Self-doubt is a real killer.
You can be as capable and talented as you like in any area, but it is your self-belief that ultimately defines how far you go.
I alluded to this last week when I talked about how average athletes can excel, largely due to their confidence and will to succeed.
But sometimes your self-belief needs a gentle push in the right direction. That was certainly the case for me when I was planning to quit my job and commit myself full time to my freelance writing business.
With that in mind, today I want to reveal how I objectively assessed the theoretical possibility of me being able to succeed in my endeavors, and how doing so gave me the confidence I needed to move forwards.
Recognize Your Value
Let’s start with a simple fact – if you are currently in employment, you are of value to your employer.
Ultimately, you were hired because he or she felt that your personal assets could be leveraged to turn a profit. If you have been in a job for any length of time, you can view your continuing employment as a clear sign that the cost of your employment is comfortably exceeded by the financial return you provide.
This works in one of two ways:
- If you work in sales, the profit made on items you sell exceeds the cost of your employment.
- If you are in an administrative or management role, the cost of your employment is less than that to outsource to an external provider. A penny saved is a penny earned.
Employing someone is not cheap. There are a plethora of costs, including but not limited to:
So let me reiterate – if you are in employment, your personal assets are of considerable value.
A Simple Example
Let’s talk about Jane Doe.
Jane is an accounts manager for an estate agent, and is paid a salary of $30,000 per annum. Her employer has to pay taxes of $2,500 per annum. It cost $5,000 in total to train Jane for her role, including initial guidance, supervision, seminars, and additional qualifications.
Amortized over 5 years, the cost of that training equates to $1,000 per annum. Furthermore, it costs Jane’s employer $5,000 per annum in overheads to have her sit in her chair every day.
What are we up to so far?
$30,000 + $2,500 + $1,000 + $5,000 = $38,500
That’s the cost to employ Jane, but she must of course actually offer a return in order to be worth employing in the first place – let’s say 15% per annum:
$38,500 x 1.15 = $44,275
So, Jane’s employer hopes to generate an income of $44,275 per annum by leveraging her skills, whilst only paying her $30,000. At this point, Jane can draw one of two conclusions:
- Her employer’s business model is completely wrong, and they’re running at a loss
- Her employer is making money from her personal assets that she could leverage for her own greater gain
Self-Employed vs. Employed
So Jane is worth $44,275, but she only takes home say $20,000 after various taxes are applied to her salary.
Here’s the kicker – self-employed Jane will pay far less tax than employed Jane. It’s just a fact of life – self-employed people pay less tax. Having previously paid around 40% tax during my employed career, I was shocked to hear my accountant utter the following beautiful words:
I would be amazed if you pay anything more than 15% tax on your gross income.
If we assume that Jane’s accountant gave her similar advice, she would only need to earn approximately $23,500 per annum from her business, as opposed to the $30,000 salary she took home from her job.
And perhaps most importantly, relative to how highly Jane’s employer values her, she barely needs to fulfill 50% of her full potential in order to earn the same amount as her job provides.
Editor’s Note: The tax savings described above is due to the fact that as a small business owner, you can deduct the cost of goods, services and travel expenses incurred while running your business. Please check with your accountant or tax attorney to determine what can and can not be deducted.
The Ultimate Question
All of the above leads to one question that you must ask yourself:
Do you value yourself as highly as your employer does?
If the answer to that question is anything close to approaching “yes”, there is absolutely no reason why you shouldn’t be able to successfully launch your own business, given careful consideration and planning.
I am a living example of my own argument. My current equivalent hourly rate, net of tax, is approximately $40. My hourly rate in my previous job, net of tax, was approximately $34. And I’m only 6 months in. I don’t say that to boast (after all, I am not particularly special, nor am I working miracles) – I say it to demonstrate what is possible.
Value yourself appropriately, have confidence in your own abilities as recognized by your employer, and the sky is the limit.
- Hiring An Accountant To Do Your Taxes Vs Using Turbo Tax Or Tax Cut
- Outcome Of Hiring An Accountant To Do Our Taxes Vs Using Turbo Tax Or Tax Cut
- Corporate Structure : Is an S Corporation For Me?
- A Less Scary Way to Look at Self-Employment
- Do You Feel Stuck At Your Job Because Of The Economy?
Have you read these?
- The Top 10 Mistakes of Online Store Website Design
- How to Deduct Your Vehicle on Your Taxes
- Mid Year Income Report: How Our Online Store Performed In The First Half Of 2013
- Small Business Accounting And Bookkeeping Can Be Fun – The Ultimate Small Business Startup Guide Part 6
- Interview With 6 Figure Blogger J Money Who Blogs For A Living At BudgetsAreSexy.com