How to Manage Money When You are Self-Employed as a Coach or Consultant
After you have taken the leap into self-employment, your next step is to develop plans. Your business and marketing plans should define your business and identify your revenue and income goals. You will need these plans to measure and benchmark your successes. Bringing in business on your own is rarely as simple as it seems before you start, but don’t let that stop you!
When developing your plan, research laws that may impact your business. For example, you must find out if you need a license or permit to operate your business where you are located. You may decide to relocate or register in alternate area. Consult your business attorney on that front. A good business plan also includes solid financial information like a balance sheet, income statement, and cash flow projections.
As you develop your business’ financial plan, you will need to choose a method for managing your new personal financial situation as well. Statistics prove that many home-based businesses fail and its more often than not due to poor financial planning. I’ve gathered a few ideas to help make self-employment as a coach or consultant work for you.
Do not go it alone.
The first best position to outsource on nearly any team is bookkeeping. Second is accounting. The sooner you bring in help on these parts of your business, the less it will cost you in the long run. Getting your chart of accounts set up properly will save you time and headache later.
Get ready to ride.
The roller coaster of income, that is. At least in the beginning, self-employed coaches have sporadic incomes or predictable seasonal fluctuations. Your income will likely vary from month-to-month depending on when you launch programs or host events. Figure out how much you should be paying yourself and how much you will reinvest into your business.
You may want to check out some resources to help you. I recommend reading Profit First. To get an idea of what your “paycheck” or owners distribution should look like you can use a calculator with refilled formulas. You may also want to visit your personal budget at the same time to make sure the plan you came up with is realistic for your household.
Watch your expenses.
It’s tempting to buy all the shiny things for your business, but resist the urge to spend on everything that catches your eye. Prioritization and a hard look at your return on investment are in order. You should absolutely invest in human help, software, education and development, and other important expenditures, but don’t go into debt unless you have a good reason to take on the risk. Only you can decide what your risk tolerance is, but getting an outside opinion from a trusted mentor is advisable.
Keep your personal and business spending separate.
Make sure to open business accounts and keep your spending clearly defined. If you need to use a personal credit card for business travel, then write up an expense report just like you would do if you were traveling for a corporate job. If you haven’t established your business as a separate entity, contact a business attorney to see which structure makes the most sense for you.
Watch your taxes.
Tax laws vary by location and you need to know what you can expect to pay. Ideally, you will set up a separate account and put the amount allotted for taxes aside as you go. Your accountant may be able to handle this aspect for you if you make that part of your arrangement. Don’t forget to track things like milage and meals for deductions; there are easy apps for your phone to help you manage this.
Keep accurate records.
Just because you are self-employed doesn’t mean you can slack on paperwork. You can use software to track your leads, clients, contracts, billing, and more all in one place. Your systems don’t need to be complicated, they just need to be consistent and accurate.
Finally, realize there is no need to stress out over any part of this process. If you are just starting out it can seem overwhelming and if you have been in business for quite some time but winging it, you may feel embarrassed… but don’t! Whatever your situation is, you are not alone and help is available. Even if you don’t love diving into your numbers, you can get comfortable with them by planning and bringing in help that is right for you. You can do this!