5 Things to Know About Being Your Own Boss
In September 2018, I quit my full-time job at a hospitality agency to go off on my own as a social media consultant. I had been working at that agency for about a year and a half and felt that I learned all that I could but that it was time to move on. It was the best decision I could’ve made but I’ve also learned a lot about being your own boss along the way (they don’t teach you this stuff in school!).
Working for yourself is super rewarding (you make your own schedule, you call all the shots, etc.) but there’s also some things to consider before going off on your own. I figured I’d share the lessons I’ve learned so far as well as some tips for anyone who is looking to go off on their own as a contractor/freelancer or is just getting started!
HAVE A LAWYER HELP WRITE YOUR CONTRACT(S)
I wish I had done this from the very beginning but I learned this lesson the hard way. Yes, lawyers are expensive but it’s worth every penny to protect yourself and your business. If you ever end up in a legal battle with a client, you want to make sure you’re covered by your contract and there are no loopholes they can use against you. Once you have one contract, you can usually modify it for each new client.
HEALTH INSURANCE AND TAXES ARE EXPENSIVE
Gone are the days of your employer covering all or at least part of your health insurance. However, there are health insurance agents that can help you find the best insurance plan at no additional cost to you. And taxes? Since you’re no longer part of a company that covers a portion of your taxes, taxes end up being close to 30% of your income because now you also have to pay self-employment taxes. Additionally, estimated taxes are due every quarter so don’t wait until the next year to file everything at once otherwise you may be fined.
Since you’re contracting and not receiving the same benefits of a full-time employee, make sure your rates reflect this! Generally, contractor rates are higher than what your hourly rate would be as a salaried employee since you have to cover all of your taxes, health insurance, and any other expenses that you would normally receive as benefits from a company. And now that you run your own business, make sure to write off all your business expenses! I opened a separate credit card just to use for business expenses so that it’s easy to keep track.
Here are some links to help you with estimated taxes:
YOU WON’T ALWAYS GET PAID
And that’s the risk you take with running your own business. There’s no guaranteed salary to rely on every month so you’re at the mercy of your clients. And as a contractor, you will most likely be the last one to get paid since you’re not on payroll. So if a client doesn’t have the means to pay everyone, guess who’s getting the short end of the stick? Don’t get me wrong, there are many clients out there who are great at paying on time but just be prepared for the ones who aren’t (and make sure to save enough to cover for those times that you don’t get paid). Of course, you can always take them to small claims court if they owe you less than $10,000 ($5,000 if you’re a corporation) but you’ll have to represent yourself in court.
Depending on the type of service you offer, you can even have your client pay before work begins so that you never end up in the position of doing work and then not getting paid. Or if you’re a photographer, for example, require a deposit when people schedule a shoot so that they’re less likely to cancel on you last minute.
Speaking of billing, set up a system to manage your invoices. I use PayPal to create all my invoices and a spreadsheet to keep track of all of them but there are other programs such as Quickbooks that you can pay for that will automatically send invoices directly to clients and remind them if it hasn’t been paid. Just a heads up, if you use PayPal to collect payments, they will take 2.9% +$0.30 of every payment as a fee.
ADAPT TO CHANGES
If you’re running a service-based business and working with clients, things always change so just remember to be flexible…to a certain extent. Like I said before, you’re at the mercy of your clients. If they don’t have their product ready by the original date that they said it would be ready, be prepared to change your schedule to fit theirs. If you’re in the creative space, many times, clients don’t know what they want until they see it so be prepared for a lot of edits and back and forths. On the other hand, if you need something by a specific deadline, make sure they know that and keep following up.
KNOW YOUR WORTH!
Last but not least, never let anyone take advantage of you or mistreat you! Like everything else on here, I learned this the hard way… I had a client that was verbally abusive to me on multiple occasions and I kept telling myself to stick it out because he was paying me well. The emotional and mental toll it takes on you is not worth it! And in the end, I never even got paid so it really wasn’t worth it. So stand up for yourself and walk away from the situation before it’s too late. Additionally, depending on the service you offer, there will probably be people who ask you to do work for free or try to haggle with you. Just remember to stand your ground and state your rate instead of giving in. Never feel bad about asking for payment if you’re owed!
Hopefully you found this helpful but feel free to ask me any questions as I’m always happy to share and talk business based on my own experiences! I’d also love to hear any additional tips since I still have a lot to lear :)