One of the first things to consider is a matter of skill. Are you comfortable enough with your talent to offer it as a service or product? Your service or product does not have to be unique, it must however show enough professionalism and experience to capture and maintain a customer-base. You must be able to interest strangers, not just your friends and family.

Another question is how resourceful are you? If your self-employed business is based on a tangible product, where are you getting your resources? Are they readily available and relatively easy for you to access? If you are not able to warehouse your inventory or raw material, then you will be dependent on a manufacture. How reliable is that source and do you have a secondary plan for supplying your business.

Tracy Coenen in her article “Are you cut out to be self-employed?” suggests that individuals who are embarking on the path of entrepreneurship ask themselves 4 very important questions. (http://www.walletpop.com/2008/01/21/are-you-cut-out-to-be-self-employed/)

First, “have you saved enough money?” The expense involved in starting your own business can be overwhelming and the cause of failure if you don’t have enough.

Second, “are you ready to go beyond the nine-to-five?” As in every new venture, the time you invest is well spent. With your own business, you will definitely need to put in the hours to increase your chances of success.

Next on the list is “do you envision a life of glamour?” If so, either rethink your plans now or hold that thought for a few years while you perform the grunge work involved in starting a new business.

One of the most important questions Coenen asks is “are you disciplined?” For you would need to be. As an entrepreneur, you do not have a punch clock, so hours spent on the job will show on your bottom-line. You are your own boss, so a sick day spent doing your personal shopping or lunching with friends is a direct lost of profit and totally your responsibility.

There are many challenging aspects of self-employment, but there are equally as many rewards. Investing time for introspection and research in your area of business will benefit you from the very start.

That seems to be the indication from this Financial Post poll that found:

“About 900,000 Canadians who plan to start a business by the end of 2008 are among 3.3 million who are looking to be their own boss within the next five years. The biggest growth in desired self-employment was in Internet and online services, while interest had fallen in arts and crafts, retail sales, business services and management consulting.“

Which is interesting to me because ironically, now that I’ve been fortunate enough to enjoy some success in building an internet business, I have spent the last couple years diligently looking for offline investments.

But I cannot stress this enough: I wound up self-employed in the internet sector because I was working in the business and had experience and knowledge there. The surest path to successful and sustainable self-employment is by sticking to what you know. Don’t just pick some sector because from the outside looking in it seems easy and lucrative. Nothing is once you get up close and into it. If was truly easy and lucrative, everybody would be doing it.

While the rest of the article poses the question of whether these “techno outsiders” are really welcome or needed doing tech start-ups (the survey also found 43% were looking at the tech sector for their start-up), it leaves us to ponder the larger issue of hard times having a recipricol effect on self-employment numbers.

I remember during the early 90’s recession (not that I even realized there was a recession on at the time), that there were more than usual television commercials targetting the entrepreneur segment. I remember some of them angered me deeply as I was for the most part an out of work college graduate. But the mechanism was unmistakable and I seemed to know it on an intuitive level.

The shift to self-employment was not a conscious decision to become an entrepreneur as much as it was a necessary mental shift I had to make in order to think outside the box and differentiate myself from everybody else in the same boat as myself.

I wasn’t an out-of-work computer programming graduate handing out resumes. Those went into the garbage after a few futile months of job searching. In their place, I printed up some cheap business cards with the words “M Factor Consulting” on them and *presto*, I was a consultant instead. That seemed to work at least marginally better than the former, even if it was a placebo effect in my own mind. I landed more one-off jobs and managed to string them together into something resembling a fledgling career.

With a recession all but officially here (even the talking heads on TeeVee agree that a recession is a near certainty in the US in 2008 and with Canada typically lagging 10 to 12 months we’ll certainly feel the effects here), self-employment in some shape or form will likely surge.

