Self Employment Plan Rules

Self-employment gives you personal autonomy.

Self-employment can be a pleasure as well as a wild ride. Working for yourself enables you to express yourself creatively, build a business that reflects your values, and create a work environment that is consistent with your lifestyle choices. But self-employment also opens the door for financial and personal difficulties if you mismanage your resources. Following a few rules will help you to plan your company effectively and keep it on track.

Pay Yourself

If your company is going to survive, it must be able to support you. On the one hand, the money coming into your business is finite, and it may seem like there often isn't enough to pay all of your business expenses as well as your personal living expenses. On the other hand, money management is an art and if you set aside money for yourself before paying any other expenses, you will be more likely to find the funds to cover your business operations.

Delegate

Learn to delegate, unless you plan to do all of the work yourself for as long as you are in business. Successful delegating is an art that involves choosing the right person for the right task, providing clear instructions and judging the right time to step in and micromanage. Learning to delegate involves creating good systems, trusting your employees, and also trusting your own ability to communicate what you need.

Plan Financially for Employees

Although it may be sufficient initially to base your pricing strategy on earning enough to pay yourself for your work, if your business is going to grow you will also need to pay employees. It is tricky to raise prices once your customer base has grown accustomed to paying a certain price, so plan ahead even if you will be doing all of the work yourself at the outset. Calculate the cost of paying someone else to produce your product or provide your service, and charge a price that will enable you to earn a profit on top of these costs.

Stay Current on Your Taxes

Unlike a conventional job, where your employer withholds taxes from each paycheck, as a self-employed individual you will need to set aside money yourself for both business and personal taxes. This can be especially tricky because many small businesses operate on a shoestring, spending virtually everything they take in. In addition, taxes for self-employed individuals tend to be higher than taxes for employees because you pay both the employer's and employees' share of Social Security taxes. Establish routines and habits for paying taxes in order to save yourself frustration and expensive penalties down the line.

References

• BusinessWeek: A Guide to Self-Employment
• iSeek Careers: Self-Employment

Resources

• National Association for the Self-Employed