When you find a way to get paid for doing something you love, it’s tempting to ditch the traditional 9-to-5 grind and go out on your own. But how do you know if you’re going to make it? Will you have enough business to pay the bills?
Number Nerd Bookkeeping Solutions has helped several clients transition to their “dream job” even sooner than they imagined! If you’re considering turning your hobby into a sustainable business, here are some of the things we can help you determine:
Are you making a profit?
First, we will create a preliminary profit and loss statement. We will look at all the incoming and outgoing transactions and other liabilities for the year. You will need to work with your CPA to determine how much to set aside for taxes throughout the year. Although there might be a significant amount of money coming in, we need to make sure that when all the expenses are covered, there is enough money for taxes…and for you! We will also discuss the amount of growth you will need to cover additional, rent, labor, supplies, and resources as you expand your business.
Are you charging enough?
Many new entrepreneurs make the mistake of charging an hourly rate that is similar to what they were making in their 9 to 5. This approach does not account for the overhead and personal taxes associated with their new business. Even if you are working out of your home and/or have an online business, you will likely incur software expenses, business filing charges, hardware expenses, marketing and/or other professional services associated with running a business. Although your prices need to be competitive, you need to charge enough to sustain the company, as well.
Do you have a business plan?
As certified LivePlan advisors, we will coach you through using our powerful software tool to produce a comprehensive business plan, including a financial forecast, industry benchmarking, financial insights, or to manage your cash flow and budgeting on an ongoing basis. A business plan will help you answer some of the harder questions like: Who is your target market and where will you reach them? How much will you invest in labor, marketing, office space, supplies, and tools? What other resources will you need to reach your goals? We put a plan in place to reach your goals!
Is your business set up properly?
Setting up a business can be overwhelming. After you set up your business entity with a CPA or Attorney, we establish separate bank accounts with your new business FEIN. Separate bank accounts ensure business transactions do not intermingle with personal transactions (which always makes an easier audit!)
Is your accounting system set up the right way?
Lastly, we will pick out an accounting software. Many new businesses start with a free version of Wave or Freshbooks but quickly graduate to more sophisticated systems, like QuickBooks Online or Xero. While there are advantages and disadvantages of all accounting systems, it is most important to make sure the financial software is setup properly so you don’t run into major problems down the road. We’ll discuss how to report and record all your transactions so that nothing slips through the cracks. Even things that seem small, like credit card fees, can create a significant impact on your reported income at the end of the year.
For me, “Do what you love, and you’ll never work a day in your life,” is so true. After 20 years in the business world, I was able to make the switch to my dream job. I love numbers. I love helping people. I love balancing books. And, I love setting businesses up for financial success. When you’re ready to figure out if you can turn your paying hobby into a full-time gig, I’ll be here ready to help! I’ll work with you as little or as much as you need so you can confidently pursue your business dreams.
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