The Joys and Pitfalls of Being Self-Employed: 10 Dos and Don’ts for Success

There can be great joy in being self-employed. The stories are true – you can set your own schedule, cater to a specific client base, focus on what you do best and be your own boss. But working for yourself comes with unique considerations compared to working as an employee, including taxes and financial planning, business development and time management.

As a business-of-one, it’s therefore important to establish thoughtful business planning and money management processes that can help you make the most out of your business. Whether you are a consultant, creative freelancer, or self-employed professional, these tips can help you run a successful business, while freeing up time to focus on what you do best.

10 Dos and Don’ts of being a freelancer

So, how do you know what to watch for and what to celebrate? These 6 dos and 4 don’ts of being self-employed can help set you up for success as you embark on a solo career. The good news is, when you know where they are, you’re better set up to avoid them.

1. DO set aside money for taxes

When you’re self-employed, the income you earn from your business activities is like a gross salary – no taxes have been withheld, so it’s your responsibility to set aside and pay income taxes directly to the government. Set up a separate business banking account to automatically allocate 25-30% of what you earn for your tax liability, though it’s worth checking this figure against your tax bracket to ensure you’re putting enough aside. Here are a few things to keep in mind:

• Depending on where you live, you may be able to pay your income taxes in quarterly installments through the year. This spreads your tax liability over twelve months (eliminating a big lump sum payment come tax time) and can help you stay disciplined – you won’t be at risk of spending money that you’re not entitled to keep

• If you earn (or expect to earn) less than $30,000 per year, you do not have to collect or pay sales tax to the government.

• If you expect to earn more than $30,000, you are obligated to collect GST/HST and pay it back to government in a quarterly GST/HST remittance payment.

2. DO make use of digital tools

When you work for yourself, life can get really busy, really fast. That’s why it’s important to make the business-side of solopreneurship as easy as possible. Digital tools can help with everything from billing to communication, web design to marketing.

• Payments and accounting software can simplify – and even automate – invoicing, payments and tax filing

• Communication platforms can help you stay in touch with clients and other freelancers who are collaborating on projects

• Scheduling software can keep your calendar up to date, automate appointments and eliminate back-and-forth emails

• Project management platforms can help you organize work across clients and teams, including automated task management

• Social media management tools can automate tasks like posting content on all platforms, interacting with your audience, and measuring your impact.

3. DO nurture networks and referrals

One of the best ways to build a business as a freelancer is through word of mouth. If you complete a project or sell a product for a client who was pleased with your work, don’t be shy about asking them to pass your name along to others within their network.

Keep in mind, while the service or goods you provide are obviously important to building your business, your attitude and approach with your clients is just as critical. They will remember – and recommend – you if go above and beyond to complete a rush request, provide additional options on top of what they have asked for and otherwise help them look good to their boss, customers or stakeholders. Being a good, reliable partner is an excellent way to build your reputation and your network.

4. DO set up a rainy-day fund

One of the most challenging parts of working for yourself is that you don’t have guaranteed income. During some months (or years) you could be flush with clients and cash, and other times, you could be checking that your phone number is activated and your WiFi still working. Freelancers often experience a feast-or-famine cycle throughout their careers, so it’s important to plan accordingly.

Setting up a rainy-day fund while you’re busy and earning good money is a really smart idea. That way, when work slows down, you don’t have to immediately launch into panic mode or rely on credit to pay your bills. There are inevitable ebbs and flows in the life of a self-employed worker. And while it can be tough to enjoy the lulls when they happen, it’s easier to do when you plan for them.

5. DO explore the unique implications of retirement planning for freelancers

For freelancers, setting up a retirement plan is a do-it-yourself exercise – you don’t have a company pension plan or group retirement savings plan to leverage. So, you have to take matters into your own hands. Here are some tips:

• Set up automatic deposits into a high-interest savings account to consistently build savings

• Make use of both a TFSA and RRSP. In a TFSA, money grows tax-free, and you can withdraw funds should you need some extra cash during leaner times. When you contribute to an RRSP, meanwhile, you can take advantage of other tax advantages – most notably, your RRSP contribution reduces your taxable income

• Create a retirement plan. Your retirement savings can be contained within your TFSA and RRSP, but it’s important to ensure your plans reflect your retirement timeline, your goals and your risk tolerance. Getting professional advice about your retirement plan can help ensure your savings match your expectations

• Set up sufficient insurance coverage to protect you in case you have to stop working unexpectedly due to illness or injury

6. DO set a schedule that works for you

Remember, you are in control of your business and your time – and how you use that time is based completely on your own effort and energy (unlike when you were an employee, and you were tied to the schedules of your company and your team).

This means that the more organized you are with your time, the more efficient you will be, and the more work you could get through. Here are some time-management tips:

• Use calendar tools to make it easier for clients and prospects to book you

• Book time to work on your business, such as networking, virtual coffees with industry colleagues, and training sessions

• Work when you’re at your best. If you find you are most productive first thing in the morning, set your working hours accordingly. Do you fade by mid-afternoon? Allocate that time for activities that take less brain power! If you’re a night owl, plan accordingly

7. DON’T wait until year-end to do your paperwork

We have already established that life as a freelancer can get busy – and paperwork could be your least favourite part of working for yourself. But leaving it until the end of the year isn’t the way to go.  From invoicing to expense management to tax filing, tackling your admin tasks at a regular cadence will save you time in the long run – and likely regulate your cash flow.

Here’s an extra tip! Keep your business and personal expenses as separate as possible. While business and personal costs can be intertwined when you’re a solopreneur, separating your business-only expenses can make it easier to manage your deductions come tax-time.

8. DON’T become stagnant

When business is strong and your clients can’t get enough of you, it can feel like you never have to hustle for work again. But even the most established, reliable clients can go through budget cuts, change their leadership or reprioritize their spending, which could reduce your workload (and income) in a hurry. While it’s crucial to provide the best possible service to your clients, it’s important to remain focused on business development. By continuing to nurture referrals, attend networking events, keep up marketing efforts and maintain your website, you’ll be in a position to take on new clients if demand from current customers falls off. 

9. DON’T forget to celebrate your successes

When you work for yourself, you don’t get regular performance reviews or acknowledgement from a manager for a job well done. This is another instance where you want to take matters into your own hands! If you’ve just completed a top-notch project, signed a big contract or reached an important milestone, be sure to congratulate yourself. Go out for coffee, book a massage or buy something nice for yourself! Celebrating your successes can keep you feeling fulfilled and motivated.

10. DON’T give up your vacations

If you’re making the transition from employee to self-employed, one of the hardest things to get used to is the lack of paid vacation. But that doesn’t mean that you should give up on taking time off. Yes, you won’t get paid while you’re taking a break, but there are many benefits that come with disconnecting – you give your body and mind an opportunity to recharge, you boost your creativity with a change of scenery and gain valuable perspective that comes with stepping back from your business.

3 min read: Unplugging for Success: 5 Tips to Help Business Owners Take Time Off

If you’re not comfortable unplugging completely, consider setting a schedule while away – i.e., you’ll check your emails during a set 30-minute period every day, and then close that laptop!

Thinking of embarking on a solo career? Follow these tips and be sure to check out our business owner resources that can help guide you through every stage. 

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