So you’ve decided to take the plunge and become a freelancer, independent contractor, or self-employed professional. Whatever you decide to call yourself you are now a lone wolf. However, you’re definitely not the only one. As of 2012, nearly 3 million people worked from a home office and nearly 10% of the total US workforce identified themselves as self-employed.
While these numbers have slowed in recent years, certain segments have still shown strong growth in self-employment, particularly jobs related to web development and marketing.
For those of us that work out of our homes, the home office is an all-purpose center of operations. The level of professionalism that your home business exudes is not just a point of pride, it can go a long way towards your retention and acquisition of clients. Sure, it can be daunting when comparing your solo operation to the bigger names in your field, but you don’t have to have a large budget to come across as a respected business. From setting up the office to more advanced concerns like legal contracts and finances, I’d like to share a few tricks I’ve learned from running my own home based business. Some of these I learned the hard way…
Furniture for the Office
Let’s start with the basics. The most obvious need for a home office is office furniture. Having an attractive and ergonomic desk and chair can go a surprisingly long way to increase your comfort in the home office, where you will likely be getting a little stir crazy. Rather than going down to the big box store, consider first checking a local second hand business supply store or thrift store. Another great place to get office equipment, and less known, is from sales of surplus furniture from local universities and school districts. Here in Seattle, the University of Washington holds a regular weekly surplus sale to the public, where chairs, desks and all sorts of office furniture can be found for cheap. Be sure to thoroughly inspect items before purchasing. Adjust the knobs, and look for wobbles. My personal test for chairs involves flopping down like a ton of bricks and running it around the floor like a luge racer.
Setting up a Business Phone Line
Now that you’ve got the inside of your office looking somewhat professional, it’s time to create that same illusion for those reaching out to communicate with your office. Yes, you’ll want people to communicate with your office – not just you. When a prospective client calls you back, it will impress them to receive a greeting and be presented with options like they would receive when contacting an agency or larger company. These are some of the business features of an auto-attendant service, which acts as an automated secretary, routing calls to the appropriate phone and putting calls on hold. You can even play your own selection of on-hold music! This type of setup is particularly useful when you’re partnering with other agencies or professionals as it allows you to quickly direct a client to the person who can best answer their question (web designer, copywriter, marketing professional, graphic designer, etc.).
You can either get a full-featured hosted plan or, if you’re feeling particularly tech savvy, go a cheaper route and set one up through an existing phone. Either option will go a long way in projecting professionalism and ensuring that clients feel you are easily reachable (more so than with using a home phone or cell phone). As an added bonus, many auto attendant setups come with a ‘black list’ feature that will block unwanted telemarketers.
Setting up a Business Address
With a proper phone system in place, the next form of business communication to tackle is the mail. You may not think that a physical address is an important factor for an independent and primarily online business… but Google does. For purposes of local search, you may want to consider registering your business at a separate address from your home. Using this address to setup a Google Places for Business account will allow you to display in search results for searches in the city you’ve registered in. For instance, if you live in the suburbs, you can register an address in the city and will appear higher in search results (potentially in map based results) when people living in the city search for your business type. Obviously, this setup is better suited for businesses that don’t have to operate within a given service area, and you’ll want to be within commuting distance of the city you’re registered in.
One solution is to sign up with an executive suite such as those offered by Regus. You can register for a workspace and mailbox at these types of locations without being labeled as a PO Box. Now, a few disclaimers about this method. Google is adamant about the accuracy of business addresses. Typically they would like to see a business address be accessible to customers, which may not be the case with an executive suite or virtual office. However, by selecting ‘I do not serve customers at this location’ and selecting a service area (similar to an independent trades professional) you can avoid this issue. Furthermore, when listing this address on your website, it’s beneficial to utilize the schema markup containedIn to note that the address is located within another registered business and avoid any confusion on Google’s end (kudos to our own Alex Kine for this tip).
…or Just Get a Collaborative Workspace
The above mail and phone setups can be made obsolete by signing up to work at a collaborative workspace. Collaborative workspaces have been popping up all over metropolitan areas across the country. They’ve grown in popularity as individuals and startups are searching for cheap office space. An alternative to working from home or in a coffee shop, a collaborative workspace is a shared office space. Depending on how much you spend, you can either get a desk or an entire office. Most workspace companies will also offer dedicated rooms for meeting with and presenting to clients – a welcome improvement over meetings at the local coffee shop.
