The self-employment mindset: Component #3: Risk tolerance

By Jeanne Yocum

This is the third part of my series on the mindset you need to succeed as your own boss. You can read the first post in this series here. And the second part is here. These ideas are also shared in my new book, The Self-Employment Survival Guide: Proven Strategies to Succeed as Your Own Boss.

There’s no denying that being your own boss is risky. But then again, we don’t have to look too far to know that being employed in corporate America is also risky. We all know people who have been kicked to the curb by their employers for reasons that had nothing to do with their job performance. Perhaps the economy took a downturn or the business decided to change its business strategy. You might even have had that experience yourself.

Other common perils of being an employee include not having your salary keep up with rises in the cost of living or being stuck in a dead-end job with no possibility of moving up the corporate ladder. Your skills may fall behind the times because your employer isn’t interested in or can’t afford new technology; this may cause problems for you if you seek to move to another employer in the future and your skills set is not what it should be.

A long list of perils

So, yes, being an employee has risks. But the list of potential hazards you may face when self-employed is long and daunting. Few of us who are our own bosses have not had cash flow worries from time to time. Few of us have not had to chase clients for overdue money. Few of us have not worried about how we were going to juggle the competing demands on our time in order to keep all of our clients happy and satisfied. Few of us have not had clients who don’t meet their own commitments on a project, causing the whole thing to fall behind and making it necessary for us to work nights and weekends to make up for their laxness.

Few of us have not lost a client for external reasons having nothing to do with the quality of the work we delivered. The list of reasons clients defect is lengthy indeed; they get into financial trouble or legal trouble or decide to expand their staff and bring the work you are doing in-house. In all these scenarios, there is nothing you can do about it but move on and look for new business to replace the income you’ve lost.

And I haven’t even begun to address the larger set of risks you undertake when you become your own boss. What if no one really wants the service or product you’re providing? What if customers or clients aren’t willing to pay enough for your service or product to provide the level of income you desire? What if you quit your job and then it turns out you don’t really like being self-employed? Yeah, wow…those are some mighty big risks.

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But let’s assume you’ve done your homework in advance and you have a well-thought-out business plan that will work. Even in this scenario, the hazards involved in self-employment can often seem significant and more pressing on a day-to-day, week-to-week and month-to-month basis. This is because the task of addressing these hazards falls solely on your shoulders. Sure, you can seek counsel from mentors, colleagues and friends, but deciding how to overcome a risk you’re facing and then taking decisive action is up to you and you alone. This can feel very lonely and very comfortable for many people. Sleepless nights are not uncommon among the self-employed, that’s for sure.

If you aren’t risk tolerant, you may find yourself frozen in place, unable to set priorities, make decisions, and take necessary actions. Now, the good news is that with experience, you will learn how to overcome many of the risks you face. For example, as I advise my book, you’ll learn to ask for deposits before starting work for new clients so that if they turnout to be slow payers, your cash flow won’t be quite so much in jeopardy. And as you succeed at facing and conquering more and more perils that come your way, you will gain confidence in your ability to stay the course and succeed. So risk tolerance is something you can build over time and that’s good news for anyone considering self-employment.


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