Friday Dec 02, 2022

3 Finance Tips for New Entrepreneurs – CEOWORLD magazine

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Carving out your niche in the business world isn’t for the faint of heart. But after months and even years of planning, you’ve started to earn income as a new business owner. As an entrepreneur, you get the best of flexibility and earning potential plus some major financial responsibilities. 

Understanding your unique financial opportunity is essential if you’ve recently struck out on your own or begun a side hustle. When you know the financial advantages, opportunities, and risks of your new endeavor, they can work in your favor. 

  1. Take Advantage of Entrepreneur-Friendly Tax Rules
    Paying taxes is one of life’s necessities and a task that’s less desirable than most. However, entrepreneurs often have tax advantages when it comes to deductions, write-offs, and savings. Before you start setting cash aside for quarterly tax payments, dig into the options available to you.

    Even if your business endeavors are in addition to your primary job, you can save for retirement past usual limits. A newer option, the Solo 401(k), gives self-employed individuals the ability to save up to $57,000 annually. This is more than double the allowable amount for traditional 401(k) plans, making retirement saving an achievable goal. Use your savings efforts to reduce or defer your tax obligation while your contributions grow over time.

    Self-employed individuals can also write off various expenses associated with operating their business. If you use a space in your home solely for your business, you may be able to reduce your tax obligation. Supplies, repairs, and technology needed for your operation are all worthwhile expenses to track and include in your business expenses. Review the latest Internal Revenue Service rules for what’s allowed when it’s time to file.

  2. Prepare for Variable Income
    Budgeting is essential for any professional, but business owners have to prepare for more variation than the average person. Contract-based work, billable hours limits, and the ability to choose your projects gives you both flexibility and risk. At times, your workload will be overwhelming, while in other seasons, it may be scarce. Do what you can now to prepare for the highs and lows of entrepreneurship.

    Aim to project your annual earnings based on the client relationships and contracts you have in place. Identify which contracts or agreements are on a rolling basis or have fixed time frames to determine how reliable they are. For each contract, track renewal specifications, identify opportunities to rebid work, or note whether the relationship is finite. If renewal is a possibility, engage with the individuals responsible for renewing your contract well in advance of a decision. Ideally, you’ll be able to identify new opportunities and client needs to help you lock in upcoming work.

    Once you’ve got a good read on your income potential, determine how much of your income to save or spend. Based on your earnings, set aside some for estimated taxes, which many sole proprietors pay in quarterly installments. Plan for variable income by being conservative with how much of your remaining income you use for personal expenses. Update your budget to account for slower months by reducing costs, enrolling in budget billing, or paying premiums in installments.

  3. Protect Your Health and Assets with Insurance
    New business owners often take on the responsibility of expenses or choices traditionally made by a corporate employer. If you’re on your own, …….

    Source: https://ceoworld.biz/2022/07/07/3-finance-tips-for-new-entrepreneurs/

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