If nothing else, being unemployed offers time for self-reflection. Sometimes, that self-reflection leads to a re-evaluating of what you want out of work. For some, that might mean seeking out a new career path. Others may conclude that self-employment might be a way to create more balance and flexibility into their professional lives. But is it possible to go from unemployment to self-employment?
"You don't have to be born an entrepreneur and it's never too late to start," says Brian Hamilton, founder of the Brian Hamilton Foundation, which provides informational programs for entrepreneurs. "The best way to know whether you are an entrepreneur is to dive into the pool and try to swim."
So how do those who are unemployed begin to start their own ventures? What do they need to do before they dive into that pool? And what steps should be taken to ensure that they swim these uncharted waters successfully?
Let's explore some ways to trade unemployment for self-employed through a variety of business ventures.
3 Ways to Become Self-employed
- Become a Contractor
This technique works well in some industries — building contracting, IT services, graphic design and professional services, home healthcare, to name a few — and it can offer you the best of both worlds – flexibility with hours, the ability to pursue other interests, and a paycheck in a field you are familiar with.
Check the laws in your state; in many places you must be a true independent employee to comply with the current tax laws, which means you control your own schedule and use your own tools, such as a computer.
If your former employer experienced layoffs but still has work that needs to be done, you may be able to negotiate coming back to work as a contract or freelance worker. This will allow you to work when work is available and then do work for a competitor when business is slow.
The value to the employer is that they don’t have to train you, they only pay you when there is work to be done, and they save on health benefits. For you, depending on how well you negotiate your contract, you can make more money for working fewer hours.
- Start a Small Business
If you have an idea for a small business and decide to go for it while you are unemployed, it is critical to build your network in order to promote your products and services. If you are freelancing in the field in which you formerly worked – say, you want to launch a marketing business after leaving your full-time marketing gig – stay connected to your former colleagues who might have leads for you.
If you are going into an entirely new venture, you will likely need to expand your network to include people and companies in your new field.
"Tell everyone you know from family and friends, to your dentist and doctor, that you are open for business," says Melissa Galt, owner of Melissa Galt Interiors, who began her own business while unemployed. "Explore a targeted networking opp like BNI, PowerCore or Le Tip Club where they allow only one professional in any industry into the group, meaning that only one printer, only one homeowner’s insurance agent, only one interior designer, only one financial advisor, etc. can be exclusive to the group. Meetings are weekly so you really get to know folks."
Networking also includes, of course, social media. "Build your social footprint," Galt states. She explains that a "current close up smiling headshot" should be used on all platforms. Face recognition is most important, she says.
Galt recommends reaching out to an alumni group from your college or university as a way to build a business that can help you say goodbye to unemployment for self-employed opportunities.
"I did a direct mail postcard to Cornell alumni, just once," Galt explains. "My first client came from that mailing. They had graduated in a different major five years after me, but the fact that we shared the same alma mater tipped them over."
- Consider Buying an Existing Business or Franchise
You might consider buying a franchise or even purchasing an existing small business (five employees or less). This could include an online business, of course. But how do you finance it?
If you received a severance package from your last job, you might use some of those funds for such a purchase. You might also access a 401K rollover to accomplish this.
Crowdfunding or getting a small business loan are a couple of ways you can raise the money to make a franchise or business purchase. SBA-guaranteed loans are an option if you can't get a traditional loan.
You could also seek individual investors or look to a venture capital firm. These firms are groups of investors who just might invest in a business considered more risky than a bank or other lending institution might take a chance on.
Finally, you might look to your alma mater for funding support. Your college might be able to provide a lead to grant opportunities and endowments, so this can be a great means for an investment into your venture.
Finally Self-employed? Follow These Steps for Success
- Learn How to Run a Small Business
There is more to running a business than networking. To increase your likelihood of success, it’s critical to learn how to run your own business. From YouTube videos to online courses to entrepreneurial blogs, there are plenty of resources you can use to learn business planning, marketing, and other needed strategies and methods to establish a successful business.
The Brian Hamilton Foundation, for instance, offers an online, self-paced course titled Starter U: How to Start and Grow a Business. The course is roughly 12 hours long and allows you to review entrepreneur stories; study customer service, marketing, and selling techniques; learn how to overcome obstacles; and even take quizzes.
You can also follow entrepreneurial blogs, like The Entrepreneurial Mind or StartUp Mindset, or podcasts, such as Stanford University's Entrepreneurial Thought Leaders. These will offer tips, strategies, and insights into creating and running your own business.
Books, too, are valuable tools. There are plenty of books written by current and rising entrepreneurs that are filled with invaluable information to help get you started. Brian Hamilton recommends "Growing a Business" by Paul Hawken, but there are hundreds of others that you could reference.
- Look Into Self-Employment Assistance
Being an entrepreneur can be financially unstable, especially in the beginning. But, believe it or not, your state could help you turn it around from unemployment for self-employed ventures.
A few states offer Self-Employment Assistance programs that are designed to pay benefits to help unemployed individuals develop their own business. These states are Mississippi, New Hampshire, New York and Oregon.
This type of assistance generally eliminates work search requirements and your benefits are not affected by any monies you might make as a result of your business venture. In many cases, the state also provides training and counseling support for entrepreneurs.
Final Thoughts on Becoming Self-Employed
When you are out of work, self-employment may be a temporary solution or a permanent change of direction.
In addition to doing contract work or starting your own business, gig economy jobs have grown in popularity. Grocery and meal delivery, ride-share driving, dog walking, and pet sitting are some examples of gig economy jobs that allow you to be self-employed contractors.
Gig economy jobs could also help you earn living expenses while you build your entrepreneurial venture. Any job, however, will do in order to at least have some money coming in. Galt, for instance, supervised a catering kitchen during the evenings and weekends, which left her days open to realize her dream.
It’s taught her a valuable lesson about being self-employed.
"Don’t just do your business, be your business," Galt says. "Live and breathe it so everyone feels your enthusiasm, your desire to serve, and understands clearly the difference you make."