Hints and tips for setting up for self-employment (especially tech-related)

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jonathan18

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Topic # 191397 3-Feb-2016 09:39

My wife's in the very early stages of planning to leave her current work and to setting herself up in self-employment.

Now, the problem is we are both life-long civil servants and so have nil experience in operating a small business. While we're starting the process of reading stuff and seeking advice from relevant organisations and self-employed friends, I hoped to be able to get further advice from fellow GZers - whether it be general hints such as how best to structure the business (we're thinking a LLC) but in particular, given this site, for advice on best options in relation to technology.

Laptop: I've read here of the benefits of purchasing a business-spec'd laptop over a consumer model; what kind of spec and how much would she need to pay to get an acceptable performing laptop? We're talking standard use here - Office, email, browsing, accounts etc. Any particular recommendations for brands and/or models? (I'm sure I recall HP being mentioned frequently as a good brand for business models?).

Mobile internet access: given she won't need significant access to mobile internet on the computer, I was thinking it may be simplest to just tether her laptop to her phone. But are there significant advantages to having a dedicated device such as a vodem?

Office: I had been thinking the most efficient method would be just to purchase an Office 365 subscription, rather than buying the software upfront - is this appropriate?

Accounting software: given the nature of the business (likely to be based around one or two main contracts with tertiary providers for regular work, and some other more casual and one-off work for other orgs or individuals), should she still invest in decent accounting software? If so, would a basic Xero package fit the bill?

CRM: given the likely small client base, would there be any need for or any benefit from any kind of CRM software?

Multifunction printer: she needs to provide for the possibility of printing material for clients; we are thinking a multifunction laser unit - would a high-end consumer/SOHO model be adequate? (eg this $1200 Brother model, or would she need to spend more like this $2000 model?). Any particular recommendations of brands or models?

There may be other critical tech-related items I've missed out, so please let me know if I have!

Many thanks

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Reply # 1484160 3-Feb-2016 09:47

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The one piece of caution I can give you is to watch out for provisional tax :-)

When I switched to being self employed (via my own company), I had never heard of provisional tax. In a nutshell, the IRD estimates what your next year's tax bill will be, and will expect payments throughout the year to cover it. When your actual tax bill is calculated, you'll have this provisional tax subtracted from the amount you actually owe (your terminal tax).

While the system mostly works well, it essentially means that in your first tax year it feels like you're paying double tax. You're actually not, but you'll have your terminal tax to cover, and the provisional tax for the following year.

As an aside to that: Get an accountant. It's so much easier.

timmmay

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Reply # 1484163 3-Feb-2016 09:49

Some thoughts:

- Anything can fail. If a laptop is critical and you can't do without it, have two, or budget to buy another immediately.

- Internet access : phone batteries will run down.

- Xero basic should do ok, but you're limited to 20 bank account transactions per month (from memory).

- CRMs are complicated.

- I have a Brother color Laser multifunction that cost around $500, it's great. I doubt a small office would need much more.

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lxsw20

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Reply # 1484173 3-Feb-2016 10:00

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HP ProBook or EliteBook with 3 year NBD onsite warranty, docking station, monitor, keyboard & mouse, ext HDD & shadow protect (or other backup solution) should be doable for 2-3k, maybe a little less.

MikeAqua

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Reply # 1484185 3-Feb-2016 10:16

Have you considered making use of an accountant. There are good, reasonably priced small business accountants around. They will help you plan for tax and ensure you are counting all tax deductible expenses etc. Get whatever accounting software your accountant uses.

CRM is useful to allow visibility of customer interactions across multiple employees, to ensure problems are tracked and customers are contacted regularly etc For a one person company with a small client base I think it's OTT.

I would use scheduled tasks in outlook (or equivalent) to remind me to contact customers regularly and save crucial emails to the customer file. If records of other interactions need to be kept (other than emails) a simple spreadsheet log per customer will do the trick.

Mike

networkn

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Reply # 1484187 3-Feb-2016 10:23

lxsw20:

HP ProBook or EliteBook with 3 year NBD onsite warranty, docking station, monitor, keyboard & mouse, ext HDD & shadow protect (or other backup solution) should be doable for 2-3k, maybe a little less.

This is good advice. Make sure you stump for an SSD.

It's worth noting the ProBooks are much cheaper, but have really low resolution screens and are heavier than the Elitebook. We try our best not to sell clients probooks unless budget is a serious problem.

Make sure if you have a backup, you take/store it offsite. The number of problems I've seen over the years where a PC gets covered in water or fire or similar with the backup sitting on top of it!

wasabi2k

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Reply # 1484215 3-Feb-2016 10:42

You don't really mention what exactly you do....

Read this thread: http://www.geekzone.co.nz/forums.asp?forumid=75&topicid=177067

My comments on page 2 are highly relevant.

