Self Employment Advice
From Adviceopedia
Self Employment Advice
Be Sure of Your Goals
There are many wonderful things about being self employed and it's a good idea to review which are the most important for you. Making a list can help you make decisions on everything from picking an opportunity to arranging a work schedule. If you're driven largely by the thought of making all your own decisions, then franchising might not work for you. If maximizing your income is your main goal, you'll probably want more high-risk, high-reward opportunities like stock trading or real estate rehabbing than making some extra cash out of an interest such as making European style pastries.
Review Your Direction Regularly
Even when your business is thriving financially, consistently review your personal and business goals. Make sure the work is still rewarding. Be aware of any changes that could affect your business. Some self employed individuals set financial or personal goals in their original business plans to provide objective indicators of what the next steps should be to expand, revise, or retract their plans.
Keep Balance in your Life
When you're self employed, you rarely feel entirely “off the clock.” Especially if you have a homebased business, where it's tempting to do “just one more thing” during time allocated for family, friends, hobbies, or just relaxing. Set yourself a realistic schedule and try to keep to it as much as possible.
Networking
Networking is the very best way to find a mentor who can give you self employment advice, get customers, learn about opportunities, and connect with potential suppliers or partners. Make word of mouth work for you. Don't be shy about asking good customers to recommend you to others. Consider joining civic organizations, alumni associations, or social groups to meet potential customers or find business leads. Online business networks are helpful, too, provided you remember that you get out about as much as you put in.
Remember to reciprocate! If you do somebody a favor, they're much more likely to remember you and help you if they have an opportunity. Similarly, be quick and gracious when you thank somebody for their help.
Know What You Don't Know
Self employment can become very complicated very quickly. Make a list of business functions or needs such as:
- Budgeting
- Market research, marketing, and pricing
- Startup funding
- Government contracts
- Purchasing
- Business loans
- Strategic planning
- Accounting
- Zoning and licensing requirements
- Health and safety requirements or OSHA standards
- Taxes
- Technology (hardware and software)
- Insurance
- Legal matters
- Hiring and managing staff
- Importing and exporting
- Environmental and waste disposal issues
- Disaster planning
For each one, decide how much it applies, if you already know enough about it, what you can teach yourself, what you'd need training in, and where you'd need a professional for your small business advice.
Training, Education, and Self Employment Advice
SCORE, the Service Corporation of Retired Executives, is an amazing source of online and in-person information, training, and mentoring as well as general self employment advice. They have almost 11,000 volunteers nationwide in almost 400 locations. Services are either free or priced very affordably.
Your local community college, the Small Business Administration, and possibly your local Chamber of Commerce will offer in-person or online training courses.
Loans and Grants
The Small Business Administration offers various loan guaranty programs, though the financial institution must agree to accept their guaranty. The most common guaranty is the 7(a) program.
Your bank or credit union are additional loan options and can often provide small business loan advice before you apply. Their willingness, the amount, and interest rates will depend on your business plan, likely profitability, personal credit history, whether the loan is secured (you put up personal assets as collateral) or not, and how long your business has been operating.
You may also look for angel investors, who will apply the same kinds of criteria as banks or credit unions, but are usually somewhat more likely to take a risk.
Franchises
Franchises are organizations somewhere between being entirely self employed and working for somebody else. They offer the advantages of pre-existing reputations and marketing, business structures and plans, support and resources from the parent organization, and shared purchasing. However, they also require certain operating, pricing and products standards; and a limited ability to make your own decisions. Usually but not always, the cost to open and run a franchise is higher than that of opening a similar fully independent operation. But this is balanced by lower risk, as the failure rate for franchises ranges from five to ten percent, based on the franchise, compared to thirty to eighty percent for independent small businesses, depending on the kind of business and even the definition of failure.
Limited Liability Company or Incorporation: Protecting Your Personal Assets
Insurance is one way to protect your personal and business assets in case of a lawsuit, but forming a separate corporation creates an official wall between the two areas. It does complicate certain financial matters (while simplifying others), requires additional paperwork, and may not be necessary for very low-risk activities. But if you have enough personal assets to make you a desirable “deep pockets” for a lawsuit or are engaged in higher-risk activities, incorporating a limited liability company (LLC) protects your personal assets.
Avoiding Scams
Many advertisements for self employment opportunities are scams. If an “own your own business” advertisement sounds too good to be true, it almost certainly is. Think of it this way: If there's a way to be self employed that lets you make hundreds or thousands a week, without a big financial investment, doesn't require special experience, takes only a few hours a day, and is perfectly honest and legal, would they really need to advertise?
Keeping Separate Records
Avoid mixing personal and business accounts. Open separate bank accounts for business purposes and get a separate credit card. It also makes record-keeping much easier if you keep personal petty cash separate from business petty cash.
Setting Rates
Find out what market rates are and price accordingly, but don't cheat yourself when you're setting rates for your work. Ensure your rates aren't just the equivalent of a salary, but include expenses and benefits.
Taxes
The IRS has a series of online workshops on self employment and taxes. You can also get tax and self employment advice from a financial professional.
Retirement Planning
One of the most important pieces of financial self employment advice is to make sure you save something for retirement, especially if your only income is from self employment.
SEP IRAs are a form of IRA for self employed people. Each year you can contribute up to a certain amount, just like regular IRAs, according to the IRS regulations.
Keogh plans and self employed 401(k) plans are actually forms of pension plans for the self employed. They are more complicated than IRAs, but allow for considerably higher contributions.
Health Insurance
Health insurance costs are a major concern for the self employed; even now that 100 percent of their insurance costs are tax deductible. You usually get better rates if you join a group program. Professional associations or groups of the self employed like The National Association of the Self Employed often carry group health plans.
