How much should I sell my business for and is it the right time? Read our latest article here


Surviving as a Self-Employed Person

Self-employment has lots of advantages. You make all the decisions. You’re the one who determines your own success. And you can always be sure of having enough money in the bank to pay the bills – or can you? Being self-employed has its own set of challenges, not the least important of which is managing your money. How you handle the money you receive, and especially how you plan a budget and stick to it, will determine whether you stay in business. 

Be prepared before you open the doors

If you’re about to start a new business there are many things to do that will help you get through the initial stages of self-employment. The most important of these is to be sure you’re not undercapitalised. The basic rule here is, unless you have enough money to cover all your forecast expenses in the first year, don’t do it.

Clear out as many of your personal debts as possible and don’t incur any new ones. Trade in the family car on a work vehicle if one’s required. Use furniture from your home for the new office, at least until you can afford a new desk and chair. Be as economically conservative as possible and only spend money on true revenue producing activities.

Prepare a business plan

Every business needs a business plan and one that’s just starting up needs it the most. Properly constructed, a business plan is a model of your business including such details as income and expenses and showing when each will come in. It will incorporate your marketing activities and show how much cash will be available to repay loans.

Your business plan will enable you to prepare budgets for the business and for your family as well. A self-employed person always has close links between their business and their personal life, and there’s never a ‘Nine-to-Five’ day nor is there likely to be a five day week. 

Watch your cash flow

It’s impossible to overestimate the need to monitor the business’ cash flow. Cash is called the ‘lifeblood’ of a business and it’s certainly necessary for the continuing health of any organisation. Very few small businesses have a truly steady income. There are usually peaks and troughs; some months are a lot better than others. About the only certainty is that the bills will have to be paid on time. Get your invoices out quickly and have a credit policy that you rigidly enforce. Don’t let bills pile up either; if you think one month’s bills are hard to pay, just imagine trying to come up with the money for three month’s bills in one hit.

Keep tightening the belt

Make frugality a habit. Before spending anything always ask: “Is this really necessary?” This doesn’t mean penny pinching on important areas like product quality, but it does mean avoiding the temptation to spend up big just because the business had a good month. This is why it’s so important to set a budget and stick to it. The business might perform better than you’ve forecast, in which case you can begin to build up a reserve to cover yourself if times get tough in the future. Invest any extra cash, even if it’s only an on-call account, and squeeze every bit you can out of it before it’s needed to pay bills. 

Remember to set aside funds for taxes. There’s a temptation to put off taxes until the end of the year when you see how much money the business has actually earned, but this can leave you with a big debt and no way to pay it. Include taxes in your business plan and put an amount away every month.