1. Daytrading
2. Real Estate Flipping
3. Forex
4. Blogging

Today is part II of the series, “Real Estate Flipping” and why, to paraphrase AC/DC “It’s harder than it looks…It’s a long way to the top if you wanna rock n roll…”

There has been an explosion of television shows over the past couple years centered around the phenomenon of making easy money flipping houses. This is a symptom of the largely US-led real estate bubble, where housing values were driven by artificially low interest rates and excess liquidity in the money system.

For awhile, it looked easy to buy a house with little or no money down, do some fixups, and then turn around and sell it at a grossly inflated price into a rising market.

Shows like “Flip That House” made it look so easy, even the so-called “problems” these first-time flippers encountered over the course of an episode seemed surmountable and more entertaining than detrimental. At the end of each episode the happy flipper would announce how much they bought the house for, how much they paid for it, and there listing price, gleefully punctuating it with large, impressive sounding number of their projected profit.

“Projected” is a key word here. The first few seasons of “Flip That House” they only announced the projected profits, which always makes for a happy ending. I can list my house at three times what I bought it for, giving me a projected profit in the stratosphere, but I can’t put projections in the bank. It isn’t until the house actually sells that profits, if any, become a reality.

For starters, unless you have in-depth knowledge of contracting and the various construction trades, including the various housing codes, doing any renovation work on a house is harder than it looks, much harder.

If you plan on outsourcing all or most of the work, you need to find and retain honest, competent, reliable and affordable contractors and laborers, which in itself is an art. Horror stories about contractors and renovations are not cliches for no reason. They are ubiquitous because finding key personnel who fit these criterion are exceptions, not the norm. Especially during a screaming white hot housing boom, the good labour is booked solid. Finding a “contractor” in this climate who is actually available is almost a red flag in itself (if they’re any good, why aren’t they booked solid?)

There is also a rule of thumb from the IT industry which applies to all areas of life and it is this: all projects take longer than planned and go over budget. There are scant few exceptions to this rule. Read it again: all projects take longer and go over budget.

A more realistic “flipping show” is “Property Ladder” which follows newbie flippers who probably watched a few too many episodes of “Flip That House”. On this show you get a more realistic depiction of the stress and they follow it to the logical conclusion: what the house actually sells for, if it sells at all. In many instances the house is still sitting on the market months later at a reduced price. Even the always bullish Flip That House has done some follow-up shows and many of them ended without a sale at all, the flipper ended up moving into it himself or ended up trying to rent it out.

The mistake many people make trying to flip real estate is they count on an ever increasing housing market, despite that this year with its subprime woes and credit crunch has all but signalled the end of the housing boom.

Professionals in any field amass wealth by buying below market and then selling at market or even having enough margin to profitably undercut the market slightly.

Amateurs rush in and buy at market, hoping for a rising market, and planning to sell into a higher market.

What makes the latter method attractive is that during bubble booms in any sector, it tends to work for awhile, at least on TV. In reality it doesn’t always work that way and after the bubble starts to unwind it’s a recipe for disaster.

Another unforeseen “gotcha” specific to flipping real estate are the tax consequences of selling property that is not your principal residence. Most people are used to selling the house they actually live in and moving to another. For the most part, your profits on selling your principal residence are exempt from capital gains taxes. This is not the case for other properties which are not your principal residence. If you do manage to eek out a profit on that first flip, you’re going to have taxable income or capital gains, it’s yet another aspect you need to plan for in advance.

Those four fasttracks to financial ruin for the prospective self-employed are

1. Daytrading
2. Flipping Real Estate
3. Forex
4. Blogging

Self-employment seems an attractive concept to many people. Unfortunately some people enter the self-employment world with either unrealistic expectations or on a flawed premise. To the prospective solo worker, self-emloyment, if not properly thought-through and planned, may amount
to little more than a get-rich-quick scheme, or perhaps, get-rich-leisurely.

To those wanting to make the jump, there are pitfalls to be wary of, and here are 4 paths that are often billed as can’t fail, make money, no effort required fast tracks to be-your-own boss financial independence which are in reality potential expressways to financial ruin.

