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7 Things Not to do Before Starting you Freelance Business

Date February 1, 2008

Many times, would be freelancers read about all the startup stuff they need to do before they market and service customers. Business licenses, corporate structures, business cards, etc…

But, focusing on the administrative portion will often stall your ultimate goal—profit. And you’ll be needlessly spending money that can used in other, more effective, ways like marketing.

The following is a list of my seven things not to do before starting your freelance business.

Don’t setup a corporation

Incorporating your business won’t do you much good. In fact, it will cause you headaches by requiring you to file more tax forms and keep more records. Most small businesses are sole proprietorships and they’re happily earning money.

Don’t get a separate business checking account

I know, this is heresy. The IRS says you should have a separate bank account. Your accountant says you should have a separate account (another don’t do). Most business bank accounts charge excessive fees and don’t offer any more benefits than your personal account such as a higher interest rate.

Your clients won’t see you as being unprofessional because they have to write you a check for your personal account. And most clients will be more than willing to pay you electronically (which they should be able to).

Don’t pay an accountant

Most accountants charge $100+ per hour for advice that you just don’t need—a high price to pay for a bookkeeper.

You can get your taxes done at a local tax service for one third the cost of an accountant. If you absolutely must have someone take care of your books, hire a freelance bookkeeper at $25 per hour or less.

Don’t pay an attorney

Attorneys fall under the same category as accountants. You just don’t need them. You’ll spend a lot of money for advice that doesn’t apply at all.

It’s nice to have a relationship with an attorney just in case. But, you can learn most of what you need to know with books or online resources.

Don’t apply for a business license

I’m not advocating that you skirt necessary licenses and permits. If you don’t have a business name, and you plan on using your own name (which I recommend), then most localitites don’t require you to have a business license. Again, just another needless expense of time and money.

Once you start generating revenue, then go out and get yourself a license if it makes you feel better.

Don’t pay to get a logo designed

Whether you’re planning to be a freelance graphic designer or not, don’t spend more than a few hours coming up with a logo. Even if you don’t have design skills, you can buy a cheap software program or, better yet, just use your own name.

This is the step that tripped me up most often. I would spend hundreds of hours coming up with different logos. Just use your own name, find a good font and go with it.

Don’t write a business plan

Having a plan is not the same as having a business plan. A business plan will take a lot of time to write and most of it will change the minute you open for business.

The point is to not spend time on activities that really don’t make a difference in your bottom line.

Of course, if you’re like me, you may like to participate in these efforts because you’re afraid to market yourself and you’re making excuses.

If you’re going to spend time doing something, learn how to sell yourself. Because selling is the only thing you need to be doing.

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Related posts:

  1. 4 Things to Ignore During Startup
  2. Protect Yourself when Submitting your Resume
  3. Preparing for Freelance Taxes Year Round

One Response to “7 Things Not to do Before Starting you Freelance Business”

  1. Tanisia Greer said:

    I will have to disagree with about 90% of the points discussed in this article. While the starter freelance writer (or any self-employed worker) won’t need to incorporate right away (if at all), the rest of the points are factually incorrect and could get the beginning freelancer into big trouble in some states.

    Here’s what I found worked for me when I started out in business.

    1. Depending on the bank one works with, the beginning self-employed person doesn’t necessarily need a formal business account to do business with. They can open a separate normal checking account that’s set aside for their business transactions. In some banks (like Washington Mutual), they can open a business checking account if they’re using just their name in the business title (Mary Jones Freelance writing). If the person wants to use a business name, then they are required to file a fictitious business name statement or a DBA statement (doing business as) with their county clerk dept. In most cases, it’s a simple and inexpensive process to do so.

    2. In the beginning, the self-employed person will need a formal system to keep track of expenses and income, whether they or someone else keeps those records for them. They won’t need to keep an accountant or bookkeeper on retainer to do this. Personally, I’ve found KeepMore.net to be an excellent online bookkeeping system that’s simple and keeps my income and expenses straight. That service figuratively saved my behind during tax time, due to their outstanding reports for tax time! Other free or low-cost software or online systems for tracking expenses include GNU-Cash (open source freeware), AceMoney (excellent software, with a free version and a low-cost version), and Mint.com (simple checkbook-style online system). Further, a freelancer will need to be able to explain their financial records to any accountant or bookkeeper if (or when) their business picks up. At that point, the freelancer won’t have time to keep their own books full time, and the savings in time and billable hours outweighs the expense of using an accountant.

    3. There are very few legal issues a beginning freelancer needs to be aware of, aside from home-office zoning laws, business license requirements (which I will talk about in a minute) and contracts. If the business owner creates a website, having a Terms of Use and Privacy Policy page on their websites not only complies with current direct marketing laws, but will increase a freelancer’s chances of looking good on paper if their business grows to the point that they need a merchant’s account to service their customers. Numerous state and local government sites, and free legal assistance, is available for business owners/freelancers, should the need arise. Also, looking into a legal services plan like Pre-Paid Legal Services Inc. would be of great benefit.

    4. The self-employed person MUST consult their county’s and city’s ordinances regarding home-based businesses. Advising that one doesn’t have to pay for a business license is, at its mildest, gross misinformation about the true requirements to be considered a legitimate business for legal and tax purposes. When I started my online business, Common Sense Conjure, I went to the planning commission to confirm that I did not need a special zone permit for my business, since I don’t bring customers into my physical residence. (I do Spiritual Life Coaching, Tarot and Pendulum readings and other spiritual services, usually online or over the phone.) With the letter from their office proving my zoning status, plus listing my expected income from the business, I was able to qualify for a city business license. The fee was nominal ($45) and the process was simple.

    5. Planning a business identity is an important factor. If the freelancer wants to build a reputation or a “brand” for their type of services, sooner or later it will be advisable to create a consistent look for their marketing materials. As you mentioned, using an online logo-creating service or purchasing logo software would be ideal for a starting-out professional. Later on, hiring another freelancer to create a business logo and marketing materials–someone with the time and expertise to create a quality product–would be a wise choice. The freelancer shouldn’t rely on amateur clip-art, quick-print cards and pre-printed stationery forever if they want to present a professional image to their clients.

    6. While the average freelancer won’t need to create a formal business plan, with financial projections, business history, and detailed resumes of all “principal owners” of the business, creating a personal plan for the business is essential to assuring the freelancer is on track with their production goals. The plan doesn’t have to be formal or complicated (unless the freelancer is creating a document to use for applying for a business loan), but a definite plan of action needs to be mapped out. It’s one of the essential Six Steps to Success mentioned in “Think And Grow Rich” by Napoleon Hill. If the freelancer doesn’t know what they want success to look like, how will they know when success finds them? Or what a successful freelancing business will look like? Further, a self-employed person may not need a formal business plan, but an operation manual that maps out the day-to-day start-to-finish process of serving clients sets a standard that leaves nothing in doubt.

    I’m not a legal or accounting expert, but I am a self-employed business person who has learned from earlier business mistakes, and is now enjoying the endless possibilities of earning money being of service to others. Being organized and compliant with my business practices allows me to be at my best when serving my clients.

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