The Right Time to Become Your Own Boss

Ironically, a tough economy often pushes people into their lifelong dream: Self-employment. At last, they have a chance to create their own hours, choose their own clients and take all the credit for success.

But even in a decent economy, most startups flounder. “The number-one reason people don’t succeed being entrepreneurs is they’re under-financed,” says Bill Lachapelle, president of the National Small Business Association (NSBA). “The second is they had no idea how much work it was going to be.”

It pays to consider what it means to own a business from every angle, including one’s personality type, he says. Do you have the discipline to work overtime finding new construction projects and the tenacity to follow every lead, even after months of rejection? Or, do you need the nine-to-five structure of an established work environment?

If a person is highly organized and a self-starter, a few other elements are essential to being head honcho: years of expertise in an area, some established contacts and income to last at least six months, for starters. If you’ve worked for a plumbing contractor for 10 years but aren’t willing to pound the pavement looking for new clients, great experience isn’t enough.

Myth versus reality
When considering the cost of owning a business, people tend to tally rent, living expenses and overhead. “The additional costs are probably the biggest shock,” says Lachapelle.

Self-employment taxes, which exceed 15 percent of total income, and health insurance are top concerns of small business owners, who account for about half of all businesses in the United States. A quarter of them have no health insurance at all, according to a February survey by the National Association for the Self-Employed (NASE). Before launching a business, do an estimated breakdown of expenses, from mileage to staffing to supplies.

Also, keep in mind that as a safety net, it’s increasingly difficult to rely on credit cards, a common funding source for small businesses. According to a report released in April by Kiplinger Business Resource Center, credit available to small businesses via credit cards will drop 20 percent by next year.

Follow the market
Susan Samson, president of Chicago Structures LLC, has watched her highway concrete construction business grow steadily since she started it nearly six years ago. Business may not be growing as rapidly as in recent years, but it is projected to grow 10 percent this year.

The company hires carpenters, laborers, operators and cement masons to do bridge repairs, bridge rehab, noise walls and other infrastructure projects. When bidding for work, she says, “We’re starting to see companies we’ve never seen that appear to be coming over from residential [construction].”

Building a business also requires a lot of patience. Although Samson had spent two decades working in the same industry, after starting her business it took several years to build up a pool of quality contractors. “We had to start from scratch, which meant calling union halls and getting people out who we didn’t have a history with,” she says. Now, regular customers include the Department of Transportation, the Illinois Tollway, villages and municipalities.

There have been a few private customers, but public ones generally pay better, she says. Still, be prepared to make sacrifices, like spending a Sunday prepping a job site and spending sleepless nights worrying about getting paid on time. “Everybody said if you can make it the first couple years, you’re going to be alright, and that’s probably true,” Samson says. “Everybody also said pay yourself first, and that sounds great, but sometimes that’s just not possible.”

Even with regular work, it’s essential to keep an eye open for new opportunities in unexpected sectors. Dodge Reports and federal and state Web Sites are good sources for public projects, but wide-scale project experience in local municipalities can be marketed in the private sector, as well.

Starting a business takes a lot of reflection and planning, something most people just don’t have time to do. But if business is slow today, there’s more time to figure out whether self-employment is a viable option tomorrow.