Just starting as a contractor - so expensive!
I've just gotten out of college and landed a full time job in video editing/web design/marketing, which puts me in the 5% lucky enough to do so. Unfortunately, it's as a subcontractor for a smaller firm.
The pay isn't wonderful, but it's more than the old pizza place and it's a resume builder. The real problem is how expensive it's getting! In a desperate hope that I won't have to live off ramen and pop tarts anymore, I was hoping I could get a little insight as to what I can write off as a business expense.
So far I've had to dip into my savings and put down for a computer, as my laptop was four years old and suffering with 1080p. The total cost has been somewhere around $2000 for the full setup, and while expensive I don't expect to have to upgrade for years.
Along the way I'll have smaller expenses, media/shipping fees, web hosting, services, programs, etc. I was hoping I'd be able to get some insight as to what I could write off on the hardware also- the desktop is meant for business, though I do use it a couple hours a week for personal things (such as rendering out my own projects) and of course e-mails. Web browsing and netflix-ing are done on my laptop.
Suggestions for you in the following order:
1) Hire an accountant! A good and cost effective one. Get a book-keeping service that will 2-4 hours for you a month, always cheaper than using the accountant. You might think of this as being an expense, but accounting is the single biggest point where most small traders and companies fails.
2) The fees from your clients has to pay for your expenses, taxes, yourself + give at least 10% profit. It might be more fun than the pizza place - but that opinion will not be shared by the tax man and your suppliers. So make sure that you charge enough! and make doubly sure that you charge for all those small things in life that you never noticed you used, before it is too late to ask the client for the cash.
3) If there is only one book you should ever read, then Seth Godin has a free download on his website here of the Bootstrappers Bible: http://www.sethgodin.com/sg/docs/bootstrap.pdf - not only read it, but it is really important that you understand it!
4) Do not borrow money to invest with. Either pay everything cash or get a silent investor (not partner!) on board to provide finance and cash-flow in return for a future pay-back.
Good Luck & Well Done for jumping out into the unknown - you'll be absolutely fine.
All the Best
@madsvid, London, UK
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While you are starting out, consider what your long-term goals are FOR NOW (trust me, it will change). You can be as detailed as you like, but leave some wiggle room for changes. Go for a 6 month, 1 year, 2 year and 5 year plan. Write them down. Keep them nearby for immediate reference. Anyone who walks into your business should be able to see what you are all about in a few sentences.
Next, get legal ASAP. Protect your personal and business assets: form an LLC or other legal entity to hold business assets. Keep an inventory. Keep it separate from your personal assets and get into the habit of never mixing personal and business assets. Take the time to talk to an attorney. Just an initial chat is all - you are finding a potential asset for later. Same with the accountant or bookkeeper.
Figure out your hourly rate: http://freelanceswitch.com/rates/
Remember, your business and personal assets (and monies) need to be separate. This is for legal, tax, and practical reasons.
Start looking into multiple revenue streams. For example, I began doing stock photo and video and now I make at least $200 a month and average about $450 a month. It's not much, but it covers my minimal overhead and it's solid money I can rely on. I tend to use it for marketing and advertising as well as licensing and office supplies. Having worked on several web design projects, I began offering web design and used my graphic design degree to add loads of other services. I now offer a wide range of services I can easily market and sell. Yeah, I want to do video all the time, but I can offer a broader range of services and I have multiple revenue streams. Don't do it all at once. Start small and get comfortable selling one service. Then, when you have the first one down, offer another one. As you go along, you will be confident creating new products and services for yourself.
One last thing: you are doing good as a sub-contractor, but you have only 1 client which is somewhat precarious. Having 5 or 50 clients is far better - spread it around. If you have a non-compete clause in your agreement, make sure they are fully compensating you.
Remember to network. Knowing a wide range of people is really helpful when you land a big project and have to hire out. Yeah, we all want to do it ourselves, but being able to run a big project successfully and under budget is a far more valuable skill than being a jack of all trades. While you are at it, learn to recognize talent in others. Really learn this skill and you can run almost any project. Learn the difference between the talkers and the doers and you will go really far.
Finally: don't be an equipment whore. It's expensive to constantly be keeping up with all the latest tech. You can easily bankrupt yourself. Furthermore, the tech will always change. You will never "arrive" at the best equipment and never need something new. Build reasonable equipment costs into your budget early on. I just read an article on the new standard they are working on for "UHDTV" - yep, that's Ultra High Definition TV. Literally 4K TV. It's not here now, but will be eventually. That's all new monitors, computers, cameras, equipment, etc. On the horizon past that is 8K TV they're working on already. The tech will continue to change so don't fall in love with it. ;)
Thanks for the tips so far guys! An accountant wasn't something I was sure of since I'm pretty apt at handling my own expenses, but it's probably best to avoid any house-claiming lawsuits or something :P
Looks like I've got some reading and calling around to do. Thanks again!
Here is the most important advice that I have given many young guys entering the biz, and this is based on my 33 years in the industry:
Marry a woman from a wealthy family who has a high income career!
You will not go wrong.
Best of luck,