The majority of my income has come from my own business since I was 16, no not baby-sitting, or blogging. And it is pretty darn neat sometimes. But it’s also hella stressful sometimes. There are certain built in things that make it harder to be a business owner and do regular life things, but it can depend on your business too. A lot of people have this notion that someday they’ll do their own thing and live the dream. That could be true… but you might want to read this first.
One time a number of years ago, so I can fess up now, a guy I went to school with made a post about his wife launching her new business. Sweet right? Well it was filled with cliche’s like be your own boss, make your own schedule and work when you want to. Charge what your worth and reap the rewards of your own hard work. Nice right? Yeah I unfriended him, he’s an idiot. That’s not what running your own business is like, not at all. It’s especially not what launching your own business is like. Plus doing business with your friends can be rough. Sounds harsh but we hadn’t talked since we were 10 and he didn’t say much to me then either.
I started tutoring students when I was in the 11th grade, got me through my undergrad with money in the bank and that was my main source of income and paid my mortgage in grad school. That’s right, being my own boss let me be a grad student and a homeowner at the same time. But what you don’t hear in that sentence is I worked 86 hours every single week, sometimes more save for about 6 chill – 70 hour weeks each summer. I’ve been on three weeklong vacations in my adult life (16 years) and about 15 overnight trips, largely for weddings and funerals. I still tutor about 10 hours a week because I just can’t let go and I’ve carved out a niche, plus I love it. And that was pretty low stress compared to honey’s construction business. So while this might seem negative it is the ‘other’ more realistic side of the dream. Theses are the things you might want to consider before leaving or even dreaming of leaving the 9-5 grind.
Buy a house first, your cars and anything else you want to finance
What do you need to buy a house? The same job for about a year and two weeks of pay stubs right, plus a good credit score. Yup, that’s it. Since about half my income came from my tutoring business they also wanted letters from 10 clients saying they would continue to employ me for at least two years, those were hard to ask for. The bank wasn’t satisfied with the first drafts extolling my virtue rather than saying we had twice weekly appointments at $30 an hour so I had to ask them to re-write them. That’s nothing compared to the hoops you jump through if your business is the sole source of your income. Then they want to see two years of your personal and/or business tax returns. The thing is if you invest most of what you make into your business then you have no income to pay your mortgage with, according to the bank. But if you take money out of your business at a high rate, say to quality for that mortgage you pay exorbitant taxes compared to leaving it there. Banks don’t accept I bought all the tools I need last year so I’ll have lots of money this year. Also if you leave the profits in the business to avoid taxes the business has to buy the house and you have to buy it from the business at fair market value when you retire or sell the business. It’s hard and even if you have a house make sure you like your bank because a new lender will expect the same things.
The business will pay your car, gas, insurance and a portion of your mortgage…
All of those things are taxable benefits and you pay income tax on them even though you don’t have that money because you spent it on you internet, your gas tank and your power bill. But you can go out to fancy dinners all the time and it’s a right of right? Probably not. Each field has a unofficial ‘window’ of these and other sorts of expenses you can right off. We get a big window in construction feeding the crew but my accountant says if I cook much because it’s healthier and cheaper I pay for it personally. Itemized deli receipts from grocery stores are okay but if were in a small town with only a grocery store that has an old computer system and we feed the crew there, it comes out of our pocket. Plus that company car, you have to maintain a log book of every single km driven, where you went and why, and the company portion is the amount you can write off. Magical tax loop holes are few and far between and mostly in Canada kick in at the million dollar valuation/ $200, 000 a year mark. We’re lucky to have great on hand tax advice and an established business. But it wasn’t that way starting out, but none of those magical loop holes apply to us. This stuff is hardest at first, when your still learning, growing your business and rubbing quarters together to make that happen.
There is value in your business and you can sell it
Again this could be true for you but chances are probably not. Most small businesses employ only one or a handful of people and provide good incomes to those people. But the thing is there isn’t likely a whole lot of value in it. My tutoring business is me, no value and selling my client list isn’t really an option. When I do hang up my hat i’ll refer people to someone I trust. Honey’s construction business will likely continue on headed by one of his sons but any value beyond used tools is not likely. Unless you own patents, long term contracts or have major infrastructure holdings there likely isn’t a big dollar value hinging on a sale. In fact one construction business in town, headed by great people who do great work folded this year and we bought some of their staging online. Which is the next truth, most small businesses have managed to eek out a small corner of a well served market. Should they close other business will just absorb the work with almost no net gain.
You’ll be your own boss
Ha ha ha no! Instead of having one boss that is constrained by well thought out company policy, EVERY SINGLE customer is your boss, even the unreasonable ones. If someone calls you at an unreasonable hour you have to answer. If someone calls at the worst possible time you have to go. Is there a provincial math exam scheduled the day after your anniversary, your working that night. Back a few years ago I had a couple of what I called mortgage payment families. One family had multiple kids the other one kid who needed a lot of extra help. Essentially each made one of my biweekly mortgage payments a month and together accounted for almost half of my hours worked. Each relationship lated for over 5 years. Needless to say they were important to my business but also personally. I felt like I couldn’t say no to them no matter what was going on in my life. Even when one kid started acting out by calling me constantly, like 5-7 times a day with asinine questions I had to put up with it and smile. I find it hard to say no, as does honey, which is an obvious issue but also probably a big part of the reason we’ve been successful running our own businesses.
