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8 Spooky Facts You Did Not Know About Self-Employed/Small Businesses
It is a huge accomplishment to take on the challenge of being self-employed and own a small business. Being able to bring your ideas to the world is a fantastic feat to be proud of. However, only about 20% of small businesses survive their first year, and about half make it past five years.
Whether your small business is a brand-new concept or one of several small business ventures you already have, keep in mind these eight spooky facts about being self-employed and having a small business.
8 Spooky Facts You Did Not Know About Self-Employed/Small Businesses
In relation to the Halloween season, it is vital to highlight the spooky facts many small business owners may not be aware of to ensure their success in the market. It is pertinent to be prepared, diligent, and remain resilient with the unique creation you could bring to life.
High Tax Rates
Gone are the days of receiving money when tax season comes. Instead, self-employed individuals are more likely to pay high tax rates they need to keep track of and pay on time. A self-employed person carries a business as a sole proprietor or as an independent contractor, is in business for themselves, or is a member of a partnership carrying a trade or business.
Those who are self-employed need to pay a self-employment tax and an income tax. The SE tax encompasses Social Security and Medicare taxes. An income tax return is obligatory if net earnings reach over $400, though an income tax return also needs to be filed if other filing requirements are met. Generally, owners have to file an annual return and pay an estimated tax quarterly.
Lack of Benefits
Many corporations offer health insurance, life insurance, and even a company 401K match. Other benefits can include gym membership coverage and travel reimbursements. In contrast, owning your small business means having to pay for health care plans and pensions out of your pocket for both yourself and your employees.
If you are self-employed, you can lack flexibility due to no guarantee of work. And when days get busy, that could lead to a lack of sick leave or vacation days. Even if you can take time off, you will not receive paid vacation days like you would when working for a huge enterprise. And if an emergency arises, it may be challenging to find someone to run the business if you have to be away for a certain amount of time.
Administrative and Management Concerns
It can often be overwhelming and time-consuming to spend so much money and work on administrative tasks such as bookkeeping, accounting, responding to emails, hiring and managing employees. Training employees can be costly and take up time, especially if retention is high. If the sole business owner is in charge of everything, they will be unable to successfully oversee other workers without other managers in place. Leadership roles need to be passed on to trustworthy employees who can manage other employees, finances, and additional activities. Inventory also needs to be adequately maintained so that there are no inventory surpluses or shortages. Sales patterns should be studied, and a point-of-sale system should accurately track inventory and give insight into the best and worst selling items.
With this method, you can make the most of your goods and focus on products that raise the most profits. This can lead to decisions about discounts, items to eliminate, and what to focus on to generate a higher return on investment. Many small business owners may avoid taking care of their finances, but it should be a priority to be financially literate and business savvy.
Customer Reviews
Many consumers often check reviews or get a recommendation for a place before they even enter a small business store or look up a product online. High-quality customer service is expected, and the pros and cons of a product can quickly spread rapidly online. Communication tools and social media sites such as Yelp, Google, Facebook, and Instagram can apply customer feedback and solicit others to buy or refuse a small business. Keep track of reviews and create a business page.
For instance, set up a business page on Yelp, share your business story, and respond to customers’ reviews. Join the conversations going on, answer questions, and upload photos. Show videos of how to use a product, and have customers provide their email addresses so you can send updates via newsletters, customer surveys to gain more information and keep them engaged by sending occasional discounts or fun events to join. Keep your business information current across all platforms, including your website.
Growth Issues
A new business may start strong with a flurry of customers and bulk orders. Therefore, self-employed people may decide to expand too quickly, which can backfire and lead to added loans and higher debts. It can be prudent not to rush and instead handle one business at a time, so working capital and quality do not decline. Think ahead to ensure business loans get paid and do not be tempted to take on more than you can handle. Furthermore, do not rely too much on one customer or large order.
Customers and trends are constantly changing, so it is essential to diversify your consumer base and adapt to the times. Continue to gain new insights, study existing data, and continuously communicate with your sales team. What may be popular one season may be irrelevant the following season, so be open to change. Simultaneously, some products remain classic and unchanged, so be sure to study sales growth and customer spending habits regularly. Moreover, communicate with your consumers about why you are excited about changing products and remind them of what makes your services timeless.
Strategic Planning Mishaps
While it may be easy to open up a storefront or online website physically, there needs to be comprehensive, systematic planning to ensure a company’s success. All self-employed individuals need to have a strategic business plan that is realistic, current, and based on accurate information. It is vital to have a company mission statement clearly describing the business, reachable goals, market opportunities, and market initiatives. Workforce needs must be met as potential problems have to be foreseen ahead of time.
All financial statements, including a balance sheet, cash flow, income statement, and capital equipment lists, have to be checked repeatedly. Businesses should also be familiar with their competition and build upon a unique brand through proper marketing and promotional activities. Lastly, budgeting must be prioritized in accordance with managing a small business’ company growth. Overall, it is essential to regularly revise and change the initial business plan as the industry continues to transform.
Financial Obstacles
Financial difficulties can arise due to a lack of working capital and funding. To successfully run a day-to-day business, continual cash flow must pay employees, take care of overhead costs, pay for monthly rent charges, keep utilities on, and pay for suppliers and vendors. It is essential to pay all fees on time to avoid extra costs and maintain good faith in various business relationships. Be highly aware of how much revenue is being brought in and understand the best ways to price out services and products. Keep track of production, delivery, and maintenance charges and find ways to be cost-effective yet also produce high-quality products.
It can be a struggle to find angel investors or even a substantial bank loan without a strong growth trajectory, so prioritize growing your working capital and be on top of your sales and expense forecasting.
Branding Mishaps
Many small businesses can be hesitant when it comes to investing in marketing and branding. Self-employed individuals may view marketing as a waste of extra money and assume customers will find out about their products organically or through word-of-mouth. There can be a high cost to advertising and publicizing a company’s products, but businesses need proper prospect reach and high conversion ratios. Marketing campaigns should thereby be planned strategically, and their high costs cannot be underestimated.
It is pertinent to secure financing and balance capital to cover branding activities such as company events and widespread promotions. Audiences must be targeted wisely so sound decisions can be made to have successful, cost-effective campaigns. Be involved with the community and show your support for important causes. Make a difference by using your small business to reach others, raise awareness, and give back.
How Do I Learn More?
When it comes to being a successful self-employed individual, be sure to look out for small business hurdles to overcome. To learn more about thriving as a self-employed/small business, contact the experts at NASE. Our licensed professionals will be happy to answer any questions you have.