If you want to be a boss, you have to deal with a bunch of things you never had to deal with as an employee. The most important parts fall into three buckets: 1. Money, 2. Marketing and 3. Methods.
1. METHODS
Your work and life will only be as good and manageable as the methods you implement to manage them. When you go out on your own, you don’t do it to create a new job – you’re doing it to create a business. Employees drive the train, but bosses pick the destination. After you’ve followed someone else’s journey, you may be stunned at how great it feels to draft your own map. But, you do have to draft the map. If you start every project, day or year without a plan, you will be disoriented and out of fuel. You also must narrow your options. Having too many choices in your destination is just as bad as having none. How you work, what you make, what you charge, how you find clients, how you find staff, how late you will work on Fridays will all be a churning set of decisions and second guesses. Save yourself the exhaustion and take control.
Your Work System. Bosses set up systems. Your system will help you maintain quality control, which will lead to more profitable projects and less costly mistakes. Creating a work system is a long term endeavor. Start by writing down the types of projects you’ll do, breaking them down into manageable bits. Adopt a way of tracking what you are working on and what’s next. Write down the steps you go through to start and finish a project. Create rules for how you work. Try to boil things down to checklists. Give yourself the tools you need to make your work efficient. Look for ways to cut steps and costs and to improve quality. And train new staff members on your system.
Write a menu of services, products and prices. As a boss, your job is to sell stuff for money. You must figure out what you are selling and for how much. You also should figure out the limits of what you will do for the initial prices you set.
Tax and Accounting. American employers play a big role in their employees’ taxes: they calculate how much the employee owes to the government, deduct and set that tax payment aside, kick in a bit of their own cash (for Social Security and Medicare) and then send the whole thing, plus a report, to the various tax authorities. Once you’re the boss, you have to do this, including paying the extra amount employers kick in (self-employment tax). I strongly recommend hiring an outside payroll service company to take care of all payroll tax matters for you. You also will have other tax chores, including exchanging some tax forms with your clients. In addition to tax issues, you will need a system of accounting to record expenses and revenues. I recommend hiring an accountant to help you set all of this up.
Legal Stuff. There are a bunch of things you could, and maybe have to, do around legal compliance. You may be required to get a license to operate in your profession or industry or a business license from your town or county. You also may want to create a formal business entity around your business to keep your personal assets safe from business liabilities. I recommend you talk to a qualified corporate or business lawyer to guide you with these issues. Compliance costs money, but failing to comply may cost everything.
Delegate. When you are ready, consider ways to delegate work to another human. Bosses need time and space to strategize.
2. MARKETING
As a Boss, you have to get your own work. But, you also get to pick and choose the kinds of clients you want, to fire the bad ones, the mean ones and the cheap ones. You get to pick the mix of work that satisfies your mission and your coffers. The biggest challenge for freelancers is landing enough work[1] – so confront the challenge. Make a part of your method the regular, dependable search for new work. Send at least one networking message per day. Create a strategy for how you’ll find opportunities and implement it, conservatively, so you can achieve your goals. Grow your network. Master social media, even if you only pick one channel. Look for ways to partner with compatible businesses to seek work. Consider investing in an outside sales or marketing professional. But, most importantly, do it every day, every day, every day. It will become a habit.
3. MONEY
You are a Boss – you need to get paid. Here is what to charge, how to collect and what to take. What to charge Setting rates is hard for everyone. How much you can charge depends on your specialty, your customer’s location, what others are charging, the demand for your type of business and the economy. Here are some ways of setting your rates.
Hourly x 3. You can simply find the average hourly rate for your work and increase it for overhead. To find your hourly rate, you could divide a fair salary by 2,000. You could also get the statistical average hourly rate for your peers from the federal government[2]. But, then you need to increase that hourly rate to pay for your overhead. Frequently, professionals multiply the salaried or statistical hourly rate by 3 (or 2 if you’re nervous).
What others are charging. If you just want to charge what others are charging, make sure to get rate information from more than just one source.
Project Basis. You can charge on a project basis, but only if you have an efficient operation and a way to minimize project mission creep.
Protect Yourself. Set a baseline rate below which you do not accept work. Increase your rate if your skills or experience justify a higher rate. Most importantly, don’t be afraid to negotiate. Negotiation is just a conversation. If your client won’t negotiate (listen), then your client will be difficult during the work phase.
How to Collect. Once you agree on a price, get the engagement in writing, including any statements of work to define what you have committed to do and to prod to your customer to do its part. You also may need the contract to prove your rights. Make collections part of your methods. Send invoices on time. If you are late sending them out, you set a tone that payment time is not important. Calendar when bills must go out. Calendar when bills are due. Follow up immediately. Stay on top of your client until they pay. Don’t stalk them, but let them know as deadlines come and go. What to Take You’re a boss of a business. The money that gets paid into the business does not belong to you – it belongs to the business. Instead, you provide services to the business in exchange for compensation and benefits. And, as an owner, you can take portions of leftover cash within reason. Make paying yourself part of the methods of your business. Figure out how much you need to make to cover your expenses. You also should budget and plan for benefits, including health insurance, disability insurance and retirement savings. Then, take a look at the Occupational Employment Statistics to see what you would make as an employee. Set a level of compensation that meets your expenses and is reasonably close to what your peers get paid. Pay yourself that amount in regular 2 week intervals. Make sure you or a reliable 3rd party withholds and pays your taxes. Resist the urge to pay yourself more until you have built a cushion of 3-6 months of expenses, including your compensation. There will be cash flow shortages and this is how you prepare for them.
[2] Look up the mean hourly rate in your geographic area for your industry and occupation in the Occupational Employment Statistics. (You can get the number of your industry and occupation at Standard Occupational Classification system.)
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