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The True Cost of Self Employment

So you want to start your own business?Great! There are many successful and happy business owners all around the world.However, many new or potentially new business owners forget to take all of the costs of self employment into consideration.Consider the following true costs of operating your own business.

- Do you have a plan for health insurance? Retirement? Investing? - One of the benefits for working for someone else is that you don't have to worry about the details.Well, as the proud owner of your own business, you are going to have to start thinking about how you are going to find medical coverage for yourself, how you will invest for your retirement, etc.In the united states the typical United States self employed business owner should expect to pay 35-40% of his salary towards medical, dental, visual, life, unemployment, disability, long term care, and worker's compensation insurance.This is quite the chunk of money.35-40% may seem high when you consider what you paid for benefits before you started your own business.The reality is that when you work for someone else, that company is paying a large chunk of your premium for you.Furthermore, those premiums under your employer were taken from pre-tax dollars.When you work for yourself, there is no one else to help you with your costs.

- Are you willing to commit the time and resources it takes to start a business? - If your mentality is to make lots of money really quickly, you may have another thing coming.It takes time to start and market your business.The odds are slim to none that you will become a millionaire over night.Starting a home business requires time to market, balance finances, deal with customers, handle problems, etc. You will not have an automatic personal assistant, janitor, and mail delivery service or phone tree.You're on your own.You are the business in the beginning.In order to avoid becoming a slave to your own business you need to sit down and consciously make choices and rules that you are committed to stick to.You need to be prepared to set boundaries, accept risk, and realize your limitations.You will have to work full-time hours to make ends meat, just as before.Many new business owners have to make considerably more in their first years of operation than they did at their salary jobs to make up for all of their additional costs.

- How are you going to attract new customers?Do you want rapid growth?If so you need to have an aggressive plan.Naturally more aggressive plans mean more time, money and effort.If your wide-span growth plan includes costly advertising, hiring of a marketing firm, and using your capital solely on the acquisition of customers, than you probably need to find other scaled down methods of managing your customer relationships.You'll probably have to pay for consultants and legal aid.

- Even more hidden costs of self employment include paying for the company car (your own car).This means gas and maintenance, especially with increased travel time.You no longer will receive promotions or bonuses.Training costs come out of your own pocket.This includes software up-dates, licensing fees, occasionally required continued education fees, etc. And you can forget about automatically receiving money for vacations or sick days.If you don't work, no matter what conditions life hands you, you don't get money.Without money, you can't pay the bills.

Analyzing the true costs of self employment should be used as a reality check not to discourage you from ever stepping outside of your comfort zone to try to make more of your life.You just need to be aware of what a new business owner is getting him into.If you have a plan for recuperating these costs, you will be that much further ahead of the folks who walk into self-employment blindly.

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