As a rule of thumb, an independent contractor needs to charge three times the hourly rate of someone on payroll. That's because the freelancer pays twice as much payroll tax (see Taxes), works on his own equipment, provides his own benefits (see Insurance), and is not guaranteed 40 hours per week. For example, if a designer with your experience in your area makes $20 per hour as full-time employee, you should be charging $60 per hour as a freelancer. If you are working in-house on your client's equipment you'd charge two times the employee's rate, or $40 in this example.
From that baseline you have the option of two alternate tracks. If you are aiming to increase your market share and client base, you can charge somewhat less than the going rate. That will help you win projects that are desirable but have smaller budgets.
You can also charge more than the going rate and position yourself as the premium designer. Many factors other than price will be involved in this decision, because clients will be expecting a deluxe experience, and of course, top notch work from you.
Throughout my career I have known when it is time to raise my rate when I feel overly busy and stressed. By raising my rate, I make the extra stress worthwhile and lose the clients that are too cost-conscious (or I never acquire them in the first place). The quality of my work has continuously improved, my experience has grown, and I have invested in tools that allow me to work more and more efficiently. That justifies a steady increase in rate. For me rate increases take place almost every year. I have also been able to win more prestigious projects and work with more desirable clients as time progressed. The route I have chosen is to always be seen as a good value, not the cheapest, but the best for the money spent. Because I am a value designer, I have been able to weather recessions better than the boutique designers.
Be careful not to undercharge. If your estimate is too much lower than your competitors' you will not be taken seriously. This has happened to me a a time or two. I lost bids because my estimate was too low.
In all my years in business, only a couple of times did I receive any comment after a rate increase. Both times they were from clients that I felt I had outgrown anyway. One of the keys to moving smoothly into a higher pay range is to do a higher level of work than you are being paid for. When you start charging the higher rate, you won't get any complaints because you are already exceeding expectations. If your goal is to charge $100 per hour, start doing work that excellent now for whatever rate you can get. You will achieve your goal sooner than you think.
Thursday, December 9, 2010
Monday, August 16, 2010
Subcontracting
Keep in touch with other freelancers so that you have someone to call upon when your workload is too much for you to handle. Their skills should complement your own. Subcontracting allows you to run a nimble and flexible business. You can take on projects outside your area of expertise, and take on larger projects without additional overhead costs.
Trusted subcontractors are extremely valuable. If one of them doesn't come through, you end up doing the work yourself or scrambling to find someone else. The ones you can count on become assets to your business. As your business grows, you may end up hiring your best freelancers as full-time employees.
Briefly, a subcontractor works on her own equipment on her own schedule. You pay her only for work completed. At the end of the tax year, you report the amount paid to each subcontractor on a 1099-MISC form and they pay their own taxes. An employee works at your direction, usually on your equipment and on your premises. You pay him regularly and withhold taxes from his paycheck. The IRS has more details, and you must know and comply with their definitions.
Find freelancers at organizations for creatives, through professional networks online and off, and by placing ads for specific skills. Check their portfolios and references.
When subcontracting, put the parameters of the project in writing. Get an estimate and agree upon a schedule and due dates. Make sure they are not intending to retain copyrights. What you want is "work for hire." The better you communicate, the less likely you will have an expensive misunderstanding. Your freelancers should be every bit as professional as you are. But the buck stops with you. Check their work carefully before forwarding it to clients.
Sometimes you will not want your clients to know you are subcontracting, but never be dishonest if asked directly. Sometimes you will want to encourage your clients and freelancers to develop a working relationship. That opens the door for your client to go directly to the freelancer and cut you out of the picture. To avoid losing a client, make sure that your management and expertise add value to every project. In some cases, however, removing yourself can be best for all parties.
Trusted subcontractors are extremely valuable. If one of them doesn't come through, you end up doing the work yourself or scrambling to find someone else. The ones you can count on become assets to your business. As your business grows, you may end up hiring your best freelancers as full-time employees.
Briefly, a subcontractor works on her own equipment on her own schedule. You pay her only for work completed. At the end of the tax year, you report the amount paid to each subcontractor on a 1099-MISC form and they pay their own taxes. An employee works at your direction, usually on your equipment and on your premises. You pay him regularly and withhold taxes from his paycheck. The IRS has more details, and you must know and comply with their definitions.
