Congratulations. Your business plan is set. The seed capital is in the bank. You've signed a lease and ordered your Aeron chair. A few starter clients are ready for the plucking like low-hanging fruit. Now all you've got to do is walk into the president's office and declare your independence.
Not so fast. There are some essential steps you should take before you quit your job to go solo. When you become self employed, you don't just break a set of chains; you also shred a safety net that's stronger and more pervasive than you may realize. Not only that, but going out on your own dramatically alters your tax status and credit worthiness.
Take the Time, Not the Money
You already know you're going to kiss paid vacations goodbye. What you may not realize is that you're about to work for the world's strictest task master. Taking off weekends will soon prove difficult, not to mention skipping town for two weeks in the summer.
Even if vacation pay accrues with your current employer and you could pocket the cash when you leave, don't do it. Take the time off now, before you go out on your own. When you're independent, free time is more precious than money... and a whole lot more rare.
Network On Your Boss's Dime
Making contacts, mixing, meeting and greeting will all be doubly important when you're flying solo, not just for getting business, but also for maintaining your sanity. Unfortunately, whatever after-hours networking you do as a free agent will subtract from a nano-personal life. The best way to compensate is to take in every luncheon, conference and convention you can before you leave your current job. Make as many initial contacts as you can now, when it's on your boss's dime. You can follow up later by calling to say you've hung out your own shingle.
Get a Check Up
You're savvy enough to figure out a way to replace your current health insurance coverage -- either by signing on to your spouse's plan, buying into another group or funding a health savings account. But new coverage means new waiting periods, especially for pre-existing conditions. And your health savings account may not have much of a balance for at least a year.
That's why you should have every procedure prudence demands before you give up your current coverage. Have a heart-to-heart with your primary care physician and, if need be, complain of everything from chest pain to fecal blood in order to justify the tests you might need. Fill prescriptions early and often.
Do Some Pre-Tax Planning
Your accountant actually has office hours outside of March and April, and now is the time to take advantage. Self employment not only means paying estimated taxes, it means covering all of your Social Security contribution, not just the half you spring for today. Those first few tax bills will create a great deal of pain unless you've planned ahead. The same goes for funding a pension plan. There's no such thing as matching funds anymore. Have the cash on hand to make your next year's contribution early, before invoices start piling up.
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