The Cost of Starting My Own Business

The Cost of Starting Your Own Business

Many of us have thought about starting a business at one time or another. The idea of working for myself has often tempted me to leave unsatisfying jobs and start a new career. However, only a small percentage of people ever act on the urge. In my case, the opportunity was thrust upon me two years ago. With few options and nothing to lose, I dove headfirst into entrepreneurship. This is my story and current assessment of the cost of starting my own business after the first full year.

The Decision to Start a Business

As a grad student, I was the textbook definition of Ph.D…poor, hungry, and desperate. I was living abroad and had no way to work legally due to visa restrictions. Then, I met some fellow students who had found a way around this problem. They worked as freelance writers online. Like me, there were completing their degrees. But, they had found a way to earn money to pay the bills and fund their travels. It seemed too good to be true.

With a little guidance, I put together a portfolio of my writing samples and launched my profile on several platforms. In the beginning, I spent hours bidding on contracts that often had no financial payoff. It was difficult to attract new clients or win bids since I had no credentials or reviews. Eventually, I took an extremely low-paying job just to keep the lights on. Little did I know, this would make all the difference in the world. As a very satisfied customer, my first client left a positive review, and more offers started coming in.

As I gained more feedback, the income became steadier. And, I had made several important contacts who had gone into business for themselves. The more we talked, the more I realized that I could do it too. While I had played with the idea of becoming a full-time freelancer, the opportunity presented itself under strange circumstances. When my dad’s health began to fail, I gave up my position overseas to return home. Although happy to be reunited with my family, I needed a new way to earn income. So, I decided it was now or never.

The First Steps in Starting a Business

In all honesty, making the decision has always been the most difficult part of any challenge. Once I commit to an idea, the path forward becomes clear. So, I set to work researching everything I would need to know about starting a business. I read countless financial articles and blogs on the subject. Then, I talked to people I know who had already done it. And finally, I sought professional advice and hired a CPA to help me sort out my accounting.

There was a lot to learn. But, I took it step-by-step. Fortunately, my situation is much simpler than most. The cost of starting my business was relatively low, especially since I am the only employee. However, as the sole proprietor, I had to learn all about the self-employment tax and stay on top of my books. While I have come a long way this year, I am constantly learning new things.

I also made sure I was in compliance with all local and federal laws. The most important thing was knowing how to separate and protect my personal and business finances. So, I set up dedicated business accounts and ensured all payments went into the right ones. Additionally, I paid myself and covered daily expenses from my personal accounts.

Currently, I’m looking at accounting classes to supplement the crash course I took through YouTube tutorials and other courses to help me as I grow my business. However, until I find ones that fit my schedule, I always check with my financial advisor when I have questions.

The Cost of Starting a Business

As I prepare to file my taxes for my first full fiscal year, I have to account for the total cost of starting a business. After finishing my tallies, I was pleasantly surprised by the results. While most businesses work at a loss for the first 18-24 months, I have recorded significant gains.

The main reason is that I have low overhead costs and minimal expenses. The only things I need to do my job are my computer and a strong internet connection. Working from home eliminates the need to rent a commercial space. And, all the digital and communications cools I use are free. The only fees I have to worry about are the 15% self-employment tax, service charges from my financial advisor, and the fee to register my business.

However, there were a few other unforeseen expenses this year as well. In addition to buying QuickBooks, I was having serious computer issues. I paid for computer diagnostic and repairs only to have to buy an entirely new laptop. While expensive, I had enough in my accounts to cover the costs and continue working for a profit.

The Greatest Cost

Looking at the year in review, time was the greatest cost of starting my own business. Since I get paid by contract, I have to be cautious about how I allocate my time. If I spend too much on a single assignment, I could potentially be working at a loss. However, I believe laying the proper groundwork will prove more profitable in the long run. Sometimes this means putting in extra effort to go above and beyond for clients. Other times it’s learning how to effectively manage my business. Unfortunately, time is one of the most limited and precious resources.

The other aspect that I didn’t account for was the emotional toll. Although my business is doing well, I constantly doubt my abilities and my decision. But, I’ve started this journey and I’m determined to see it through. I’m navigating unknown territory which is both exhilarating and terrifying at the same time. I have invested my blood, sweat, and tears in the initial phases and know I can succeed. But, only time will tell…

Read More

Posted in: Career, Personal Finance

Top of page