Work when you want
See above! Here are some things honey (and sometimes me) has done that he obviously didn’t want to be doing. Stopping a septic backup on the way home from a romantic date, we left early. We met a customer at a marina to ‘catch’ a partially disabled yacht on the first try when he had partial steering and one shot, leaving a family dinner and driving like a maniac to get there in time. We flew out of that dinning room at light speed and for me in heels. He gets woken up in the middle of the night on the regular to deal with floods. We’ve missed funerals, weddings and lots of social stuff since we have to work. We almost always take my birthday of but work on Richard’s. And finally three different Christmases (yes Christmas eve and day) Richard has moved into someone else’s house to complete work that couldn’t be done while they are home. In almost every field it is a myth that you get to work when you want.
Your customers will be your friends
They might be at times and you might even feel really, really close to them at times. As a high school tutor my kids sometimes tell me things they can’t tell their parents for all sorts of reasons. Things like abusive relationships, first times and experimenting with drugs and alcohol. Every single time I weigh the option of telling their parents very, very carefully. But I know they are telling me and asking for my advice since they can’t tell them. Given their ages, usually 17 and 18 and ever so close to being adults I try to tell them what I would want someone to say to my son or daughter if they couldn’t talk to me. And I lay awake at night and stress about whether I did the right thing for months after. No matter how close and friendly we are they all graduate move on and leave your life because they are your customers not your friends.
For the construction folks everyone is friendly and invites you to dinner when they project is underway and they’re adding ‘extras’. But when the bill comes, even with as much of a friendly discount as we can muster, the gloves come off. Customers that have really burned you call in the middle of the night when there is a disaster and you go and help them. It’s possible that things really go off the rails and your best customer/friends and lead to animosity, lucky the one time that happened to us the person took it in stride. Personally I’ve has some situations like this that were truly heartbreaking when I was younger with a student that did go on to be a friend for years after.
Your friends will be your customers
A lot of people will put a call out to friends for work when they launch a new venture. Think about asking for referrals instead. It can be really weird, awkward and not profitable to work for friends. If the professional relationship doesn’t work out it puts the friendship at risk. I charge a premium rate for tutoring but provide a premium service, I come to you, don’t charge cancellation fees, encourage extra help texts and phone calls, have a PhD in the field I teach in, provide detailed updates, a money back guarantee and invoice you at your chosen interval. But when a friend asks for help I typically end up charging half my hourly rate with the understanding that the ‘on demand’ part isn’t a given. For a really close friend that doesn’t insist I usually work for free. But… it’s hard not to end up giving even better service than standard.
When Richard works for friends and family the understanding is that it’s for cost or we even pay for the material. For both of us you can feel not super awesome about knowing you could have made money that week but instead you came here. When you do people sometimes want to hang out and want to know why you’re so cranky, because you’re working!
I’ll just evolve to the point you can drop your 9-5
This might be why you’re not actually you’re own boss yet. There is an idea that you’ll blog, youtube or do extra work in your evenings and weekends and eventually that will totally replace your 9-5 income and it makes sense to quit. Chances are you’ll have to jump before that happens, yes it’s scary but here are some ideas on how to do it. Give yourself a slush fund of savings for that day. Limit your spending to the bare bones before and after to make it possible. Do it at a ‘cheap’ time year for you. And quit with a full out plan of how to market and grow before you ever leave.
It will alleviate your financial issues
It might over the long term bet and the amount of money you make in a year could be more. But it’s not a steady biweekly stream that you’re used to. Even if you keep your self a big slush fund it’s hard. Plus if your anything like us you’ll pay your employees your last dollar from time to time just to keep them going.
We tend to get into an issue when a customer misrepresents their financial situation which is to say lies by omission. You get the deposit cheque on time and maybe the first progress payment too and looking around you think your good. Expensive house, cars, vacations and designer clothes. The choices and overages are all expensive and top of the line but you haven’t had an issue so far so you keep going. Then it’s cheque day again and the homeowner is travelling or busy on a lucrative deal at work, so you wait and keep working. Then you keep missing each other and you’re spending that slush fund and getting nervous. You might even have to shut down at this point and have that awkward due to non-payment conversation but… they come up with the next cheque the thing is you’ve already done that much work plus all those extras you’re carrying. But that was the contract and your have no choice but to spend that money to finish.
Then that’s it, no final payment and no overages paid for, they just don’t have the money. Their work is done and they have hardwood instead of carpet, porcelain instead of ceramic and granite instead of laminate but your still missing that last cheque and you have to pay the crew. Everyone’s pissed but usually they do pay, but one GOOD friend never did! You have to wait for instalments, or the bank to re-mortgage their home based on your improvements which usually includes an appraisal. Sometimes you’re asked to finish just for that appraisal and it’s your only chance of getting paid so you do. Or their conscience just gets to them an living in a small community doesn’t hurt with that either. Or you wind up in court which you want to avoid because your only going to get a lien and only get paid if they ever sell. Plus now they have their dream home completed and the kids are 3 and 5. You say never again but it happens.
We’ve never ended up in court yet… But this is really hard on a new business. One thing that helps us is that we don’t advertise and are very busy just with referrals. The person that referred us is usually an ongoing customer and a friend of the non-payer and that is an awkward situation. That or they need something else done and they love the work so they pay. This situation happens more regularly than you think and when someone genuinely needs something done we’re still going to show up. On bigger jobs these can get painful the numbers get bigger and the implications cast a wider net for us and can cripple us financially at least for a time. There are a lot of people out there that still owe at least some money.
The flip side of that is every once and a while you have a money week. Someones quarterly instalment is due, their income tax came back or they want to talk to you about finally doing that bathroom refresh. All of a sudden a few people are in a rush to settle their overdue accounts.