Engage an accountant. SBA Albany have been very good for me, unsure where you are. A good accountant is not just a bookkeeper, they can assist with planning, cashflow, tax etc. - ask for assistance with this. They are particularly useful in making sure you establish your business correctly and prepare for first year tax obligations such as provisional tax and acc. They can also assist with FBT on cars, claiming home expenses etc.

I like Xero and use it a lot - a lot of people think it is too expensive. YMMV.

You do not need to spend piles of money setting yourself up. You most certainly do not need a $2000 MFP. You do not need a gold plated CRM package day 1. Start with what you actually need and grow it if/when you need to. If it all goes south you don't end up with 10k worth of gear you won't use.

Get a mid grade business laptop - HP Probook or similar. The key factors are screen size and quality and the keyboard. If there is going to be a lot of text entry/referral get a 2nd monitor. Again you aren't all that clear on the nature of her work so phone tethering may be fine - just make sure there is a charger handy.

Office365 is the most cost effective way to get office. $150 a year is nothing and you get 1TB of Onedrive.

CRM - don't bother until you need it. There are a number of smaller "cloud" services available. Many are industry dependent. A notebook/spreadsheet will do fine.

With regards to LLC vs Sole Trader - again depends on the nature of your business. If it is just your wife then the additional admin and overhead of an LLC don't really gain anything. If you will be working for the business too there can be benefits.

MikeAqua

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Reply # 1484219 3-Feb-2016 10:50

Another suggestion: If you get an external monitor, get a USB (3.0) dock.

They are often cheaper than genuine docks and work with almost any windows laptop.

I wouldn't be without my external monitors. I have one portrait and one landscape. Great for working across multiple documents and applications.

Mike

ech3lon

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Reply # 1484221 3-Feb-2016 10:51

I'm a contractor myself as a software dev, this is my take..

jonathan18:

Office: I had been thinking the most efficient method would be just to purchase an Office 365 subscription, rather than buying the software upfront - is this appropriate?

I'm using Open Office since it's free, it can open and save Office documents (Excel, Word).
Depends what you need them for, if MS Office development is your thing for example then this is a must, and I will go with the non 365 variant.

Accounting software: given the nature of the business (likely to be based around one or two main contracts with tertiary providers for regular work, and some other more casual and one-off work for other orgs or individuals), should she still invest in decent accounting software? If so, would a basic Xero package fit the bill?

Xero is a good candidate, but with all things SAAS, internet blackout will leave you with notepad.exe

CRM: given the likely small client base, would there be any need for or any benefit from any kind of CRM software?

I wouldn't worry about CRM if you have less than 50 clients, doesn't require mail campaigns, leads/opportunity management, etc.
But if you do, check out swiftpage Act (act.com) it's a desktop product, also supports hosted solution with web browser as a front end.
It's very cost effective compares to say salesforce, and has quite a bit of third party software support; one them integrates with Xero (http://www.xactsoftware.co.nz/xlax)

Multifunction printer: she needs to provide for the possibility of printing material for clients; we are thinking a multifunction laser unit - would a high-end consumer/SOHO model be adequate? (eg this $1200 Brother model, or would she need to spend more like this $2000 model?). Any particular recommendations of brands or models?

Any (cheap) laser printer is good, mostly for paper invoicing.
I'm using Brother MFC 9340CDW as an all purpose wireless print/copy device, big foot print though. They always seems to have rebates throughout the year.

There may be other critical tech-related items I've missed out, so please let me know if I have!

Many thanks

networkn

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Reply # 1484224 3-Feb-2016 10:53

If I was buying a colour printer right now, I'd be SERIOUSLY looking at the HP OfficeJet X Series (Truly fast not just marketing BS, and CHEAP to run). Depending on print quality (SOME colour lasers have better quality printing but almost none of the cheaper (Sub $1500) do.

Cheap Lasers have a higher running cost than expensive ones in our experience.

antoniosk

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Reply # 1484226 3-Feb-2016 10:54

jonathan18:

My wife's in the very early stages of planning to leave her current work and to setting herself up in self-employment.

Now, the problem is we are both life-long civil servants and so have nil experience in operating a small business. While we're starting the process of reading stuff and seeking advice from relevant organisations and self-employed friends, I hoped to be able to get further advice from fellow GZers - whether it be general hints such as how best to structure the business (we're thinking a LLC) but in particular, given this site, for advice on best options in relation to technology.

Are you in Wellington?

________
AK

lxsw20

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Reply # 1484231 3-Feb-2016 11:04

MikeAqua:

Another suggestion: If you get an external monitor, get a USB (3.0) dock.

They are often cheaper than genuine docks and work with almost any windows laptop.

I wouldn't be without my external monitors. I have one portrait and one landscape. Great for working across multiple documents and applications.

At the expense of needing to use a seperate power cable. I've never found them as reliable as the genuine dock either. Sometimes in the past HP have done a bundle with a dock, but its a bit luck of the draw on that one.

networkn

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Reply # 1484233 3-Feb-2016 11:07

lxsw20:

MikeAqua:

Another suggestion: If you get an external monitor, get a USB (3.0) dock.

