Saturday, March 14, 2009

Biz Basics for Writers

I just found some notes from a presentation I did a while ago for a group of aspiring writers. I shared the stage with my accountant, Jonathan Becker, CPA. The notes, taken in my particular brand of shorthand, are filled with great advice for owners of “creative” small businesses. That definitely includes freelance writers. The suggestions are still relevant, so I’m going to pass them along without embellishment.
  • Bill by the hour. Bill for every single hour you put into your business.
  • If a client isn’t willing to pay you for what you do, you probably don’t want that client anyway.
  • When you raise your rates, don’t grandfather your old clients. If you do, you will begin the resent them.
  • There’s a rule in accounting that every three years you should dump the bottom 20 percent of your client list.
  • When you figure your hourly rate make it three times your expected or hoped-for income. Add to that 40 percent for what it costs to run the business. Divide that figure by 2,080 hours (working hours in a year), and that is what your hourly rate should be.
  • Set up your books. Get help from your accountant if you need it.
  • Creative people need to know how to reconcile a checkbook.
  • Creative people should have a feel for what’s going on inside your business.
  • If you’ve been business for two or three years and are going nowhere, it may be time to look for a job.
How to set up your business entity:
  • Sole proprietor (on your own and doing business)
  • LLC (Limited Liability Corporation limits your personal and family exposure) Set up your LLC with an attorney, and register with the Missouri Dept. of Revenue.
  • Add umbrella protection to your homeowner’s policy.
Income tax:
  • Fifty percent of incomes goes to taxes.
  • Deduct anything that pertains to your business: Internet access, website, magazine subscriptions, supplies, equipment, consultants, accountants, attorneys, and so on.
  • Any items deducted reduce taxes by 50 percent.
  • Work with your accountant on what to deduct.
  • The IRS does very little auditing at the small business level.
  • Get on TV or radio to talk about what you know.
  • Follow up on every lead.
  • Return phone calls that day.
  • Respond to e-mails.
  • Identify your market. Network. Join groups.
Basic? Yes? Important to your financial success? Also yes.