Find freelancers at organizations for creatives, through professional networks online and off, and by placing ads for specific skills. Check their portfolios and references.
When subcontracting, put the parameters of the project in writing. Get an estimate and agree upon a schedule and due dates. Make sure they are not intending to retain copyrights. What you want is "work for hire." The better you communicate, the less likely you will have an expensive misunderstanding. Your freelancers should be every bit as professional as you are. But the buck stops with you. Check their work carefully before forwarding it to clients.
Sometimes you will not want your clients to know you are subcontracting, but never be dishonest if asked directly. Sometimes you will want to encourage your clients and freelancers to develop a working relationship. That opens the door for your client to go directly to the freelancer and cut you out of the picture. To avoid losing a client, make sure that your management and expertise add value to every project. In some cases, however, removing yourself can be best for all parties.
Tuesday, June 22, 2010
Writing a Business Plan
If you are applying for financing, a business plan is essential. If not, a business plan is a valuable tool. Writing the plan will force you to consider the finances, operation, marketing, and competition of your business. The SBA, SCORE, your community college, and other small business support organizations have in depth explanations of each element of the plan. The outline with a brief description is here to get you started.
Cover sheet with your business name, address, and contact info.
1. Executive Summary
Write this last, but place it first in the document. This is a statement of purpose, with concise supporting analysis gleaned from the other topics below. Think long and hard about why you are going into business for yourself and what you have to offer. What is your mission?
2. The Industry
Explain your industry to someone who is not familiar with it. Identify trends, major players, and your niche within it.
3. Market Analysis
Describe the audience for your service and how you will fulfill a need. Include pertinent data in the form of charts and graphs if that will help comprehension. Is your market local, regional, national, or global?
4. Competitive Analysis
Research the other players in your market and identify ways that you will stand out from them.
5. Marketing Plan
Outline the ways in which you will reach your potential clients.
6. Management Plan
This will be mostly about you and your experience and education. You can include a résumé. Also include other resources you have to draw upon: subcontractors, colleagues, vendors, other professionals, mentors.
7. Operating Plan
List the physical equipment needed, your location of operation, what kind of suppliers you have lined up—all the nuts and bolts of day-to-day operation.
8. Financial Plan
Estimate all of your annual income and expenses for 3 years. If you are requesting a loan, do not forget to list loan payments as expenses. As a sole proprietor, you will also include your personal balance sheet and 2 years of tax forms in this section. This could be the single most important part of your plan. After going through the numbers you will know how much to charge per hour and how many hours you need to bill per day. You will know what it takes to break even, and what it takes to show a profit.
This is only a guideline. You can add other sections to the plan and craft it almost any way that best portrays your unique skills and your one-of-a-kind business. Many good books and websites are available with detailed information. For the simplest approach, look at the One Page Business Plan.
Cover sheet with your business name, address, and contact info.
1. Executive Summary
Write this last, but place it first in the document. This is a statement of purpose, with concise supporting analysis gleaned from the other topics below. Think long and hard about why you are going into business for yourself and what you have to offer. What is your mission?
2. The Industry
Explain your industry to someone who is not familiar with it. Identify trends, major players, and your niche within it.
3. Market Analysis
Describe the audience for your service and how you will fulfill a need. Include pertinent data in the form of charts and graphs if that will help comprehension. Is your market local, regional, national, or global?
4. Competitive Analysis
Research the other players in your market and identify ways that you will stand out from them.
5. Marketing Plan
Outline the ways in which you will reach your potential clients.
6. Management Plan
This will be mostly about you and your experience and education. You can include a résumé. Also include other resources you have to draw upon: subcontractors, colleagues, vendors, other professionals, mentors.
7. Operating Plan
List the physical equipment needed, your location of operation, what kind of suppliers you have lined up—all the nuts and bolts of day-to-day operation.
8. Financial Plan
Estimate all of your annual income and expenses for 3 years. If you are requesting a loan, do not forget to list loan payments as expenses. As a sole proprietor, you will also include your personal balance sheet and 2 years of tax forms in this section. This could be the single most important part of your plan. After going through the numbers you will know how much to charge per hour and how many hours you need to bill per day. You will know what it takes to break even, and what it takes to show a profit.
