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Your Guide to Starting Up a New Business
There’s no how-to for starting up your business. Sure, you can find tips on how to attract clients or a list of the best online schedulers or even a how-to for setting up your website. But there’s so much to starting up a business–and all the specifics depend on what type of business you are.
But what about all that paperwork? The seemingly endless list of tasks you need to complete to make sure your business is on the up-and-up?
Let me take some of that off your plate. Here, you’ll find a list of some of the biggest to-do’s in your new business start-up. This list may vary depending on the type of business and amount you’re able to invest, so keep that in mind as you’re working through it.
General Business/Legal Forms
Business Name: Do some research on the name you’re thinking of using in your business. Make sure it’s not already under copyright and that its domain is available. If you’re building a solo business without plans to expand into an agency style, consider using your own name.
Employer Identification Number (EIN): Using an EIN protects you from having to give out your Social Security Number to potential contracted clients, which you’ll have to do if you run your business as a sole proprietorship or LLC. Use this form to apply.
DBA Form: Depending on the state where you live and/or do business, you may need to submit a “doing business as.” Check with your state’s Secretary of State office.
Working Online
As a business in the 21st century, there are certain must-haves for growth. These include:
- Domain name
- Website hosting
- Branded email address
- Google Apps
Time Tracking and Accounting
Tracking your time ensures you’re charging the right amount for your services and that your products are priced fairly. You’ll also want a system for billing in place before that first client signs on.
- Harvest is a great system for tracking your time as well as sending proposals and invoices. It also offers integrations with Stripe, Trello, Asana and QuickBooks Online.
- QuickBooks Online is my go-to choice for bookkeeping. It’s hands-down the most comprehensive.
- Client and contract management is important and is available through numerous systems. Consider finding one right away as it will automate systems for you. Just a few include:
- 17 Hats (my choice for you)
- Honeybook
- Dubsado
- HelloSign (a great way to send contracts if you don’t use one of the options above)
- Merchant Processing allows you to accept credit cards and payments online–perfect if you want to require up-front deposits from clients (which I recommend). Stripe is my personal favorite due to the ease of use and integrations. But consider the processing fees for each. As of this writing the fees are:
- Stripe: 2.9% + $0.30
- Square: 2.75%
- PayPal: 2.9% + $0.30
- Wave: 2.9% + $0.30
- QBO: 3.2% or 3.4% + $0.25
Workflows and Systems
Having workflows in place allows you to work more efficiently with your clients and on projects within your own business. Some workflows you might want to set up include:
- Onboarding new clients
- Finessing potential clients
- Client workflows for each service provided
- Working with team members
Tools to use to set up your workflows include:
Other Costs
Starting a business isn’t free, and investing in the right places now will save you time and a headache later. Here are some of the places you’ll want to invest some cash:
- Legal – Find an attorney who specializes in your niche to ensure your client contracts are up-to-snuff.
- Insurance – Just because you have your contracts in place doesn’t mean that other legal issues won’t come up. Invest in insurance for your business to protect yourself. This is especially important if you’re an online business!
- Accounting – Business taxes and accounting laws are much different than personal taxes. TurboTax simply doesn’t cut it anymore. Find a good CPA or tax attorney and schedule a consultation to walk you through what you need to do to protect yourself financially.
- Training – Whether it’s learning how to manage your website or figuring out your email provider, you’ll want to invest in some training so you’re making the most of your time and investments.
- Conferences – A conference is a great place to learn something new and gain new insights, but it’s also a good avenue for networking, finding referrals and even meeting others in your industry to refer out work overflow. Getting to know people online is no replacement for real, in-person connecting. Find a conference or two where your ideal audience hangs out and go for it.
- Networking – Find a local networking group or join a membership program in your area. Do some research about the types of people in the group before you go and know that it may take visiting a few times (or visiting a few groups) before you find the perfect fit.
Starting a new business is empowering, but sometimes scary. You’ll put a lot of work into the process, every step of the way. Bookmark this post so you can come back to it.
What? I Can Deduct That?
“You must spend money to make money.” – Titus Maccius Plautus
I don’t know many people who enjoy spending money. But it’s a necessary part of doing business. You need resources to be able to do your job well and to grow your business.
Investing in your business is important. Whether it’s a new phone, a course to help you grow as a business owner or a place to set up shop, your business expenses are tax deductible. And some deductions get forgotten because you’re not recording or categorizing them correctly (or at all!) or mistaking a business expense for a personal expense.
But many deductions go by the wayside because you may not be aware that you can deduct them. If you’re doing your own taxes (which I don’t recommend, especially if you own a business), be sure you’re keeping tabs of the following expenses. Your bank account will thank you, come tax time!
- Health insurance – While there are rules that must be met, health insurance premiums are tax deductible for those who are self-employed.
- Charitable donations – Whether it’s a donation directly to a qualifying charity or expenses you incurred as a result of volunteer service, you can deduct donations your business makes. You cannot, however, deduct the value of your time if you volunteer.
