Being self employed can be one of the most difficult ways for someone to earn a living. Although many people see self employment as the ultimate “job” – a very high percentage of new ventures never make is past the planning stage or at best do not survive the initial year. Here are some helpful ideas to ensure that your self-employment experience is a successful one.
Starting Your Business
When starting your self-employment venture you should make sure to do an enormous amount of research on exactly what type of market there is for whatever product it is that you are marketing. There must be a demand for what you have to offer in order for it to be successful. It is also extremely important that you have the finances in place to cover the first six months of operating expenses. These expenses also include whatever amount of money you will require to keep your household running for the same length of time. The first months will be difficult financially but once your business is showing a profit you can then begin to draw a salary.
One way to help offset the start up costs of your business is to do some thorough research within all levels of government to see if you qualify for a government grant or subsidy. There are many programs out there that are hard to find but doing the research up front may prove to be very beneficial. Some grants or subsidies may require some type of repayment over time while others require no repayment at all. A business plan is usually required before receiving such funds but that shouldn’t pose a problem as every new business enterprise has a greater chance of succeeding if a good plan is in place.
Recording Income and Expenses
It is extremely important to have an excellent set of books, both for personal and taxation reasons. Knowing the details of where and when you are generating income is essential for continued growth. This allows you to focus your efforts on specific areas or times when sales or earnings are at their highest. The importance of immaculate bookkeeping cannot be overstressed, especially in when it comes to keeping track of your expenses. As a sole proprietor it is your responsibility to have a very detailed account of all business related expenses. This is especially important when filing your annual income tax return. As opposed to an employee of a larger corporation who receives most of his or her information for the year on one slip, the self employed individual will have pages and pages of income and expenses to keep track off over the course of a year. The more detailed and organized these amounts are recorded is directly related to the ease of completing your tax return.
Business Use of Home
This is one of the many perks of doing business from your home. If your business is one that can be operated from home then a portion of many household expenses can be deducted from your income. This amount is usually based on how big your home office is in relation to the rest of your home. Most business use of home expenses are based on a percentage that is calculated by dividing the size of your office by the size of your home. If your office takes up five percent of your entire home, then you are likely to be allowed to deduct from your income five percent of your home’s heating costs, mortgage or rent costs, home insurance costs, as well as many more. This is a benefit to working from home that many are unaware of.
Expect the Unexpected
It is always important to keep one eye on the present and one eye on the future. Make sure to keep enough money available for unforeseen yet rather common expenses. Whether it is repairs to your automobile that is a daily part of your business or any other sort of out of the blue expense that may seem to appear out of nowhere, you need to be able to cover these costs and keep your enterprise running smoothly. It is always a good idea to keep funds set aside for such hidden and unexpected costs.
Plan Ahead For Taxes
This is one of the most important things to keep abreast of when going about your business throughout the year. As you earn income and eventually create profits, taxes are going to have to be paid on those profits. The worst thing to do is ignore what you owe until the very end of the year. By the time you reach that point you will likely be so far behind it will be almost impossible to catch up. Review your finances weekly and make sure that you have accounted for any potential income tax that is due and place those funds in either a separate bank account or make installment payments to the government for the current taxation year. Trust me – you will feel a lot better come tax deadline day when you see that you have a healthy portion of your taxes due already set aside to cover any amounts owing.
As you can see there are many things to consider when starting your own business and I have covered just some of the most important ones. It is imperative that you thoroughly research any prospective business enterprise and make sure you are up for the task. It will be difficult but it will also be extremely rewarding and there really isn’t a price tag that can be put on your own happiness. Do your due diligence and the rewards of self employment will find their way to you.