7 Business Lessons I Learned the Hard Way

by Mikey Rox on 16 August 2011 4 comments
Photo: FaceMePLS

When I started my own copywriting and creative consulting business two years ago, I wasn't prepared for all the stress that came with it.

Naively, I thought I could name the business, create marketing materials (like a website and business cards), and start working.

Not so much.

There were several hurdles that I had to jump to get the business up and running, and I'm still encountering hurdles to this day. Perhaps if there were a blog post for newbies, like this one, many of these situations could have been avoided.

If you have entrepreneurial aspirations like I did, this one's for you. Study my mistakes to (hopefully) avoid your own. (See also: 3 Questions to Ask When Starting a Business)

1. Research the legal aspects of starting a business.

My first blunder was creating marketing materials based on a business name I hadn't registered. As it turned out, the name I chose, Paper Rox Scissors, was already being used by another incorporated business, but I didn't know that until I had already established the business as a sole proprietorship with New York City and sought incorporation after the fact.

I had several meetings with the Small Business Association and one with my local representative to try to convince New York State to let me incorporate, but the powers-that-be wouldn't budge on their decision to deny my request — despite the fact that the other business whose name was similar didn't offer the same services that I did, and their business name was spelled differently from mine. To this day, I'm still registered as a sole proprietor. It was an unnecessary headache that could have been avoided if I had known what to do from the start.

2. Contracts are 100% necessary 100% of the time.

For some dumb reason — usually when the project was small — I chose not to draft a formal contract for a client because I didn't think the project warranted one. Surely the client won't stiff me on a few hundred bucks, right? Dead wrong. Not drafting up a contract for even the smallest project is practically begging for the client to walk away without paying for the final product. I've skipped the contract a couple times, every time to my dismay. As they say — fool me once, shame on you; fool me twice, somebody punch me.

3. Don't be timid when it comes to getting paid.

In the beginning I was afraid to ask clients to pay overdue bills. I didn't want to embarrass them or cause friction in our relationship. But after six months of getting the run around, I got over it. I will work with clients who communicate about late payments, but if I've sent several emails and placed multiple phone calls to no response, I have to hit where it hurts.

Recently, I took to Facebook to let a client's fans know that he doesn't pay his bills. I didn't want to do that, believe me, because that's absolutely burning a bridge. However, I deserve to be paid for my work and, at the very least, communicated with if there's a problem. I received no response to my queries for more than six months, yet it took less than six minutes for someone to respond to me after I took the issue to a public forum. Sometimes you have to play hardball. Of course that client won't work with me again, but whose loss is that? I'm doing just fine with the clients who actually pay their bills on time.

4. Trust your gut.

Every now and again a prospective client will contact me whose demeanor doesn't sit well — just something about them I don't like. Against my better judgment I took on a client who, during our first meeting, badmouthed a former freelancer she had hired because that person posted unflattering comments on a few blogs about the client's work ethic. I gave the client the benefit of the doubt because I understand how petty some folks can be and because she made a great case for how she was the victim.

She should have won an Oscar for her acting skills. Months after we started a project it still wasn't finished because she was unresponsive, bossy, and downright rude. When we finally finished and I billed her, she threw a fit because she didn't think she should be billed for research and time spent emailing her, billable hours that were discussed prior to the start of the project and clearly stated in a contract. After days of haggling, she then told me that she was going to bill me if she had to print out the invoice on her own. Lady was crazy, and I should have trusted my instincts. As soon as she paid me, I let her know she was fired. She was way more trouble than her account was worth.

5. Don't get suckered in.

These days, people want to pay as little as possible for high-quality work. There have been several times when I've presented a proposal with fees to a prospective client and they audibly scoff — and then go into their sob story about how the economy is affecting their business and they can't afford my services. Guess what? The economy affects my business too, and if you can't afford my services, seek someone else.

I did give in once, though. I agreed to take on a project for far less than it was estimated because the client was a master of flattery. As a man of my word, I stuck with the project until eventually the client stopped using me because he couldn't pay even the lowest of fees. On the bright side, at least he didn't stiff me.

6. Hire an accountant.

Once I started signing clients, I was invoicing left and right in addition to spending money on business expenses. When tax time rolled around, I had a binder full of invoices, an accordion-style folder full of receipts, and several 1099 forms from clients. I had no idea what to do, and if I had done the taxes myself I'd probably be in jail right now. To cover my bases, I hired an accountant who knew what he was doing in terms of filing the necessary documents and making the most of my deductions. The $225 I pay the guy every year is worth every penny.

7. Pay quarterly taxes.

Mo' money, mo' taxes. This year my tax bill was fairly hefty, even with the attention to detail my accountant has when it comes to deductions. After I paid the lump sum back in April, he set me up with estimated quarterly taxes, which will help soften the blow when it's time to file next year. I'd much rather pay several hundred dollars four times a year than several thousand at once — especially when it's unexpected.

Do you own a small business? What are some lessons you've learned the hard way. Let me know in the comments below.

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Guest's picture

Contracts are always the way to go. When my clients are very small, I ask for payment upfront. This alleviates the back and forth that can sometimes happen with very small clients. The larger ones though always get a contract.

Don't forget contracts and NDA/confidentiality agreements if you outsource your services. Agencies and companies that are outsourcing your services are a must when it comes to these documents. You never know if they will go under tomorrow and you deserve payment for the work you do.

Guest's picture
Kevin Bernhard

Pay someone to do the things that you have never done before. I was smart enough to pay someone to design my logo for me, but after that I got stupid, and attempted to design the website myself.

I am great at what I do (drafting, design, education, etc), but I had to quickly learn not to do what I had no experience doing.

Andrea Karim's picture

Yes! You can waste so much time trying to complete tasks that are simply beyond your skill set - these days, it just doesn't make sense to try to learn new skills that you will only use once, when you can get someone else to do the same work in a snap.

Andrea Karim's picture

"As they say — fool me once, shame on you; fool me twice, somebody punch me."

This is among my favorite adages.