There are many pros and cons to running your own micro practice/business. Depending on where you sit, one side of pros typically outweighs the other side of cons.
The route that one pursues to make the decision to go solo/small is made through complex thoughts based on: Personality, Goals, Lifestyle, Finances, Geographics, Security, Career Opportunities, etc.
It is a difficult and scary choice.
If there is one certainty for self employed professionals, it’s that they have to make a lot more decisions when it comes to their careers. This means more time is needed to maintain a micro practice/business. This is not necessarily a bad thing, as the trade-off for this increased time commitment on the “management” side can be the main reason why one went, or wants to go, the self-employed route (i.e. The freedom to practice how, what, where and when they want).
In time, we will delve deeper into a lot of these areas. In today’s post, I would like to briefly highlight some of the important areas which micro practice/business owners need to think about (This is not an exhaustive list, but does cover most of the major areas).
- Area of Specialization – A niche helps keep us focused. It could be a certain type of law or a specific field in psychiatry. Whatever it is, you need one as a solo professional. In today’s world, there is almost no advantage to being a “generalist”. Thanks to the internet, people can now find the professional that is suited perfectly for there situation.
- Business Structure – Sole proprietor, LLC, Partnership, S-Corp…you get the idea. This topic can get confusing as what is right for you comes down to things like expected annual income, number of employees, state laws, costs of upkeep, etc.
- Business Accounts – It can seem silly to open brand new bank accounts and get a new business credit card when you first start out, but it is very important to keep your business spending and personal spending separate. For tax purposes AND piece of mind. This is one of those small but important steps. On the plus side, you can usually get some decent perks out of your new business credit card.
- Tax Treatment – Understand how you get taxed as a self-employed professional. Some of this will depend on what business structure you end up choosing, but regardless, it will be different than when you were an employee of a larger firm.
- Retirement Plans – This decision, much like choosing a business structure, will come down to how much you want to (or should) save annually, number of employees, costs of plan upkeep, etc.
- Insurance Needs – No more benefits from your employer. You will now be responsible for your own health/dental/vision insurance coverage. You may have a spouse who can get coverage for your family through their employer, but if not, this is going to be a big change. You should also consider any other types of insurance you may need: Term-Life, Disability, Malpractice, Umbrella etc.
- Cash-Flow Considerations – Without a regular salary coming in, cash-flow planning and budgeting will become much more important. No more paid time-off. For most self-employed professionals, if you are not working, no money is being made. Should you have an emergency fund? How much cash should you keep on hand in quickly accessible accounts? It’s different for everyone, but you should have a plan for this.
- Office Location – Home office, shared office, your own office. Some of this depends on your profession and the area you live in. Technology has reduced the importance of an office location for some professions, but some are still bound by state licenses and certain “formalities”.
- Equipment Needs – With the exception of doctors (Not including psychiatrists) most professionals will have modest “equipment” needs. A desk, chair, computer and phone are the basics. You can go from there, but after a potential rent expense, actual office “equipment” needs should be a fairly infrequent large expense. These days, “equipment” is probably more applicable to software and tech needs.
- Marketing – It would be great if clients walked in the door on day 1, but they don’t. Ideally this step would have been planned out before starting up, but its important to revisit this topic every year. Find what works and focus in those areas. You do not have to pursue every marketing strategy on the planet (In fact, you should never do this). Find a couple ideas that work with your practice’s style and keep at it.
- Hours of Operation – That’s right. No one can tell you when to start and when to end. Obviously this could be a dangerous thing, but I don’t think it will come to that. You still need to decide of some standard operating hours though. This is a business after all and clients will still want to see some formality.
- Practice/Firm Management – Do you know if or when you should hire employees? How about when to fire them? Do you know how big you want your firm to become? Topics like this seem abstract sometimes, but there will come a time when you need to have an answer to these questions.
I will stop here for now but for those who run their own business, what areas have given you the most trouble over the years? Let me know.
Have some fun out there!