- Cell phone – This is a tricky one. While you can deduct the cost of your cell phone (including both the purchase price and the monthly fee), this is true only for the portion used for business. So hang onto your phone records and talk to your accountant at tax time.
- Home internet – If your business is home-based, it’s likely a necessity of doing business. You can deduct the cost of using internet for your business—but not the portion used for personal use.
- Rent or mortgage – This is where those of us with a home office score! You can write off the portion of rent or mortgage you pay for the space you use for work. So if your home office is 100 square feet of your 1,000 square-foot house, you can write off 10 percent of your mortgage or rent payment.
- Team meetings – This can be a tricky one, but if you’re hosting a meeting with team members, you can write off some of the expenses. Whether it’s meeting space, travel or refreshments during the meeting, you can generally write these off. But check with your accountant first.
- Service fees – Any service you use for your business is deductible, including ATM and credit card fees, licensing, professional services and other service-based fees.
- Travel – Another great perk of being a business owner is being able to write off travel. But be careful. Unless the travel is directly and solely related to your business (meeting with an out-of-state client, prospecting new business, etc.), you’re better off paying out of your own pocket.
- CPA fees – If you own a business, it’s always a good idea to have an accountant on retainer. And they will let you know that their fees are all tax deductible.
- Moving expenses – Do you have to relocate to service a client? Is your office moving? You can deduct the expenses that relate to your business. On a separate note, if your family moves to a new state that can be deductible too! Keep track of your mileage and expenses and be sure and let your CPA know.
It’s always important to track any expenses related to your business, regardless of if it’s a write-off or not. Tracking your business expenses helps you to budget and see where your money is going.
Unsure about a deduction? Always talk to your accountant before claiming something on your taxes.
The Ultimate Pricing Guide for Creative Entrepreneurs
Find out how much money you’re really making in your business, and how to adjust your prices accordingly.
Pricing your offers can be tricky, especially in the early stages of business. When I started working with clients on their pricing, I quickly realized that many were setting prices without much rhyme or reason behind them. I’ve heard everything from coming up with a number on a whim, to basing prices solely on what competitors are charging. Trust me, this is NOT the way you want to calculate your prices.
The problem with setting your rates this way is that there’s no backbone to your pricing.
Your prices should be based on a logical and repeatable calculation, so that you can confidently share your prices knowing that they’re justified. Click To TweetToday, I’m going to help you do just that.
I’m sharing the process I go through with my clients to help them understand their numbers, and make informed decisions about their pricing. 9 times out of 10, this process reveals that they’ve been undercharging, sometimes by a whole lot. By the end, they can see all the underlying time and monetary costs in their business, and confidently raise their prices knowing they’re justified. Sound good? Let’s get started.
Personal Expenses First
Before you start looking at you’re prices, let’s take a steps back. You need to know your personal expenses, and what you need to make each month to meet your personal income requirements. This is why you went into business in the first place right? You’ve got to take care of yourself first. Try to find both your NEED number, (the bare minimum you must make each month), and your WANT number, (enough to afford extras and have the lifestyle you want). You want to aim for the WANT number, but it’s important to know the non-negotiable amount that you can’t dip below.
A good way to calculate these numbers is to look at your expenses, and categorize how much you spend on different things. This process takes time, and you may need to pay track your spending for a month or so to get a clear picture of where your money is going.
Also consider how much you made in your previous job and the income you want to replace. Were you making enough to cover your expenses? Do you want to make more than that?
Whatever the number is, you need to know your personal expenses so you can pay yourself enough to cover them.
Next, Business Expenses
Now let’s look at the costs of running your business. Make a list of all of your overhead costs: subscriptions, software, rent, office supplies, payments to team members, everything you spend to keep your business running. If you’re trying to replace a corporate salary, be sure to include the benefits that your company paid used to cover – this usually includes things like health insurance and taxes taken out of your paycheck.
Add up your business expenses (don’t forget taxes!) + your personal expenses and you’ve got your minimum that you need to make every month. Calculating your expenses this way helps you see the full picture of everything you’re spending (or would like to spend.) How are we doing so far? If these numbers don’t reflect what you’re currently making, hold on. We’re not done yet.
Time = Money?
You’ll also want to consider the number of hours you work each week when calculating your prices. Don’t get me wrong, I’m not suggesting you charge your clients an hourly rate, or that you create a business model where you simply trade time for money. But you need to know how many hours you’re working and where that time goes, to get the full picture of how much money you make.
Do you know how much time you spend on the different tasks in your business? If you offer services, how much time do you spend on each stages of a client project? If you sell products, how much time do you spend making or curating your offers? Don’t forget about the marketing and admin work that keeps new clients coming in the door. While these aren’t things that your clients pay for directly, they’re essential parts of running your business.
You can use a free tool like Harvest to track time and break it into categories and see how much time you spend on different activities. Many of my clients, are apprehensive at the thought of tracking their time so meticulously, but it doesn’t have to be restricting. Think of it as an experiment. There’s no need to judge the time you spend on different tasks, you’re just getting an idea of where the time is going. And you don’t need to track your time forever. Commit to doing this for one week, and I promise you’ll gain amazing insights about your business and how you spend your time.
