April 23, 2012 - Odds and Ends

So, you've LLC'd yourself, made a website, and made business cards. What's next? It's time to start worrying about money, o'course! First, let's figure out how much it costs for you to wake up in the morning.

Here's an example: Fred has decided to quit his job at Amalgamated Boredom to open up a brand new venture selling paper shredders. Fred's Shedders, he'll call it. The question is . . . how much will Fred have to charge per hour to sustain his current lifestyle? It's going to require some calculation.

Fred plan on working 8 hours a day for five days, and 50 weeks out of the year. 40 hours * 50 weeks = 2000 hours of potential work. Since running your own business is tough, maybe half that will be actual billable hours. So, 1000 billable hours per year.

Fred also used to make $50k/year + $10k in benefits. However, Fred will also have many business expenses. Perhaps $12000 worth. And then, of course there's the taxes on his business (18% per year) adding an additional $11,000. Add it all up, and you've got $83,000 year. Subtract $5000 for profit (if you're lucky!) . . . and you're left with Fred needing $78,000 every year and having only 1000 billable hours to do it. Fred needs to charge or make $78/hr selling and repairing shredders. 

If Fred decides to sleep for an extra hour. It just cost him a potential 78 dollars.

Hitting the snooze button once costs Fred $11.70

That's why running your own business can be very stressful.

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Marketing Yourself.

How will clients and vendors believe in you, if you don't believe in yourself?

Another helpful tip is to reach out to others and network. I'm not talking the drunken debauchery of a so-called "networking party." Reach out to friends first. Friends that you trust will do competent, dependable, (and sometimes free) work for you. I, for example, asked my girlfriend to make the header image for this blog.

Thanks, again!

Vendors are people you need to be able to trust. Your friends are people you already trust, so it's a perfect match.

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Doing Work

Doing the work is as easy as just doing the work. Not much can be said about doing work, because if you don't know how to do work, you shouldn't be working for yourself. So when doing work, you should be able to do work, or it won't work and you'll be out of work. How does that explanation work for ya?

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Invoicing

Some common questions include: Do I need a contract? and How much should I charge?

If you're working with your friends, don't use a contract. Contracts indicate distrust, and you should be able to trust your friends.

Obviously, you should also be in a reputable business.

When working with strangers, if it's under $2000, you shouldn't necessarily need a contract. It's small potatoes. Anything above that, though, and it's time to get the paperwork out.

For any standard creative job, it's important that you break up the money they'll give you.

So, get 33% of the money upfront. This ensures that they are committed and invested in you. It also means you don't have to use your own money for any additional expenses for working on their project. 

Get another 33% when you've completed the first draft. Not only does this motivate you to keep going, you can buy any additional materials needed to complete the project. Warren Buffett once said "Never do business with your own money."

I'm sure he said it at some point, anyway.

Finally, before giving away your final project, get the remaining money. The client has to pay first. It would be like receiving your fast food at the first window of the drive-thru. What's to stop people from just driving away with what they need?

Other than this horrifying clown, of course.

In the final blog, we'll cover just a few more pieces and wrap this thing up. I hope anyone who reads this has learned just as much as I have throughout this class.