- Financial Mistakes Entrepreneurs Make
Financial Mistakes Entrepreneurs Make
Sharing our biggest mistakes so you can avoid them.
Hey y’all. We’re getting a little ~vulnerable~ today…
Reminder: If you’re self-employed, quarterly taxes are due next week on September 15th. You can pay federal taxes here and state taxes on your state’s website.
For more jobs like these, check out a full list here.
BBC is looking for a freelance business writer.
For an Australian jewelry brand. Budget is $50 to $75 per hour.
The average Wag! user makes around $1,200 per month (although I know people who make significantly more).
Want to see a specific type of work? Just let us know.
5 Financial Mistakes Solopreneurs Make
I’m coming up on the 2 year mark of being a full-time freelancer, and I’ve been reflecting on the mistakes I made in the early stages. These are the top 5 financial blunders I experienced, so you can avoid them.
Putting Your Eggs in One Basket
I had a client I loved so much, so I agreed to take on a lot of work with them. A few months later, they realized they needed to make a substantial budget cut, and marketing (aka me) was the first to go. My income got slashed, and I was panicking trying to find new clients to fill the gap.
I learned that, generally speaking, it’s best to not let any single client make up more than 25% of your income. Diversify your sources of income. If you can’t, make sure you have a solid emergency fund in place in case that client pulls the rug out from under you.
Not Building an “Oh $hit” Fund
I had one month where I made significantly more than I did in previous months. I saved 30% for taxes and paid myself the rest. Then I used the money to pay off debt. I felt like I was absolutely balling, but was humbled shortly thereafter.
A few months later, I had a health concern and needed to take time off of work — like a few weeks off. My income that month was about a third of what it was just a few months prior.
In that moment, I wished I had saved a bit more from that high income month to offset the lower-income month. So, just like a personal emergency fund, make sure you have a business emergency fund. Keep some cushion in the bank.
Basing Prices Solely on Desired Revenue
You may have heard the advice to work backwards from your desired income to determine your prices — something like “if I want to make $100k, I should charge $50 per hour.” This works to a degree, but it doesn’t account for expenses.
Remember, as an entrepreneur, your revenue isn’t necessarily the same as your profit. For example, if you had $10k in expenses, your profit on $100k revenue would be $90k. After taxes, you’re taking home even less.
Mixing Business and Personal
A couple years ago, I entered tax season with business and personal expenses intertwined…in one personal account. I think I sprouted my first gray hair that tax season, at the ripe age of 23.
Please. From someone who’s done it before…separate business and personal. I promise the process of opening a business bank account isn’t as stressful as it may seem. I use and love Bluevine, but there are tons of options.
Investing Before Testing
I’m a multihyphenate through and through. I’ve got 27 ideas at any given moment, and I want to do ‘em all, somehow, someway. This has led me to dive head first into something that excites me in the moment, spending money on new softwares and paying friends to build websites for me.
I’d say I’ve followed through with around 30% of those ideas. 🤡
Make sure you have a market for something before investing money into it. For example, before creating a full website, hiring a contractor, and designing a logo, create an MVP (minimum viable product) that allows you to test your idea first.
If the response is positive, invest in taking it to the next level. If the response is poor, make changes and trial it again.
Need an example of an MVP? Look at what big brands like Airbnb have done in the past. You might be surprised at just how barebones their product was to begin with.
To determine your rate (including a buffer for expenses) use Indy’s calculator. You’ll need to make a copy of the sheet to use it.
Ask the Sidepiece Team
A: Freelance, baby! Or pick up a virtual side hustle. We share ideas every single week in this newsletter, but you can view a larger list within our app, Boost. Here are a few places to look to learn about specific online side hustles:
Have a question you want answered in a future newsletter? Just hit “reply” and send us your question.
See ya next week,