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A Brief Guide for Your First Year
An estimated 24 million Americans want to be self-employed by 2021, according to market research from FreshBooks.
This report found that people who work for themselves in some capacity—whether as a small business owner or independent contractor—experience more satisfaction in their careers than people who are employed by someone else.
In fact, the report found:
- 70 percent of those self-employed have a more consistent work-life balance
- 55 percent have lower degrees of stress
- 54 percent are healthier in their lifestyles
- 48 percent are in greater control of their own career development
- 27 percent spend more time outdoors or traveling
Despite these clear benefits, FreshBooks also determined that, of the 24 million Americans with self-employment aspirations, many hesitate to take the leap.
This reluctance stems from concerns about unstable income, lack of health coverage and unpreparedness for what it requires to maintain a self-employed business. If you’ve considered self-employment, but are wary to take the leap, use this guide to ease your concerns and plan ahead so you can become self-employed once and for all.
Turn to People You Know for Work
There are numerous people in your sphere of influence already who might need the professional services you offer. The majority of Americans know about 600 people, according to researchers at Columbia University. If you’re worried about finding clients, start with this massive network of people, including, friends, family, previous roommates, past co-workers, etc. These people could turn into clients if you’re willing to invest in developing authentic relationships and show them what your business can provide.
Start Paying Your Taxes Quarterly
If you’re self-employed as an independent contractor, sole proprietor LLC or s-corporation shareholder, in most cases, you need to make tax payments to the IRS on a quarterly basis. Since income taxes are not automatically withheld from the revenue you earn, you have to pay it yourself.
This means you need to save a percentage of each month’s income and submit a quarterly tax payment to the IRS four times a year:
- April 15
- June 17
- September 16
- January 15
You can approximate the amount of taxes you owe each quarter by setting aside 10 to 20 percent of your net income, suggests QuickBooks.
If the frequency of, or dates for, tax returns are different in your country, find out what these are and plan to put aside the required percentage of your income to be prepared.
Know What You Can Deduct
Deductions lower your taxable income as a self-employed tax payer, making them critical for everyone who goes out on their own. What’s more, there are dozens of deduction opportunities, most of which you can easily take advantage of throughout the year.
Some of the most common deductions include:
- Office space: You can deduce a percentage of your rent or mortgage if you work from home.
- Health insurance: According to HealthMarkets, to be eligible to deduct your premium payments, you must show the business has earned a profit without combining multiple sources of income.
- Education: Conference costs, payments for classes and courses, etc.
- Gas and mileage: If you drive a lot for your work, you can deduct some of those costs.
- Travel costs: You can deduct the costs of flying or stay overnight for work-related travel.
- Subscriptions: The payments made for software, professional dues, etc.
- Advertising: Fees incurred to market your business.
Network ConsistentlyThe more exposure your business generates, the more opportunities you have to maintain a client base. This is why it’s essential to network, allowing you to meet potential customer and connectors within your industry.
Networking can seem arduous at first, so Smart Business recommends that you join in professional group functions or volunteer on the board of a local committee. “Start with the classic networking events and then start branching out.” This is your chance to leverage your skills and interests to build contacts and connect with potential business leads.
Focus on Your Brand Development
Whether you’re a freelance writer, an ecommerce owner, or a website designer, your brand is what makes you visible and recognizable to potential customers and clients. A unique brand identity helps you stand out from competitors and allows you to earn referrals and maintain long-time clients. It’s defined by how you market your business, from the content of your website to the font and colors of your logo, to how you communicate, whether you’re emailing someone or sharing on social media, and what’s unique about what you offer as a business.
A successful approach to brand development should take the following three factors into account, according to The Balance Small Business:
- Purpose: The brand must communicate a “functional and intentional” reason for why you’re relevant and valuable.
- Consistency: Design elements should be cohesive and uniform across all your business marketing channels. For example, brand colors should be consistent from social media posts to your website and direct mail marketing.
- Emotional Impact: Your brand should allow potential customers and clients to connect with your business emotionally. The best way to achieve this is with storytelling and sharing your “why.”
Your brand may not be clear just yet. If not, let it develop as you build your business and discover what you offer, and how that’s different from similar businesses.
Become Successfully Self-Employed
If you aspire to be self-employed, but are nervous to take the first step, use this guide to find the confidence and reassurance to make it happen once and for all.
The first year of self-employment is rewarding and challenging at the same time, but when you plan ahead, you create a foundation for success.
About the Author
Jessica Thiefels has been writing for more than 10 years and is currently a full-time writer and business owner. She’s written about professional development and growing a freelance business for sites like UpWork, BlueSteps and Virgin. Follow her on Twitter @JThiefels and connect on LinkedIn.