Running your own business is invigorating. You’ve got ultimate flexibility, and there’s no limit on what you can do, or how much you can earn. However, it goes without saying, being a solopreneur also means you must have a certain degree of comfort with the unknown. Where traditional employment brings some level of job security with employer-sponsored benefits like healthcare and retirement plans, small business owners must be proactive about creating their own assurances, so they know they’re future-proofed and ready for anything.
Below are six ways you can take matters into your own hands, and build a solopreneur safety net on your own:
Set up an emergency fund
Keeping a cash cushion can help you avoid making desperate decisions, should disaster strike. To determine how much you need, assess the risk you take on in your business. How dramatically could market fluctuations impact your business? How long could you stay afloat with no revenue coming in? What’s the likelihood of being sued by a customer?
The right amount will vary by industry, and by your personal comfort levels with risk. When you consider where to open an emergency account, think about what kind of interest you’re getting, but also how quickly you can take the money out if you need it. Talk to a financial adviser about the right type of account for you.
Related: 5 Ways to Feign Motivation as a Solopreneur
Build steady cash flow
Every smart entrepreneur knows that poor cash flow can be enough to put you out of business. That’s why it’s critical that you find ways to keep revenue coming in year round. One simple way to improve cash flow is to invoice efficiently. Encouraging faster payment means steadier income and fewer unpaid invoices. Especially for seasonal businesses, think creatively about how to smooth out ups and downs. Pre-sell products and services for a discount, diversify your offerings to better fit seasonal demands and build strong relationships with your customers to encourage repeat business.
Keep your business and personal finances separate
It’s common to use personal funds to start a business, but as soon as you start generating revenue, it’s important that you draw a firm line between your finances. Mixing the two complicates everything from tax time to selling the business down the road. Start by opening separate checking accounts, and be disciplined about drawing from the right one at the right time. Keep receipts separate, and store them digitally to make reporting even easier. Also, set and stick to a business budget to avoid pulling from your personal account when cash flow is tight.
Plan for the future as a solopreneur
Careful planning can help you achieve your desired level of financial security, no matter what your working status. Get to know what retirement plans are available to you as a small business owner or self-employed individual.
While a traditional 401(k) plan may not be ideal, consider other options such as a Simplified Employee Pension plan (SEP), a Savings Incentive Match Plan for Employees (SIMPLE IRA) or a Self-Employed 401(k) plan. IRS.gov has some great resources to help you choose the best approach for your business.
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Choose the right health care plan
Health care is a complicated area, and many entrepreneurs aren’t covered at all because they don’t think it’s financially viable to buy health insurance. However, there are a number of affordable options out there for anyone willing to do the legwork.
Freelancers Union has curated a variety of viable benefit packages for the self-employed at discounted prices, and sites like eHealth offer affordable plans for both small business owners and entrepreneurs. HealthCare.gov is a good resource for the latest on what’s available, and what small businesses need to know.
Back everything up to the cloud
Losing all your business’ data, from files to contacts, plans and contracts, can be catastrophic. Think of the time and expense it would take to recover years of history and hard work. Storage solutions used to be available only to large companies, but today there are a number of very affordable cloud-based services that have been designed specifically for small businesses. Box and Dropbox for Business are easy to use services that keep your information secure, and also allow you the flexibility to share your files from wherever you are.
Take these steps and you’ll be well on your way to building a strong safety net for your business that will see you through nearly any bump in the road. Creating your own assurances not only prepares you for anything, but also gives you the peace of mind to put all your focus back into running and growing your business.
