Choosing and developing a career path is hard. Everyone, unless you’re one of those lucky humans who happened to be in the right place, at the right time, with the right product, will spend a lot of time developing and nurturing a career path.
Thirty years ago, the world was a bigger place. Career options were limited to a set of pre-approved industries: medicine, law, engineering and finance. It was reasonable, dare I say respectable back then to spend most of your working life at the same company, working your way up the corporate ladder so that you could finally jump off at the top with your golden parachute and finally relax.
Well, technology changed all that. I’ve spent the majority of my working career freelancing and contracting. Learning the ins and outs of being a sole proprietor. You should make note of that label. You’re not running a business as a sole proprietor, you’re running yourself. If you want to register a company and give yourself a CEO title, and it’s just you — guess what? You’re still not running a business.
You’re a solopreneur. No matter your profession, if you work for yourself, by yourself you’re actually more than what your title gives away. You’re an accountant, marketer, salesman/woman, brand ambassador, tax consultant, account executive and more. Never forget that.
Before I continue, I’d like to make it clear that I’m writing this post within the context of my home country, South Africa. None of the advice I give has been checked by a lawyer, accountant or tax consultant, so don’t take what I say as gospel. If you live in SA, I’d be more than happy to refer the professionals I work with. If you live outside of SA, I’d suggest you go speak to a professional that understands your countries laws and economic climate.
The question we’re asking here, is how do I successfully run a sole proprietorship? Well, in South Africa, you should count your blessings. In eyes of the tax man, and the law, you are your business.
Choose Your Entity
I, Daine Mawer, am a sole proprietor in South Africa. There is no difference between myself and my business. It’s what’s known as an entity. A company is a separate entity to that of the person running it. Each business entity has a set of rules that apply to it, from a tax, finance and legal perspective. If you’re at the point of deciding what entity to form, seek help or speak to your accountant. It generally depends on your goals, how much money you think you will earn and more.
For those of you who aren’t planning on the following:
- Managing/employing other people straight away (this doesn’t mean contracting out to third parties),
- Earning more than R1 million in a tax year,
A sole proprietorship is a good fit for you. You don’t even need to register anything with the registrar. All you need to do is apply to become a Provisional Tax Payer in SA. If you were previously an employee of a company, then you will already have a tax number and a profile with SARS. A good accountant can help with this process.
Find good people
You probably already know a ton of good people in your network. Never underestimate the power of your network. Ask more questions, more frequently. Learn from other people’s mistakes. Most importantly, never forget the mindset of continuous learning.
Finding a mentor is a great way of doing this. I’m lucky to have some incredible mentors. Guys who have made plenty of success for themselves and their families. This is not something that takes a few days or a month. A mentor is a relationship that requires rapport and trust. It requires your mentor to have faith in you, and for you to have faith in your mentor. There is a lot of information available on the internet, but it pales in the face of 1st hand experience.
If you’re smart about it, identify these people and allow them to teach you. Once you get there, ask questions. In my experience, your biggest asset in a sole proprietorship is your accountant or tax professional. Don’t kid yourself. If you are not number friendly or you don’t understand bookkeeping or tax law, don’t waste time figuring it out yourself. Pay people who are better than you at a given task to do it better than you could (at least in the short term) — it has taken me years to truly understand tax, and it still schools me at times.
If you’re making a list, finding a worthy tax account should be your number one priority. You don’t want to be in any position where you owe SARS money and cannot pay them. More on that later though.
Getting Savvy with Tax
Tax is complicated. Often, people think that they don’t have to pay any tax, that the taxman will just glance by your profile. Being a sole proprietor is no joke. Somethings are easier — you can work when you want, where you want, for how long you want. Choose your clients, create a brand and a name for yourself. It’s great. But you also are in peril. Credit scores, bank loans and interest rates, all start playing against you. I guess the reason for this is understandable. To an institution like a bank, you are a major risk — it’s hard to ensure stable income when you’re starting out. Would you loan people money if you knew there was probably a pretty good chance of them not paying you back or defaulting? Probably not.
