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Competitive Edge Blog

  • alison28006

Money Mistakes Solo Entrepreneurs Make

Freelancers may be excellent at what they do, but "they have to realize, at some level, that it's a business—and treat it like a business."

Here are eight mistakes to avoid if you're planning to work for yourself as a freelancer or solopreneur.

  1. The paycheck mentality: Employees receive regular paychecks. Freelancers have more erratic cash flow, and failing to adapt to it could cause financial problems

  2. Uncertainty about revenue & taxes: Self-employed freelancers are typically responsible for remitting estimated taxes on a quarterly basis to CRA to cover federal and provincial tax liabilities. How much you need to withhold will depend on your income, province of residence, your other tax deductions and tax credits, as well as of course the volume of expenses you have related to your business.

  3. Overlooking business expenses: Even side hustles have expenses, including lead generation, licenses, subscriptions, equipment, continuing education, and internet access.

  4. Mixing personal and business funds: You should have a separate bank account for freelance income in order to track cash flow. Also, you should keep receipts to support your business expenses. You can keep track of your business income and expenses by using a business credit card and business account or by using a bookkeeping software like Quickbooks online

  5. Before you test, invest: Before you start investing money in building a website, logo, branding, sales, and ads, make sure you have a market and that people see value in what you're offering.

  6. Concentrating your efforts: Client and service diversification can prevent a serious setback if you lose a big client or if a specific type of work dries up due to market conditions. Depending on your area of focus, you shouldn't take on more than 25% of your income from one client.

  7. Pricing low: Getting clients may tempt freelancers to underprice their services, especially early on, but if you undercut what your business needs to be profitable, you won't last.

  8. Self-reliance: 90% of high earners use automation in their businesses to get more done. Outsourcing may be as simple as hiring a bookkeeper.

Until next time,

Christine Walters

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