We had a great webinar last week, “From Employee to Entrepreneur: Breaking Free of the 9 to 5”, discussing why now is a great time to start or invest more time and resources in your small business endeavors, and just what the heck happens in a downturn economy that can actually help the self-employed succeed. Better yet, many of you posed some really great questions that got me thinking – ‘let me give a short-answer version of the top questions clients and prospective clients come to me with’, because sometimes these are a critical starting point for aspiring entrepreneurs.
I Want to Focus on Building my Business. How Do I Leave My Full Time Job to Work for Myself?
You need to create a sound “exit strategy”, which includes a full work-up and analysis of your personal finances, as well as what you think you will need on a weekly, monthly and annual basis to run your business. Remember that it can take over a year and more to start turning a profit, and you have to account for that when planning your finances. Break it out into financial plans for the first 3 months, then the 6 month point, then the year as a whole. Once you establish what you need to start up and sustain your business and yourself personally, you can start to construct a timeline for your transition from employee to full time entrepreneur! Also, don’t discount part time work, consulting or freelance as options for making the transition smoother, and earning some of your startup capital in the meantime (that’s what I did).
What Do I Do for Health Insurance?
Three things: Don’t have it (NOT recommended), marry someone who does, or check with your state to see what individual plans are available through state-subsidized programs and major carriers. Some states, like Massachusetts, have state-wide requirements that all residents have some form of insurance coverage, and because of such, offer a wider variety of programs at affordable price points, than say, the State of the New York which doesn’t have such legislation in place.
Do I Need to Incorporate to Start a Business?
No. There are different levels of companies, or business entities, based on a tax, legal and financial standpoint. If you’re just starting out and unsure about what the structure of your company will be, or know that it’s only going to be you, you might want to consider registering your business (which you do at the state-level) as either a sole-proprietor or an LLC. In both cases, the business can have its own separate name, but you’re operating as an individual tax-wise, versus a corporation, which has a lot more guidelines and red tape. The difference between sole-proprietor and LLC is that an LLC separates the actions of the business from your own personal assets, so you have much less liability.
Do I Have to Pay Self-Employment Tax?
Yes, if you are a sole-proprietor or an LLC, so long as your income is below a certain amount. Corporations pay taxes as a company, and on individual distributions to its employees or shareholders. When you’re employed by someone else, essentially they’re paying half of your taxes, and you’re only paying a certain amount as defined on your W4 by marital status and number of deductions. When you work for yourself, you are the employer, and so you assume responsibility for all of those taxes on your income, instead of just half.
How Do I Make My Business and My Products & Services Stand Out?
This is all about branding – creating a brand that is uniquely you, represents your voice, and clearly communicates your value proposition. Who are your customers, what is the challenge, need or lack that they currently have in their life, and what solution does your product or service provide them to solve that? That is the core of your marketing message. But it’s important to also identify your competitors and look at how they are positioning themselves in the market, so you can better understand how to position yourself differently in a way that represents the unique value of your brand!
Thinking about starting up and have basic questions? Exciting stuff! You might want to consider doing an introductory session to go over some small biz Q & A, and get you started on the right foot!