This is only a guideline. You can add other sections to the plan and craft it almost any way that best portrays your unique skills and your one-of-a-kind business. Many good books and websites are available with detailed information. For the simplest approach, look at the One Page Business Plan.
Friday, June 18, 2010
Stay Positive
The 80/20 rule says that 80% of your success depends on attitude, and 20% on external circumstances. Sure, luck is a factor in anyone's career. But your attitude in the face of adversity will mean the difference between success and failure. You are a creative person and are better equipped than most to find ways around obstacles. You know how to brainstorm ideas, think outside the box, and change perspectives until you find a solution. Keep in mind that people like working with someone who is generally happy and optimistic, not someone who whines or grumbles.
Visualize yourself the way you want to be: doing satisfying work, being well-paid, winning awards (if that's your thing), and whatever else is part of your definition of success. Mentally touch that vision frequently and update it as your business progresses. If you can maintain a positive vision and positive attitude, your chances of realizing your dreams are greatly increased.
Visualize yourself the way you want to be: doing satisfying work, being well-paid, winning awards (if that's your thing), and whatever else is part of your definition of success. Mentally touch that vision frequently and update it as your business progresses. If you can maintain a positive vision and positive attitude, your chances of realizing your dreams are greatly increased.
Sole Proprietorship or LLC?
A sole proprietorship is the easiest, least expensive way to organize your business. Essentially you are the business and the business is you. There is no cost to organize this way. You will report all business income and expenses on your personal tax forms. If you use a name for your business other than your own, you should register with your state. The IRS requires your business to show a profit in 3 out of 5 years to qualify as a business, otherwise it is classified as a hobby and you are not allowed to deduct expenses.
An LLC (limited liability company) is a separate entity and offers the owner the protections of a corporation. All profits or losses flow through to the owner. You will have to write articles of organization and file them with the secretary of state. There is an annual form and fee. You might also be required to draft an operating agreement. Check the specific requirements in your state. You can do the paperwork yourself, or you can use the services of a lawyer and accountant. An LLC is advisable if you plan to grow your business, hire employees, obtain loans, or take partners.
You should research both options carefully before making a decision. Operating as a sole proprietorship does not preclude you from incorporating later.
An LLC (limited liability company) is a separate entity and offers the owner the protections of a corporation. All profits or losses flow through to the owner. You will have to write articles of organization and file them with the secretary of state. There is an annual form and fee. You might also be required to draft an operating agreement. Check the specific requirements in your state. You can do the paperwork yourself, or you can use the services of a lawyer and accountant. An LLC is advisable if you plan to grow your business, hire employees, obtain loans, or take partners.
You should research both options carefully before making a decision. Operating as a sole proprietorship does not preclude you from incorporating later.
Thursday, April 1, 2010
Continuing Education
No matter what education and training brought you to becoming a designer, you will need to continually stay on top of developments in your field. At a minimum, subscribe to several design publications, visit design websites and blogs regularly, and join your local design club. Join the nearest chapter of the AIGA and familiarize yourself with all that they offer.
Time is always at a premium, but if you don't find time to educate yourself beyond the minimum, your work will become stale and perhaps no longer in demand. Find time to read books on design. You don't have to limit yourself to software manuals, though they are extremely valuable. Any design related book will expand your knowledge and understanding. (See bibliography.)
Conferences are a great way to immerse yourself in new ideas without dedicating a lot of time. In one day you can hear several speakers. Look into community colleges and universities for the best value. Professional organizations also hold conferences, but they usually cost more and last longer.
For a bigger boost, you might take a full semester class, or even pursue another degree. This route is most helpful if you want your business to move into a new technology or specialty where you have a weakness. Or you might want to augment your strengths with a class in marketing, writing, photography, or another complementary discipline. Especially if years have gone by since your last class, going back to school will open your eyes to a lot of new ideas.
As a designer, you can use knowledge from any field or art form to better understand and inspire your own. So follow any interest you have with the confidence that the more you have to draw upon, the better you will design. Your unique collection of interests and skills is what sets you apart from the competition.
