Entrepreneurship has been made glamorous by the rise of startup culture, but as any founder knows, running a business has more than its share of ups and downs.
For the past five years, I’ve been leading a digital marketing agency with a team of freelancers. Here’s what I’ve learned about being a business owner.
Thankfully as a consultant, you can usually run your business from your home and inexpensively get your business online. This saves you on some upfront and overhead costs and allows you to work from home on your own schedule. I enjoy the freedom and flexibility working from home allows, but it can be distracting depending on your home situation, as well as isolating, without a solid professional and social network. There’s also plenty of opportunity for professional development as a consultant since further education or certification can make you more credible or sought after as a business. This is a major benefit to me personally because I love the opportunity to make time for and learn new things. It keeps things interesting and opens up space to branch out into new forays.
Unfortunately, it’s not all rosy running the show. You have to focus some of your time on self-promotion and sales. Even as a marketing consultant, I find this part difficult. It’s hard to spend the time you could be working on client projects to work on your own company’s marketing. If you can’t afford to bring marketing and sales in-house, dedicate time during the week to DIY, or outsource it to a professional. As a consultant, you also need to take care of your own retirement and other benefits that would otherwise be taken care of if you were an employee. Put money aside for an emergency fund (3-6 months of expenses) and find a personal health and disability insurance plan that works for you. Make long-term investments in a TFSA and RRSP. Of course, I am no financial advisor, so I suggest you meet with one and get the full picture. You also need to handle your taxes differently. Find a good accountant and a good bookkeeper and let them help you get your house in order.
As obvious or not-so-obvious as some of the ideas below about running a consulting business may seem, I learned them the hard way, by messing them up and redoing them, and some I am still making mistakes on. I hope that by sharing some of these tactics you can incorporate them into your plans rather than making the same mistakes.
- Charge more. Add up your labor and overhead costs, add the profit you want to earn, then divide the total by your hours worked. This is the minimum you must charge to pay your expenses, pay yourself a salary, and earn a profit. Benchmark your profit to your industry.
- Be picky. Choose your clients wisely. Work with clients who your values align with. Learn about the relationships they have with their suppliers, their customers, and their employees. If these relationships are positive, it’s a good sign for you, if not, consider referring them elsewhere.
- Set boundaries. Set expectations with clients so that they know the best way to contact you at the appropriate time. Set your work schedule so that you have free time to spend- disconnected from work- with your friends and family. On your deathbed, you will never wish you worked more in your life, but you can guarantee you will wish you spent more time with loved ones.
- Write off more. Don’t miss out on the opportunity to write off tax-deductible expenses for independent contractors: home office expenses, vehicle expenses, meals, travel, and more.
All said I believe consulting is an ideal way to work. The way I see it, the pros outweigh the cons. With enough thoughtful planning, you can avoid most of the usual pitfalls of being an entrepreneur. Or you can do what I, and many others, do and make all the mistakes, ride out the ups and downs, and do your best to come out on top!
Keep these tips on hand with this handy infographic: Tips and Tricks for your Startup Journey
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