This month I made a tough choice and decided to leave my full time job as a designer to focus on working on my own business full time. The job paid decent enough and had excellent benefits, so leaving that behind took a lot of careful planning and action. Consistent hard work over the course of a couple of years made this possible in a situation where I started with a lot of debt, so I'm going to outline the steps I took that made this possible. These steps will apply to almost anyone looking to work for themselves full time, but my experience is in working in the design field, so that's where many of my thoughts will be directed.
Reducing debt is a task that is no doubt easier said then done, but it's a critical step to take in order to reduce your overall risk when contemplating working for yourself. You want to work towards allowing yourself to live on as little money per month as possible to keep on going, as you will no longer have a guaranteed paycheck. Debt has a tendency to cause people to make poor career choices when they're too focused on the amount of money they need to make, and not about the amount of opportunity and growth that a different path may give them. When you get rid of the debt equation you can start to look at career choices in terms of what is actually best for you, and not what you need to do just to survive.
Reducing costs like credit cards or car payments will increase your cash flow every month after the final payment. I tend to look at paying off a $200 per month credit card payment as effectively increasing my income $200 per month, with an added bonus of no more money being spent on interest. Focus on paying off the highest interest debt first and work your way down from there. Also always try to pay well above the minimum payment as this can drastically cut down on interest paid over time. Use the additional money saved once you pay something off to add to the payments of the item with the next highest interest. Continue working your way down the interest rates until you pay off the final loan / debt. Victory!
In order to allow myself to do this as quickly as possible, I cut out almost every non-essential cost that I had. I stopped purchasing things that I didn't really need, and drastically reduced the amount of money I spent doing things like eating out instead of making my own food. Simple changes like that can have a HUGE effect on cash flow over time, as even $10 a week saved turns into $520 a year. Not bad!
Create a Budget:
Budgets tend to get a bad wrap because they sound so unexciting. The word budget rarely causes people to get enthusiastic about the opportunity to create one, but it is a critical step in how to properly understand how much money you need to make in order to keep cash flow positive.
I use budgeting software called You Need a Budget that has a nice simple interface, but you can make a budget in Excel, Google Docs, or even just write it down on paper at home. Track absolutely every cost you have (save those receipts!), and every dollar you make. Doing so over the course of a few months (and eventually years) will give you all sorts of critical information that you will need to know in order to properly figure out what you need to do in order to make it on your own.
Learn your actual cost of living. It's easy to figure out your major expenses such as rent, car payments, insurance etc etc - but it's the little details which are often ignored that actually amount to a significant portion of your total costs. Every coffee you get in the morning, and every snack you grab at lunch may only cost a few dollars, but over the course of a month it can easily climb into the hundreds of dollars. Once you are able to see your actual cost of living as it is now, you can begin to figure out how much you'll need to make working for yourself, and areas that you can cut down spending if it looks to be out of hand.
Carefully tracking all of your income may also help you see patterns in what type of work generates you the most amount of income for the time you've spent doing it. This information will be critical when looking at the next step of diversifying your income, as it will give you the knowledge of what jobs to focus more time on, and what jobs to either cut time from, or eliminate entirely.
Diversify your Income:
One of the larger mistakes both individual freelancers and design businesses make is relying on a singular source of income to provide the majority of their income. It's easy to get caught up in thinking things will continue to be good if a particular client or income source is supplying you 75% or more of your money, but nothing is guaranteed. If that income source either dries up, or they drop you as a designer, you'll find yourself in a very difficult financial situation.
Having a wide variety of smaller income sources is often times a much safer bet than a singular large income source, because if any one of your smaller income sources were to go away, you would still be stable financially and able to adapt to the change. When I started taking my own business efforts more seriously, one of the first things that I did was to branch out into several new sales avenues to see which ones worked best. I was then able to put more effort into the ones that were paying off, stop doing the ones that didn't, and pursue new opportunities in areas I hadn't yet explored. After a few years of doing this I was able to create a large network of different places that I could expect a little bit of income from every month with little to no additional effort on my part. Having this network in place, and being able to prove it's reliability over time, is what allowed me to eventually work for myself full time.
When you're trying to decide what areas to invest more of your time in, consider who you're dealing with, and how invested they are in you succeeding. It's relatively easy to find people willing to pay for your services that simply want to get the job done, but it can be much harder to find people to work with that are invested in seeing you succeed. When you're finding clients or businesses to work with, keep an eye on the ones that are willing to go out of their way to be helpful to you, or offer you advice or assistance. These are the routes that will provide a long lasting and positive work relationship, and that will also likely provide the most amount of growth and opportunity for you as a designer.
Create a Savings:
Things won't always go as planned, that's life, so having a savings to rely on will allow you make it through slow business times when they inevitably come. Income over time tends to have a wave like pattern, so being able to save enough during the high points to survive the low points is an important step in mapping out a solid future long term.
I personally decided to save up enough money to live on for a year without any additional income coming it. It was a very difficult thing to do, and took multiple years of careful spending and saving to accomplish, but it will allow me to focus on my own business with an added level of security to keep making smart business decisions, and not choices motivated by quick money. Everybody's situations are different, so create a savings that suits your needs accordingly. Be sure not to only plan for costs that allow you to keep on going (food, housing, etc), but costs that your business needs to keep on going as well (online hosting, software, hardware, etc.).
Prove your Business Model:
Perhaps the most important thing of all is to actually prove that you are able to be financially stable working for yourself. As tempting as the thought can be, you don't want to just leave your job and hope that you can make it work out in the end. You want to prove over time that you can consistently make enough money to keep on going on your own before making your run for self-employed freedom. This took me about two years once I started taking it seriously, and by the end of that time, I was actually making more income working part time for myself than working a full time career design job. Having this knowledge made me a lot more confident in my ability to support myself, and gave me a very good idea of how much income to expect over my first year of full time business.
Be sure to develop working relationships with people who are willing to help you succeed. Working for yourself doesn't mean working by yourself, and having a series of partners and friends to work with and learn from will make the journey infinitely easier and more enjoyable to be a part of.
I don't think that working for yourself is necessarily the right choice for everyone, but if you think it's for you, it's better to get started on these steps than to sit back and wait for things to happen. Careful planning and action from the start will allow you to make strides in achieving your goals at a vastly quicker pace than a more laid back approach.
Work hard, work smart, and most importantly....enjoy what you do! When you're working towards something you really love, it no longer feels like a chore to get the work done. When this happens, you know you're on the right path for a solid future of creating meaningful work.