In 2017, Courtney Lynn Ottrix began running a blog about issues to do in Cleveland. She’d finished some freelancing up to now, and the weblog provided occasional alternatives for revenue.
But two years later, when her full-time place was eradicated, Ottrix all of a sudden discovered herself self-employed.
“I had started to see what could be of my business if I gave it my all,” Ottrix says. “And literally overnight, Courtney Covers Cleveland went from a blog to next level.”
Whether you’re pushed into it like Ottrix or have time to make a plan, following these steps will help you transition your corporation from a facet hustle to self-employment.
1. Separate your corporation and private funds
Ottrix began her self-employment by working as an impartial contractor. But as she started working with bigger manufacturers and bringing in additional income, she selected a enterprise construction, filed for an employer identification quantity and opened a enterprise checking account.
“Start to visualize and treat the business like a business. It’s separate from your personal stuff,” Hall says, including that you simply want to make an “unwritten commitment to never mix the two.”
Creating a business entity and filing for an EIN is necessary before you can apply for grants and loans or make wholesale purchases, adds Lewis Weil, founder of Austin, Texas-based financial planning company Money Positive.
2. Start bookkeeping
At a minimum, keep a spreadsheet listing your revenue and expenses so you can see if you’re making money, Weil says.
Business owners “grow to enjoy looking at their numbers,” Weil says. “It’s really nice to be able to just push a button and be like, ‘Ah, I made money this quarter.’”
As your business gets more complex, Weil recommends starting relationships with a bookkeeper and certified public accountant.
Ottrix recently began working with an accountant who uses accounting software, which has helped her develop a better understanding of her different income streams.
“Everyone thinks they have to do everything by themselves,” Ottrix says. “No, you hire help. The most successful people build really, really good teams.”
3. Formalize your business plan
“If your family needs you to make $100,000 … How many clients is that? How many engagements is that? How many rocking chairs is that?” Hall says. “That business plan is your map.”
Weil recommends new business owners aim to pay themselves twice as much as they need for monthly obligations like rent or mortgage payments, food and utilities. On top of that, you’ll need enough revenue to cover business expenses and taxes. About 30% of your revenue after expenses should be set aside for quarterly tax payments, Weil says.
4. Prepare your personal finances
Some entrepreneurs, like Ottrix, become self-employed out of necessity. But if you have time to plan for a transition, prepare your personal finances by building up your personal emergency fund and paying down high-interest debt, like credit cards. If you get health insurance from your employer, research the cost of COBRA or a health insurance marketplace plan.
If you’re earning money from a side business, Weil recommends letting it pile up in your business bank account. He encourages saving enough to pay yourself for three to six months before relying solely on your business for your income.
“Take care of the basics in a very conservative way so you can take the big risks,” Weil says.
5. Jump in
The final step, Hall says, is to “let go of the side of the pool” — whether you climbed in by choice or were pushed in by circumstances — and start swimming.
It’s easy to feel like you’re in the deep end, especially when what once fit into evenings and weekends is now a necessity to generate income.
“The reality is that every day as an entrepreneur is not glitter and gold,” Ottrix says. “Like, yes, I work for myself, but I do a lot of work.”
In those instances, remember the “self” in “self-employment.” Measure success against your business plan — not your peers’ — and embrace the fact that you’re in charge of your own destiny.
“I didn’t wake up and say, ‘I wanted to always start my own business,’ but here we are,” Ottrix says. “And I could never see myself going back to anything else.”