A  self employed independent contractor must have working money to begin a business.  Depending on the type of self employed business you want to establish will dictate how much start up money you will need.  Before you open your business you need to create a budget.  Break down in detail what it cost you to live for a month.  Items such as food, clothes, utility bills, mortgage and car payments, etc.  This list will show you what it will take to live for several months until income from the new business starts to arrive.

The Classic Mistakes That I Made:  And Made by Many  New Self Employed Independent Contractors

So many people wishing to become successful as a self employed independent contractor miss the basic first step and start their business under capitalized.  They don’t spend the time learning the steps necessary to establish a business and figure out how much money they will need to live on until their business is making money.  They just jump in and start working in their business and never stop and take the time to work on their business.  According to Steven Covey author of The 7 Habits of Highly Effective People more time should be spent working on your business than any thing else.

I made the mistake of starting my self employed real estate independent contractor business without proper planning or funding.  It took me several years of stumbling before I realized that I had to run my business like a business.  Oh, I was busy getting listings and working with buyers.  The main detail I missed was not having the structure in place of qualifying the people I was working with.  If the house I was listing was overpriced it either would not sell or it would take twice as long on the market.  Therefore, it wasn’t smart to take an overpriced listing because it cost me time and money to market the property. I had not planned on needing money to market property belonging to someone else.  Therefore, when I took an overpriced listing I was struggling to get the funds to market someone else’s property that was overpriced and not going to sell or not sell quickly. 

Work Only With People Who Can Generate Income For You: The concept of billable hours

I wanted people to like me and I would allowed the price the seller wanted to get for the property to dictate the listing price rather than use the research I did for comparable sales in the area.  When the house didn’t sell the sellers would become upset with me. Most businesses depend on repeat and referral customers.  You don’t build referral business by not being in charge of your business or not being completely honest and straight with your customers.  Even when you have to tell details they don’t want to hear. I was naive and didn’t want to confront a seller that the price he had in mind was not supported by the market.  It took time for me to learn that when the comparative market analysis that I generated out of my multi listing systems records was appreciably different from what the seller thought the property was worth, it was not a smart business decision for me to accept the listing. Marketing that listing was my responsibility and  it was going to cost me money.  The longer the house stayed was on the market the less money I would make.  I came to realize that my time was my money.  I started to look at the hours in my day as lawyers and CPA’s do, billable time.

I made the same mistake working with buyers when I first started my business.  I was not comfortable asking a couple how much money they had saved towards a down payment, or if they had any credit problems.  I was excited that a buyer wanted to look at property and I could show them the community.  I soon learned that buyers must also be qualified.  I had to learn to ask the hard questions up front.  Regardless of how excited a buyer was about finding a house, if they couldn’t qualify for a loan and had no money for down payment we were wasting each others time. 

Lesson Learned:

I had to control my business rather than allow my business to control me. I found that I had to create a personal business policy to identify buyers and sellers who were ready willing and able to follow through with a purchase or sale commitment.    I had to establish the limits so that I could have a successful business and a life.  The value of my time became the primary indicator of who and how I spent my time.