“No matter what kind of self-employed business you do, you need to make at least $28 an hour for it to be worth your time.” Kevin Viel
If you have worked in a traditional job for any amount of time when you go into business for yourself and receive that first check for your services, it’s going to seem like you hit the lottery. I remember the first check I got when I went on my own and started a business, there’s just a tremendous sense of pride and accomplishment. Then week after week I would get great checks that got bigger and bigger as I did more work and it motivated me to push harder to build my business. This is how it should be but there were a few things I really didn’t think about and maybe you’re starting out and might miss them as well. It would be nice if when you started a business you had a personal coach to guide you through some of the things that you just don’t know, right?
Now I’m not trying to discourage anyone from going into business for themselves, I believe in it whole heartedly, I just want you to be prepared. Here are a few things to watch out for to make sure you’re not wasting your time working for yourself:
- How much will you pay in taxes? This has to be the number one thing you look at and consider to make sure you’re making enough money! When you get those checks they look so huge because there are no taxes taken out, I know you know this. It needs to be brought up because something doesn’t really click in our minds when it comes to paying taxes. When you work for a company they take taxes out and you don’t think twice, when you work for yourself you know that you’ll have to pay taxes but it just doesn’t seem real. First and foremost, make sure you’re paying your quarterlies! For those that don’t know what these are, you pay these estimates every three months so that at the end of the year you don’t owe $100,000 in taxes (that was a slight exaggeration). As a practical matter if you don’t pay your quarterlies, you’ll pay what you owe plus a penalty. Then save up a little bit of extra money just in case you owe more, the logic behind this is simple and obvious, it’s better to have too much then not enough. If you don’t owe as much as you thought then you’ll have some extra money for next year! I suggest that you set aside a certain amount of money every time you get paid for taxes, if you don’t know how much try to google search it or talk to a tax professional. This is the one thing that makes or breaks businesses, not paying your taxes can shut your business down and ruin your life, trust me!
- How much are the expenses to operate the business? Will you need to purchase a vehicle for your business? How much will all the equipment cost to operate the business? How much will all your insurances be? Will you have to pay for your own health care? Once we get an idea and it seems like it will work, we should be willing to implement a step by step plan to start this business. However, before we get that ball rolling we have to research all the cost and expenses to operate this business. Does it make sense to go into business for yourself and break even after you just left a $90,000 a year job with benefits? In the past I had the opinion that it was better to work for yourself no matter what, just leave that job that you hate so much. I have since had my eyes opened a little more and see that it’s better to use that job you hate (if it pays well) to fund your future business, you just might have to move at a slower pace. If you work at a minimum wage job and have the chance to break even after expenses, then that’s a different story entirely! If you have already started and are running a business and the expenses are eating you alive then it’s time to re-evaluate and see what can be done to cut those expenses down or be honest as to whether or not this is your dream. If this is your dream business then please get on top of this now, if it’s just a business, then cut your loses and get out before this turns into a nightmare.
- Are you charging enough for your product or services? It’s perfectly understandable that if your starting out to offer some sort of opening special, most of us have done that. However, once you see that your product or service is being well received then it’s time to make sure you’re getting what your worth. Don’t know what your worth? Look at your competition, look at the time and effort you put in, how much should you be paid for that? One of the biggest mistakes I made when I first started off in business was to not raise my rates sooner. I had charged a discounted price to draw in the customers, they liked my service and booked me enough to the point where I was able to quit my two other day jobs. At that point I should have raised my rates but I didn’t and let some people talk me into keeping the prices the same (big, big mistake). It took a new friend of mine to come along and look at my prices and say: “for the work that you’re doing and for what those guys make, you’re getting ripped off”, that talk with him really opened my eyes. I then went to my customers and asked if they were happy with the service and they all said yes. I then put out a memo stating that my prices would be increasing and why, they flipped out. They had gotten so use to the cheap prices they didn’t want to pay an extra cent, in the end I lost business because of it. Here’s the kicker though, because of the price increase, I made more money working less, with fewer customers. I would say that’s a win, right? Maybe that’s your problem right now, you’re not charging enough and working too hard for too little. If you validate with your customers that they’re happy with your service or product, then raise your rates, in the end this will weed out all the bottom feeders and give you a real solid customer base that will be loyal the whole time you’re in business!
The American dream is to start your own business and be very succesful and live happily ever after, this can be done, you just have to be smart about it.
If you’re in a business that’s more headache then it’s worth, it’s ok to admit it didn’t work out and move on. We have such a fear of failure in our society today that we’re either too scared to start a business or to scared to get rid of a losing business. The whole point of business is to not take things personally and not get caught up in emotions, we have to think rationally.
Thomas Edison tried 1000 times before he got the light bulb to work, when interviewed he didn’t view that as failing 1000 times, he said “I think of the light bulb as an invention that had 1000 steps.” Maybe you have to go through “1000″ steps to make your dream business work (I hope not), but make sure that you can answer the above questions and that after reviewing them, you’re making enough for the time and effort you’re putting in. You’re worth more than you think, make sure you’re getting paid that amount!
Are you making enough money? Let us know in the comments below: