Congratulations! You’ve made the leap to full-time solopreneurship.
The first few days out on your own are exciting, scary, freeing and anxiety-inducing all at the same time.
I would know. I’m currently in the midst of week three of running my own solo business after six years in a stable 9-5 corporate job. Over the last few years, I was building my business as a side hustle around those corporate hours.
During my first week of full-time solopreneurship, I experienced a million different types of emotions, ranging from “This is the BEST! Why did I wait so long to quit my job?” to “Oh My God, WHAT am I doing with my life?!”
Feeling that way, too? Take a deep breath and relax. What you’re experiencing is completely normal.
Plan ahead for those jitters with these five must-dos for your first week of solopreneurship.
1. Stick to your “normal” routine. While one of the major perks of solopreneurship is the ability to create your own flexible schedule, for the purposes of an easier transition, stick to your normal routine as closely as possible in your first week. For me, that meant continuing to set my alarm for 5 a.m. and starting my day with a workout even though I didn’t necessarily have somewhere to be at a certain time. Similarly, don’t forget to eat and hydrate! On my first day of solopreneurship, all of a sudden it was 2 p.m. and I hadn’t eaten lunch and was wondering why I was starting to feel so cranky and anxious. It’s the simple things that can fall by the wayside when you run your own business. Over time, begin to experiment with your schedule, but to keep yourself sane (at least in week one), stick to a schedule that creates a little bit of normalcy in your life.
2. Stay organized. Your first week as a solopreneur is your chance to start strong. As a business owner, there’s A LOT to keep track of. Put processes in place now to track your income, expenses, emails, client list, etc. One thing that has really helped me is creating a “master networking spreadsheet.” This is a list of every single person I reached out to (or who reached out to me) upon announcing my new business venture. In the spreadsheet, I track who the person is, the date we chatted, what we talked about and I tag the person as either a client, potential client or simply a good person to network with. This spreadsheet makes me feel in control of my relationships, connections and conversations, and will serve as a useful tool to remind me to stay in touch and follow up with my network. As business owners, we don’t always feel in control of what’s going on around us, but putting processes and organizational tools into place can help us gain back a little bit of control.
3. Leave yourself blocks of time to get work done. When you announce to your community that you’re starting your own business, naturally, your network will be excited for you. Many will want to set up coffee dates, breakfasts, lunches or Skype calls. I recommend you take the time to network and chat with these connections, but be sure to leave yourself significant blocks of time to actually get work done. In my first week of self-employment, I participated in 18 different meetings, many of them back-to-back, leaving me no chunks of time to write and complete proposals. By the end of the week, I felt completely panicked and realized I had committed the #1 major mistake of self employment: I seriously overbooked myself. Consider blocking your time in a way that works for you — moving forward, I plan to leave my mornings open for writing/work and keep my afternoons clear for meetings/calls.
4. Do something that makes you feel like a solopreneur. In my first week of self-employment, I did two things that truly made me feel like a solopreneur. The first was meeting a friend for lunch and coworking at our favorite cafe in the middle of the day on a Tuesday. The second was teaching a 9:30 a.m. yoga class on a Friday morning. Both of these activities made me feel like I was “playing hooky” from work until I realized, “This IS my job now.” While simple and not so out of the ordinary, these two events allowed me the opportunity to really feel like a business owner calling the shots and running my own business. What type of activity makes YOU feel like a solopreneur? Allow yourself to indulge and take advantage of your new schedule and life by doing something that makes you feel good and excited about the future ahead.
5. Start and end your week with inspiring conversations. My first day of self-employment kicked off with a phone call with my mentor/biggest cheerleader, Jason Mollica. The week ended with a Friday afternoon call with a super inspiring fellow business owner, Ben Butler. I couldn’t have imagined a better way to kickstart and bookend my first week of solopreneurship. Think of two of the most inspiring and encouraging people in your life and ask them to be part of your all-important first week of self-employment! These two conversations gave me the motivation I needed to start my week right and ease into the weekend, mentally prepared to take on my second week of solopreneurship.
Fellow solopreneurs: Have anything else to add to this list? What are some must-dos you’d recommend to new business owners in their first week of self-employment?
Sales and use tax: words to make even the bravest entrepreneurs quiver in their boots — once they know about it. If this is you, that’s totally OK, it’s less a tell-tale sign of your ability as an entrepreneur and more a case of under-education on the government’s part.
In fact, I’m willing to bet 75% or more of you don’t even know what use tax is and yet you could be responsible for paying it. (Again, not your fault.) Another large portion of you probably believe sales tax is something only those in retail have to worry about, but you would be wrong. Listen up infopreneurs and service providers: You might be required to collect sales tax!
If you weren’t quivering before, you might be now. Take a deep breath, because I’ve got the keys to the beginner kingdom of sales and use tax. What you’re about to read, however, is just the foundation. With these basics in mind, you’ll have to do some research on your own, because each and every state has its own laws when it comes to taxes.
But, let’s start from the beginning.
Sales tax…Do I collect it for every state?
Thankfully, no. You only collect sales tax for states in which you have nexus. Nexus is having a presence in a state in such a way that you come under jurisdiction of that state and are responsible for taxes if your sales apply. What exactly does that mean?
You likely have nexus in a state where:
You have an employee
You have a contractor who creates or maintains a market (This one can be confusing. I suggest calling your state’s revenue department just to be sure.)
You have inventory housed (A lot of sellers get burnt on this one. If you use Fulfillment by Amazon, you could be responsible for collecting sales tax in many states!)
Your next best step here is to look up the states in which you think you may have nexus and research their particular criteria. A good starting point is my Sales Tax Resource Guide; it has links to states’ nexus requirements.
In addition, there is now “click-through nexus,” which might affect you if you have affiliates marketing your products. I’ll leave it to the experts over at TaxJar to explain this one. (Note: For many states, it depends on dollar amounts of affiliate sales, and most thresholds are relatively high.) Keep your eyes open here: I would expect this idea to spread as affiliate marketing becomes a more popular trend.
So this is only for businesses selling a physical product, right?
The days of only physical products being taxed have passed with the progression of technology. Sales tax is a huge part of state revenue and they want to keep it that way!
What this means for infopreneurs selling digital goods and service providers is that you might also be responsible for collecting sales tax. I know: Crazy!
The best way to find out if your state requires you to collect sales tax is to call your state’s revenue department and ask directly. States have made an attempt to create resources to help you determine if your sales should have taxes applied, but I tend to find that these pages are vague and are often not much help.
Some digital goods you might be responsible for taxing:
e-courses (falling under audiovisual works or publications)
apps or software
But again, check with your state. For example North Carolina, where I live, does tax digital goods. New York however, does not.
As for services, this really depends on your state. (Are you seeing a trend here?) Here are a few examples to show you just how deep this runs:
Web design is taxable in Texas, but the first 20% of the total is exempt. Updates to an existing design may not require sales tax. Graphic design is also taxable. Consulting is not taxable; it’s the realization of the idea that is taxed.
In some states, an entire photography package may be taxable if a physical copy of photos is delivered.
Hawaii doesn’t have sales tax, but does have a general excise tax for all products and services.
The truth is, there are too many oddities in the laws to list. I would suggest doing a quick Google search for ‘your service + your state + sales tax.’
What the heck is “use tax,” anyway?
Now that we have the basics of sales tax squared away, let’s discuss use tax. The two go hand-in-hand. In fact, the registration and filing is done at the same time, but they are quite different in nature.
Have you ever bought something big online and were delighted to see that no sales tax was added? You were probably pretty excited to not have that extra charge tacked on, right?
Well, not so fast! Remember how I said sales tax is a big revenue stream for states? Even though you didn’t pay sales tax on that item, they still want their money. (Shocker.) And guess what? You are responsible for keeping up with your purchases made out-of-state that weren’t taxed and sending in taxes on that item to your state under use tax.
I know. This is a major bummer, and most people either have never heard of this or have and choose to turn a blind eye. BUT, this is important. States are starting to crack down more aggressively on people and businesses who don’t pay these taxes.
Okay, so now I know I should be collecting and sending in sales and use tax. What are the next steps?
The first step is figuring out if you have back taxes to pay. Unfortunately, even if you didn’t collect taxes over the past year doesn’t mean you can just start now and pretend those sales don’t matter. You are still responsible for sending money that should have been collected to your nexus states. Check to see if your state has a Voluntary Disclosure Program to disclose unfiled taxes without penalty.
Find a system to help you keep up with sales tax. You have a few options here:
Use a sales tax platform like TaxJar or Avalara’s TrustFile. Both connect with major ecommerce platforms or can have sales imported in. They will calculate your tax due for you and e-file in certain states, for a price.
Find a bookkeeper who can do it all for you. Keep in mind that not all bookkeepers do sales tax and it likely won’t be their cheapest service offering. Sales tax is a pain in the rear, regardless of who’s doing it.
Register with your state for a sales and use tax certificate. Some states may call this something different. This takes a while to process so start ASAP! Be sure to check out my Sales Tax Resource Guide below with links to each state’s registration page.
Take note of the filing frequency given to you when you register. This will tell you how often you have to file – annually, quarterly, or monthly.
File and pay. (And wipe the sweat from your brow!)
That was a lot of information — and that’s just the basics. Tax laws are like rabbit holes. They run deep and are quite complex. If you are the DIY type, give your state’s revenue department a call, and don’t be afraid to interrogate them; they will be able to answer any questions you have. If this is completely overwhelming, you have an out! Hire a bookkeeper who handles sales tax. You might have to work with them to register your business and get everything set up, but then it will be a mostly hands-off process.
Over to you: What experience do you have with sales and use tax? Share in the comments below!
Note: One Woman Shop is not a source for expert tax advice. The information provided here is shared with the understanding that the authors and publishers of this information are not intending to render legal, accounting, tax, or other professional advice and services.
As solopreneurs, we wear many hats in our business: customer support, copywriter, salesperson, and CEO. As we bounce from field to field trying to get our tasks done, we’re often bogged down by industry jargon. And the worst part of jargon is this: We get sucked into a rabbit hole of research trying to understand how these complex terms relate to our business.
One of the industries that is chock-full of jargon is the accounting and finance industry. In my opinion (and I think you might agree), it sometimes feels as though they’re just trying to overcomplicate things. Here’s looking at you, IRS.
This became especially apparent recently, as I was working with my friend Jenny on the launch of a new service, adding in-home cooking classes to her current catering business. As she was trying to work through the financial side of things, she kept running into over-complex formulas and explanations that didn’t relate to her solopreneur business.
We worked through her questions and I gave her basic explanations of some of the most important accounting terms, how to use them in her business, and why she should be sure to look at these items. I thought maybe an explanation could help you, as well.
Here are the main accounting topics we worked through and examples of how these relate to her new service launch:
What it is: Costs that will not change, regardless of how much you sell (rent, website hosting, utilities, salaries, etc).
Why it’s important: Fixed costs are often overlooked but they can creep up and quickly take a big bite out of your profits.
When you should review it: Monthly, to make sure your costs aren’t creeping up
As this is a home-based business and an extension of an existing business, Jenny’s fixed costs aren’t too high. They include things like her website hosting, her advertising budget, and her own salary. We were able to estimate that her fixed costs would be approximately $2,500/month.
What it is: The cost you have when you actually sell a product (materials, hourly wages, shipping, etc).
Why it’s important: Without knowing your complete variable cost, it can be very difficult to price a product or service appropriately.
When you should review it: Also monthly, to make sure your costs aren’t creeping up
For Jenny, included in her variable costs is the food she buys for each cooking class as well as payment to the assistant she hires on an hourly basis to help with each class. We concluded that her variable costs total for each student is $20.
What it is: Sales (income) from each product or service sold minus variable costs.
Why it’s important: This will tell you how much money from each item that you’ve sold can be used to cover other costs (like fixed costs). I use this as my first test to see if I’ve priced things high enough.
When you should review it: When reviewing your pricing or launching a new product/service
Jenny charges $60 per student and her variable cost per student is $20, leaving her with a contribution margin of $40 per student ($60 – $20). That means that for every student she has in class, $40 can go toward covering her fixed costs and hopefully making a profit!
What it is: The point where you have sold enough you are no longer losing money. To get this, you’ll take your fixed expenses each month and divide by your contribution margin.
Why this matters: This one is seriously a big deal. This is the point where you will either have a business that makes money each month, or loses money each month.
When you should review it: Also when reviewing your pricing or launching a new product/service
Jenny has pretty low fixed costs since she’s running a home-based business. Her breakeven point each month is $2,500 fixed costs / $40 contribution margin = 62.5 students each month. This means that in order for her business to not lose money, she needs to have approximately 63 students in her classes each month. If she sees more than 63 students in a month, she’ll have a profitable business.
Return on investment (ROI)
What it is: When you spend money, or invest, in a business you want to be sure that you’re making that money back, and then some. How you measure that is by using the return on investment. It is the sales you received from an investment minus the cost to fulfill those sales, divided by the cost of the investment.
Why it’s important: Use this calculation to make sure that the money that you’re spending on your business is working for you.
When you should review it: Before making an investment in your business such as new equipment or a marketing campaign
To advertise her new classes, Jenny is doing a sponsored post with a local food blogger that has a significant following in her city. The cost of the sponsored post is $750 and Jenny hoped that she could bring in 40 new customers from it. With that estimation her return on investment would be:
40 customers * $60 income per customer = $2,400
40 customers * $20 cost per customer = $800
($2,400 – $800)/$750 = 2.13
In other words, for every $1 that she spends on the advertising campaign she expects to get $2.13 dollars back. A pretty solid investment.
Understanding accounting jargon
At first overwhelming, these accounting numbers can be used pretty easily to evaluate your revenue and costs, and help make pricing decisions for your solo business. While accounting certainly isn’t the most fun aspect of the solopreneur lifestyle, having a foundational grasp on things like fixed versus variable costs, break even and contribution margins, and return on investment can help make sure you’re growing a healthy business that is paying you what you deserve.