Business Advice Every New Entrepreneur Should Take
One year ago, my husband and I decided we’d give entrepreneurship a go for one year while I focused on recovering from extreme burnout. I had absolutely no clue what I was doing, if I’m being honest. I’d never even taken a business class, but I had a handful of contacts asking to work with me, so my plunge into entrepreneurship was happening, ready or not.
Here are some of the things I learned over the past year that I would advise myself on from the beginning - if only I could go back in time!
#1 - Figure out where your value is and when you need to get paid
Initially, when I started consulting, I decided to take the approach of a service-oriented business and bill by the hour. I quickly realized that I loathed the time tracking and billing components of doing it this way. I also quickly realized that my value is not necessarily captured in an hourly rate. If you are truly providing a service, perhaps assessing a billable hourly rate makes sense. If you are providing expertise – your hourly rate might not be the best way to capture your value.
Not all my contracts are calculated hourly and almost none of them are identical. Some are fixed monthly base rates – others are performance-based, and others are structured as long-term gains (where I put the work in now and am paid later). I would not have had the foresight or vision to structure contracts this way without #2. I’m deploying a new product this fall that is flat-rate priced (a totally new concept for me).
#2 - Hire good attorneys
I’m fortunate that I already knew a handful of attorneys prior to starting out as an entrepreneur. I worked with attorneys specializing in small business interests and real estate development to structure my client contracts and my subcontractor contracts. I wanted documents that protected my best interest but also were flexible enough that we could modify them as project needs or scopes changed. This is an instance where I had no idea of what I didn’t know until I hired someone to tell me what I didn’t know.
This is an expense where you simply must bite the bullet and pay. You can’t afford not to.
#3 - Take the leap into legitimizing your business (not baby steps)
I made things so much more difficult for myself by going slow when it came to setting up my business (and my business presence).
For example, I did all of the following within my first year:
November 2021: Registered a personal EIN and set up business bank accounts as a sole proprietor
December 2021: Obtained personal professional liability insurance coverage
February 2022: Incorporated as an LLC and registered a business EIN and set up MORE business bank accounts
February 2022: Developed a business brand and logo
March 2022: Designed and launched a business website
April 2022: Got a business credit card
April 2022: Had my contract documents reviewed by an attorney
May 2022: Obtained commercial liability insurance coverage
September 2022: Registered a business trademark
October 2022: Set up a business email account
It would have made my life a lot easier to just incorporate from day one rather than baby stepping over the course of 12 months. I didn’t think I was “ready” from day one, but it would have taken less time, in the long run, to have done that all in the first quarter.
#4 - Add 10%
I’ve got to admit – I took on some projects this year that I did NOT charge enough for. Part of it was realizing that I owned no intellectual property going into my business and I needed to get some projects under my belt to resolve that issue and for testimonials. But – goodness gracious – I’m embarrassed at what I provided for how little I charged this year. I even got scolded by one client saying that it was borderline irresponsible how low my bidding price was. Lesson learned. While I thought I was charging fairly and properly estimating the hours that it would take to deliver a project, I was way off base.
I underestimated the hours it would take AND what the market rates were for this type of work. I’ve worked to perform cost analyses on my projects and now I know better. I’m glad I learned as quickly as I did, but I wish I didn’t have to learn this lesson firsthand at all. I make sure now on future proposals that my cost-setting is grounded in the realities of what a project to my standards takes (hours-wise) and what I need to charge to make a profit on the project.
… the good news is that I didn’t get it all wrong!
There were a few things I’m so glad I did get right the first time. I would repeat these steps again and would advise any aspiring entrepreneur to do the same.
#5 - Make a business plan and update the document quarterly
I bought a book titled The One Page Business Plan (Professional Consultant Edition) and designed my own business plan within weeks of deciding to start a business. This was a great starting point. I revisited the plan on a quarterly basis and modified it as my vision for my business solidified in year one.
#6 - Work with a mentor
I was fortunate enough to connect with my professional career coach in the weeks following leaving my job – which was what gave me a push to try out entrepreneurship in the first place. I owe so much to that relationship. I’ve maintained my relationship post-initial coaching sessions and we meet every other month or so for check-ins. I so value these meetings as I’ve run challenges, questions, and new ideas by my coach. I respect her insights and opinions so much and I always leave our sessions feeling empowered to problem-solve and innovate.
#7 - Keep your financial house in order
As I’ve mentioned before, I am lucky that my spouse is an accountant. He’d trained me in how to use QuickBooks years before I started my own business, so I had some level of exposure to bookkeeping – more so than the average person I believe. I’m so thankful that he was able to advise against bad accounting practices (that I didn’t know were bad) – such as charging business expenses on a personal credit card.
A continual theme in entrepreneurship is not knowing what you don’t know, and this was one area where I’m very thankful to have had a knowledgeable partner who helped me establish best practices right away.
Essentials for proper bookkeeping are some form of tracking tool (I like QuickBooks), a mechanism for tracking invoicing, and a system to ensure you set aside enough money to pay your taxes. While very conservative, the system I use is setting aside 40% of any income that comes in in a segregated checking account for paying my taxes. This hinders available cash flow, but I am always more than covered for paying my tax estimates in each quarter.
