My sister was a high school senior when I was a freshman. Prior to one hour into the first day of school, I thought this was awesome. She would drive me to school. She would help me make friends (via her friends), and she would make sure that no one messed with me. Boy, was I mistaken. The experience was nothing like I had imagined. The highlight of my first 60 minutes of high school? Her friend, Jon, helping me find my next class. “Go to the end of that hall, out the door, and take a left into the corridor.” Great advice, Jon. I went out an outside door, the door shut behind me, and I had to walk to the front doors of the school. School security almost didn’t let me back in, and I was 10 minutes tardy to my second high school class.
Whereas this mistake was comical and most likely unavoidable, common errors of new entrepreneurs are never comical and always avoidable. Don’t be a noob. Learn from the mistakes of so many part-time entrepreneurs.
Oh, wait. We should probably identify the group of people that I’m talking about and to. I’m talking about that awesome mom with the awesome camera who knows her way around Photoshop. I’m talking about that brainy computer guy that can navigate all things tech. I’m talking about that talented designer who can breathe life into a dying project. And I’m talking about the hard working account manager who doubles as a club promoter on the weekends. Yes, everyone who earns money outside the realm of normal employment with the hope of that income turning into normal employment. That’s who I’m talking to.
Avoid the following mistakes and your chances of turning your part-time gig into your full-time gig will increase exponentially.
- Bad Banking- My biggest entrepreneur pet-peeve on the planet is the commingling of personal banking and business banking. Alright, I’m puttin’ the smack down. If you don’t have a business account, then you don’t have a business. Go to a credit union or small bank, and get a business checking account. Yes, this requires you registering as a business in your state. Yes, this SLIGHTLY complicates things. But it’s a business, dammit! Treat it like one. Get a freaking bank account. Plus, you get the added bonus of naming your business. Don’t name it something lame like I named my first business (Advanced Planning Solutions).
- Wrong mix of free work- While you are honing your skills, you will probably agree to work for free for a friend or family member. That’s fine. Just don’t do it too much. Don’t get taken advantage of. Do a couple of projects for free in order to have examples of your work, and then move on. Charge your friends. Charge your family. My uncle is my dentist. He charges me. One of my good friends is my doctor. He charges me. My best friend on the planet is my lawyer. He charges me.
- No business budget- How much does it cost to run your part-time business? What’s that? You don’t know? Come on, man. You HAVE TO know what it costs to be in business. I know exactly how much it costs to run my business. This is because I have a business budget. How will you know if you need a new piece of equipment, if you don’t have a budget? You won’t. So you will either buy something you can’t afford, or you will not buy something that will help your business grow. Create a budget.
- Treating your business like a hobby- Are you treating your business like a hobby because you don’t want to stop enjoying it? Big mistake. The quickest way for the fun to run away from your business is to treat it like a hobby. I LOVE my business. It is perpetually fun. Your side-business, or full time business for that matter, is most likely something you are passionate about. That means that it’s easier to have fun with it. Have fun. Just don’t treat it like a hobby. Don’t have a stupid email address. Don’t have crappy business cards. And have a website. It’s a business, not a hobby.
- Calling your revenue, income- When your business earns money, that money is called revenue, not income. It’s a very small difference, but when you call the money, income, then you tend to forget about things like taxes and expenses. In addition, when you call the money, income, you tend to just deposit the whole damn check, and spend it freely. No real business would do that. The money that your business earns is called revenue. Repeat after me: revenue.
I love owning a business (several actually), and I hope that you will enjoy owning your own business some day too. If you follow these 5 tips, then you will avoid many of the pitfalls that so many part-time entrepreneurs face. Want to read a good book on part-time entrepreneurship? Check out my friend Erin Albert’s book Plan C: The Full-Time Employee and The Part-Time Entrepreneur. Not only is it a great book, but Erin embodies this philosophy. She is an amazing person.
Have a mistake that you would like to share. Leave a comment below. Thanks!!!
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.
16 thoughts on “The 5 biggest financial mistakes of the part-time entrepreneur”
Love the article and the candid language. However, I already had these lectures from my husband, hence, your best friend on the planet. Guess you must have gotten to him first. Great stuff Pete. I always love and appreciate what you have to share.
Awesome article, Pete. I’ve learned a lot in this realm in the last few years as I finished up my degree from the Kelley School of Business. Sad to say, however, that in the entrepreneur CLASS (notice the singularity, because that’s all that was offered)… your 5 big points up there were never even touched on. In fact, I pretty much hated the class because all the instructor did was talk about HIS businesses, how much he works on them, and then told us to come up with an idea for a business and put together a “pitch and pro-forma” to present for grade. As I cautiously venture out into the world of Entrepreneurship, I welcome your experienced articles and advice!
Wow. That seems like a disheartening class. I’m glad I could help.
WOW! Thanks for that post! Little scary when you feel like you are being directly spoken to thru a blog. None the less, Great advice! Some I have followed already and some (like charging friends and family) I need to do. 🙁 Great suggestion on the book! I am required to read a book a month by my boss (CJ)! Wonder if this one would qualify….HMMM? May just be my January book!
This is the total ass-kick I needed. PtP- you somehow always know exactly what I need before I know I need it.
Straight up awesome. Nicely done, Pete.
It’s the binoculars. Kidding. Thanks.
Great article! The lack of budget thing kills me. Equally as important, I find that a lot of people vastly underestimate expenses (especially startup costs) in putting together a budget. They try to shave costs before knowing where the savings can be found. This puts the brakes on things really quickly.
Ladies and gentlemen, my lawyer.
This was a great post. I have often thought/dreamt/wished I could leave my full-time job to start my own business… I am very early in those thoughts/dreams/wishes, but this is a great start!
Loved this article! I’m in the bliss, make that an often ignorant bliss of starting my own business to open in March…definitely great points that will stay top of mind with me as I continue planning and budgeting!
Awesome!! Best of luck to you!
Great post -love #4. Whenever you catch yourself tinkering, it’s a hobby! If your improvements or tweaks are not billable, it’s a hobby. If you’re regularly working after supper time, it’s a hobby. Save hobbies for the weekends and you’ll know the difference.
Pete, the simplicity in which you approach this topic may be this post’s most valuable attribute. I can tell you that with some of the people that I have mentored (and are currently mentoring) that sometimes the basics simply go unattended. Considering each of these five steps, a budding entrepreneur can learn a lot about their willingness to take their “pre-occupation” to the next level of becoming their *occupation*. You have a keen ability to simplify! Well played.
Great! Another good entrepreneurship book is “The E Myth: Why Most Businesses Don’t Work and What to Do About It” by Michael Gerber.