If you’ve recently decided it’s time for you to separate from your employer and become your own boss, then congratulations! Entrepreneurship could be one of the most exciting and potentially rewarding ways for you to challenge yourself.
However, self-employment isn’t for everyone. So, before you hand in your resignation, let’s review five important points you’ll need to know about becoming your own boss.
1. Your Customer Is the New Boss
The self-employed know the phrase “the customer is king” better than anyone. That’s because when you have a regular job, your employer acts as a sort of buffer. However, when you’re on your own, there’s no one standing between you and the people you’ll serve.
Spend some time getting to know your clients and don’t be afraid to ask for feedback so that you can make improvements. Also, don’t forget to prioritize your customer service. Treating the customer like royalty can go a long way for your business.
2. It’s Up to You to Produce Revenue
Unless you were in sales, it’s unlikely you were responsible for finding customers and bringing in revenue. However, when you’re self-employed, that job falls squarely on your shoulders.
To help with this, draft a business plan by writing down:
- What your service or niche will be
- Who your customers will be
- How much you’ll charge them
- Any other important details
You may even want to consider advertising if that might help to get your name out and gain new clients. Posting consistently on social media is an easy way to get started.
3. You’ll Provide Your Own Benefits
Now that you won’t be working for your employer, you’ll have to make sure you have the right amount of coverage. This will be particularly important when it comes to health insurance and life insurance.
Health insurance can be purchased from a variety of sources. Checking out healthcare.gov is a good place to get started and compare different offers.
You’ll also want to make sure you’ve got plenty of life insurance in case an accident happens. If budget is an issue, look into getting an affordable term life insurance policy. But if you do have room in your budget, you may want to consider a permanent policy like whole or universal life insurance, which offers additional benefits.
4. You’ll Owe the IRS
Another aspect of being self-employed is that you’re now responsible for paying your own taxes. When you worked for an employer, taxes were withheld from your paychecks, which made paying them simple. But as an entrepreneur, this will be a task that you’ll need to remember to perform.
Paying self-employed taxes can be tricky. During the tax year, the IRS will want what’s called ES or “estimated tax” payments. These are four quarterly payments based on all the revenue you anticipate earning.
Most types of tax preparation software can be used to help you to prepare ES payments. Of course, it’s always a good idea to work with a licensed tax professional.
5. Don’t Forget to Save for Retirement
Sometimes retirement can be the last thing on your mind — especially when you’re trying to start a new business. However, as your own boss, you’ll have to plan ahead and ensure your financial independence.
Many self-employed individuals will utilize a Solo 401(k) or SEP IRA. Contributions to either will help reduce your taxable income. In addition to these plans, you can also put money into a traditional or Roth IRA. Remember that every dollar you save is another dollar your future self can enjoy.