Time is always at a premium, but if you don't find time to educate yourself beyond the minimum, your work will become stale and perhaps no longer in demand. Find time to read books on design. You don't have to limit yourself to software manuals, though they are extremely valuable. Any design related book will expand your knowledge and understanding. (See bibliography.)
Conferences are a great way to immerse yourself in new ideas without dedicating a lot of time. In one day you can hear several speakers. Look into community colleges and universities for the best value. Professional organizations also hold conferences, but they usually cost more and last longer.
For a bigger boost, you might take a full semester class, or even pursue another degree. This route is most helpful if you want your business to move into a new technology or specialty where you have a weakness. Or you might want to augment your strengths with a class in marketing, writing, photography, or another complementary discipline. Especially if years have gone by since your last class, going back to school will open your eyes to a lot of new ideas.
As a designer, you can use knowledge from any field or art form to better understand and inspire your own. So follow any interest you have with the confidence that the more you have to draw upon, the better you will design. Your unique collection of interests and skills is what sets you apart from the competition.
Thursday, March 4, 2010
Time Management
As a business owner, you have many tasks. One of the greatest challenges is finding time to do everything. You must manage your time well to succeed as a self-employed designer.
First of all get a calendar and put every meeting and event in it. Keep track of deadlines, because missing a deadline hurts your credibility.
Next, start a to-do list. Check things off as you complete them and add tasks as you think of them.
A regular routine can take some of the stress out of juggling the many roles you play. For example, every Friday afternoon, send out invoices for the work completed that week. Take a lunch break every day at the same time. Identify your most productive time of day and use it for your most challenging projects. Try to stack meetings within one day so your week is not chopped up into small chunks. Run other errands in between meetings while you are out.
Don't let work take over your personal life. Have office hours, but also have time for yourself and your family. Sometimes we have to work evenings or weekends, but doing that often creates an unbalanced life. Make time to exercise.
Amidst all the efficiency, leave some room to deal with emergencies or simply let your mind wander. Know your limit and don't take on more than you can handle. Don't make promises you can't keep. If you are too busy to take on a new project, be honest about it. An overstressed designer doesn't do her best work.
Time management is a lifelong struggle, and we constantly have to make adjustments and reset priorities. Be aware that you are in control, and make conscious decisions about how you spend your precious time.
First of all get a calendar and put every meeting and event in it. Keep track of deadlines, because missing a deadline hurts your credibility.
Next, start a to-do list. Check things off as you complete them and add tasks as you think of them.
A regular routine can take some of the stress out of juggling the many roles you play. For example, every Friday afternoon, send out invoices for the work completed that week. Take a lunch break every day at the same time. Identify your most productive time of day and use it for your most challenging projects. Try to stack meetings within one day so your week is not chopped up into small chunks. Run other errands in between meetings while you are out.
Don't let work take over your personal life. Have office hours, but also have time for yourself and your family. Sometimes we have to work evenings or weekends, but doing that often creates an unbalanced life. Make time to exercise.
Amidst all the efficiency, leave some room to deal with emergencies or simply let your mind wander. Know your limit and don't take on more than you can handle. Don't make promises you can't keep. If you are too busy to take on a new project, be honest about it. An overstressed designer doesn't do her best work.
Time management is a lifelong struggle, and we constantly have to make adjustments and reset priorities. Be aware that you are in control, and make conscious decisions about how you spend your precious time.
Thursday, February 18, 2010
Insurance, Retirement, and Vacations
The benefits that come with a full time job are health insurance, a retirement plan, and paid vacations. As a self-employed individual, you have to provide these benefits to yourself. Do not shortchange your health and future by going without.
The first benefit you need for yourself (and family) is health insurance. You are no good to anyone if you are too sick to work. What I recommend, and have for myself, is a high-deductible major medical policy. The premiums are affordable because you pay for most expenses out of pocket. The insurance only kicks in when you have a serious condition that requires expensive procedures. If you are in good health, your annual check-up and incidental costs will be much less that the premiums on a plan that pays for everything. The insurance can be coupled with a health savings account that you contribute to tax free.
