1. Try it on the side first. Rather than ditching your job, setting up shop for yourself and just hoping that the clients come, try out your business idea on the side first – while you keep your day job. This way, you can test out the market and wait to see if it takes off before you give up a steady paycheck. If you build up enough of a client base, you can quit your job with more confidence. And if you don't, you'll probably be glad that you waited.
2. Understand the difference between an independent contractor and an employee. As an employee, your employer can control when, where and how you work. As an independent contractor, the IRS puts restrictions on how much control your clients can exert over those factors. You want to make sure that you're adhering to the regulations for your new classification. And speaking of the IRS…
3. Talk to an accountant. As an independent contractor, you'll be responsible for paying your own payroll taxes (which previously your employer paid for you). You'll also probably be able to write off more expenses. It's worth investing in an initial consultation with an accountant to make sure that you understand how your taxes will work now that you're on your own, and to make sure that you're taking advantage of any write-offs now legally available to you.
4. Be prepared for lean times. Freelancers tend to have ebbs and flows in their income and sometimes go long periods without checks coming in. Make sure that you have enough savings to cover you when money isn't coming in or in case a client is late in paying (which happens more than you might think).
5. Know how to set your rates. Figuring out how much to charge is one of the most stressful and confusing elements for new freelancers. What if you set your rates too low and deprive yourself of additional income you could earn? Or what if you set them too high and drive away business? To confuse matters further, you can't even base your rates on your previous salary, because contractors typically charge more than employees (since employees also receive benefits and have the stability of a steady paycheck). You'll need to research the market you're entering and talk to others in your field to price your services, and even then you might always worry about whether you found the sweet spot.
6. Take advantage of free online resources for freelancers. You can find all sorts of tools for freelancers online, from invoice templates to time trackers to project management tools to discussion boards where you can pick the brains of other freelancers. Don't overlook this huge wealth of resources.
7. Know how to market yourself, or be willing to hire someone to do it for you.You might be fantastic at the service you're selling, but that won't be enough. You'll also need a plan to find and pitch yourself to potential clients. No matter how great your product or service, you don't really have a business at all if you don't have a plan to get clients.
8. Stick to a schedule, even if you don't need to. Your business might not require working the same fixed schedule as you needed when you worked for someone else's company, but most freelancers are well served by creating a work schedule for themselves anyway. Otherwise, if you take too much advantage of your flexibility in hours, you can find yourself at the end of the week (or the month) without much work done.
Alison Green writes the popular Ask a Manager blog, where she dispenses advice on career, job search, and management issues. She's also the co-author of Managing to Change the World: The Nonprofit Manager's Guide to Getting Results, and former chief of staff of a successful nonprofit organization, where she oversaw day-to-day staff management, hiring, firing, and employee development.