A couple of weeks ago, I received an e-mail from a reader (I love when you guys comment or e-mail me) wanting me to do a series to expend on my “Three pointers on how you can keep your business finances manageable” post. I loved the suggestion and so that’s what I’m doing. I am going to do a series for the next three Saturdays that expends on the three things I listed in this previous post.
This first post will be about your basic business costs and some basic resources you can use to help you in one way or another with that cost or help in finding the basic things you need to set up your business.
I have read at a few places where they said having business cards was obsolete. I could not disagree more. Sure, you don’t always give them out, but it is still better to have a few to give away when someone asks you about your business, especially at networking events. Because, guess what? If someone is telling me about what they do and they don’t give me a card, chances are I will forget the name of their company and just Googling it is not going to be enough to find them. Don’t take chances with potential future customers. Here are some great places you could get business cards for fairly cheap.
- Office Depot
Which equipment you need will depend on the kind of business you are starting. But I will try to give a few general equipment that all businesses need whether they are located at an office space or at home.
- Phone (Google has a great options for business)
- Internet connection
- File folders
As I have mentioned before, don’t be so eager to make your business “official” that you rent an office space when you don’t need one. You could figure out a way to get your business going from home and then perhaps when you start making a profit, invest in an office space. By the way, I cannot begin to emphasize enough how important it is that you designate a certain area of your home, your office. It will help you to be more productive as well as help you put you in a work state of mind once you sit down in that area. If you are in need of an office building, here are a few things you could do to find your ideal space.
- Decide the location that is ideal for your business (you should know who your ideal customer is when you start your business. You should also know where they hang out). Many businesses have gone out of business because they picked price over area. It doesn’t matter how cheap a place is if your location is not helping you gain customers.
- OfficeSpace.com (helps you find available space in your ideal location)
Independent contractors, freelancers, and small business, startups, and more can come together in a shared office space. You could start your own community co-working or join one that’s already established.
The sum of all the costs that goes into creating a product (materials, labor, manufacturing, profit). It will be different for every product and so it is very important you do some research before you start production.
This is probably one of the more stressful aspects of owning a business. It might be to your advantage to seek the counsel of tax advisor. This is a part of your business you want to be very clear on. You do not want the IRS to come after you for tax evasion or fraud. Check out the following tax guides if you live in the U.S.
There is federal and state licensing. Check out the following link to figure out what kind of licensing you need.
Accounting, Payment methods, and Credit cards/transaction fees
Figure out how you want your customers to pay you for your services. Here are a few resources for sending invoices & accepting payment. They have free trial services as well as paid services. If you are thinking about using one of these
- Freshbooks (this is the one I personally use. It is simple and easy to use to bill your customers)
- WebPay (a free service from Amazon)
- DWOLLA (.25c/transaction or free for transaction of $10 or less)
Your time (the hardest cost to estimate sometimes)
Business owners as well as freelancers have a hard time with this part. Often, they will calculate the cost of everything but their time. Right after giving birth, I had an issue with my hand from being a new mom. I decided to go to the doctor’s because I was in a lot of pain. Well, after an hour waiting, then checking in, and then waiting again in the examination room, the doctor came in. He examined me for a total of 5 minutes only to let me know that there was nothing they could do and only time could cure my hand. Then I got the bill. A few hundred dollars for a 15 minute exam?! I was annoyed, but then I thought about it and realized that I already knew a few minutes with the doctor would cost a lot of money, but I had been willing to pay it just to figure out what was going on with my hand.
Just like this doctor, make sure that your customers know your time is valuable by figuring out how much it is and putting that cost into any service or product you provide. Here are some great ways to figure out how much your time is worth.
- Research your industry (see what the national salary is, and how much others in your field are charging).
- Do you want to get paid per hour or per project? Personally I like being paid per project because it allows me a lot more flexibility in my time (which is an advantage for the client and myself), and gives the client an exact idea of how much a project will be.
- Figure out how much you want to make per year and then how much you would have to make per hour to make that. Here is a formula that’s helpful when you are first starting out. After working for a bit you will get an idea about how much you want to charge.
If you work 52 weeks in a year-2 weeks vacation=50 weeks
50 weeks x 40hrs/week=2,000
How much you want to make a year/2,000
From there you can estimate how much time you will spend on a project to figure out how much to charge per project.
I hope this list of great resources will be useful to you. In the comments below, tell me what your favorite resource was when you started a business or has been since you have started the process of launching your own business. I would love to hear it.
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