Part 1: Daytrading

The lure of the seemingly glamorous lifestyle of lounging around in one’s bathrobe, making millions daytrading can seem irresistable. How hard can it be? There are numerous “black-box” products aimed at neophyte daytraders:

no skill required, just buy when the box says buy and sell when the box says sell.

If it really worked like that, everybody would own one of the black boxes and we’d all be rich.

The fact is, becoming a professional daytrader is difficult. Very difficult. Unless you already have direct, hands-on experience in the equities markets, you should not even attempt it. Common mistakes non-financial professionals aspiring to become daytraders make include being under-capitalized and having unrealistic expectations.

Newbies expect 20%+ returns and start out with stakes less than 100K. They would be wiser to do some math. So you wanna become a professional daytrader?

Ok, how much money do you need to live on in a year? Include everything, food, shelter, clothes, car payments, etc. Let’s say it all adds up to $35K.

How big of a stake do you have to start? 100K? Where is the money coming from? Your savings? Or if you’re completely insane, borrowing?

What do you need to do to maintain your standard of living on your stake?

Well let’s say after mortgaging your house (yikes) and cleaning out your bank accounts you’ve come up with $100K and you need 35K a year to live on.

So you need to generate a return of 35% a year to maintain your standard of living, excluding inflation.

The best fund managers in the world, the ones who are paid millions of dollars to trade the equities markets, are absolutely thrilled if they can beat the major indices. Last year the DOW did 16%. A
hedge fund manager who did 16.5% probably got a million dollar Christmas bonus and a Ferarri for a stocking stuffer.

Warren Buffet, the second richest man in the world and regarded by many as the world’s most successful investor has managed an average of 29% compounded annually.

So if you want to daytrade your way to financial freedom, unless as I’ve noted, you already have oodles of real world experience, already designed and tested your own trading methodology, and are properly capitalized to the point where you could live off savings separate from your stake for awhile and subsist on less than steller returns: 3%, 5%, -10%, you should probably not walk this path.

Next part: Real Estate Flipping

Changes include new, digital format of date field and label, obligatory numbering, larger area reserved for MICR printing only, standardized positions for key information and mandatory pre-prints on the back of the cheque.

For the latest specifications of the new cheque format you can visit site of Canadian Payments Association at www.cdnpay.ca .

What all this means to a small business or selfemployed person? It not only means that you need to order new cheques pretty soon, but also you need to verify that your accounts payable software is ready to print such a new standard cheques. If you postponed to update your software for a few years – you will be probably forced to do it now.
New (2007) versions of Quickbooks and Simply Accounting are compliant with this standard. In Accpac you can change your cheque template – so experimenting with the printouts may do the trick.
Users of customized accounting software are out of luck if programming support of these companies does not exist any more or is not ready.

Independent payroll software providers, like Easypay.ca are ready since last year, and allow users to print either old or new cheque format.

Canada is not the only one improving technology to process cheques more efficiently. Countries like US, Singapore, Portugal, Spain, Hong Kong, United Kingdom and New Zealand are running advanced implementation of similar projects.

Cheque imaging will enable financial institutions to offer new products and services to combat signature forgery and cheque alterations. Did you know that 12 billion dollars is lost yearly in fraudulent cheques?

How can you protect yours? Here’s a quick checklist of anti-fraud protection practices:

Procedures:
• Separate responsibilities to write/reconcile cheques
• Treat negotiable documents as cash
• Conduct private, periodic security reviews
• Limit the number of official cheque signers

• Use tamper-apparent packaging
• Use serial number on documents

Practices:
• Lock up valuable documents and processing equipment
• Centralize cheque writing
• Use audit programs

Cooperation with bank:
• Reconcile cheques promptly and look for alterations
• Use bank on line reporting/reconciliation
• Protect and shred account references

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