+ READY TO START YOUR OWN BUSINESS? Advice for would-be Entrepreneurs and SOHOs +

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+ READY TO START YOUR OWN BUSINESS? Advice for would-be Entrepreneurs and SOHOs +

A Guide to Self-EmploymentAdvice 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."

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10 Part-Time Business Ideas by Jeremy Quittner and John Tozzi
In any economy, a part-time business can bring in extra income, give you a fallback plan if you lose your job, or plant the seed for a larger venture. In a downturn, it's hard to argue with preparing a backup plan. Of course, starting a business is always risky, and you will almost surely spend more than you make at first. Previously, we offered advice for recently laid-off workers considering going into business for themselves. Now we're offering snapshots of part-time solo business ventures that could turn into full-fledged businesses, including tips on getting started.

Baker

Man does not live by bread alone, or so the saying goes. But if anyone checked the sales of some of the best independent bakeries around the country, they'd be astounded. In 1994, Jim Lahey started Sullivan Street Bakery after several years experimenting as a home baker. Today, his company, which has about $6 million in annual revenues and about 90 employees, is a New York City bread-baking institution. Lahey has a word of warning, though: "Knowledge of cooking is much greater than 20 years ago," he says. "The market is more competitive and if you want to develop a cottage industry, the product better exceed expectations."

And if you want to jump on one of the hottest trends nationally—cupcakes—you might even find yourself selling upwards of 2,000 a day, an amount that New York's famed Magnolia Bakery easily exceeds. At $2 a pop, you can do the math, even for your home-based business.

First steps: Break out your market. Are you going to make muffins and cupcakes or bagels and baguettes? As with most food businesses, you'll need a state license in order to sell to the public. If that seems daunting, you can start by selling to friends and relatives or at local bake sales.

You also need to decide how much space you'll need. If you outgrow your home kitchen, consider renting space in a professional kitchen.

Time needed: Baking is a time-consuming business, so expect to devote 10 to 20 hours a week on it for part-time work.

Average sales: $41,000, based on Labor Dept. data.

Blogger

It's true that few bloggers make enough to earn a living—most make nothing at all. But if you can write well about a topic you're passionate about, you may develop a following, and with enough page views you can start bringing in revenue from ads. Pick a narrow topic that you're intimately familiar with and that has a well-defined audience. For example, a site that covers the world of digital SLR cameras in minute detail has a more natural audience than a broad technology blog; likewise, a general restaurant review site may elicit yawns, while a blog chronicling the seafood shacks of New England could attract a cultish following.

First steps: Begin writing and start participating in online communities where people interested in your topic hang out. Start for free on a platform like Blogger or WordPress.

Time needed: Prepare to spend at least a few hours each day writing. Keep a regular schedule to make sure your blog doesn't get stale.

Average sales: $24,335, based on Economic Census data.

eBay Seller

Yard-sale mavens who already spend weekends trawling for hidden treasures can resell what they salvage online, on eBay or other sites. Pick a niche that interests you and that you have some expertise in and monitor what already sells online so you can set prices accurately. If you know your vinyl, buy old record collections in bulk and resell the gems individually online. From books to electronics, you may be able to find resalable items out on the street on trash night or given away for pennies at moving sales.

First steps: Set up a shop on eBay or other e-commerce sites and begin to build your seller rating. It's free to list items on many e-commerce sites, though eventually you may want to invest in your own Web site, advertising, or premium services.

Time needed: Expect to spend several hours a week finding inventory and listing it for sale.

Average sales: $22,196, based on Economic Census data.

Floral Designer

Turn your love of flowers and colors into bouquets and arrangements for occasions that vary from weddings and bar mitzvahs to confirmations and dinner parties. About one-third of the estimated 87,000 floral designers are self-employed, according to the Labor Dept.

First steps: Community colleges, vocational schools, and private floral schools all offer courses in flower design. You'll need to find a source for flowers, too. If you don't live near a flower wholesaler, a growing number now sell online. This is a supply-intensive business. You'll need a workshop space, refrigeration system, and some means of delivering your goods to clients.

Time needed: Three to 20 hours per week.

