Dear Advisor: What do I Need to Know to Start my own Business?

Post was originally published in December 2019 and updated in June 2020, August 2021, March 2023, February + June 2024 for relevancy.

Here are 15+ things you need to do before starting a business:

Read "Freelancer's Union" (book and blog) and "Getting Started in Consulting" (book)
Scoped out specialty/industry for (consulting) services
- Are you an expert in an industry, and/or what is the prospective client trying to do?
- My elevator pitch: AI due diligence for VCs.
Determined your business model or what rates to charge, using a top-down or bottom-up approach, a monthly retainer rate, or something else entirely?
- To help you estimate your rate, the top-down approach starts with your desired salary to set your rate; the bottom-up approach starts with your total expenses to help you understand what your minimum rate needs to be -- to break even.
- How much of your time do you expect to be billable? 50%?
- Will you take equity as part of your rate? How will it be vested?
- Will you charge by the hour, by the week, or by the project? As a recurring monthly fee for a retainer? Something else?
Set your invoicing frequency and repayment terms, e.g., bi-weekly with a net-15
Decided what you'll do in case of non-payment
- Will you charge late fees?
- Will you stop all work until you're paid what you're owed?
Found a great lawyer to help draft and review contracts (including non-payment terms) + sign contract(s) before starting work
Settled on invoicing template and re-iterated non-payment terms from the signed contract in the "Notes" section of your invoice
Registered as a sole proprietorship with your city -- or maybe you decide To incorporate or not? That is the question
Applied for an EIN
Lined up 1+ clients, before you start consulting full-time
Set aside 6 months of savings
Opened separate business credit card and business checking account
Set 6-month revenue target, to help me determine if I should continue pursuing consulting full-time
Determine if I'll be using accrual or cash accounting to determine my taxes
Prepared for quarterly estimated taxes
Bought insurance on the Exchange
Opened a SEP IRA account
Listened to "Freelance Transformation" podcast
Settled on your productivity stack
- Mine is: Trello, Calendly, Hubspot CRM, Zoom, and Zapier

Disclaimer: Please consult your own legal, accounting, and tax advisors before starting your business.

What worked for you? Good luck!