This means that you need to spend some time growing up. When you ask for a loan, the bank will want to see evidence of consistency and that you have generally kept your ducks in a row. A small ripple in this department can cause you big trouble. So, why am I saying this? Many people don’t take into account that part of their day to day, is keeping their books in order. Bookkeeping is an activity you need to provide for on a weekly or monthly basis, not when the tax man comes calling.
As a provisional taxpayer, you are expected to estimate your salary for the year ahead. You then pay tax as if you were earning that amount (even if you don’t) — if you make less, the taxman sends you money at the end of the year, if you make more, he asks for more money. A tax year in SA runs from 1st March to 28 Feb.
You make a payment in Feb for income earned August-Feb (the previous year), and payment in August, for income earned March-August. This is where people really tend to fuck up, especially when they start earning decent money. A percentage of the money you earn is not yours. It belongs to the tax man. If you understand this, you’re good to go. When you’re salary arrives every month, figure out what tax table you reside in and save tax based on that figure. You can find tax tables on SARS’ website.
Tax Evasion vs Tax Deduction
Another concept people often get caught on is what is tax deductible? Being a sole proprietor enables you to plenty of tax deductions, especially as a provisional taxpayer. Generally, if you are working for people on this basis, you need to take care of your own medical aid and pension. Evading tax is paramount to lying: the activity of falsely declaring how much you earn. Tax deduction is perfectly legal if you do it responsibly. I often see people spend a lot of money running a business by themselves, and never really come out with a profit because they aren’t being smart with their tax deductions. So what is tax deductible then?
This generally depends on your industry, but if you’re in information technology like I am, the following expenses are tax deductible, or a portion thereof, as long as you’re using it for business purposes:
- Equipment ( Laptop, iPad, iPhone, Printer, Flash Drives, HDD’s )
- Accessories for Equipment (Anything that will guarantee the future value of the device as an asset, ie cables, covers, mouse, keyboard etc)
- Rent ( If a portion of your home is used as an office, you can claim a portion of home expenses based on the % sqm amount. In other words, if your home office takes up 10% of the square meterage of your house, you can claim 10% back on expenses like WiFi, electricity, cleaning etc )
- Stationary ( Pens, pencils, printer ink etc )
- Office Equipment (Chair, Desk, Monitors etc )
- Entertainment ( Taking potential clients or clients out for business lunches or dinners, meetings in coffee shops, etc)
- Education ( Courses, upskilling, professional development )
- A percentage of your medical aid, usually around R300/month
- Your pension/retirement contribution ( one of the smartest ways to save and beat the taxman )
- R33,000/tax year in Tax-Free Savings, maxed at R500,000 for your lifetime.
- Travel — if you travel to speak at conferences, you can claim the ticket if it hasn’t been paid for by the organiser, as well as hotel stays and food. Remember though, this is not an excuse for a holiday. If you only need 3 days worth of expenses to go speak at a conference then claim 3 days worth, not 10 days worth where the other 7 was a holiday. Be honest. Not a scumbag.
- Software Licenses ( Licenses for software used to provide a service, domain registration, hosting, Google Suite, Slack, etc — anything that aids your in operating your business successfully, or that you couldn't operate your business without)
- If you drive around to clients a lot, then you can claim petrol but you need to keep a logbook up to date and submit that at SARS’s rate. This is an easy way for people to scam the taxman, so be honest about it.
- Remember that there is a tax threshold, the first R70,000 or so is tax-free. This is to aid lower LSM demographics due to the economic legacy and climate here in SA.
The biggest thing here is to just be honest. You don't want to be audited, so don’t give the tax man any reason to. Other than understanding tax law and accounting, this is where an accountant can really help you to submit documents correctly and be aware of the ins and outs of SARS’s return process.
You may be able to work all around the world and whatever hours you like, but you are not a workhorse. In my experience, clients often abuse this fact (knowingly or unknowingly), I’ve been in some real conflicts with clients in the past because I never set boundaries. Often, companies think because you are one person, you’re easy to walk over, but that’s rather untrue and you should dispel it as a soon as possible.
- Set working hours (9–5) whatever you’re comfortable with. Remember most businesses operate 9–5, so try to keep your hours within that range.
- Set your communication channels. Your clients don’t need your personal mobile number. Email, Slack, Skype are already 3 always-on channels for discussion which can be documented. Don’t WhatsApp clients. WhatsApp is for your friends, not business.
