Are You Sure That You Want To Be Your Own Employer?

Not everyone can be their own boss. Ask yourself these two questions before you take the leap.

Does self-employment suit your life circumstances?

No matter how much you want to be an entrepreneur, if you have a well-paying, stable job with benefits, and a job that is satisfying, it might not make sense for to go self-employed.

When you are able to plan vacations and major purchases and have regular hours and a stable paycheck, you will find it easier and less stressful, especially if you have children.

Before you decide to go self-employed, examine your current lifestyle, your financial situation and your future retirement goals. Discuss them with your family.

Does your personality lend itself to self-employment

It has its advantages, but you are also responsible for your business’s success (including your income). You may not be a good entrepreneur if you are prone to anxiety and stress when dealing with the uncertainty of self-employment.

Prior to the event, get financing in place

What capital will you require for your business premises, machinery and equipment? A computer consultant may not need capital financing to start a at-home consultancy business. However, starting an excavation business may require equipment worth hundreds of thousands.

You will also need to cover your personal and business expenses until you generate income. Even if you have clients at the time you launch your business, it could be several months before you are paid for your first project.

If you are considering becoming a contractor, you should review your finances, estimate your needs, and (if necessary) look into possible sources of funding, including family, friends or financial institutions. (Spoiler alert: it’s virtually impossible to obtain financing from a bank for a brand new business unless you can provide collateral, like personal assets).

You will need a detailed outline of your Financial Requirements in your business plan if you are seeking financing and intend to ask for loans or equity investment.

Create a Business plan

Do you require a Business Plan? You may not need a business plan if, for instance, you have the opportunity to leave your full-time position and immediately be hired as a contractor or if you already have clients and are starting a new business.

There are several reasons for most startups to have a plan.

• Market research can be used to test your business idea’s feasibility.
• Describe how you plan to market your product or service to customers
• Attract investors or obtain funding
• Forecast future expansion, such as the acquisition of new equipment, hiring subcontractors or employees, etc.

A solid business plan, updated regularly, is a roadmap for success.

Name, register, and insure your contracting business

You will need to do the following before you can start accepting clients.

• Decide on the legal structure of your business. Do you need to incorporate, or can you run as a sole proprietorship. Many professions require that you be incorporated. Before signing any contracts, you should incorporate if that is your intention.
• Decide on the name of your business and register it, if necessary.
• Insure as needed. Will you require general liability insurance, for example? Professional liability? Errors and Omissions? Insurance may not cover a claim made against your company, which could have catastrophic financial consequences. This is especially true if you do not incorporate your business. Home insurance does not cover any business conducted from your home.
• Get a business bank account.

Marketing Your Business

The biggest challenge in starting a consulting business is getting your first paying clients. You may already have clients if you’ve left a full-time position in the same field. You should contact friends, family and business contacts if you haven’t already. Word-of-mouth advertising can help you get clients more quickly and also provide feedback on the potential of your new business.

You can start at the beginning by creating a marketing strategy and implementing some inexpensive, simple marketing techniques (such as social media marketing) to attract your first customers.

For starters, you can be your own accountant

You can save money by organizing your books and creating systems to invoice your customers.

Accounting software simplifies your bookkeeping. FreshBooks, Zoho, and other cloud-based accounting packages offer starter packages that are ideal for contractors, including invoicing, expense reporting, simple reporting and mobile apps, for as little as $10 per month.

You can hire a bookkeeper to take care of your bookkeeping once you have a lot of clients.

Always Be Professional

No matter what your profession is, you should always look the part. Inappropriate dress and behavior will turn off potential customers who do not know you.

Being a professional means also answering the phone correctly, using voicemail and responding quickly to emails or messages. Online reviews and social media can make it difficult for businesses to maintain a good reputation.

If you plan to run a business from your home and you need to meet clients, you should have a separate home office that is properly furnished and equipped.

Building Your Reputation with Best Practices

You want to keep your ideal customer for the entire life of your company. You can do this by:

• Building a reputation of honesty and integrity
• Under-promise and over-deliver
• All mistakes can be rectified
• Treating each client as a special person and thanking them regularly

Making impossible promises and over-extending yourself is a surefire way to lose clients in the long run.

Avoid Tax Issues By Having Multiple Customers

Self-employment has many advantages, including the ability to deduct tax expenses. Tax authorities can scrutinize abuses. You may be considered an employee or a Personal Services Corporation (by the CRA) if you only work for one employer. This could prevent you from claiming the standard deductions and the small business deduction. If you are a contractor who has converted to an employee and continues working full-time for the same employer, then your risk is increased.

The best way to maintain your status as a freelancer is to work with multiple clients. You can discuss your status as an Independent Contractor with your accountant if you’re unsure.

You Don’t Have to Do Everything

Consider subcontracting your non-core work if your business is expanding and you find that you don’t have enough time. Are you willing to manage your social media posts or be your own website designer? Do you want to deliver your product directly to the customer? Make your own travel arrangements or deliver products to customers yourself? Keep your own records and pay your taxes yourself?

You can save time by outsourcing some of these tasks. You may be able to get tax benefits if you can have your family perform these tasks.

Make sure you’re ready before expanding

Many contracting companies reach a stage where they need to hire more staff in order to expand. A self-employed contractor in IT may be forced to decide whether or not to bid on a project that will require a team of people to complete.

Many self-employed contractors are reluctant to hire (or contract) additional staff for several reasons.

• It may be more difficult to find qualified employees if your business is more specialized.
• Interviewing, advertising, and vetting resumes takes a lot of time. After you hire, the training, supervision and paperwork that goes with it will take up more time. The paperwork is more difficult when you hire employees instead of contractors. Payroll requires tax deductions (and other accounting costs) and increases your overhead.
• Profits will not increase unless additional staff generates more revenue than their cost of employment.
• If the person you hire is not performing at a high level, your reputation may suffer.

It is easier for many contractors to control costs and keep their workload manageable. This also helps them maintain a positive cashflow.

If you want to expand your business, and have the time to do so, then go for it.

Do not forget the rest of your life

Avoid letting your business take over your life. A balanced, healthy lifestyle involves a good diet, regular exercise and personal time with friends and family. It is not worth it to put all your energy and time into your business in order to make money to fund retirement or for other reasons if you end up with a declining mental or physical health.

Be a great entrepreneur–but be an even better person.