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Amid the “Great Resignation” and ongoing pandemic, millions of Americans are quitting their jobs to become their own bosses.
In October, there were about 9.44 million unincorporated self-employed individuals in the U.S., according to data from the U.S. Bureau of Labor Statistics. Since April 2020, the number of such self-employed people has increased by nearly 2 million.
And, this year through October, Americans have applied for more than 4.5 million federal Tax Identification Numbers, needed to register new businesses, according to data from the Census Bureau. That’s already outpaced the roughly 4.3 million applications for new businesses for all of 2020, as well as the 3.5 million filed in 2019.
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Deciding to leave a steady job to freelance or start your own business generally isn’t something you should do without proper planning. Here’s what experts recommend before, during and after transitioning out of a 9-to-5 job.
“If you’re thinking about making the move, I always encourage people do to do it the right way,” said Sheneya Wilson, CPA and founder of Fola Financial in New York.
Before you take the leap
Before striking out on your own, it’s a good idea to first set a business plan for yourself and your new endeavor, according to Kevin Lao, a certified financial planner and founder of Imagine Financial Security in St. Augustine, Florida.
That means writing out in simple language what the goal of your business is, who your audience is and what you’re hoping to charge, he said.
“It’s very hard to be successful if you don’t have a very compelling ‘why,'” said Lao.
You may also want to identify multiple potential income streams for yourself, said Mandi Woodruff-Santos, a personal finance expert and executive producer and co-host of the podcast Brown Ambition. From there, you should also be open to taking on new work or revenue streams as you see fit, she said.
Once you have a vision of your next steps as a solo entrepreneur, you want to make sure you have finances in place to sustain yourself while you build up business.
The exact amount will depend on your risk tolerance and how quickly you think you can turn a profit, said Lao, adding that when he started his own financial firm, he had 12 months of living expenses and three months of business expenses saved.
Business expenses include things like the cost of establishing an entity such as an LLC if necessary, and paying …….