Self employment is equally as risky as owning a small business or a start-up, if not more. This is because of the risks and limitations involved in being self employed and the adverse effects of even the smallest of personal mistakes in the whole of business.
One of the things you should think twice about before you venture into the world of self employment is your level of management when it comes to personal and business cash flow. Here are a few things for your consideration before you decide your cash management levels.
Personal Cash Requirement
Though everything you earn through self employment is a profit that needs not be split, you cannot use everything you earn from your business for your personal expenses. This is because of the expenses involved in branding your business, reserve cash, filling up of work gaps, etc. So, you should be perfectly aware of your personal cash requirement and whether it could be met by the profit you make from your business, after allocating cash for all the business related expenses.
As a matter of fact, getting financial help is very hard for a self employed person and you should be completely aware of this. You should not have huge expectations to get personal or business loans in the future to expand your business as everything of that sort has to be taken care with the profit you make from your self employed profession. If you are expecting such financially aided expansion in the future, then self employment may not be for you.
Identify signs of failure
You should be readily able to identify any signs of business failure at the first instance and should have a fool proof alternative plan at times like that. Also, having a backup cash reserve is inevitable to avoid yourself from running into acute financial problems when your business is not running as you expected. Be very cautious about the signs that may lead your business to fail and have plans ready to enact at times like that without any hesitation.
These are the basic requirements when it comes to cash flow management in a self employment and if you are confident about all the above, you can consider yourself a perfect self employed professional.
Read also Three questions that will help you to become successful in self employment