Due to the financial and business crisis knocking on our door, employers and employees are analyzing different options. Company managers and business owners want to reduce the financial burden on their back to free assets for investments. In most cases, this means making redundancies and firing people.
On the other hand, employees are looking for solutions that would help them increase their incomes and protect them from poverty.
In that light, one of the most popular trends among employees is to quit their mundane 9-5 jobs and go their own way. They become freelancers, sole proprietors or they work from project to project.
Either way, it’s important to learn the basic financial hacks if you’re getting ready to follow that path.
1) Ensure steady cash flow
If you don’t have enough money to cover your overhead expenses and business payments, you won’t last for too long. What’s more, from the legal point of view sole proprietors guarantee for their business assets with their personal assets. In other words, if your business gets into financial dire straits, banks and creditors can collect the debt from your personal assets, such as your car, your house, personal savings, etc.
That’s why solopreneurs must ensure a steady cash flow.
For starters, don’t launch your own business until you’ve saved enough money to use it a safety net in case of payment issues in the initial stage of your sole proprietorship. You don’t know how payments will go at the beginning, so make sure you can rely on your own assets.
Moreover, bring a clear statement policy for your business in writing. Just write down the payment rules as you see them and follow those regulations. For instance, set the payment period, e.g. 15 or 30 days or whatever suits you, and stick with it for every client. Create a universal reminder notice for your debtors, as well as a more serious one, as a backup if they don’t make their payment after the first notice.
2) Project the workload in advance
When you’re doing everything alone, you need to determine how much work you need to cover all your expenses and make a living. This means that you should project the workload in advance.
In line with that, don’t launch your business until you’ve made negotiations and closed some deals with your first clients. Otherwise, you might register your venture and wait for months to land your first project. Your overhead expenses and taxes need to be paid during that period, as well.
If you’re working in a company can contact some of the previous company’s clients to feel their pulse regarding the potential services that you might be offering in the future. Of course, if you’re in any way whatsoever limited by an NDA, don’t do that, because the company in question will have the legal right to sue you.
However, if there’s no NDA or its clauses relating to some previous clients have expired, feel free to check what those people think. If you generate some leads that way, continue with negotiations to set all the rules in advance.
You can try to find your first clients via Upwork and similar platforms. While they charge certain fees for every connection you make there, it still pays off at the beginning, when you’re making your client list.
As you set the optimum number of projects you can handle on your own, your finances will become stable.
3) Save along the way
Sole proprietors need to save a lot along the way. On the one hand, this is necessary because your personal and business assets aren’t separated, which is a double-edged razor. If you save one share of your profits all the time, you’ll significantly minimize the exposure of your private property to debt risks.
A rule of thumb is to put aside at least 10% of every net amount of money you get paid for your work. This rule should be applied to both smaller payments and larger amounts of money. Instead of setting a fixed amount on a monthly level, a certain percentage is a more reliable and consistent method. That way, you’ll be saving assets regardless of the amounts paid to your account.
On the other hand, if you say, for instance, that you want to save $1000 every month, you won’t be able to reach that goal in “weaker” months. Once you break your rule, there’s a risk of losing consistency in business savings.
4) Cover accounts payable on due dates
The golden rule of business management is: cover your debts on due dates. We all like to postpone some payments or skip a bill to make financial room for something else. This is something that sole proprietors mustn’t do.
If you lose sight of your overhead expenses or payments to other businesses, you’ll end up in a financial turmoil.
One of the greatest benefits of running a sole proprietorship today is that you can make all your payments online. If you adjust your accounts receivable and accounts payable to overlap, you can simply sit down at your computer and make all the payments in less than an hour.
Also, you may want to have a look at these payment organizational tips and make sure that you pay all your invoices and bills on or even before due dates.
5) Use digital marketing wisely
The Internet is growing so fast that users might not be able to follow all the innovations and trends.
What you can and should follow are the options to advertise your sole proprietorship for free. Billions of people (yes, billions, with nine zeros at the end) are using Facebook and Instagram at this moment. New social media are growing as we speak so these numbers will continue to grow in the future. Promote your services on these networks and you’ll increase your opportunity to see and be seen online.
Apart from that, don’t underestimate the power of a frugal but well-arranged business website. As the guys from a web design company headquartered in Houston put it, you don’t need the fortune to make an appealing website.
On the other hand, avoid paying marketing services that are not essential for your ventures, such as expensive marketing webinars or misplaced social media ads.
Self-reliance and self-growth are two strongly connected elements. People who decide to become sole proprietors want to pursue both to ensure steady and lucrative business progress. You’ll get there if you’re a financially disciplined and organized sole proprietor. In line with that, keep your books in order, pay your bills and taxes on time, and use the benefits of frugal or free marketing services. By doing so, you’ll ensure smooth cash flow and make savings along the way. All these features are crucial if you want to run a successful venture.
Author Byline: Liam Collins is a tech pundit and Web enthusiast working at TuiSpace.com. He spends most of his time reading and writing about the current affairs in the world of information technology. When he isn’t working, he likes going for long bike rides and walks in nature.