When you become self-employed or a freelancer, you join millions of other people hoping to materialise their dreams.
However, navigating the murky waters of self-employment can be challenging, especially during the early stages.
While there are no guarantees in business, there are some strategies that could increase your chances of success, especially financially. Here are a few mistakes to avoid as a self-employed person.
1. Not delegating or prioritising
Self-employed people often act as their own stunt doubles in their business during the incipient stages because of budget constraints. However, trying to do it all on your own may be a mistake, says Ronne Brown, owner of Girl CEO and Herlistic in Washington.
“We have to understand that we go fast by ourselves, but we go far as a team,” she says. For people who feel they cannot afford to delegate, Ms Brown says to keep your expenses low until you can afford to do so.
If you do decide to delegate, it is key to spend your dollars in ways that help your business grow.
To do this, people should consider focusing on the business operations and systems versus just aesthetics, Ms Brown says. Doing this effectively often requires prioritisation.
“In the beginning, people are always focused on the look. But that’s not what truly creates the income in business,” she says.
Ms Brown suggests prioritising bookkeepers and accountants, building automations or hiring someone to generate leads.
2. Not saving for retirement
Saving for retirement as an entrepreneur can easily fall to the bottom of your priority list. This is a common mistake self-employed people make, says Preston Cherry, a Wisconsin-based certified financial planner.
While it can be smart to reinvest income you generate into your business, it may be equally important to build an emergency fund with three to six months’ worth of expenses and invest in your retirement savings.
Mr Cherry says self-employed people, depending on their country of residence, have several retirement savings accounts to choose from. In the US, for example, this includes an IRA or a solo 401(k).
“Not only are you as a business owner saving for your retirement, you are also getting to deduct the contributions [for] tax planning as well,” he says.
3. Spending money on courses you don't take
As a new entrepreneur, you may want to amp up your knowledge to make your business more profitable.
That could mean spending money on courses or training, which can sometimes cost a pretty penny. While investing in yourself can be worthwhile, you may not get a return on your investment if you do not take the courses and apply the knowledge.
“Make sure that you are fully committed and that you are dedicated to actually doing the work and sitting down and making time before you invest in any course or class,” says Ms Brown. “You can’t have excuses. People buy stuff with an excuse in mind.”
certified financial planner
Ms Brown also recommends doing your homework before investing in a course, especially on social media. You can do this by looking beyond good content and ensuring the person you are buying courses from has a proven track record of delivering results.
“For me, when I’m looking for a mentorship or I’m looking for people to train me, I’m looking at the personal success that they are having in the area that I am looking to grow in,” she says.
4. Not having a clear why
Entrepreneurship can be a way to make extra money or have your dreams materialise, but it can also become a money pit.
For this reason, it is important to have a clear “why”, Mr Cherry says. Having a clear purpose can also help you know when to keep pushing through difficulties and when to stop.
“Entrepreneurship is not for everyone. It’s not supposed to be. It’s not the only way to wealth.”
