I am a small business person now. I have my own consulting practice and two clients. I live comfortably and make enough money, although I could always use more. I make nowhere near $200,000 per year in realized income. If I did, I really wouldn’t mind sharing more of my income with the federal government, as long as they were using it wisely.
Realizing or showing a $200,000 personal income usually means you’re spending too much. Your fixed expenses are high. Maybe you’re living in a million dollar home with a big mortgage. Maybe you have an expensive car you’re paying for. Something is causing you to spend a lot of money. Because I know that if you don’t need to realize a high income you won’t. You can put as much as $42,000 year year in a 401k. You can hold money in your business if it is a corporation (and pay corporate taxes on it), unless you have a subchapter S corp. Even still, you have so many business expense choices to keep you from realizing an income as high as $200,000.
The real killer to the small business person is administration time, the stuff we don’t know, and the stuff that could change. If you want to do me a favor, get rid of the complexity so that I don’t have to spend so much time working on my business administration and trying to figure out what the tax laws really say. Do I really need to put an attorney on retainer or use a tax accountant? I cannot possibly afford either’s fees, so I have to do it myself. And that takes time away from billing my client and making more money for my business. This brings down my income much more than a tax increase would.
So to the politicians who say that the small business guy making $200,000 can’t afford a tax increase, you’re probably right. But it’s his own fault that he can’t afford it. Otherwise he wouldn’t be realizing that much income. The vast majority of small business people, though, make nowhere near this. Some are by choice but most are because they are struggling to get by.
If you really want to help the small business person, the ones who provide most jobs to the economy, make it easier for us to do business.
In a job, you typically sell your time for money. The employer really wants the product of your labor, but pays you on an hourly basis. Now some people are lucky enough to also be bonused or commissioned based on the results of their efforts, but most people just trade their time for a paycheck. In multi-level marketing, we called a job Just Over Broke, because you can never really rise above your circumstances by working harder or doing more, and you can’t multiply your “profits” by using technology or brokering the efforts of others.
In my current business, I am actually selling my time for money, but because I am more like a temporary worker, I can get a higher hourly rate and hold back money for when I am not working. I have also sold more work than I can possibly do, so I am brokering my work out to others in exchange for a small portion of their hourly rate. I can also get excellent people that are extremely specialized, so ultimately the client will be happier than if I had done the work myself. It is not always easy finding the right people, but doing this kind of business means that I earn some amount of residual income from my efforts. Residual income means that I might earn for a month, year, or five years from my efforts today.
My focus is helping my client do what they want to do and I go above and beyond the call of duty to make that happen. But ultimately the work is performed by others. So I can spend my time selling work and putting together deals, building my business to an unlimited size, rather than selling my own time where there is a limited amount I can sell. Selling time for money is a great way to start a business, don’t get me wrong, but ultimately it is a dead end that you need to move away from.
Do you still sell your time for money?
I was laid off from my job of three years three weeks ago. I really thought it was going to be a hardship for my family but it has turned into something else completely. I’ve actually been able to consult daily, although I’ve still been taking interviews and have to still be available to work. Finding another job has not really been working very well, but I did sell two projects and have a third that another consultant is doing for me. So while the job front is not doing so well, consulting has been booming.
Consulting is still selling time for money, which is what you don’t really want to do when you’re in business, unless you sell other people’s time. And mostly what I’m doing is selling my own time. Still, I am making more as a consultant than I would be an employee, which has helped me to create a cash surplus. On the downside, I am allowing my clients 30 days to pay their invoices, so I have slow cash flow. Still it does beat working at a regular job.
I continue to work at building income streams that don’t require a ton of my time but it is slow going. Maybe in a year or two these efforts will pay off. But right now, consulting is paying the bills… and it is giving me the freedom to play a little. It’s not a bad life. I work hard and play hard, and have a little cash available.
Are your business efforts paying off for you?