If you have dependents, you should also have term life insurance. Term is straightforward and low cost. It pays a defined amount upon your death, and you pay a defined amount each year for the term (10 years, 20 years, whatever).
The next benefit you should set up is an IRA. Most investment companies will guide you through this very simple process. Your contributions to the IRA are tax deductible.
Taking vacations is vital to psychological health, especially for creative people. The stress of working extra hard before going away, and getting caught up again when you get back, is worth it. Everyone needs time to recharge. Working vacations have their place, but at least twice a year get away from work completely. Don't forward your calls and email. Make vacations part of your annaul budget, and charge enough during the rest of the year to fund these getaways.
The next form of insurance you'll want to consider is disability. Social security alone will not allow you to continue your current lifestyle should you become too ill to work. Interview insurance agents until you get an affordable rate.
Business insurance is not always required, but is a good idea. You can sometimes put a rider on your home insurance policy for business equipment in your home office. You should also look into business liability insurance. Some companies will require you to have it before they will work with you.
If you can find one insurance agent or company to handle all your policies, it sure is convenient and valuable. And you become a valuable customer to them.
Your hourly rate is much higher than someone working full time with benefits for the above reasons. You have the responsibility and privilege of taking care of yourself.
For a more in depth look at these topics, I suggest reading a book by Suze Orman.
The first benefit you need for yourself (and family) is health insurance. You are no good to anyone if you are too sick to work. What I recommend, and have for myself, is a high-deductible major medical policy. The premiums are affordable because you pay for most expenses out of pocket. The insurance only kicks in when you have a serious condition that requires expensive procedures. If you are in good health, your annual check-up and incidental costs will be much less that the premiums on a plan that pays for everything. The insurance can be coupled with a health savings account that you contribute to tax free.
If you have dependents, you should also have term life insurance. Term is straightforward and low cost. It pays a defined amount upon your death, and you pay a defined amount each year for the term (10 years, 20 years, whatever).
The next benefit you should set up is an IRA. Most investment companies will guide you through this very simple process. Your contributions to the IRA are tax deductible.
Taking vacations is vital to psychological health, especially for creative people. The stress of working extra hard before going away, and getting caught up again when you get back, is worth it. Everyone needs time to recharge. Working vacations have their place, but at least twice a year get away from work completely. Don't forward your calls and email. Make vacations part of your annaul budget, and charge enough during the rest of the year to fund these getaways.
The next form of insurance you'll want to consider is disability. Social security alone will not allow you to continue your current lifestyle should you become too ill to work. Interview insurance agents until you get an affordable rate.
Business insurance is not always required, but is a good idea. You can sometimes put a rider on your home insurance policy for business equipment in your home office. You should also look into business liability insurance. Some companies will require you to have it before they will work with you.
If you can find one insurance agent or company to handle all your policies, it sure is convenient and valuable. And you become a valuable customer to them.
Your hourly rate is much higher than someone working full time with benefits for the above reasons. You have the responsibility and privilege of taking care of yourself.
For a more in depth look at these topics, I suggest reading a book by Suze Orman.
Thursday, February 4, 2010
Marketing and Networking
The best way to grow your business is by word of mouth. Make sure that every client you have the good fortune of working with has a positive experience and believes she got value for money spent. She will recommend you to her colleagues, and the multiplier effect goes to work for you. A dissatisfied client can have a poisonous effect on business for the same reason.
The way to get that first client is by promoting yourself and your business to everyone you know. This is called "networking." Once your family and all your friends know about your new endeavor, join business organizations and online networks. Have a short introduction of yourself and your business on the tip of your tongue for meeting new people. Carry your business cards with you and make sure they are well designed. Be confident and professional in all your interactions, both online and off.
For free publicity, your local newspaper might write articles on new businesses. Make sure they know that you have started a business. Volunteer for organizations that you'd like to be involved with. Your work will be appreciated, you will have pieces to add to your portfolio, and you'll rub shoulders with new people who might lead you to paying work. You will almost always get a credit line or thank you for your contribution in the organization's material, another chance for still more people to see your name.
You must have an online portfolio. Put the URL on your business cards so people can quickly and easily see what you are capable of. Put only your best work online, and keep the samples updated. Make sure your phone number and email address are on every page.