- You’re not available on weekends. Unless you’re that way inclined.
- Don’t use the word “should” ever. I “should” have this up by Friday. I should be able to get this done today. Very dangerous statements. If you set client expectations, give them a day and a time. If you feel like you may not make that time, buffer extra time into it. There’s nothing wrong with doing that and more times than not, the buffering is needed.
- Learn to say no — nicely. Clients will take and take and take if you let and let and let. Outline goals and objectives, deadlines and hard dates. Decide on a scope that is possible during that timeframe and if anything else creeps in that is not part of that scope, push back. You are not expendable and only one person. You may or may not have multiple clients, and all clients tend to think they’re priority number one. Time management, setting expectation and pushing back professionally will be your biggest allies here.
- Carve a little picture from a big picture. Often, clients come to you with crazy dreams of this fantastic product that needs to be built in a month. if you dedicated 8 hours a day to it and limited the scope of the project, I’m sure it would be possible, but that’s often not the case. Learn to sell an MVP. A minimum viable product — it will benefit your clients in the long run.
- Don’t accept rush jobs and last minute requests. This is when stress kicks in and clients are pretty good at making it sound like they’re doomed if you don’t manage to get it done. Nothing good comes from these requests. Don’t reply immediately, stay calm and think about it.
- Ignore threats of lawyers if you don’t meet client expectation. Very few people are going to spend extra money and time getting small amounts of money back from you. Its happened to me before where I’ve been threatened with lawyers. Remember, misunderstanding and miscommunication is not illegal. But the onus is on you to set the expectation, get things in writing and outline the rules in which both parties play, otherwise its a free for all.
- Quality over quantity — when you start out, you’ll want to take all the work you can on, mainly because you never know when you’ll get more in. I've often found that this is when problems start to occur. There are bad clients with shit projects out there. You need to learn to be able to determine good clients with good projects from bad clients with bad projects. It takes time, but if you can get it right, you’ll be a lot less stressed out.
Tools of The Trade
It’s not always easy to find good tools to help you with your work, but I’ve been doing this for years and have literally tried everything.
Slack is a brilliant tool for communication. Most businesses are on it now. I’d suggest you set up a Slack channel for your business, invite your clients and give them a channel of their own. If each client has a channel, you can service all their needs from one place, everything is documented and central. Not to mention the integrations that are available.
Ensure all important decisions happen over email- I.e in writing. Just in case something goes wrong one day, you’ll be able to back up your conversations.
Get a Google Suite for Business account ($5/month), and you’ll have Docs, Sheets, Slides and more in one place. 30GB worth of storage is available for free as well. Don’t store documents and files on your computers HDD. Keep it in the cloud.
Harvest is a great tool if you’re into waterfall project management. Use it for tracking your time so you can bill your clients fairly. Harvest has integrations with platforms like Asana, Basecamp and Teamwork which can make your life a damn side easier.
Pivotal Tracker is a great tool if you’re into AGILE project management. Charging for sprints using a velocity of points is a lot more complicated than charging by the hour so I wouldn't suggest going down this route unless you were either a student of AGILE, a certified Scrum Master or a project manager by trade.
Hosting and VPS
I tend not to be too opinionated about where to register domains, as long as the platform provides you with easy DNS management and competitive prices. Endeavour to find a local service provider in case you need to get on the phone to support.
Apple vs Google vs Windows
I constantly find myself within this tension. I am definitely not a fan of Windows, with the exception of the Surface Pro. However, I often find myself requiring a Windows machine for testing ( I’m trying to hold out for the destruction of IE11, considering Edge is moving to the Chromium engine. Remember, part of your service offering, if you’re building websites is to ensure consistency. Whatever costs are incurred doing that, eats away at your profit, which means you pay less tax at the end of the day. If you require a Windows machine, go get one, or pay for a service like BrowserStack.
I use Apple hardware (save for Google Home) with Google Services. Chrome is my main browser, my settings are synced across my Apple devices (iPad, iPhone and Mac).
All files are stored in Google Drive, save for any projects that I’m working on locally which are stored in Github. Googles apps for iOS are pretty good in my opinion (though 80% of my opinion is based on how nice they look).
