We were cleaning last night, getting the house ready for a meeting with our new Realtor this morning (it went great, she’s great, life is great). When I was cleaning the floor in my husband’s office, it struck me that he still works at the same small desk he had when I met him, eight years ago. It’s actually the same desk he got when he was in college, so he’s had it since the mid-90s. The office chair he uses was dumpster-dived not long after we met each other.
When I first met my husband, we were both working for a big company, and his desk was just part of his bedroom furniture. Once he became self employed in early 2002, he started spending much more of his time at that desk. He was thrilled to replace his very ragged office chair with our dumpster find, and has been working there ever since. Seven years later, we’re still happily self-employed, and doing quite a bit better financially than we were in those early years. But it would never occur to my husband to replace his desk or his chair, since they’re both still perfectly functional.
I sometimes get emails from readers asking for tips about how to become self-employed. Of course there are lots of issues to address, but one that always comes to mind is don’t fake it till you make it. I’ve seen people who became self employed and immediately sank several thousand dollars into new office furniture, even if they don’t meet with clients in their office (we don’t – everything we do is online and over the phone, so all that is required is a quiet office space with high speed internet and a good phone service). There’s an endless amount of money that can be spent to get a business off the ground. Some of it is necessary, and will have an impact on how your business performs. But some of it is not, and will just extend the time until your business becomes profitable. And since a good number of small businesses never become profitable, that initial expenditure might just end up being debt that you have to pay off once you secure another job.
If you’re looking to start a business or even just become self-employed part time, make sure that you apply the same frugal eye to business purchases that you do to all your other purchases. Ask yourself if you need it, what sort of return on investment you’ll get, and whether there’s a less expensive option out there. Don’t be fooled by the idea that business expenses are a tax write-off. Yes, you can deduct business expenses, but it’s better to keep $100 in your pocket and pay $25 in taxes (just an example) than to spend that $100 on a business expense and save yourself the $25 in taxes. You come out $75 ahead in the first scenario. So unless you really need to spend the money, don’t let yourself be lulled into the idea that spending it is a good idea because of the tax write-off.
Starting a business is tough, no doubt about it. And it’s likely that you won’t earn a whole lot of money in the beginning, no matter how hard you work. By spending a bunch of money upfront without carefully considering whether the money really has to be spent, some people set themselves up for a stressful start to self-employment.