have a cushion to float myself through.

 

[SmoothieX]

No bridges burned anywhere this way.

Your civil engineering background is showing through.

Well I have done a demolition plan or two in my day.

Bridgework is mainly the structural subdiscipline. I can make shit flow uphill however.