The idea is pretty genius as it caters to professionals who don’t want to pay a premium for office space and are tired of spending all day in the home office talking to their cats. Being around other people during the workday is not only better for your mental well being, it also offers a great opportunity to network with other like minded professionals.
In more tech-oriented cities you may have several options to choose from. A larger collaborative workspace company will likely have more prime real estate, nicer amenities (kegs seem to be popular) and provide access to offices in multiple cities, but will typically have higher rates (ex: WeWork). A local workspace company will likely have less amenities and real estate outside core locations, but usually will be more affordable and, as I’ve noticed, offer more pricing options that are better tailored to individuals, rather than startups (ex: Works Progress here in Seattle). Expect to pay $200-400 a month as an individual, depending on your city and the level of access you require.
Accounting and Cost Tracking
Taxes – the bane of the self-employed. In my first year of self-employment I screwed the pooch and seriously underestimated my tax burden. I didn’t file quarterly and when tax season came I was looking at a large debt that I owed to Uncle Sam. Accounting and managing funds is perhaps the most difficult aspect of transferring from employee to self-employed. Need to use a new tool online or have to pay a registration fee? Those payments are no longer managed by your employer. You’re on your own now.
Thankfully there are solutions for the self-employed that are a bit more advanced and easier to manage than a folder of excel spreadsheets or a shoebox of receipts. One software that I’ve found to be quite helpful is QuickBooks Self-Employed. While not the most robust accounting software, it does a great job of identifying and aggregating business expenses from your bank account. These business expenses can easily be applied to quarterly tax filings. At only $10 a month it’s a fairly wise investment and, best of all, just like the rest of the solutions covered in this article, that monthly fee can be claimed as a business expense in and of itself.
If you’re really short on cash one option, and one which I have yet to try myself, is an invoice loan. These types of loans are geared towards the self-employed and are essentially like a payday loan for those of us who don’t have regular paychecks. Fees may be higher than typical loans, but the qualifications for receiving one are usually more lax, with most not requiring a credit check. There are even some startups catering to these types of loans, such as Fundbox, who aim to make the process as seamless as possible. This can be a quick solution to a cash flow shortage for your business, but, as with all loans, proceed with caution!
Contracts and Legalese
Along with financial management, legal issues are perhaps the most facepalm inducing aspects of self-employment. For most of us the legalese behind contracts and agreements is a foreign language. It can take a good deal of research to understand what terms needs to be in your contract agreements, let alone how to write them. If you are operating on any type of handshake arrangement, stop! It may seem like everything is fine now, but you are leaving yourself open to huge financial and legal risks. Such an arrangement is akin to being naked in the jungle without a Discovery Channel crew on standby to airlift you to safety.
The most important thing to understand for self-employed individuals is the independent contractor relationship. When you are in this type of arrangement, the company or person paying you is not beholden to provide you any of the benefits or legal protection that an actual employee would receive. However, on the flip side, you are not beholden to the restrictions an employer might require of their employees. Beyond being able to complete assignments in your underwear, this arrangement has several perks that you must understand alongside the liabilities.
Rather than pouring over the details of how to write the perfect contract (a lengthy discussion in and of itself), I’ll point you to some resources that do an excellent job of breaking down the essential elements that the self-employed must know.
- Nolo.com has perhaps the greatest collection of free legal resources online. Their section on the Independent Contractor Relationship is a great reference and should be in the bookmarks of any self-employed individual.
- Sarah Bird has a great series of articles on Moz that provide examples and clear descriptions of important legal terms and clauses that independent contractors should know before drafting a contract and common legal problems they may face. Of particular importance are her articles on Indemnification Clauses and Liability Clauses. The advice here is geared to those in the online marketing space, but are applicable to a wide range of self-employed professionals.
- Rocket Lawyer is an online resource that provides access to templates for legal documents and maintains a pretty sleek Q&A tool for asking legal questions of lawyers. I’ve had mixed reactions to using their auto-generated legal contracts, but they do make a good starting point when drafting your own contract. The ability to filter by state is perhaps the best feature here, as each state has unique stipulations for the independent contractor relationship.
Many people think working for yourself is a dream job, but alongside personal freedoms come personal responsibilities that regular employees don’t have to fret over. I hope that this quick guide has helped you further understand the complexities of being self-employed and provided a useful, and affordable, trick or two along the way.
Remember, we’re all in this together – independently.