Also think about how many hours you’d work in an ideal week. Would it be less than you’re working now? You have your NEED and WANT number for your personal income, now calculate your CURRENT and IDEAL weekly working hours.
Crunch the numbers
You have all the info you need to look at your numbers and get an accurate view of where you are now, and where you’d like to be. Here’s a recap of the numbers to keep in mind:
- Average monthly revenue in your business
- Total of all business expenses
- Amount you NEED to cover personal expenses
- Amount you WANT to cover ideal personal expenses
- CURRENT work hours/week
- IDEAL work hours/week
Here’s an example of how to calculate what you’re currently making in your business: Say you’re business brings in $4,000 each month, you have $1,000 in business expenses, and you work 40 hours each week. Subtract the business expenses, and you make $3,000/month, or $750/week. Divide that by 40 hours/week, and you’re making $18.75/hour. If you’re feeling queasy because you just realized you pay your dogsitter more than you pay yourself, don’t panic!
Almost all of my clients are in shock after calculating their hourly pay (and $18.75/hour is high compared to some numbers I’ve seen.) No matter how shockingly low the number is, the good news is that you know where you are now, and can start making a plan to get to where you want to be. Play with these numbers and plug in your ideal salary, and ideal work hours to see what number you get. You’ll start to see how you could get closer to the ideal by raising your prices just a little.
Getting comfortable with these numbers is the first step toward raising your prices and getting closer to the ideal life and business you want.
If the idea of going through your numbers and tracking your hours feels overwhelming and tedious, I want to make it easier.
Many entrepreneurs struggle with facing their numbers and building the confidence to raise their prices. This is something I work on with my clients through my DIY Bookkeeping Program. If you’re ready to take control of your numbers, and work toward a price increase that supports your ideal life and business, I’d love to help you get there through the DIY bookkeeping program.
Schedule a discovery call to learn more about how we can work together!
How To Set Up Your Internal Accounting Processes
When you’re hiring an accountant or bookkeeper, it’s important to have a good handle on your numbers already. You’ll need to provide a list of recurring expenses and access to bank accounts, along with some other information. The bookkeeper you hire should guide you through this process like we do at Number Nerd.
But even if you’re not ready to hire an accountant now, there’s a lot you can and should do to prepare for when you are. Because the more you grow, the more complicated your bookkeeping will be–and eventually you will want to have a pro on your side to help.
These are my non-negotiables for every business owner. If you’re doing these things, and doing them well, from Day One, the transition from DIYing your bookkeeping to working with a pro will be seamless.
When you take care of your books NOW, transitioning to an accountant or bookkeeper is seamless. Click To Tweet
List of monthly expenses
If you have a budget with a clear list of your monthly expenses, you’re doing pretty well. But when you have that same list outlined and categorized, you’re doing even better. Knowing how much you’re spending each month in different categories (like bank charges, dues + subscriptions, insurance, continuing education, marketing, merchant processing fees, software, utilities, etc.) is key to finding leaks in your accounts. You’ll then want to review your numbers monthly and compare to the prior month (and ideally your budget) and ensure that you aren’t spending more than you anticipated and on track. It all depends on what kind of business you have, of course, but it’s something to audit quarterly.
Folder for receipts
You’re saving receipts, right? In the event you get audited, you need to have receipts to back up any business expenses and write-offs. But throwing all your year’s receipts in a folder or shoebox isn’t the best way to go, especially if you have a lot of expenses.
Saving your receipts in a shoebox isn’t going to help you keep your books organized. Stop. Now. Click To Tweet
I recommend using Evernote, Google Drive or that manilla folder to organize your receipts on a monthly basis. Each month should have its own space, and if you’re using hard copies of documents, clip them together by month. You can also group receipts by category or vendor if you have recurring expenses from similar vendors. When storing them electronically, be sure to have a standardized file naming convention. You also want to write on the expenses what they were for before you scan and save them. For example:
VendorName_TypeOfExpense_Date.pdf
XyzCoffeeShop_Meeting w/123 re xxx_Date.pdf
Have sales process documented
Every business has a step-by-step process they go through when acquiring a new client or repeat sale. Even if it’s not explicitly documented. The key is to get that process documented. How do you bring clients on? When do they pay your deposit? The rest of your fees? How will you deliver the product or service? Or do they pay at time of purchase?
Having your process documented allows you to better track costs and revenue on every sale so you can start to tighten up the process and your profits.
The more organized and efficient you are, the better. You’ll save time getting the accountant or bookkeeper up-to-speed. And even if you’re not ready to hire someone to help you keep your numbers in check, you’ll have a much better picture of your books if you keep tabs on everything now. Not only that, but you’ll be much less stressed come tax time.
Need to get your books organized? Download my 2018 Biz & Books Planning checklist to get started. And feel free to scour the blog archives as well for other helpful posts that will help you get a great handle on your bookkeeping.