Are you ready to strike out on your own?
Being self-employed is the dream of countless Canadians. They fantasize about the freedom that comes with being the master of their own destiny…
But of course there’s another side to being self-employed. The rewards of being self-employed can be huge, but so are the risks and strains. Yes, you’re your own boss, but that means all of the responsibilities and risks are yours as well. If you want to be an entrepreneur, you need to provide your own motivation, pushing yourself every day towards success.
To be clear, we are not trying to talk you out of starting your own business! However, it’s important to have a clear understanding of what’s involved. With that in mind, here are some of the things you need to consider before making the leap to being self-employed.
What Do Your Current Finances Look Like?
Whether you’re considering going freelance or you’ve decided to start your own business, you cannot count on your endeavour becoming profitable right away. In fact, for the first year or so, you might be losing money.
Jumping from a reliable paycheque to invoicing clients and hoping they pay on time can be nerve-wracking—not to mention finding those clients and getting through the start up expenses. You must have detailed knowledge of your finances and your risk resilience before you make the full leap to being self-employed.
Not sure where to start when it comes to your numbers? Luckily, this is an area where The Number Works can help. We can walk you through all of your current financial data, showing you exactly where your profits and expenses are and what you can do to shape things up before you go into business for yourself.
Do Your Research
Before starting your own business, you should probably ask yourself the tough question, “Do I have any idea how to start my own business?”
There can be a real “look-before-you-leap” mentality when it comes to becoming self-employed. It isn’t just about the state of your finances; it’s also about learning the ins and outs of creating your own business and managing it effectively.
The first thing you might want to do is talk to some of your entrepreneurial friends. Getting a first-hand account of what it’s like to be self-employed can be invaluable, enabling you to bypass some of the mistakes they made in the early days of creating their businesses.
You’ll probably also want to read some books about entrepreneurship. While countless books have been written on the subject, you should be selective about which you pick up. There are significant differences between the Canadian and U.S. markets, so be sure your book is focusing on Canadians laws and guidelines. You also need to make sure it was written (or at least updated) within the last four to five years. Technology moves so fast that anything before 2015 will be borderline useless, omitting vast chunks of what it means to be self-employed today.
Ongoing management of finances can be another big hurdle for those who want to jump into the self-employed arena. If you’ve never had to manage anything larger than a personal budget, you might need a hand getting started. That’s another thing we can help you with at The Number Works. Right from the first minute of your business, we can be there to support your financial position and ensure you’re optimized and running things as smoothly as possible.
Start Slowly
Have you ever heard of a “side hustle?” It’s essentially part-time self-employment. A side hustle could be as simple as setting yourself up with an an Etsy store to sell things that you’ve created in your spare time, or taking on a single freelance client to get your feet wet in your desired industry.
Having a side hustle can be a great way to get a small business started. If you’re feeling nervous about jumping into self-employment with both feet, this can be an excellent starting point, building muscles that will come in handy when you decide to quit and go into business for yourself full-time.
Keep in mind that it can require building some serious discipline to force yourself to work even after you get home from your job, but the result can be more than worth it. And you’ll need all that discipline when you’re a full-time entrepreneur who has to continuously self-motivated.
Do Not Forget About Your Taxes
One of the biggest shocks that a self-employed person can go through is their first tax season.
When you’re working for a company, taxes are automatically taken off your paycheques. Now that you’re self-employed, you’re collecting the entire amount you’ve earned… until tax time that is. When tax season rolls around and you need to calculate your taxes, you might be in for a shock! Yes, you knew that your tax bill would be higher than usual because you’re now self-employed but… Surely there must be some kind of mistake, right? Don’t be one of those people who realizes they owe thousands of dollars to the government that they’ve already spent!
While, yes, there is a chance that you made a mistake, it’s much more likely that your numbers are correct and you need to give the government a sum of money that you hadn’t planned for. It’s shocking, but there are several ways you can mitigate this situation.
One thing you should definitely have is an accountant experienced in working with self-employed entrepreneurs in your province. At The Number Works, we know all of the deductions and legal tricks for Ontario that could save you big bucks, especially come tax time. With our help, we might be able to get your taxes down to a slightly less jaw-dropping amount. And we’ll certainly help you prepare so that you aren’t caught off guard when you see the amount you’ll owe.
We also recommend that, rather than just dump every paycheque you have into your Chequing account, you take off about 25% off and put it into a separate savings account that you use for taxes. That way, you’ll have a reserve of money ready for you come tax time, reducing any sense of “sticker shock” when you figure out precisely what you owe.
Take Care of Yourself
For new entrepreneurs and freelancers, self-care can become an afterthought in the pursuit of making your business a success. This is a massive mistake!
If you’ve been putting off going to the gym, heading to yoga, buying healthy groceries, or spending quality time with family or friends, be sure to start scheduling it in your calendar like you would a business meeting or other important event. Same with making sure that you take appropriate breaks for lunch and for stretching if you’re sitting down for long hours. If you don’t take care of yourself physically, you’re going to start getting worn down by the job. Manageable things could start to feel overwhelmingly stressful, all because you aren’t caring for your personal needs.
There is also a mental self-care component of being self-employed. Some people start feeling like every minute they aren’t working is a minute they’re losing money; an unhealthy mindset that can lead to self-esteem issues and self-abusive thoughts of “laziness”.
Even though you’re self-employed and can technically get up at any time of day (including well after 9am), try setting “business hours” where you do your work throughout the day. Working 9 to 5, even if you’re doing so from home, can help you maintain a healthy work-life balance. If you prefer unorthodox hours, that’s ok too but make sure that you schedule your on- vs. off-time. It can keep you from feeling guilty that you aren’t working at 9pm on a Saturday rather than spending time with friends.
It takes a great deal of bravery to be self-employed, either by starting a new business or by going freelance. No matter which path you choose, you can bet that at The Number Works we’ll do whatever we can to help. We work with freelancers and entrepreneurs every single day, helping them balance their finances and making sure they’re fully prepared come tax season. If you want to simplify your financial life while moving towards self-employment, get in touch with us today. We’d love to help your entrepreneurial dreams come to life!