When going to a live interview, have real samples to bring. Tailor your live portfolio to the specific client and type of work they are interested in. Don't bring too much. Keep your resume updated, well designed, and proofread, because some organizations will request that as well.
Advertising can bring in new work, but can be expensive. A small ad in the local paper is usually affordable. Commit to a year of running the ad at least once a week, because it takes many repetitions before any advertising sinks in. You can augment print ads with a direct mail campaign. By itself, direct mail has a very low response rate. Again, repetition is essential if you decide to take this route. Another option is a billboard. Email is most effective for keeping in contact with existing clients. Anyone who doesn't recognize your name will send your email to the spam folder. Radio and television are likely to be out of reach for the small studio, but can be effective for a large, growing business.
When you consider the cost of obtaining a new client, you will agree that keeping each one happy is the best approach to long-term success.
The way to get that first client is by promoting yourself and your business to everyone you know. This is called "networking." Once your family and all your friends know about your new endeavor, join business organizations and online networks. Have a short introduction of yourself and your business on the tip of your tongue for meeting new people. Carry your business cards with you and make sure they are well designed. Be confident and professional in all your interactions, both online and off.
For free publicity, your local newspaper might write articles on new businesses. Make sure they know that you have started a business. Volunteer for organizations that you'd like to be involved with. Your work will be appreciated, you will have pieces to add to your portfolio, and you'll rub shoulders with new people who might lead you to paying work. You will almost always get a credit line or thank you for your contribution in the organization's material, another chance for still more people to see your name.
You must have an online portfolio. Put the URL on your business cards so people can quickly and easily see what you are capable of. Put only your best work online, and keep the samples updated. Make sure your phone number and email address are on every page.
When going to a live interview, have real samples to bring. Tailor your live portfolio to the specific client and type of work they are interested in. Don't bring too much. Keep your resume updated, well designed, and proofread, because some organizations will request that as well.
Advertising can bring in new work, but can be expensive. A small ad in the local paper is usually affordable. Commit to a year of running the ad at least once a week, because it takes many repetitions before any advertising sinks in. You can augment print ads with a direct mail campaign. By itself, direct mail has a very low response rate. Again, repetition is essential if you decide to take this route. Another option is a billboard. Email is most effective for keeping in contact with existing clients. Anyone who doesn't recognize your name will send your email to the spam folder. Radio and television are likely to be out of reach for the small studio, but can be effective for a large, growing business.
When you consider the cost of obtaining a new client, you will agree that keeping each one happy is the best approach to long-term success.
Thursday, January 28, 2010
Funding Your Business
To get started in business you will need to make an investment. A professional designer needs professional tools, and they are not cheap. You will also need some basic office equipment and furnishings. You might be able to get some of what you need second hand. I recommend buying your software new. You plan to make money using the programs, fonts, and other software, so it is ethical to pay the creators of your tools. You also have access to technical support and upgrades as a licensed user. I wouldn't buy a computer that is more than 2 years old. (Personally, I buy a new one every 4 years or so.) Graphic designers are power users and need to have the most processing power that money can buy to be able to work efficiently. Also, hard discs crash eventually. Even if you are fully backed up, a crashed computer is a major business catastrophe. (And if you're not backed up, well, you can imagine.)
You can pay for your startup costs with savings or by borrowing. Sources of loans are friends and family, banks, and credit cards. If you borrow from friends and family, your relationship with them will change. They might even believe they have a right to give you advice or receive free services. Proceed with caution. Banks are another source of funding. If you want to borrow from a bank you will have to write a business plan. (A business plan is a great idea no matter where your funding is coming from.) Credit cards are extremely useful, but make sure you can make the minimum payment each month, and never be late. The fees and interest are harsh if you ever miss a payment. I use a credit card for ongoing expenses, and have used them for capital investments as well. Like your checking account, designate a credit card for business only and do not mingle with personal expenses.
The interest you pay on business loans is tax deductible. So is your business equipment. (See taxes.)
Business debt is different from consumer debt. In business, you are using money to make money. If you are charging for your services correctly, your investment will pay for itself and generate a profit. Being in debt can be stressful. However, as long as you are making a reasonable payment towards principal every month, you are doing fine. About every 5 years you will need a new computer, so pay enough every month to have your loan paid off in 5 years or less.
