Many people are transitioning over to contractor work, but what does that mean for you? Most people know that means you pay your taxes, but how does that work? Many people do not realize you have to charge enough to cover what you need to earn and your self-employment taxes. If you want to charge $30 for the administrative consultant fee, you can only pay yourself $10-15 an hour. The rest needs to remain in the business. Also, because you cover your supplies, you would either charge the client for the supplies (cost of goods sold) for that specific job. However, if it is a general expense, such as your phone service, you cannot charge your client directly, but I will show you how to handle this issue in my pricing course. Learn more over at the “Building A Fair & Profitable Pricing Plan.”
You need to charge to earn a profit. Yes, as a contractor, you need to make a profit so you can cover business expenses. Gone are the days when we can earn $15 and do what we want, but business requires specific reporting steps. If you say, let me keep it simple, you will end up on the financial rollercoaster of not earning enough to continue in your business, and this is where the struggle comes from for most small business owners.
Please ignore people that say you do not have to report income until you earn a certain amount. If those people are writing off your pay as an expense, the IRS will look for you to report that as income. Expense for them, but it is income to you, and someone has to pay taxes on that amount. Also, working for a non-profit does not mean you do not have self-employment taxes. If you earn a small amount of income, typically, there is no tax or a small amount.
If you hire someone to respect, they are business owners. You cannot pay someone $30 an hour and expect them to live off that money, could you? Stop thinking all people manage money poorly when the problem is they are not earning enough money from the start. Also remember they are not an employee, and this may be their primary stream of income. Remember, for many of us; our business is not side income.
Also, set your number of hours worked. Slavery is over, and working unlimited hours for no pay or small fee is costing you money. Remember, time is money. If a job takes 4 hours to complete, you need to charge them for each hour plus additional business costs and expenses. Learn more in the pricing course, and we will work to increase profits together.
I have seen people give up to soon and change their pricing. Sadly, I can't tell you the number of times I have heard, "They will not pay that price." A business is suppose to increase your earning potential. Don't give up but learn how to price better in your business and the people will come!
"$Building A Fair & Profitable Pricing Plan" - online learning and self-paced. Interactive exercises with me, a professionally trained accountant. Y. Michelle Coard