When you start your business, you’re so focused on getting new clients and making your first dollars that you don’t think much about how your business runs. Hey, you’re just happy that you’re making money doing what you love!
The initial novelty of starting a business is undeniable.
However, before you know it, years go by. Rather than Upleveling into the role of a business owner, you’re still stuck in “little ol’ me” thinking. That thinking translates into actions (or inactions) that can ultimately keep you at the same income level for years. Not fun.
Do yourself a favor and make sure you aren’t making the following “newbie” mistakes. Then, take action to Uplevel your business and yourself!
Mistake #1 – Not having a business checking account
Do you let your money just flow in and out of the same account? Are you paying for groceries and web design from the same checking account? At the end of the tax year, are you frantically trying to determine which expense is business and which is personal?
Yes, yes and yes?
Well, you must change this immediately. Make it a priority TODAY. Get a checking account for your business.
This may sound like Biz 101 to some of you, but I’ve met too many self-employed women who work in this kind of accounting chaos year after year. It’s a guaranteed way to fail.
Mistake #2 – Not paying yourself a salary
The woman with a Lack Mindset doesn’t pay herself a salary. She just grabs what she can at the end of each month. What she’s telling herself (and the whole world) is that she doesn’t value herself or her work.
Don’t be that woman!
Now that you’ve set up a business checking account, here’s your next step. Choose an amount to pay yourself each month or week. Then set up a system and do it.
Money is energy. As such, it needs to know where to flow. Once you set up an exact amount for your salary, you’ll be amazed to discover that this amount always seems to be there each month. It’s one of the key ways to Uplevel your business when you’re a newbie!
Mistake #3 – Not setting up a business entity
If you’re still a sole proprietor, you’re probably paying way too many taxes! Self-employment taxes are among the highest taxes you can pay.
Whether you choose to incorporate, you need to have both the tax benefits and the legal protection of a business entity. An LLC is also another option. Choose a name for your company, and research the options available to you. On-line legal services like LegalZoom.com make this process a breeze!
AMENDMENT: After I posted this article, Marilee (who is an attorney) generously added her thoughts in a comment below – and I wanted to make sure my readers could see what she wrote:
I am an attorney, and notice three big issues with what you said. First, a member of an LLC will still pay self-employment tax on the money that they earn working for the business. Second, if they incorporate, they may not be able to take advantage of any start-up lossess. It’s a real decision to decide whether to incorporate or set up an LLC. Third, why would you recommend that people need to spend hundreds or thousands on an accountant, but say that Legalzoom.com is the way to go for legal advice. If you are not the only one in the business, having a good Operating Agreement or By-Laws could literally save your entire business. Please don’t discredit the value of good legal advice. If it hasn’t served you well so far, then you haven’t found the right lawyer.
Mistake #4 – Doing your own taxes
I recently overheard two self-employed people talking about how they saved “hundreds of dollars” by doing their own taxes. Ugh! This is a surefire way to stay stuck, in chaos – and most likely have to endure the painful process of an audit. (Plus, are you even any good at that stuff? I didn’t think so!)
Entrepreneur, take thyself seriously. Get a great accountant, and happily pay her the hundreds (or thousands as you get more successful!) to ensure that your taxes are done professionally. You’ll sleep better, and you have much less of a chance of being audited.
Mistake #5 – Not setting boundaries with well-meaning friends and family
If your friends or family do not take your business seriously, it’s an issue of communication.
People who have never had their own business simply don’t understand what you do! They often won’t take your time or space seriously. They might call during the day, drop in when you’re on a call, or accuse you of not being a good friend when you can’t just pick up the phone.
All of this can be prevented with some communication on your part.
But first, you must be clear about your boundaries. What are your hours? Who do you work with? Do you do pro-bono work for friends? (I strongly suggest that you don’t!) Does family get discounts? Do you hire family or friends? What will you/won’t you tolerate?
Take some time to get clear about what most needs to be communicated to the people in your life. And then, honor yourself and your business enough to share these boundaries in a clear, proactive manner. Then, it’s up to you to enforce your boundaries!