Survival Tips For A Sole Proprietor In A Competitive World

by Silicon Valley Blogger on 2011-03-1414

Any kind of crisis breeds opportunity and changes behavior. And when the financial world did its crazy jig in late 2008, it caused a lot of us to stop and evaluate our financial behaviors and consumer habits. You can probably get a lot of interesting examples along these lines in any type of financial, business or economic environment.

As a reaction to the shifting employment landscape (U.S. unemployment rates still leave much to be desired), we now see a lot of people who’ve lost their jobs now turning to new careers as a result. Also, more people are becoming freelancers and sole proprietors (me included :) ). So if you’re going to start doing your own thing, what kind of things should you be mindful of?

Survival Tips For A Sole Proprietor

You begin by making it official. It’s pretty simple anyway. You start out by getting registered at your local county office to register as a sole proprietor. The fees are typically under $50 and give you legal designation as a business. You should then pick up an EIN (Employer ID Number) for your business, which is a tax identification number (TIN). Some people use their Social Security Number as their TIN but I’d recommend against that. Better to have your own business ID number rather than use your own SSN for that purpose. There are lots of reasons for this — you receive greater credibility and opportunities for business grants and credit in the future. I did it for security reasons — separate your business from your personal affairs even as a sole proprietor.

Sole Proprietor

After this, you can start getting to work! If you’re out to market yourself, then some basic ways to do it include these following action steps:

1. Get Connected.

Get involved in your particular business circle. Know your niche, as they say. Know your customers or what kind of market you are entering into. Sounds pretty basic, but a lot of people aren’t terribly tuned into their market and only begin to understand it thoroughly over time (again, me included). If you’re in a competitive space, it’s all the more important to get your name out.

Some of you will take out ad space or promote yourself in other ways. Often people look to their business peers first to pick up ideas. You can also seek mentors to obtain insights. You can also start using the services of others when you need them. This builds reciprocal business relationships.

2. Sell Yourself and Start Networking.

So you think your product or service will sell itself? You’d be lucky if that were the case. Most of the time, you’re going to have to put in some effort to let the world know about what it is you do. If you don’t have business cards and a website, you are missing out on excellent ways to sell yourself.

Marketing is one of the key aspects when being in business for yourself. I didn’t realize how big a role it played until I became an accidental entrepreneur. But it can literally take just as much time to do as running your core business. You don’t have to be too pushy though — but you can encourage others to talk about you, too. Word of mouth is powerful. Talk about other businesses you appreciate. When you spread positive word of mouth about other businesses, they often return the favor.

Through these interactions, you can build lasting business relationships. Once you do a great job for someone, they remember you. Building positive relationships is one of the keys to business success.

3. Get Online.

So who hasn’t gone online yet? Well, lots of brick and mortar places don’t. But I found that those businesses who’ve decided to go online as part of their shtick are seeing some great results. Think about it. Let’s say you sell and make jewelry (okay it’s a pretty popular hobby and done by several people I know). You may have a small jewelry shop in your town or work from home to do it, distributing some of it around town. Well, why not think about taking an e-commerce slant with your business?

Here’s a real life example I can provide you — I’ve got a friend who owns a tea garden house (our plug: it’s called Samovar) here in San Francisco who pretty much bootstrapped his venture. It’s taken him 8 years, but now he has three locations, all in the city. It’s a great brick-and-mortar business. But he also has his eye on diversifying his income via an e-commerce site that exists to sell his tea off the web. Since tea and coffee are basically non-perishables that are easy enough and lightweight enough to ship, these make ideal products to sell online.

4. Seek Leverage: Think About Bartering and Outsourcing.

Support can go a long way, and it can come in a couple of forms. I’ve discussed the idea of bartering with other entrepreneurs before (see my post on clever ways for other entrepreneurs to help your business). In the kind of work I do, for example, the idea of bartering has worked out pretty well. I basically trade services with a colleague so that we’re both able to get what we need without having to spend a cent. If you know enough people in your field, this could be a great approach! In my case, I’ve often traded writing services for design or technical services. The online realm lends itself easily to this sort of arrangement, actually, so it’s kinda cool that way. Check out the time I was looking to get a logo designed for my site — I basically bartered with a logo designer and helped promote their logo company in exchange for developing a logo for this site! Nice.

So I’d suggest that you connect with other business owners to see if you can create synergy and leverage each others’ skills further.

Another way to gain leverage and grow your business further is by outsourcing. If you’re at the point that you can grow your business out with the revenue you’re earning, then start thinking about investing back into your venture. Maybe you’ll get more work accomplished this way! I’ve felt growing pains now and again while doing my work. And it’s a godsend to find really great people who can help support your efforts and become part of your team. From accounting to marketing to possible design work (if you’re in a creative field), there are many tasks that can be assigned to an independent freelancer, contractor or employee. The investment can be worthwhile because this will allow you to focus on other productive business endeavors.

After some point, it’ll be impossible to do everything alone. The key is to know when it’s time to reach out and start taking your business to the next level.

Copyright © 2011 The Digerati Life. All Rights Reserved.

{ 14 comments… read them below or add one }

KDB March 15, 2011 at 1:00 pm

This reminds me of the old acronym I first heard from Dan Kennedy, YCDBSOYA – You Can’t Do Business Sitting On Your A#@. Well, you can do some business sitting in front of a computer, but still, you need to take action, and not just sit in your store or office and hope business finds you!

ericabiz March 15, 2011 at 9:47 pm

Hi! As a fellow Silicon Valley girl, I’d really appreciate your opinion about my latest post:

http://www.erica.biz/2008/how-can-you-have-that-perfect-flow-state-more-often/

It’s about my journey toward hiring a personal assistant. I would value your opinion on whether you would do something like this, even though it isn’t necessarily the traditional “frugal” choice — especially since you’re now focusing much more on working from home.

