Happy New Year! Is your number one New Year’s resolution to establish your own entity and become a business owner or Freelance consultant? Are you planning to abandon the “safety” of a traditional job to directly market and sell your products or services to customers with money and motive to do business with you?
Going out on one’s own is a thrilling and sometimes frightening prospect. Those who take the plunge eventually discover that many resources that are casually taken for granted while working in an office are not readily available to those who step out on their own. As you weigh your options and prepare to write your business plan, be aware of a few changes and expenses to expect should you join the self-employed sector:
No paid days off
It is now Winter and there will be days when extreme snow fall could make it impossible to meet with a client or otherwise work. Further, regardless of the season, there will be no more paid sick days, vacation days or personal days. In particular for those who own a small B2B or B2C venture where the business model requires you or your employees to visit a customer location (e.g., cleaning services), or customers to visit your location (e.g., a laundromat), snow days = no revenue days.
Establish business credit
For tax purposes, it will be useful to open a separate business bank account and also apply for a business credit card or two. There will be business expenses to write off and you want to make it easy to monitor spending. Do yourself a favor and check your personal credit ASAP and correct any errors.
Financial management will assume more than one form. As noted above, you’ll need to establish credit for the business, so that you can order inventory and supplies without immediately impacting business cash flow, for example. Those are Accounts Payable items. You will also need to ensure that clients pay on time, or at all, and that is an Accounts Receivable function.
Maintaining sufficient cash flow is crucial to the business’ survival and your own ability to keep a roof over your head, food on the table and your car on the road. You must develop a business budget and plan for the purchase of equipment, licensing costs (if applicable), insurance (if applicable), professional certifications (if applicable), or space rental (if needed).
In addition, you may consult with a business attorney or accountant to discuss the legal structure of your venture: Sole Proprietor, Corporation (chapter S or C), or Limited Liability Company. The type of business that you’re in and your exit strategy will play a role in choosing the legal entity.
Paying for office supplies
Free scanning and photocopying will be over. When you need to staple a few pieces of paper together, you must buy the stapler and the staples and you’ll buy paper clips, photocopy paper and envelopes, too.
There will likewise be no meeting space or audiovisual equipment for you to reserve. You’ll have to meet at the (prospective) client’s office, or at a coffee shop or other restaurant. Privacy might be an issue and arranging a Power Point or other visual presentation can be awkward as well. A lap top computer or tablet are must-haves. It will be imperative to possess the tools of your trade and to always appear as a competent and prepared professional as you develop your reputation and build your brand.
Next week, we’ll look at more unexpected challenges that await those who choose to launch a business venture.
Thanks for reading,