- Sole proprietors face unique challenges in managing their business finances.
- Initiating and delegating simple tasks is an important skill that helps owners stay organized.
- Building a community with other solopreneurs allows owners to share resources and collaborate.
- This article is part of “Unlocking Small Business Success,” a series that provides small businesses with a roadmap to growth.
There is no one path to success as a solopreneur. Rachel Camp knows this better than anyone.
Camp, a certified financial planner, had to take on the roles of accountant, salesperson and bookkeeper to start her business in 2022. “I didn't know what to do and when, I felt overwhelmed, and I felt like things were constantly falling through the cracks,” she said.
Those lessons are camp wealthis a financial planning service dedicated to helping other self-employed individuals and high earners achieve success.
Starting a small business can be daunting.From understanding daily expenses to making choices retirement accountEspecially if you're a sole proprietor or small business leader, running the behind-the-scenes parts of your company while still being profitable can seem impossible.
Here are four tips for managing your finances when starting out as a sole proprietor or launching a small business.
start simple
Many of Camp's clients come to her overwhelmed with ideas on how to get their business off the ground, she says. The first step, she says, is to get organized and understand the basics.
“Usually when we start, we just declutter and separate everything,” Camp said.
Separating personal and business accounts is an important first step for small business owners. Reduce legal risk and liability Tax season is coming, Camp added. Splitting your account may also provide you with tax advantages and benefits. Build rewards with your business credit card. For example, setting up a home office may be deductible as a business expense, but something like a car used for both business and personal purposes can be more complicated. He encouraged business owners to consult financial experts for advice on the costs of setting up a company.
Kathryn Knighton, Director of Customer Experience collectiveis a financial management platform designed to help “one-person businesses” by providing services such as bookkeeping and accounting. He told Business Insider that starting a business organically also helps owners understand their options.
Knighton said many owners come to the Collective looking for confirmation on the “right” way to get started or for help understanding trends in popular social media businesses. “You don't know what you don't know,” she added. “So a lot of what we end up doing is educating people about their options.”
Knighton and Camp added that social media can be a source of misinformation about things like LLC formation and tax breaks. They said it's important to do your research, talk to financial experts and start simple before making big decisions.
“Before you worry about optimizing everything, first see if you can benefit from it,” Camp added.
Incorporate necessary expenses
Solo entrepreneurs often run all aspects of a business, including building products, serving customers, and keeping track of the finances.
“What a lot of people don't realize is that you're a jack of all trades,” Knighton said.
She and Camp said that incorporating the expense of financial matters early in a business's life can reduce stress during tax season. Camp tells clients that a good rule of thumb for preparing for taxes is to stash 30% of her income in a separate savings account.
But small business leaders don't have to manage their finances alone. Mr Camp told his BI that incorporating costs such as financial services and bookkeeping services, for example, is worth the upfront cost. “A lot of people try to DIY or do it themselves to save money, but often find that it costs more in the end,” she said. “You don't want to take on too much responsibility.”
It's important to recognize which business tasks are too complex to do in-house, Camp said. For example, hiring an accountant could help reduce complications in the future, she added.
Outsource when it helps
Knighton said the most approachable way for owners to delegate is to identify where they can provide the most value to their business and what tasks others can perform.
“Instead of getting bogged down on the business side, taking inventory to enjoy what you're doing can help you be more proactive and use creative outlets to bring joy.” she said.
Business owners also need to be careful about how they do things. Outsource these services, added camping. Working part-time or freelance with a financial planner or accountant is usually more feasible than hiring a full-time employee.
Camp said these resources can help solopreneurs build their teams and keep their organizations afloat. “You can actually start filling these roles on a part-time basis, and it’s much more affordable that way,” she said.
Build a support system
knighton said find a community Consulting with other sole traders and small business owners can be one of the most helpful ways to get financial advice. Many people who pivot from traditional careers are used to having a support system at work, whether it's co-workers, managers or human resources, she said.
“It's easy to get lost in the lonely world of sole proprietorship,” Knighton says. Local chambers of commerce and small business administrations often host virtual and in-person events about small business ownership, allowing owners to share skills and connect with each other. Mr Knighton said these events could help independent contractors gain confidence and develop their skill sets.
“There are people who are doing this successfully,” she says. “There are avenues for partnership and collaboration.”
