Freelancing? Treat Yourself Like a Business.
Tips to run a successful business in the gig economy.
You’re finally free! You’ve left your job, are on your own schedule and loving your new boss — yourself. This is awesome! But before you settle into your sweatpants and get cracking on your deadlines, there are some things to remember about self-employment.
Yes, you may be the best boss ever, but you’re also filling all the other roles that other people filled in your old company. Now, you’re a one-person HR department, accounting, marketing and even maintenance. Nobody else is going to clean up your messes unless you personally pay them to do so — and nobody, except you, is going to be responsible for doing things like paying your taxes and balancing the books.
So, it’s important to start thinking of “you” as a business, whether you’re an artist, an athlete, a driver, AirBnB host, or a writer — whatever it is that makes your business run. So, how can you do that? Here’s some tips to succeed:
Give Yourself a Paycheck
It’s tempting to look at 100% of your self-employment check as income, but some of that money actually belongs to Uncle Sam — and he’ll be coming for it. Think back to how you got paid as an employee, with your taxes already withheld, neatly spelled out on your pay stub. Now, being self-employed, if you make more than $400, you’re responsible for paying those taxes. And, you may need to pay quarterly installments to the IRS or risk fines and interest charges.
Typically, you should save 15–25% of each check for taxes. Sound scary? It doesn’t have to be. Tools (like Track) are available to help you save and run a more tax-savvy business, without all the busywork. Track is a smart system that works with you to automatically save for taxes. Track will even help you pay your quarterly dues to the IRS and give you a weekly pay stub.
Saving for taxes and staying on top of your quarterly payments will keep you from paying more than you should — and from getting caught with a massive tax bill at the end of the year with no money left to pay for it.
Track Your Business Expenses
Balancing the books and tracking expenses will keep things running smoothly. And on top of that, it will save you money. One of the perks of self-employment is having flexibility to itemize your deductions to account for your business-related expenses. But it’s important to stay on top of that on a regularly basis as well — because for one knowing how much you’re spending vs. earning for your business matters. And two, it will save you time and money in the long run.
How many of us have been caught desperately pawing through shoeboxes of receipts the first couple weeks of April? Not only is this entirely inefficient — and stressful, but it could mean that you’ve been missing important deductions in your estimated quarterly tax payments. Some common tax savings opportunities for freelancers are car expenses, health care premiums, home office deductions and retirement savings.
Don’t Sell Yourself Short
Negotiating your pricing structure may take a change in thinking if you’ve been a salaried employee your whole professional life. Too often, companies want to pay you a base rate that they’d offer their employees. However, this pay doesn’t account for your expenses in the same way — like taxes, health insurance, or your cost in securing new business in the first place.
However you decide to structure your rates, whether it’s hourly, project-based or a monthly retainer, make sure you’re charging what you’re worth. Things to consider in setting your rate are your experience level, your ability to manage and meet deadlines and the value you’ll bring to your client.
For drivers, maybe that’s managing your time on the road so that you maximize hourly pay. Or, maybe that’s being realistic about how much time a project will take so as not to sell yourself short on your hourly rate.
If you’re used to having an annual salary, a good rule of thumb for determining your rate could be dividing your former salaried income by 12 to calculate your monthly rate, and then mark it up by 25–30%. This will help take care of additional expenses like administration work in managing the client, on top of all the other expenses like taxes and healthcare.
Stick to your Mission Statement
Heading out on your own can be one of the most liberating things you can do. But when faced with business expenses and the realities of life, it can be easy to lose track of your mission, of what You, Inc., is all about in the first place.
As you pursue your daily hustle, take some time for you, whether that’s exercise, meditation, or setting aside time with your family or friends. These grounding moments will be important to help you achieve balance and be more efficient and successful in your business.
Wishing you all the best in running You, Inc. Let us know if we can help you! ~ The Track Success Team