Anyone who wishes to become self-employed or start a business should consider the following key financial points, which is where many self-employed people have avoidable problems:
- Whether you choose to consider yourself in business or simply self-employed, the market will consider you nonetheless to be in business. As a result, you have no choice but to think like a business owner and entrepreneur at all times.
- A business with a great product but poor marketing will likely fail. On the other hand, a business with a so-so product but great marketing stands a much better chance of thriving. Consequently, as a business owner, you must continually invest in marketing and selling. At the beginning, this is more about time and effort than big bucks, but the tendency is to skimp on these as they can be hard. It takes sustained effort and perseverance to create the demand for your products and services (which is what marketing is) and to face refusals and obstacles as you start promoting and selling. The investment is psychological and physical, but it is real nonetheless.
- Keep a tap on your ego. Ego is what leads people to buy a Mercedes as a company car at the beginning, rather than, say, a Honda. There will always be time for that later, once you’ve got better cash flow and are a going concern.
- You should pare your fixed expenses to the minimum and transform fixed expenses into variable expenses. Do you really need to rent an office with a receptionist, or can you work out of a home office. The cash flow savings are significant as can be the tax implications. You also save on commuting in terms of time and money.
- Build a safety net in the form of savings, commercial insurance (as relevant), supplementary health insurance, income replacement insurance, and catastrophic illness insurance.
- Be prepared to invest in yourself and in time-saving approaches. For instance, you need regular professional development, professional memberships, and professional advisors (e.g. accountant). You also must consider the time value of your work and other activities. For instance, time spent doing household chores can be better spent marketing and selling for your business. It can be an investment to hire someone to do these while you invest your time and effort in your business.
© 2012 Richard Martin. Reproduction and quotes permitted with full and proper attribution.