Being self-employed brings self-fulfillment, freedom, financial rewards, and sometimes the ability to work in your pajamas from home. However, all those things get put at risk when you make costly mistakes. So, hold on to your house slippers and check out these five self-employment blunders that you ought to avoid.
1. Failing to Budget and Track Finances
Create a budget that accounts for regular, ongoing expenses and also allows you to set aside money for emergencies. As you draw up your plan, remember that you want income to exceed expenses to ensure you’re not just getting by, but in fact, you’re making a profit. If your expenses or income change, be sure to update your budget so you can get an accurate guide for your spending each month.
Just as it’s important for large corporations to keep meticulous financial records, small businesses and freelancers need to be just as diligent about tracking their expenses and income. By doing this, you always have an accurate picture of how much profit you’re making, and whether income is keeping pace with expenses. The bottom line is you need records to show whether you’re staying within your budget.
2. Filing Taxes Incorrectly
Whether you freelance or run a business with a two- or three-person staff, you need to understand the tax implications you’ll face each year. For example, most freelancers work as 1099 contractors. That means your pay is higher because the payee hasn’t taken out any taxes. Be sure to set aside money throughout the year, though, so that when you do have to pay taxes on that income, you aren’t hit with a significant bill.
If you have employees, it’s a good idea to hire an accountant to handle the taxes for you and your business. You’ll need to ensure you’re complying with applicable federal and state payroll and income taxes. Getting in trouble with the IRS can cause significant problems and hassles for you and your business.
3. Forgetting to Market Your Business
Just because you run a small enterprise or operate as a freelancer, that doesn’t mean you can afford to stay quiet. Each year, you need to develop a marketing plan to reach existing and potential customers. Take advantage of social media platforms such as Facebook, Twitter, Instagram, and LinkedIn to share information about your services or business. Next, investigate targeted marketing opportunities in your local area. Placing a digital ad with a local media outlet’s website may serve you well.
Part of your communications plan should include strategies for achieving earned press. This free publicity comes in the way of getting your services or business mentioned in a news story. Introduce yourself to the local newspaper or any other news outlets in your area. Offer to speak authoritatively for a news story when there’s a trend or breaking news that relates to your industry.
4. Leaving Your Home Vulnerable
Without a high-quality security system, your home and at-home business could suffer. Having the appropriate safeguards in place enhances the safety of your business assets including money, sensitive documents, technology, and any equipment you use for your business. Investigate security services from different companies to find the option that’s best for you.
Part of your strategy should also include having homeowner’s insurance endorsements that take into account the fact that your home also serves as the base of operation for your business. An insurance agent can explain the types of add-ons that may benefit you and protect your assets.
5. Operating Without Creating Value
Your small business thrives when it offers the marketplace a valuable service or product. Instead of obsessing over generating big profits, pour your energy into creating value for customers. When you offer something of value at a reasonable price, you’ll have customers aplenty. Know how to succinctly articulate the value you bring to customers, and let that message permeate your marketing and communications plan.
By being proactive and avoiding these pitfalls, you’re much more likely to be successful as a freelancer or small business owner. Share some of the biggest blunders you’ve seen others make and how you avoided them in your own business.
Miles Young is a freelance writer, business advisor and tech geek. You can follow him on Twitter @MrMilesYoung.