The most common mistakes of the newly self-employed

One of the biggest benefits of running your own business is being able to take on new challenges and experiences. But when you’re starting out, simple errors can destroy your confidence and motivation. Avoiding the most common mistakes of the newly self-employed will preserve your self-belief, and save you time and money.

Most of the issues outlined aren’t typically business-ending. But they’ll take time and effort to resolve at a later date, cause you additional stress, and slow your growth at a time when you need to be making progress towards a sustainable income and career.

• Skipping preparation and planning
• Setting your prices or rates too low
• Taking on clients without any checks or contracts
• Not having long-term plans or objectives
• Trying to do everything at once, all by yourself
• Taking rejections and failures personally
• Not asking for help when it’s needed
• Missing deadlines and skipping client communication
• Forgetting admin and accounting requirements

Setting your prices or rates too low

Whether you’re selling to customers or clients, having a budget and financial plan should help you understand how much money you need to make on a daily, weekly or monthly basis. And what volume you need to secure to ensure you’re able to earn a reasonable living from your work.

There’s no point in selling products or services if they’re not making you a reasonable profit. But it’s always tempting to try and undercut your competitors, especially when you’re just starting out.

The problem is that you’re likely to overpromise and underdeliver if you know you’re making a loss on a project, or barely breaking even. Which makes it less likely you’ll end up with a happy client referring you to more business in the future.

It’s not always bad to work for a discounted rate, or even offer your services for free in specific situations. But you need to ensure you’ll benefit enough to make it worthwhile. For example, you might suggest that a client could get a 10% or 20% discount if they agree to a 12 month contract. But ensure that it’s seen as a temporary discount, not your standard day rate or project cost.

Taking on clients without any checks or contracts

If you’re starting out with no financial buffer, then it’s tempting to take on any, and every, piece of work that might come your way. But being indiscriminate about which clients and projects you take on can provide some harsh and costly lessons. Especially if you don’t have a basic contract or statement of work in place.

With any new client, even if you’re working for friends and family, it’s worth ensuring that they’re going to be able to pay for your work, and within agreed schedules. And that you’re clear about what you will deliver, what the deadlines will be, and where changes and revisions will incur extra payments. 

Informal agreements feel nice and friendly until something goes wrong. At which point, you’ll wish you’d put a clear contract in place. It can be stressful and time-consuming to tackle late payments, but when a client defaults entirely it can leave you with major financial issues. Especially when that time could have been spent securing projects from reputable clients.

Not having long-term plans or objectives

A lot of self-employed careers and businesses can quickly start to stagnate because there’s no long-term target to aim for. Whether your goal is to make millions, or just bring in a sustainable living to support yourself, having a clear objective means you know what will help you progress, and when to turn down projects or opportunities which won’t move you forwards.

Your long-term plans don’t have to be hugely detailed, or be set in stone for all time. Your priorities and tactics will probably need to be adjusted on a regular basis. But the progress you’ve already made towards your previous objectives will usually contribute towards your new target as well.

Thinking about your personal and business plans for the long-term will also help you identify weaknesses and potential problems before they become an issue.

It will also help you identify opportunities to develop yourself and your business by investing in training, new hardware or software, or marketing and advertising.

Trying to do everything at once, all by yourself

When you become self-employed, there will probably be an overwhelming list of tasks you want to tackle on your ‘to do’ list. And with a finite amount of hours available to anyone in a day, you’re going to need to prioritise, or potentially delegate and outsource some of those responsibilities.

Be realistic about the time you have available to work on your business on a sustainable basis. If you have family commitments, another part-time job, or you have a disability or chronic condition, none of that will prevent you from becoming successful.  But pretending you can work endless 12-hour days without a break will be far more of a problem, especially when you quickly burnout.

It’s important to be honest about what drives results for your business, even if they’re not the most enjoyable ways to spend your working hours. You might love posting on Instagram, but if your clients are all coming via LinkedIn, then save it for your spare time in the future.

And while it’s wonderful to feel like you control every aspect of your business and career, that doesn’t mean you need to spend days mastering bookkeeping if a professional can do the job for you in a couple of hours. Free up your time to deliver more paying client work instead.

This is particularly important if you want to scale up. One good philosophy is to develop systems and processes which mean your business can operate effectively without you even being involved. This means you can invest more time planning for the long-term, and things won’t crash down around you if you fall ill or just want to take a holiday.

Not asking for help when it’s needed

It’s tempting to think that being self-employed means you can be entirely self-sufficient. But everyone has benefitted from help and support at some stage of their career. And most successful business people have built up a network of contacts able to provide support with specific issues.

Whatever problem is causing you to struggle, there are people and organisations able to help and support you. And none of it will detract from your achievements in starting a self-employed business, or take away from any success you’ve had. 

Whether it’s managing personal debts, stress, procrastination, or freelancing as a new parent, you’re not the first or last person to face these challenges. And trying to tackle issues by yourself simply makes them tougher, meaning more time is taken away from your business. 

In many cases, the earlier you seek advice, the easier it will be to resolve any problems and ensure your financial, mental and physical wellbeing are able to benefit from self-employment.

Missing deadlines and skipping client communication

It’s important that once deadlines have been agreed with a client, you respect them and deliver work on time. Clients will often choose to work with people that are good and reliable, rather than someone who may be brilliant but misses deadlines. Especially if you’re working for larger companies which may have significant investment and plans depending on your piece of work.

This shouldn’t mean that you’re constantly working long hours to deliver work on time. Be realistic about the volume of clients you can handle, and the timescales required, including some contingency time for unexpected delays or changes. Don’t be tempted to take on new clients when you’re already busy, unless you’re able to outsource some of your existing work.

Set your own deadlines without your contingency time to give you a safety net if everything goes to plan, and you’re potentially able to surprise your client with an earlier delivery. 

And whether things are going well, or there’s an unexpected delay, make sure you’re maintaining regular project updates. If you know a deadline might get missed, telling your client straight away will give them more time to adjust their plans, and can prevent it becoming a potentially relationship-damaging issue.

Forgetting admin and accounting requirements

Many people become self-employed because they want to focus as much time as possible on the most enjoyable parts of their career. And that’s typically not tackling administrative and accounting tasks.

But it’s important to plan admin time into your daily, weekly or monthly schedule to stay on top of tasks including maintaining any required insurance, certification or licences for your career, issuing and chasing invoices, updating business accounts and other housekeeping. Simple chores like backing up your hard drive regularly can become invaluable if your computer gets stolen or suddenly stops working.

And doing regular audits of your financial accounts can often uncover recurring payments which aren’t required, unpaid invoices, or even outdated address details which can cause problems if you lose your credit card or have someone attempt to defraud your account.

It’s also useful to schedule time to check any business accounts, from website analytics to social media profiles, for any third party access which should be removed because the person or service isn’t being used any more. And installing software updates at a time when those programs aren’t business critical.