Do I believe the myths or realities?
Get a reality check! Self-employment is not an easier way of life, it’s a different way of life.
Myth # 1
If I build it, they will come.
Reality: No they won’t. Even if you have the most original idea, the coolest logo, the biggest store-front signage and the neatest print advertisements. You may have a warm and fuzzy feeling, but the reality is that getting people to part with their hard-earned cash is not directly proportional to how in love you are with your business idea. A good business idea is a great place to start, but it takes research, planning, hard work and successful implementation to turn your idea into profits.
Myth # 2
If I’m my own boss, I won’t have to work so much.
Reality: You’ll probably work harder and longer than you ever have before, but you’ll enjoy it more.
Myth # 3
I won’t have to do the things I don’t like doing. I can just work on things I love and find interesting.
Reality: Most small businesses start with little cash and cannot hire experts right away. You need to have a general knowledge of all areas of your business such as computers, social media, bookkeeping, marketing, human resources, payroll and federal income taxes. There is a time and place to delegate, but be prepared to do many tasks and jobs that you don’t like to do.
Myth # 4
I’ll be able to deduct everything, so I won’t have to pay taxes.
Reality: Taxes are based on profits. If you make a profit, you will pay taxes. Purchasing something you don’t need just because it’s a business deduction is bad math. Taxes are based on a percentage of profits. If you buy $1,000 of something you don’t need, you don’t get a $1,000 reduction in the taxes you owe.
I won’t have to report to a boss.
Reality: This is true. You will not have a traditional boss. You will have several non-traditional bosses: your clients, your employees and the government. Your clients sign your paychecks. You must meet your employees’ needs for salary and working conditions so they will be effective in creating and delivering your product to your clients. Government taxes, laws and regulations dictate much of what you can and cannot do, and often how you do it.
Myth # 6
I don’t have to make a profit, I can just write off all the expenses related to my passion.
Reality: The IRS has rules about individuals treating hobbies as businesses on their tax returns. The IRS requires businesses to make a profit at some point. If you do not, you run the risk of an audit and the IRS disallowing all previous years’ tax deductions.