The days of being a corporate drone are dwindling as people are being ignited to pursue their passions. But where do you start? Here are some tips for starting your own business so you don’t jump ship without a life jacket!
You’ve decided you’re ready to take the plunge, but what’s the first step? Write down your goals, both financial and professional, as well as your mission statement, services you’ll provide and what you want to get out of your business. Keep this is a convenient place for revisiting quarterly.
GET YOUR FINANCIALS IN ORDER
Michelle Evard, CFP, of Evard Financial Advisors, PLLC, recommends having at least six months of living expenses saved before leaving your current position. She also advises people to develop a spending plan, essentially a not-so-frightening term for budget.
Evard uses Microsoft Excel to estimate how much to budget for each monthly expense, such as dry cleaning, groceries and home expenses. “Then as you get paid,” she says, “‘deposit’ that money into each of the cells on your spreadsheet until you have used up your entire paycheck. That way you are planning how you are going to spend the money you just deposited.”
Evard says these expenses should be tracked at least once per week. For incidentals, withdraw cash once a week so you don’t have to track the small things.
PLAN YOUR RETIREMENT
Retirement saving is often offered as a benefit for corporate employees, but freelancers can plan just the same. Evard recommends putting away at least 15% of your income for retirement and says there are several options for retirement saving. For incorporated companies, the possibilities sky rocket. Be sure to meet with a financial advisor before beginning your business to ensure you properly plan for the future.
ESTABLISH YOUR BUSINESS
There are various business registration types, including sole proprietorships, partnerships, corporations, S corporations, and limited liability company (LLC). The best way to ensure you’re covering all your options is to meet with a lawyer or qualified business consultant to review the legalities of each type, and register your business per your countries laws .
PLAN FOR INITIAL EXPENSES
It’s the chicken and the egg concept. Starting a business costs money, and making money is the very reason you begin a business! List every initial expense you will incur in the first few months of freelancing, even the unlikely, so there are no surprises.
Evard warns, “Be sure to plan for health insurance, phone, fax, online subscriptions, computer, online access, business cards, legal expenses to incorporate or file with the state, and increased gasoline expense if you are meeting in person.” She also recommends having a work plan, whether in-person, virtually or a hybrid of the two, and to research the options online. “These should be included in your budget and cushioned for unexpected expenses.”
Don’t forget about purchasing domains and web hosting, attending educational events and upgrading software and hardware.
Paying your dues to the government
Independent contractors are subject to different tax regulations than full-time corporate employees. It’s important to meet with a Certified Professional Accountant (CPA) before getting too far into your freelance business to ensure you correctly follow the process and avoid penalty fees.
Inquire about tax write-offs for fuel, mileage, cell phone, hardware, charitable giving, business meetings and other business expenses, and keep detailed files of each. Consider opening an additional bank account (other than your bank business account) to save 20 to 30% for taxes and retirement.
Visit the Australian Government business site for more information.
RESOURCES FOR MORE INFO
* The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich by Timothy Ferriss
* The Richest Man in Babylon by George S. Clason
* Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence by Joe Dominguez and Vicki Robin