They are often cheaper than genuine docks and work with almost any windows laptop.

I wouldn't be without my external monitors. I have one portrait and one landscape. Great for working across multiple documents and applications.

At the expense of needing to use a seperate power cable. I've never found them as reliable as the genuine dock either. Sometimes in the past HP have done a bundle with a dock, but its a bit luck of the draw on that one.

I would agree with this. Geniune Docks are MUCH more reliable and capable (The number of issues with USB 3 docks and Multiple External screens!!!)

BruceHamilton

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Reply # 1484237 3-Feb-2016 11:09

I purchased a business-class HP laptop when I set up, and found it ideal. I replaced it with a HP Elitebook after 8 years of reliable use. Having on-site and off-site backups is most important. I purchased Office with the laptop, rather than the licence version. Today, I'd probably go with the 360 licence.

There is a lot of good information on NZ government websites, especially IRD and govt nz.

http://www.business.govt.nz/starting-and-stopping/business-structures/overview-of-structures

However, as noted by others, an accountant is very useful during setting up and interacting with the IRD for the first year. Especially helping to make the decision whether assets, such as the family home, should be in a trust to protect them. The IRD is very new business friendly.

One major cost may be insurance, some clients require contractors and suppliers to have professional indemnity and/or public liability, depending on the nature of the services you plan on providing.

Most major banks offer guides on setting up businesses, and almost all will want to see a viable and rational business plan. They offer useful templates for such plans, even if you're not planning in borrowing money. Ask to see the bank's business staff. They are very helpful.

Virgil

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Reply # 1484238 3-Feb-2016 11:16

As others have said, get a recommendation and get an accountant. They will help set up the business with the companies office, GST registration, etc, all the paperwork required. In fact most already have shell companies set up that just need the name and directorship changing, and are good to go the same day.

Once the company registration paperwork comes through open a new cheque account in the company name, and put all transactions through that every time.

Run Xero through your accountant, this will have a small monthly charge but will make end of month GST and end of year a breeze.

Others mention provisional tax, this kicks in in the second year. I move 20% of every payment received (or monthly) to a separate bank account, this ensures there will always be enough to meet tax obligations. This balance could grow quite healthy after 12 months, don't spend it you will be so glad of it after 15 months.

Hardware wise - any reasonable laptop will suffice. Get one with a SIM slot for a data SIM. Share the data from your mobile phone account. (Purchased in the company name of course, with the company paying the bill).

Some thoughts anyway, good luck!

jonathan18

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Reply # 1484245 3-Feb-2016 11:37

Wow - that's a great lot of really useful feedback; thanks so much for the advice.

Rather than respond to each individually, here are some responses to some of the issues raised:

* It's my wife who's doing this, not me; she's a consultant/advisor in an employment/study-related field, so it's not an IT-related job. While previously Wellington-based, we now live in Palmerston North .

* Totally plan on using an accountant; we have a recommendation from a self-employed friend, which we plan on following up on. Based on your advice, I think we will start this relationship soon, given the comments re providing advice on set-up etc.

* the LLC versus sole trader thing - for us one of the main reasons to consider the LLC is in its title; while we don't believe hers will be risky compared to many other newly established small businesses, we would be keen to avoid any chance of the business having a negative impact on our personal assets, eg the house. Is this concern not justified?

* Good point re indemnity insurance - it's something we're aware we'll need to investigate.

* Provisional tax - what are the obligations during the first year? Is that period just paid retrospectively based on actual income, which then provides some basis for calculating future years' provisional tax payments?

* So even for just setting up business accounts (with no overdraft facility), will banks require a full business plan?

* Indeed, would we be recommended to complete such a business plan, even if this is a relatively simple business where the finances will inevitably stack up?

* So it seems that I was on the right track with an HP laptop. Most I've seen (both Elite and Pro) seem to come with standard HDDs - even when I filter on PriceSpy down to those supposedly with SSDs (http://pricespy.co.nz/category.php?m=s257308269&o=produkt_pris_inkmoms#rparams=m=s257308296) the actual product, when I click through to it, still has a standard drive. Does one need to make a specific order for one with an SSD, or have it retrofitted?

* Printer - ok, may be sensible to scale back the budget from c $2k, but as mentioned by others cheaper models often have expensive consumables. Based on experience, I'm wary of inkjets - while the actual printing time can be quick, they seem to spend so much time flaffing about before printing! Are these OfficeJet X series supposed to be less frustrating in this way? There's a good chance that she may need to print out multiple copies of resources (eg hand-outs) for clients (eg, for workshops), hence why we need to plan for decent volumes. But this may not be needed initially - therefore one option is to start off with using our current set-up (mid-level consumer HP colour laser printer, and Canon inkjet MF for scanning)?

Thanks again everyone.

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