Best Practices for the Self-Employed

Not every web worker is self-employed – but many of us are. And some are poised on the brink, ready to take the leap but not quite sure what’s waiting on the other side. For those of you considering self-employment, the self-employed members of the WWD staff put our collective heads together to come up with this list of things we wished we’d known about when we struck out on our own.

Know what business you’re in. If you don’t know what you’re doing, how can you expect clients to figure it out? Even if you have many interests, pick one to promote. If you’re struggling to define your business, think about writing a business plan or at least an elevator pitch. One tip: define your business life by what you do, not where you do it or how you get paid. If you worked in an office, you wouldn’t put “Work for someone else” on an “occupation” line so why write “Self-employed”?

Keep work and personal life separate. Most web workers are happiest if they can define boundaries. Separate telephones, separate e-mail accounts, and a home office are all ways to help put psychological space between your job and the rest of your life without going in to the office. Some people go so far as to recommend you secure your own office space outside of the home.

Get a lawyer and an accountant. Unless your business is law or accounting, figuring out the best legal structure and the right way to track your income and expenses is a distraction. You may gulp at the cost of good legal and accounting help – but advice from a competent team will actually decrease your overall expenses by saving you legal and tax bills, interest, and penalties down the line. Talk to others in your line of work to get recommendations for professionals who understand your field.

Don’t get yourself in tax trouble. If you’re making the transition from being an employee, remember that you’re responsible for your own income tax withholding – and there are penalties if you don’t pay into the system in advance. This is one of those topics that you should discuss with that accountant that you hired. You’ll also find it helpful to have a copy of IRS publication 1518, the Tax Calendar for Small Businesses and Self-Employed. Check our quick guide to self-employment taxes to get started, but don’t stop there.

Don’t skimp on your tools. If you’re a web worker, at the minimum you’re going to need a decent computer and a good internet connection. If you’re giving up the comfort of a regular paycheck for the first time, the temptation may be strong to make do with old hardware and to try to get by – but remember that your time is valuable too (and it’s probably what you’re selling). Investing in your own efficiency is generally a wise move. If you’re cash-poor, take a look at leasing instead of buying.

Set a schedule and motivate yourself. It can be hard to get started in the morning if you’re used to the tyranny of the timeclock doing it for you. You don’t need to work every waking moment (indeed, the happiest self-employed workers are those who leave time for unproductivity), but you do need to treat your work seriously. We’ve offered tips on getting yourself motivated to work.

Talk to your insurance agent. If you work from home, your policy may not cover having clients over for business reasons. If you’re consulting, you may need to purchase extra coverage such as errors & omissions insurance. And of course health insurance is a perennial problem for self-employed workers.

Set a budget. It may be tough when you’re first starting out, but you should try to plan a realistic cashflow at least six months in advance. Then give yourself an actual salary, and invest a reasonable amount in growing your business. Being the owner is not an excuse to neglect financial planning – if anything, it should be incentive to treat such things more seriously. A word of advice: set your rates realistically. You may find that only one third of your time is billable, and the rest goes into marketing yourself and taking care of business issues.

Keep track of things. Don’t neglect the business side of running a business, even if you’re a one-person show. A business credit card can be a huge help in making sure that you have itemized receipts for all your deductible expenses.

Don’t reinvent the wheel. Time-tracking tools, stock photos, business forms, file-sharing, marketing…there are so many great resources on the web that you should concentrate on your own unique niche instead of building your own infrastructure. Check the list at FreelanceSwitch or the membership site CreativePublic to see some of what’s out there. And of course keep an eye on Web Worker Daily as we bring you new tools and ideas!

Following these ten best practices won’t make you an instant success – but they can save you a lot of pain. If you’ve got tips of your own to add to the list, we’d love to hear them.


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