Managing credit wisely is extremely important for the small business owner. A good credit rating gives you access to loans at a lower interest rate. A bad rating means you will pay a higher rate, if you can get a loan at all. Every business has ups, downs, and emergencies. During downs and emergencies, having access to credit can save your business. Credit is a bridge to the up times when you are able to repay.
If you can grow without borrowing at all, that is commendable.
You can pay for your startup costs with savings or by borrowing. Sources of loans are friends and family, banks, and credit cards. If you borrow from friends and family, your relationship with them will change. They might even believe they have a right to give you advice or receive free services. Proceed with caution. Banks are another source of funding. If you want to borrow from a bank you will have to write a business plan. (A business plan is a great idea no matter where your funding is coming from.) Credit cards are extremely useful, but make sure you can make the minimum payment each month, and never be late. The fees and interest are harsh if you ever miss a payment. I use a credit card for ongoing expenses, and have used them for capital investments as well. Like your checking account, designate a credit card for business only and do not mingle with personal expenses.
The interest you pay on business loans is tax deductible. So is your business equipment. (See taxes.)
Business debt is different from consumer debt. In business, you are using money to make money. If you are charging for your services correctly, your investment will pay for itself and generate a profit. Being in debt can be stressful. However, as long as you are making a reasonable payment towards principal every month, you are doing fine. About every 5 years you will need a new computer, so pay enough every month to have your loan paid off in 5 years or less.
Managing credit wisely is extremely important for the small business owner. A good credit rating gives you access to loans at a lower interest rate. A bad rating means you will pay a higher rate, if you can get a loan at all. Every business has ups, downs, and emergencies. During downs and emergencies, having access to credit can save your business. Credit is a bridge to the up times when you are able to repay.
If you can grow without borrowing at all, that is commendable.
Thursday, January 7, 2010
Presenting Yourself
The way you present yourself is the way you will be perceived. If you want to be perceived as a competent professional, you must dress and speak like one. Working at home can lend itself to becoming sloppy.
The way you communicate says a lot about you. Speak clearly and politely on the phone. A good tip I heard years ago is to smile when answering. Answer with your name or the business name. When using email, write in complete sentences with excellent spelling and grammar. Whenever a client or vendor does something out of the ordinary for you, a written thank you is in order.
When a client calls, be sure that he doesn't here barking dogs and crying babies in the background. When a client comes to your home office, make sure you have a clean, neat place to conduct the meeting. Keep clutter behind closed doors. Use an air freshener to remove cooking smells. Don't forget the upkeep of the exterior as well: mow the lawn, rake leaves, and shovel snow. (If you rent, some of this might not be in your control. Do your best with what you can.)
You might find yourself working in casual clothes, even pajamas, many days of the week. But every time you meet with a client you should dress like a professional. As a creative professional, you have a lot more latitude in defining what that means. Unusual color combinations and cutting edge fashion are acceptable, but sloppiness and dirtiness are not. (See what to wear.)
I am not saying you need to hide the fact that you work at home, just don't use it as an excuse to let yourself go.
The way you communicate says a lot about you. Speak clearly and politely on the phone. A good tip I heard years ago is to smile when answering. Answer with your name or the business name. When using email, write in complete sentences with excellent spelling and grammar. Whenever a client or vendor does something out of the ordinary for you, a written thank you is in order.
When a client calls, be sure that he doesn't here barking dogs and crying babies in the background. When a client comes to your home office, make sure you have a clean, neat place to conduct the meeting. Keep clutter behind closed doors. Use an air freshener to remove cooking smells. Don't forget the upkeep of the exterior as well: mow the lawn, rake leaves, and shovel snow. (If you rent, some of this might not be in your control. Do your best with what you can.)
You might find yourself working in casual clothes, even pajamas, many days of the week. But every time you meet with a client you should dress like a professional. As a creative professional, you have a lot more latitude in defining what that means. Unusual color combinations and cutting edge fashion are acceptable, but sloppiness and dirtiness are not. (See what to wear.)
I am not saying you need to hide the fact that you work at home, just don't use it as an excuse to let yourself go.
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