• Thu. May 23rd, 2024

4 Financial Planning Tips for Solopreneurs, Small Business Owners

  • Solo business owners face unique challenges in managing business finances.
  • Starting simple and delegating tasks are important skills to help owners stay organized.
  • Building a community with other solopreneurs allows owners to share resources and collaborate.
  • This article is part of “Unlocking Small Business Success,” a series providing micro businesses with a road map to growth.

There’s no single path to achieving success as a solopreneur. Rachael Camp knows this better than anyone.

Camp, a certified financial planner, had to take on the roles of accountant, salesperson, and bookkeeper when starting her business in 2022. “It just felt overwhelming not knowing what to do, when to do it, and feeling like things were constantly falling through the cracks,” she said.

Those lessons played a part in the founding of Camp Wealth, a financial-planning service dedicated to helping other solopreneurs and high earners find success.

Starting a small business can be daunting. From figuring out day-to-day expenses to choosing retirement accounts, it can feel impossible to operate the behind-the-scenes parts of a company while still building a profit — especially when you’re a solo business owner or leader of a micro business.

Here are four tips for managing finances when starting as a solopreneur or building a micro business.

Start simple 

Many of Camp’s clients come to her overwhelmed with how to get their business off the ground, she said. Their first step, she said, should be to get organized and figure out the basics. 

“Typically, when we get started, it’s just getting organized and getting everything separated,” Camp said. 

Separating personal and business accounts is an important first step for micro-business owners because it can reduce legal risk and liability come tax season, Camp added. Splitting up accounts can also be beneficial in accessing tax benefits or building rewards on business credit cards. For example, while a home-office setup has the potential to be deducted as a business expense, something like a car with both business and personal uses can be more complicated. She recommended owners consult with financial professionals for advice on the costs of starting a company.

Kathryn Knighton, the director of customer experience at Collective, a financial-management platform designed to help “businesses of one” with services including bookkeeping and accounting, told Business Insider that starting a business organized also helps owners understand their options. 

Photo of a woman with brown curly hair wearing a black shirt in front of spots of light.

Kathryn Knighton, the director of member relations at Collective.

Kathryn Knighton

Many owners come to Collective looking for assurance on the “right” way to start or for help understanding popular social-media business trends, Knighton said. “You don’t know what you don’t know,” she added. “So a lot of what we end up doing is educating folks on their options.” 

Knighton and Camp added that social media could be the root of misinformation on things such as LLC formation and tax breaks. They said it’s important to research, speak with financial experts, and start simple before making big decisions. 

“Make sure you’re profitable first before you really worry about optimizing everything,” Camp added.

Build in necessary expenses 

Solopreneurs often operate all aspects of their business — building a product, dealing with customers, and keeping track of finances. 

“Something a lot of folks don’t realize is you’re the person for everything,” Knighton said.

She and Camp said building in expenses during the early stages of a business for financial matters could help reduce stress around tax season. Camp tells her clients that stashing 30% of their revenue into a separate savings account is a good rule of thumb to prepare for taxes.

But micro-business leaders don’t have to manage their finances alone. Camp told BI that building in expenses for financial and bookkeeping services, for example, was worth the up-front cost. “A lot of people try to DIY it and do it themselves to save money, and I often find that that ends up costing them more in the end,” she said. “You don’t want to mess with exposing yourself to a lot of liability.”

It’s important to recognize which business tasks are too complex to do in-house, Camp said. Hiring an accountant, for example, can help reduce complications down the line, she added. 

Outsource when useful

Knighton said the most approachable way for owners to delegate was to identify places where they could provide the most value for their business and which tasks could be done by someone else. 

“Taking inventory so that you can still enjoy what you’re doing, rather than being bogged down by the business side of your business, can make you feel more engaged and still use those creative avenues to bring joy,” she said. 

Business owners should also be mindful of how they go about outsourcing these services, Camp added. Working with financial planners and accountants part time or freelance is usually more feasible than hiring full-time employees. 

Camp said these resources could help solo business owners build their teams and stay organized without losing money. “You can actually start filling these roles on a part-time basis, and it’s way more affordable to do it that way,” she said.

Build a support system 

Knighton said finding a community of other solopreneurs or small-business owners could be one of the most helpful ways to get financial advice. Many people who pivot from a traditional career, she said, are used to having a support system in their job — coworkers, managers, and human resources. 

“You can easily slip into this lonely world of being a solopreneur,” Knighton said. Local chambers of commerce and the Small Business Administration often hold virtual and in-person events on small-business ownership where owners can share skills and connect. Knighton said these events could help solopreneurs gain confidence and grow their skill sets.

“There are people doing this successfully,” she said. “There are avenues for partnerships and collaboration.”

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