Top Ten Things No One Tells You About Going Out On Your Own
I probably take 2–3 calls per month from new consultants or new business owners about all the things they worry about as new entrepreneurs. I have also started supporting female entrepreneurs through the Center for Women in Entrepreneurship (WIE) in New England, as well as launching a coaching service in my consulting practice. Below is a summary of the top things I get asked. Unless you have friends and/or family who are entrepreneurs or who are self-employed, there are some very important things you might not know about starting a business or a consulting practice. I love working on my own and (with rare exception) wouldn’t have it any other way. But there are some important things I learned along the way. And, some of these things could get you into big trouble! Here is a list of the “must do’s” in order to avoid issues later.
Separate your personal and business finances. Get a separate business bank account and a credit card for business expenses. This helps to figure out how much money you are actually making. This also makes your taxes much easier! There are several no or low fee small business accounts out there — I recommend looking into a local bank.
Create an LLC. This will protect you both legally (the LLC will be liable, not you personally) and tax-wise. All contracts, paychecks, documents, etc. should be in the name of the LLC and not your name personally. LLCs vary state-to-state but you can generally start with your state’s Secretary of State office. The annual fees also vary state-to-state, but these are also a tax write-off. Be sure to renew these each year! Note: you do not need to be actively using the LLC in order for it to exist.
Pay quarterly estimated income taxes. Because you are now self-employed, your employer is not taking out money from your check each month to pay both state and federal taxes. Every 3 months, you will need to pay quarterly taxes to BOTH your state and the federal government. This can easily be done online. I recommend saving a percentage (check with your accountant on how much) of each paycheck for taxes.
Get a good accountant. Having a good accountant will advise you on how much estimated taxes to pay, what percentage to pay and what you can write off. It will also save you a lot of money and time. Don’t know any accountants? Ask other consultants, other small businesses you know (coffee shops, dry cleaners, dentists, etc.) or friends and family members to refer you. Tax laws and expertise vary state-to-state, so be sure to ask someone who lives in your state. Here’s a good article from the New York Times on how to find an accountant. You should also familiarize yourself with what can be written off (hint: a lot of things).
You now need to do everything. As an independent consultant and entrepreneur, you are in charge. This provides a lot of freedom and flexibility. This also means that….you are in charge of everything. You need to create your own structure for the day, week, month in order to meet deadlines. You need to schedule appointments and meetings, book travel, and deal with finances and bookkeeping. I recommend several tools such as Quickbooks for finances and Toggl for time management. There are also a ton of project management tools you can look into.
Create an elevator pitch. In my opinion, major marketing such as branding, Websites and social media can wait a bit until you are more established. However, its is very important that you can briefly state (30 seconds or less) who you are, what you do, and what your areas of expertise are. Create and practice your elevator pitch.
Network, network, network. Now that you are on your own you not only need to do the work, but bring in new work. Plan to spend 3–4 hours per month (at the very least) on business development. This includes networking calls/meetings, events, conferences, social media, writing proposals, etc. This also includes both growing and maintaining your network.
Join other networks of consultants. There are many free and very helpful networks out there of other consultants. For education, I of course love and regularly use Catalyst:Ed and Transcend Education’s Design Community, both of which you must apply to join. I regularly attend workshops and ask questions with these networks. There are also local groups, such as the Center for Women in Enterprise in Boston (and greater New England). I also highly recommend Meetup.com.
Diversity, Equity and Inclusion cuts across everything. This is still important in your work, even if you are a solo practitioner. Pay attention to who you are working with, who you are interacting with, and how you are working and interacting. This may also deeply affect your work (and what work you are getting), especially if you are a woman or a person of color. Joining networks of other consultants and keeping yourself up-to-date on skills and knowledge will help in this area.
Sign contracts. Be sure you carefully review and sign all contracts BEFORE you start work. Protect yourself. Make sure you know all the tasks, deliverables, and responsibilities, as well as payment, intellectual property and anything else that might be important to you.
Hopefully the list above will save you some trouble. Feel free to comment if I am missing anything.
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