Average sales: $21,700, based on Labor Dept. data.

Jewelry Designer

It's probably easier than you think to turn your love of bling into cash on the side. About half of all jewelry makers in the U.S. are self-employed. You can sell online or to thousands of brick-and-mortar retailers.

First steps: You'll need design flair, manual dexterity, and attention to detail to get started. Technical and vocational schools offer classes on basics; community colleges also offer courses on design. A clean, well-lit workspace is necessary. Be sure to design pieces in a variety of price ranges. You'll probably spend $500 to $2,000 for materials, from beads and wire to gold and silver to cloth and wax, plus tools like a vise, pliers, and jigs.

Time needed: Evenings and weekends.

Average sales: $30,000, based on Labor Dept. data.

Pet Sitter

Love animals? Opportunities abound in the pet care industry. Consider walking dogs during the day, grooming or training pets on weekends, or boarding animals overnight. Even if you're not equipped to keep others' pets in your home, you can offer to wash and groom animals at clients' houses, or check in on their pets at their home while they're away. Owners often need someone to watch their pets on weekends and holidays, so pet care can be an easy business to start if you work during the week.

First steps: Start by caring for your friends' animals and get referrals through them, because trust is key for people placing their pets in other people's care.

Time needed: You can get started working on weekends and evenings.

Average sales: $22,183, based on Economic Census data.

Photographer

The barriers to starting a photography business virtually disappeared with the dawn of affordable digital SLR cameras and software like Photoshop. If you're skilled in taking great pictures, pick a niche and build a business around it. You might want to shoot weddings, bar mitzvahs, or corporate events. Or consider family or individual portraits. You could even set up a small studio space in your home. Consider what services you'll offer clients beyond just taking pictures—can you build a Web page to showcase the photos of their event as well?

First steps: Put together a portfolio of your existing work to show potential clients.

Time needed: For event photography, expect most gigs to be on weekends or evenings (galas, for example). You may be able to arrange portrait appointments on a more flexible schedule.

Average sales: $26,259, based on Economic Census data.

Translator or Interpreter

Those who speak more than one language have a ready skill to turn into a part-time business. You can get work translating documents or as an interpreter over the phone or in person. Focus on an area you have some deeper knowledge in. For example, if you have a legal background, angle your business around translating legal documents.

First steps: Get a certificate proving your proficiency from the American Translators Assn. and/or the American Council on the Teaching of Foreign Languages.

Time needed: Translation work can be done from home on your own schedule, but be prepared to meet client deadlines.

Average sales: $21,541, based on Economic Census data.

T-Shirt Vendor

Launching a T-shirt business is about as American as apple pie and your first paper route. Take the Life is Good guys, Bert and John Jacobs, who started out in 1989, selling their shirts door to door, at street fairs, and from the back of their van. Today, the company has about $100 million in annual revenues. T-shirt design is a hotly competitive market, however, and it should go without saying that the barriers to entry are low.

First steps: Create a catalog of design ideas, or simply one good one, like the Jacobs brothers, whose smiling stick figure captured the national mood. You need to decide if you will invest in the manufacturing materials or use a third-party designer, frequently known in the trade as a publisher: Lots of these exist, from CafePress to T-Shirt Monster. Using a publisher is cheaper, but you have less control and you'll be handing over most of your profits. On the other hand, investing in your own equipment, including a heat transfer press, can be expensive: $500 to $1,000. Again, this is an intensely crowded and competitive industry.

Time needed: Nights and weekends.

Average sales: $48,000, based on Economic Census data.

Web Designer

If you're adept at coding and have an eye for sharp design, you make be able to make a business making Web sites—especially if it's something you already do professionally. Begin by building sites for friends and contacts to accumulate a portfolio. Focus on a niche, like designing pages for bands or restaurants, where you can develop a name for yourself in the community and get referrals from your early clients. Decide whether you want to build a one-time site for clients or take on the responsibility of updating and maintaining it, and bill appropriately.

First steps: Set up your own Web site with a portfolio of your work.

Time needed: You can make your own hours as long as you meet client deadlines—which may mean pulling some all-nighters.

Average sales: $42,104, based on Economic Census data.