Monday we talked about deciding whether you should be self employed and how to determine if it's the right decision for you. Today is all about what happens once you take the jump and make a new career for yourself. This is the point I am at now and there is so much to learn that I never even thought about before. I'm sure many people who have entered self employment have been in the same situation. Now what? Before now, you had employers take taxes out of your paycheck for you. There were lawyers that took care of contracts and any important client relations. Expenses? Those were simple forms that you got checks back for every other week. All of this is now your responsibility and not only do you need to plan for it, you also need to budget for it. Hello reality,goodbye la vie en rose.
Where should we start? How about money. I am in no way an accountant or financial professional so don't ask me for budget advice or anything like that. My first piece of general advice would be to invest in an accountant. Unless finance is your trade, you should really have an accountant to deal with taxes, bank accounts and the whole financial mess. I go to my accountant first for everything. Get one you trust and who understands your business because the only one who will regret bad financial decisions whether you make them or not is you. Don't put yourself in that position. Next step, get a lawyer. I'm currently working on this. You will not need them often but you should have someone who knows what your business is at the ready in case something legal should ever come up. They will most likely only handle your contracts but preparation is always key. If law isn't your trade, it's aways in your best interest to have a professional draft contract templates for you and look over any contracts you need to sign. You are now a business owner. You need to protect yourself and your business.
Being your own boss has its perks but there are a lot of things you need to stay stay on top of or risk trouble. Taxes: I've been told several times to put aside 30% of paychecks and invoices aside for taxes. Consult a professional for a more exact estimate. Expenses: you need to keep all business and personal expenses separately and you need to document every single one. Income: you need to document all of it. You do not want to deal with the IRS because you forgot to include that invoice for a one time project. It all counts.
Clients. Remember when your boss used to take the heat when clients weren't happy? Remember when the company negotiated rates? Well, those days are gone and all, I mean all, the client management is now your responsibility. The good, the bad and the ugly. You need to determine your rates. How much is your time and expertise worth? What are the expenses you will incur to complete the project? Are you charging hourly or on a project basis? All these questions and more are important and you need to answer them. Charging is one of the hardest things for me personally and I know many people who say the same. How much is too much? You don't want to undercut yourself but you also don't want to to be greedy. All of those hard questions and daily inner debates are going to be your responsibility now and you're going to have to deal with it because this is your livelihood now.
Self-discipline. So you got all the above figured out and under control. Great! Now you have to keep up with your responsibilities, manage client expectattions, handle deadlines, last minute projects, and anything else without anyone really holding you accountable. Sure, a client might ask where something is ahead of schedule but you need to manage your time and workload to have everything done in a timely manner and always on schedule. Your name alone is on the line. You screw up, that's on you. Losing a client when you're self employed is different than losing a client at a company you work for. Your paycheck takes a cut and your reputation has the potential to be at stake. Sometimes relationships with clients don't work out and that's fine but you do not want to lose a client because you couldn't handle your responsibilities. You need to set work hours. You need to be responsive on emails and be accessible within reason.
On the other hand, you also need to set expectations. You can't let clients walk all over you. For example, I am accessible for the most part from 9-5 Monday through Friday unless in a meeting, on a phone call or unavailable for a reason I notified them about in advance. I will usually answer within an hour, if not sooner. However, at night and and on weekends I am "off duty" unless there is something important going on that I have been planning for in advance. If I see a email, I say that I will respond Monday morning. If you get into a habit of being available for anything 24/7, you set yourself up for disaster because you won't always be available and more importantly, you shouldn't always be available. End of story. Establish those boundaries early and stick to them. You know what's important and if it can wait till morning or Monday, let it wait. Unless you're in medicine, it's probably not going to be life or death. If it is, I doubt you're self employed.
Being your own boss can be the best decision you ever make and nothing should keep you from following that path. There are realities to it though and you can't ignore them. I've been fortunate enough to be surrounded by great people who can point me in the right direction but not everyone has that. Owning a business is a big deal and you need to get your priorities straight otherwise you might just be setting yourself up to fail. What's the point of going through the trouble if you're not going to do it the right way? Chances of of a lifetime don't come often so don't take advantage of one when it comes around.
Miss Part 1? Make sure you check it out. I also included several links to great articles on self-employment and being your own boss in part 1.