Sunday, April 22, 2012

How to start a small business - a small general guide for freelancers and sole proprietors

Today I want to talk a little bit about starting an illustration business, or really how to start a small business in general. Now of course the rules and regulations for starting a business will vary from country to country, and they will also differ depending on what kind of company you intend to start, but since I'm Norwegian I will be using the Norwegian system for reference.When it comes to the art business the most relevant form is freelancing or a sole proprietorship. In a lot of ways it's easier to just freelance, you don't have to be registered as a small company to work freelance, but a lot of freelancing artists do register their own sole proprietorships. Of course you don't have to be an illustrator to freelance, actors, photographers, musicians, consultants and translators all work in this field.

A lot you young artists may be wondering what the difference between freelancing and a sole proprietorship is, and I will try to give you a small clue. I am not an expert so I recommend looking up more information on the subject, but I will try to describe what the differences are.
In my opinion the two are intertwined, they are very alike but have a few differences. The main difference between a freelancer and someone running their own business is that the clients don't have to deduct taxes from your paycheck when you run a business, you are responsible for paying your own business tax and having your accounts in order. They will however deduct taxes from your fee if you just freelance. As a freelancer or a sole proprietor you are not really considered an employee you are as the name implies a hired gun for a given project and as such you are not entitled to the same benefits that regular employees are entitled to when working for a company. You are for example not entitled to holiday pay, pension or sick pay. Simplified this means that the state is responsible for your sick pay. You have to set up your own pension fund and the holiday pay has to come from your own pockets. I think some of the best advice out there is to make sure you and/or your business is properly insured. Yes it will cost you a bit of money, but it sure beats the alternative! A freelancer often does not make his or her sole living from illustration or photography or whatever. They tend to have a job on the side to make the wheels go round, as they often only work part time as freelancers.

Freelancer is a an English term referring to free lances, knigths and soldiers who fought for the highest bidder. That's pretty much what illustrators are, but with a pencil instead of a lance or sword :p (Drawing made by me: Anita K. Olsen Illustration).

The hard part is figuring out whether you should just freelance or if you should run your own sole proprietorship. A lot of people have some trouble figuring this out, but I found this "checklist" at a Norwegian site run by public organizations like the tax administration. If you can tick off several of the points below you should consider running a sole proprietorship instead of just freelancing.

- You have the use of your own office and you have several clients.
- You are responsible for the end result of the project.
- You are responsible for the economic assets.
- You get a project based fee instead of being paid  by the hour.
- You can hire in help for your projects at your own cost.
- You control your own free time and vacation time.

Helpful? Yes, I at least found it to be very helpful. So now that we have an idea of what kind of business we form we should choose or if you indeed should be registered as a company at all. What next? Now you have to do some research on your own. You have to figure out where you belong in the market. Do you belong in Fantasy and Sci-Fi or do you belong primarily in editorial art, should you focus on children's books or do you maybe belong in several ends of the market? Do you want to work internationally or not? Where do you plan on getting the funds for your business and how are you going to promote it? These are all very important factors to take into consideration, and there are probably several other key things to figure out that I have conveniently forgotten to mention here. Yeah, now that I've probably given you a headache and a tingle of fear and frustration in your stomach I'll be moving on to the pure mechanics of it all.

Once you have decided what form to actually start your business in and what it is you are going to do, then what?

1. You have to come up with a proper business name that complies with your countries rules and regulations.

2. You have to register your business with the proper authorities.

3. You need to apply for a bank loan or apply for some other type of financing (like government funding or scholarships etc.) unless you have your own funds to put towards getting your business up and running.

4. You have to get an accountant that can keep your finances organized unless you are capable of doing some of it yourself. I still recommend an accountant though. You also need to find a billing system that works for you and that also complies with the regulations of your country.

5. You need to acquire the equipment you need to run your business, be it software, hardware, artistic equipment and so on.

6. Get yourself out there! Send out promotional items. Attend book launches, go to cultural events. Buy advertising in news papers or on-line, write a blog, set up a proper website, you know all that stuff.

Now of course you don't necessarily have the possibility to do all of this at once. It might take a while before you get all your things in order. It's hard and frustrating work to set up a business. You have to do your own research, you have to do a lot of paperwork, work late nights and early mornings and give up a lot of your social life. If you're going to work in illustration and run your own business you really have to want it more than anything else. You are hereby warned, but don't be scared. It's quite rewarding when you get your first projects and a little bit of money starts coming in.

The bottom line however is this:  If you don't love it, don't do it!

Have any questions about the text? Anything that you found to be confusing or ill informed? or did you just plain like this post? Leave a comment and I'll do my best to get back to you.

Until next time
Anita K. Olsen

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