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4 Things to Ignore During Startup | Freelance Sprout | Find, Start, and Grow Your Dream Freelance Business
Read the six part series on creating a freelance business plan
 

4 Things to Ignore During Startup

Date April 28, 2008


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Starting a business for the first time can be overwhelming. Part of the problem is that so many “experts” harp on ancillary, nonessential, startup tasks. It can be confusing and take the wind right out of your confidence.

Whether it’s explaining company structures—C Corp, S Corp, LLC—or business bank accounts, much of this stuff is just that—stuff.

While it’s important, most is not critical for a startup. Below are four activities you can ignore when you’re starting out…

1. Incorporation

I’ve actually been told by business owners that deductions can only be taken if you’re incorporated. Not true! Incorporation is for a legal purpose which also has tax advantages and disadvantages. In many ways it can complicate your fledgling business.

Unless your industry requires you to be incorporated—which is shouldn’t—there’s no need to spend any time on this task in the beginning.

2. Business bank account

You’ll need documentation and the fees are horrendous. Yes, the IRS says you should have a separate bank account. Yes, your accountant (which you don’t need either) will tell you to get a separate bank account. With today’s sophisticated bookkeeping systems, you don’t need a separate account right away.

You can download transactions and tag them as expenses. Run tax reports at the end of the year and, voila, you’re done.

I had a business account with a very large financial services company. They charged me $15 in maintenance fees per month, no matter how much I had in the account. Did I get a better interest rate? Nope. It was a no interest bearing account.

Banks still try to pass on old school thinking. You probably don’t need the extra service they promise and rarely provide.

3. Professional service providers

Especially accountants and lawyers. You’ll pay high hourly fees for services that you just don’t need. If you absolutely don’t want to, or can’t, keep your own books, hire a professional bookkeeper for 75% less.

Lawyers aren’t necessarily business people and will end up making you buy services they “think” you need. Don’t take the bait.

4. Yellow Page advertising

As a professional freelancer, Yellow Page listings may not be the best use of your money. Most of your local clientele will be from referrals NOT from the phone book.

Phone book publishers tend to rope small businesses into unnecessary fluff.

I know a company who spends over $1,000 per month in Yellow Book advertising for four different listings. They get preferred listings but at a thousand bucks a month? I don’t think so.

I believe anyone who has experience in their chosen business can get started in 30 days or less. This includes Website, business cards, phone, etc…

There’s no need to drag out a startup for months or years. Just do what you need to do to get started. It’s similar to selling your house. If you wait until everything is perfect, it will never get sold. Put it on the market and THEN worry about all the stuff that nobody sees.

By making a goal to start your business in 30 days or less, you’ll actually force yourself to do all the little stuff. Because once you’ve started, your reputation and name are on the line.

Once your business is stablized, then you can can start looking at these other activities.

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Related posts:

  1. Creating a Freelance Business Plan - Part 5
  2. 7 Things Not to do Before Starting you Freelance Business
  3. Is Your Cash Flowing?

4 Responses to “4 Things to Ignore During Startup”

  1. Marty said:

    Good points. I agree that you can definitely get caught up with a lot of expensive details when you should just be concerned with taking action and getting your new business off the ground. The only caution is not to forget about formalizing your business entity organization and tax situation before you get too involve and start making money. Could get rather complicated later if you don’t formalized things.

  2. Ramona Iftode said:

    In Romania any business HAS to have an account that’s separate from the owner’s personal account. It’s unpleasant indeed, but they don’t release your papers otherwise. I also have to work with an accountant (even if I am able to do that work). I need the authorized signature. The good thing is that I don’t have to pay much since it’s just something like few hours of work from them in a month.

    I do agree that we need to spend as little as possible and try to pay ONLY for what’s needed. I see too many people who start spending as if they were millionaires and then they just can’t make that business work.

  3. Daniel Espinoza said:

    I agree with the spirit of the post that when you’re starting out you want to keep costs low.

    However, I disagree with #2. I have 3 accounts (operating, tax, merchant) with Washington Mutual (WAMU) and it is truly ‘free’ business banking. I opened these when I registered my DBA at the local court house since I currently operate as a Sole Proprietor, and that form was all the documentation I need. Registration of the company and setup of the accounts took 3 hours. There are no fees, no minimum balances, and free online banking and bill pay. It’s a good deal if you’re in a state where they operate. It is good to get into the habit of keeping business and personal expenses separate.

  4. Jerret said:

    Thanks for all the comments. I obviously struck a cord.

    The point I try to make in many of my posts is that new business owners tend to look at unimportant steps as a source of legitimacy. For instance, it would be silly to turn down work for lack of a business license. But that’s the mentality I see all the time.

    I do apologize if I came across as reckless. I didn’t intend to imply that no record keeping was necessary just because a business bank account wasn’t necessary.

    I live in a very “behind the times” area where banks can dictate just about everything. More competition would be great!

    -Jerret

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