How to be stone cold self-employed, part 2: getting the money

There is this little speedbump that many budding entrepreneurs back up and drive away from. It is called living from paycheck to paycheck. SCSE’s wouldn’t know what a paycheck is – we live in a world of cash flow, not fixed sums handed to us by others. To leap from the first world to the second, you need to figure out some way to survive for – everyone swallow hard now – six months.

Why six months? Because that’s how long it’s always taken me to get from a standing start to being busy and fully solvent when – listen carefully – I am doing things people like and pay for. Here is why: first, few people accelerate immediately from zero to a full plate of clients the minute they go into business. Second, life is cyclical and so is business. Third, even the most successful self-employed person in the world usually has to work for at least a month, then bill or invoice their customers, and then wait 30 to 60 days to get paid.

Of course, there is an important flip side to this. Many if not most forms of self-employment pay a lot more per hour than your 40-hour-a-week job. So once you get *over* the speedbump and onto the freeway, you can be doing very well indeed. The dirty secret of self-employment is that no one cares if you starve, but no one cares if you make three or four times your normal salary in a month either. I have done both, and the latter happens more often than you think – once you get over the speedbump.

That six month buffer has an important spiritual quality to it as well. People who need to get paid tomorrow are desperate in ways that harm their business. Instead of focusing on building relationships and pleasing customers, they are always selling, upselling, or trying to collect – and in the process become tiresome caricatures of what they could be. One consultant I knew even showed up at a client’s house unannounced one evening asking to be paid, and the client was NOT impressed. So breathe deeply, smile, relax, and repeat after me: six months.

Now, before you shuffle away with that dejected look on your face – especially if the thought of missing even a single paycheck gives you the yips – let’s do a little brainstorming together on how you might survive for six months. Can you leave your job with a financial package or consulting retainer? Are there things you could *always* do more or less on demand, like temp work? And of course you don’t want to raid your retirement savings or home equity, but would knowing that a small slice of the interest from it could carry part of your budget in an emergency help you get started?

Notice I am not talking about *raising* money. There are two reasons for that. One is that the vast majority of businesses are self-financed. The second and more important reason is, who wants to owe money or equity to people? The more you lean on others for financing, the more your work looks like another job instead of being a SCSE. So if you are planning to start the next Google or open a plant somewhere, respectfully, this probably isn't your article.

In my case, I took my own unique steps to put six months between my job and reaching my goals. The first time I struck out on my own, as my company was about to lay people off, I said “oooh, pick me!” and left with a consulting contract that covered my first year. The second time, I wrote a popular book while I was still working and banked all of the royalties and speaking fees from it – and today, there are few problems in life that I don’t write my way out of. Whatever approach you take, make peace with a six-month buffer, start thinking in terms of long-term cash flow, and welcome to the world of stone-cold self employment!

Next up, in part 3 of this 4-part series, is the fun part: getting clients. Stay tuned!