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Ryan Robinson wrote an article for Forbes entitled “5 Financial Mistakes Solopreneurs Make When Starting a Business.” As insightful as I found it to be, I wanted to take a different approach in explaining some of the challenges he outlined regarding starting a business, specifically as a freelancer or solopreneur. Before I get into that, I wanted to outline some key differences between these two terms.
A freelancer as defined by Merriam Webster is “a person who acts independently without being affiliated with or authorized by an organization” while a solopreneur is “an entrepreneur who works alone, or “solo”, running their business single-handedly.” Someone who uploads music to websites like BandCamp may be considered a freelancer while a local small-town antique dealer, may be a solopreneur, for example.
Ryan Robinson suggests solopreneurs (1) fail to accurately track expenses, (2) take on unnecessary overhead, (3) do not have a set invoice system, (4) do not adjust their lifestyle when going into business and (5) fail to optimize or add new revenue streams. In a nutshell he points out that instability is a major concern when gaining entry-level experience. To overcome these challenges, I’m offering suggestions of my own.
Find a Creative Way to Track Expenses
Remember when they taught you in school how to balance a checkbook? Well, today you don’t have to do all the work; you can simply go online and pull up the statement where it shows the details of your transactions. At the end of the month print that statement out and begin to analyze. I’d find this useful in both personal and business situations.
Give Minimalism a Try
Have you heard of this new concept? If not, please visit the link I provide here. To sum it up minimalism is the practice of eliminating physical/material resources that become less useful to you. It could involve attire, furniture, even people. It’s important to minimize the distractions and limit the many other obstacles you’ll have to face. The point is, eliminate enough clutter to sharpen the focus on doing clean, smart work and getting value in return for it.
Determine How Transactions Should Be Recorded
In addition to having an adequate invoicing system, I’d like to specifically suggest creating separate expense sheets for different clients. For example, when you enter a business arrangement with Client A who pays you to wash their car, create a profile for them. This document can have their name, location of where you performed the work, contact information, how long it takes to complete the task, how much was charged, and payment method. These initial indicators over time will help you to determine a set financial system where you can efficiently manage each transaction per client.
Make Lifestyle Choices That Complement Business
I identify this as possibly the biggest challenge. When you decide to go into business or profit from doing something that you love on the side, it would be very wise to adjust your life accordingly. For example, if you’re looking to make money fixing car parts, spend more time around auto part retail stores. An artist can practice going to sleep at night with colored pencils and a sketching board beside your bed. Then of course we have the importance of sleeping and dieting; the focus here is to align freelance or solopreneurial decision-making with activities that benefit your business, to the point where both allow for a healthy and balanced lifestyle.
Have an Expansion Strategy
You may find countless articles on the web showing how most companies today started as self-run enterprises. You may have a similar future; you want to map out where you’d like to go as you navigate your way through creating a corporation. Do you wish to add staff? Will you need to invest in a house? A car? Studio? Will you need to relocate? All of these things will matter as you grow your business. You’ll also find other ways to capitalize as you expand—perhaps acquiring licensing rights and be able to create a revenue stream from licensing! The possibilities are endless when you take the time to strategize the growth of your company.
By following the suggestions outlined, you can set yourself up for success. The key is to make wise choices and, especially at a time like this, practice safe habits. Learn from experience, seek advice from others who also have an interest in personal finance. These things among others will serve you best in your pursuit toward doing personal finance right as a freelancer or solopreneur.
Have any more personal finance tips for freelancers or solopreneurs? Let us know down in the comments.
This article originally published on GREY Journal.