Cheers, and good luck!
-Erica

Silicon Valley Blogger March 15, 2011 at 11:41 pm

@KDB, I agree — I don’t believe there’s such a thing as totally passive income if you want your business to grow (especially so). Passive income erodes over time so while you can set something up to let it fly for a bit, it may not last long. The business climate changes often and there’s a lot of tending to be done in order to keep yourself ahead of the game. If you hire great people to manage your business, then I can see it chugging along on its own volition, but situations like that take a long time to build up.

@Erica,
I think that outsourcing is a great idea. I would certainly do it. There’s just so much to do as a small biz owner that it makes total sense to think about how best to use one’s time. For instance, my time is best spent on certain tasks, while the smaller, more systematic type tasks can probably be best done by an employee or other assistant. When it’s time to grow, you’ll know!

Thanks for your comments!

Kathryn March 16, 2011 at 2:01 pm

Great tips, but I want to point out one thing: for tax docs, the IRS usually prefers that a sole proprietor use his/her SSN, not a TIN/EIN. This applies whether you’re filing your regular tax return or auxiliary docs like 1099s (for all those outsourcers you’ve used). But I agree 100% that it’s good to have a TIN/EIN to use on invoices, etc. so you’re not sharing your SSN with clients and other business contacts.

Silicon Valley Blogger March 16, 2011 at 2:14 pm

@Kathryn, great point. I have an EIN but I’ve discovered that some of those who pay me are requiring I give them my SSN instead. When filling a W9 form, I use my EIN, but in some cases, they bounce back with the request that I provide my SSN. If you or someone can confirm what it is that is needed for the W9, I’d love to know so that I can properly comply. I prefer to use my EIN at all times for obvious reasons. The strange thing is that in some situations, it’s accepted and in others, it is not.

My tax guy tells me that if there are no complaints about the EIN then it should be alright to use this for the W9. If there is resistance, then yes, provide the SSN. But according to him, they should map out to the same individual.

Going forward, I’ll be shifting to a new business form anyway so hopefully it becomes a non-issue. But a clarification on this matter would be helpful.

BayAreaTech May 6, 2011 at 3:41 pm

Leveraging other professionals and small businesses has worked well for my own small business. I have found that most professionals today have the mindset/understanding to be open to mutually beneficial relationships… after all, everyone involved stands to gain from working together.

Don’t be afraid to ASK. You will never know what door opens, unless you first knock.

Susan June 23, 2011 at 11:00 am

It seems pretty funny now (or seemingly naive) when I remember how I used to fantasize what it would be like once I resigned from my corporate career. That was almost 3 years ago. I thought I’d have more time to organize my house and my finances in a way that would completely satisfy my obsessive-compulsive self. I would be able to devote more time to my kids’ extra-curricular activities. I would be able to focus better on a new business and carve out a life, relaxing as an entrepreneur. I would live the ideal life and say I “retired early” and ride into the sunset. Yeah right. :)

Of course that did not happen. Simply because of Parkinson’s Law that states:

Work expands so as to fill the time available for its completion.

which also has this interesting corollary:

Nature abhors a vacuum.

You may want to watch out for “work creep”. No matter what you decide, there will always be stuff to do.

Silicon Valley Blogger June 23, 2011 at 11:06 am

@Susan,
Well, it’s good to have that problem — to have too much work rather than too little? When I became self-employed, eventually, optimism took a backseat while reality came to the forefront. And ultimately, the ideal schedule I thought I’d have once I started doing my own thing never really materialized. That was because the financial blogosphere changed over the years and working in it got more and more intense. ;) Plus, a lot more opportunities opened up once I quit the corporate life and decided to focus entirely on online business ideas. So I found myself feeling the pinch of growing pains.

So what’s the solution? Get help. Outsource if you’re experiencing business growth. Don’t overextend though, as it’s important to keep a balance between how much you spend/invest vs how much you’re taking in.

Mrs. Accountability June 23, 2011 at 12:10 pm

I’m still at the fantasizing part… wishing I could just blog and do my husband’s accounting, instead of work and blog and and and… I actually got to take today and yesterday off from work and surprise surprise the kitchen stayed clean two days in a row!

The Penny Hoarder June 25, 2011 at 4:25 pm

Oh boy, I can certainly relate to that. Working from home isn’t always as glamourous as it sounds. Sure, it’s nice to stay in my pjs until noon, but I find that I work more now than I did at a real job.

Good luck with the changes and dealing with the growing pains this year.

Craig June 25, 2011 at 5:56 pm

I’ve been a stay at home dad for about a year and I thought I’d have a ton of time to blog. No way!

Silicon Valley Blogger June 25, 2011 at 6:35 pm

Thanks again! Gonna be an even busier year. I can feel it! I’m also eager to see what surprises you bloggers have in store for us going forward. :)

James Murray June 25, 2011 at 11:45 pm

I was hoping that the 60 hour weeks of full time work and part time business would someday be just 40 hours of full time business. I’m wondering after reading this if that means… no matter what I do… it’s 60 hours per week.

Give me hope… At least the rush hour commute time might reduce a little?

Silicon Valley Blogger June 26, 2011 at 1:07 am

@James,
Well it depends on how hard you want to work. If you’re a passionate person about your work, you can end up in this way, especially if your business is actually growing or is on a successful track. It’s harder to pace yourself since there can be so much work going on and you have to wear a lot of hats in the process as well. If you decide on turning down work because it’s eating up your time, then it’s your prerogative, but that’s opportunity lost as well. It’s hard to say “no” to opportunities once you’re at the helm of your own venture.

Leave a Comment