If you’re doing a lot of open source development in the Linux, CentOS realm, it really is ridiculous to spend a lot of time setting up virtual environments on Windows machines when a Mac gets you 80% of the way there and a Linux machine gets you 100% of the way there. If you’re a C# developer, it makes sense to stay on Windows…duh.
Regardless, do whatever floats your boat, this isn’t a post about your local setups, so I don’t really care what makes you happy in this regard. Do whatever you feel most comfortable with.
A lot of your time will be spent at home if you don’t rent a co-working space. For some digital nomads fortunate enough to hold European passports, co-working spaces are the light, but if you’re stuck with the “green mamba” — a SA passport for those of you who are reading this who aren't from SA. You’ll probably end up spending a lot of time working from home. This is a big consideration and you need to put a lot of effort into your surroundings and the psychology behind those surroundings.
- First things, first — get a good chair. Your back and neck will thank you. This is a pricey expense, but 100% tax deductible as Office Furniture / Equipment
- A good desk, at the correct height with enough space for peripherals, is your next step. There is a ton of research out there about correct heights, angles and distances for healthy desk work.
- Get a good monitor — this is imperative. Working off of a small screen can cause you to focus too hard, straining your eyes. A high-quality monitor is worth the price tag, trust me.
- Get a wireless keyboard and mouse. This is important for keeping your posture correct and preventing you from being absorbed by the screen.
- Wireless headphones is another win for your home office — grab a pair with microphone functionality while you’re at it.
- Lastly, get a pair of glasses — whether your vision is perfect or not, you get glasses that don't necessarily magnify that can have blue light filters added as a coating to help you with glare and eye strain. Plus, it also makes you look more professional and intelligent.
You may be saying to yourself, sure — this will cost me R10k or more. I don’t have that kind of money, which may be true. You’re not going to start out earning R50k a month, but you could get there very soon. You build upon your business, it just takes time.
So there! I’ve imparted some of my knowledge about being successful, by yourself. Making the move to managing people that work for you is a whole different ball game. Once you do move into that space though, a concrete ceiling is removed and you can really reap the rewards of owning and running your own business, not just yourself. I’d like to leave you with a few last notes that I hope will help:
- Never underestimate the value delivered in business. The value that you deliver, and the value that you purchase. For instance, don’t buy a cheap set of headphones that you’ll need to replace in a few months. Buy a good quality pair with a solid name that delivers value. Do your research, find the value.
- Don’t be arrogant. Clients and most emotionally aware human beings can sniff it out. If you go in charging R2000/hr, you better have worked for Google or released a popular app. Your credibility and reputation will be challenged at every juncture. Likewise, don’t think you’re worth R200/hr if you have a bit of experience under your belt.
- Clients don’t care about code. Clients are interested in two things: If it works and if it works. Don’t spend extra hours reinventing the wheel for a client who doesn’t care or will never see the code. Especially if it’s just you and you have other fires to put out and clients to attend to. That being said, don’t write shit code either. Find a balance.
- Reply to any email or any communication within 24 hours. Don't procrastinate, you’re not the US President-Elect, you have time.
- When you’re sick, when you’re tired, when you’re on leave, you aren't working. Don’t go above and beyond for clients who request you to do something when you’ve informed them of the above. Even if it’s just changing a setting. It sets a behaviour that clients will abuse because you allow them to.
- Always strive to deliver with S.M.A.R.T goals: Specific, Measurable, Assignable, Realistic, Time-related. “Can you build us a plugin that will help convert users at check out” is not a S.M.A.R.T goal. “We need to build a plugin that will show a user a link to our Amazon Affiliates at Checkout, we want to start using this feature in 3 weeks time” — is more S.M.A.R.T — if the client cant give you that level of detail, give that level of detail to the client.
- Lastly, move your “business” / “proprietorship” in your own direction, achieve your own goals through client projects, innovate and suggest new things, learn to educate clients and enjoy the act of building!
Hope you enjoyed the article! I’d love to keep adding to this article as a living breathing guide for everyone who finds themselves in this position career-wise, so please do let me know if you have additions and changed!
Please follow me on Twitter @dainemawer and feel free to DM me if you have any questions!