Throughout your career as a contractor, you’ll have opportunities to help your business grow. No opportunity is without costs, but with proper planning you’ll be able to avoid the worst of the growing pains.
Here are some things to watch for:
Keep Your Pipeline Flowing
When you’re trying to grow your business, you have to be looking for the next job at all times. Of course, the more work you’ve got on, the more of your time will be dedicated to those jobs. And we all need to eat, and sleep, and we all deserve to spend time with those closest to us…
It’s always a temptation on a busy day to tell yourself that you don’t need to get back to a potential client on their inquiry, don’t need to advance potential projects through your pipeline. But if you don’t spend the time on it when you’re busy, the moment your contracts start to run out you’ve got nothing coming up – and that can put paid to growth easily.
One of the best ways to free up some time for this is to look at what you can outsource cost-effectively. If someone else is handling the dunning cycle for you, that’s a weight off your mind and time freed back up. And just letting expert contractor accountants handle your books means so much more time to invest in your business – and yourself.
Fixed versus Variable Costs
If there’s a piece of software you use regularly for all clients, you’re almost certainly paying the same for it no matter how many clients you use it for (the more ridiculous SaaS deals aside). IT contractors, influencers, creatives and architects are all likely to relate to this. There are plenty of other examples of fixed costs that contractors may have to deal with.
However, there are also a number of variable costs out there. Taking on more clients or even tackling bigger jobs for them can mean these variable costs go up – and sometimes, as they tip over one threshold or another, they get significantly bigger.
Sourcing can even become a problem in some cases – so now there’s a cost in time as well as in price. If you’ve been used to the same expenditure day to day for some time, these shifts can take you by surprise. More importantly, what you charge may not have been adjusted appropriately to cope.
And believe us when we say very few things are worse than undercharging when you’re trying to grow your business!
More or Bigger Jobs?
Depending on your industry and your goals, you may find several simultaneous smaller contracts or fewer larger, higher-paying jobs a better way to build up your business. Bear in mind that this choice may also define your future for some time to come – the nature of word of mouth marketing means you’ll usually see referrals very like the jobs you’re already doing, and shifting focus means more effort put into your own marketing.
Bigger businesses tend to come with longer payment cycles, too, so you may find yourself facing tighter cash flow as you transition into larger jobs with higher fees.
Again, having tight control over your dunning cycle is a must here, but the wise contractor also builds a nest egg for seasonal fluctuations in business or just to weather a lull in payments.
Taxes Go Up as Earnings Increase
It sounds obvious – it is obvious – but you’d be amazed how many conversations we’ve had with contractors who didn’t fully take this rule of thumb into account.
If your business has been performing at a particular level for some time, it’s easy to mentally estimate your tax liabilities at the same level. For contractors, where you have decision making power over what contracts you accept, you can assess the likely tax obligations of a given contract ahead of time, and you should be taking it into account with your decisions.
We should also say – your mental estimates will be a lot more accurate if your business accounts are kept up to date and you can easily refer to them. If you don’t have time to handle your accounts yourself, you’re busy enough to have someone else do it for you – and the added decision-making power is well worth it!
To discuss any or all of these points, and to help you manage your finances for growth, please get in touch.
