This article was updated on January 31, 2024
Whether you're a social media marketer, a plumber, or a hairstylist, you've got all the necessary prowess in order to succeed in your small business field. No one knows their way around hashtags, piping systems, or balayage quite as you do, and you're ready to venture out on your own as an independent contractor.
If you're unsure how to set up an independent contractor business, we're here to support you in your journey. In general, if you're a business owner that provides services to other businesses, you are considered to have independent contractor status or self-employed. In this blog, you'll find the resources you need to not only lay the small business framework for your business plans but also to propel it forward into a promising future.
To get started, follow these five steps on how to become an independent contractor:
- Pick your vocation and obtain the necessary licensing
- Focus on branding
- Smooth out the specifics with a business plan
- Open a business account and stay on top of taxes
- Establish a winning marketing strategy
1. Pick your vocation and obtain the necessary licensing
Independent contractors exist in all sorts of shapes and sizes, with varying skill sets and areas of expertise in their fields. Some of the most common jobs in the realm of independent contracting include:
- Photographers
- Bookkeepers
- Writers
- Bloggers
- Tutors
- Online coaches
- Plumbers
- Electricians
- Graphic designers
Before starting out on your entrepreneurial journey, you'll first need to find your niche. Based on your educational background or experience in a certain field, you'll be able to decide on what the most viable path is for you.
Once you've settled on what that path is, do research to find out what the requirements are for your vocation. This will likely vary depending on the state or county you live in, so make sure you're familiar with the local licenses and permits for your business.
2. Focus on branding
Once you've settled on your product or service and obtained the necessary licenses, you'll be able to shift your focus to branding. This is the part of the process in which you can tap into your creative side and work to match your business's mission with an appropriate visual identity. For that, you'll need to consider things such as:
- Your business name and brand logo
- A color palette to be used consistently across all branding materials
- A brand voice
- Imagery
- Typography
Having a business name and clear branding plan will not only make your business recognizable to your target audience, but it will also make it so that your company commands respect and exudes professionalism within the market.
3. Smooth out the specifics with a business plan
When considering how to start an independent contractor business, you might have a clear vision for the future of your brand, but it's best to transfer those ideas into something concrete such as a business plan. Here is where you'll outline your overall plans as well as the specifics of things such as your budget and company goals. To build out a comprehensive business plan make sure it includes:
- An executive summary - In this section, you'll provide an overview of what your company is all about. It'll provide an outline of your services as well as introduce the core members of your leadership team.
- An analysis of the market - Before launching your business, you'll want to do some research into some market trends. Be clear on the outlook for your industry as well as some of the top competitors within it. Take this section to address these projections and carve out your competitive edge.
- A set of marketing strategies - Here you'll provide an overview of marketing strategies that'll work to put your business in front of the right audience. Whether you plan to capitalize on social media, email, or content marketing, find tactics that will help you reach your buyer persona and generate the most leads. Your buyer persona is a fictional representation of your ideal audience to give you a clear picture of who you're marketing to.
- Your financial plan and budget - From business supplies, business expense numbers, employment taxes, business income, and staffing to marketing costs and funding from investors, this section of your business plan will tackle all things related to your company's finances. When done correctly, it will help you to avoid unforeseen expenses and get a general idea of the profit you expect to generate in your business checking account in your first year.
4. Open a business account and stay on top of taxes
As an independent worker, reporting to the Internal Revenue Service (IRS) during tax season will look different than it typically would if you were a traditional employee. As an employee, a portion of your paycheck is withheld by your employer to cover income tax, unemployment tax, and taxes for Medicare and Social Security.
When you work as an independent contractor, however, you're in charge of managing those taxes yourself. To help you navigate how to pay taxes as an independent contractor, you may want to consider hiring a self-employment tax accountant to manage this aspect of the business or take responsibility for the research and financial management yourself.
Here's what you'll want to keep in mind when filing and paying taxes as an independent worker:
- Whether your business entity or business structure operates as a sole proprietorship, an LLC, or an S corporation will affect how your taxes are filed and what kind of federal tax savings you may or may not be eligible for.
- It may be a wise choice to look ahead at your financial projections and make a tax estimation so that you have a general idea of how much you'll owe at the end of the year. This way, you can even chip away at your anticipated tax expenses by making quarterly payments in January, April, June, and September rather than paying one lump sum at the end of the year.
- Another idea is to set up a separate bank account, a secure space in which you can set aside 20 to 25 percent of your paychecks as they come in to allot for tax purposes.
- Be sure to save receipts for things such as business travel and accommodations, rental fees for your office space, gas expenditures, business insurance premiums, advertising fees, and internet and phone bills. Keeping a careful record of these expenses could give you a break on your taxes when it comes time to file.
- In addition to submitting Form 1040, a tax document required of both employees and independent contractors alike, you'll need to complete a Schedule C and a Schedule SE. This is where you'll outline your income and expenses as a contractor as well as calculate the amount of money you'll owe for the self-employment tax.
Before getting your independent contractor business off the ground, prioritize having a clear understanding of the standard tax procedure. This will help you to avoid unexpected financial challenges in your first year in business.
5. Establish a winning marketing strategy
Wondering how to attract new customers to your small business? As you work through the layers of building brand awareness, you'll want to be sure you've got some carefully considered marketing strategies in place to help you along the way.
Here are a few potential tactics to consider adding to your plan:
- Start a blog - If you've already put the time into building a website for your business, you may want to consider boosting its visibility on the internet by starting up a blog. Your blogs should incorporate some SEO, which focuses on improving keyword rankings for a website to bring in qualified traffic. When it comes to search engine optimization (SEO), blogging is often a high priority for successful companies given that the return on investment is 13 times higher than that of companies without a blog. Blogging ideas you can try include:
- Answering some commonly asked questions related to your field
- Providing tips and tricks
- Sharing the latest insights and trends related to your industry
- There are many approaches you can take when it comes to blogging, but the most important thing to keep in mind is to understand what your ideal buyer persona might be searching for on the internet and make sure your blog is the source for all the answers.
- Take advantage of email marketing - Another way of making direct contact with your target audience is by harnessing the power of email marketing. This way, you'll be able to foster personalized relationships with your prospective clients and keep them informed about updates to your products or services as well as current promotions, all at a low (or no) cost to you.
- Tap into video marketing - Video marketing is another marketing trend that's been on the rise in recent years. Customers who prefer consuming visual content may be more likely to interact with your business via video rather than a written blog post or email. Create engaging videos that entertain, educate, and showcase your skills and expertise. Share them across whatever digital platforms you plan to use.
Moffett Plumbing & Air, a family-owned plumbing company in Orange County, CA is a business you can look to as an example when it comes to developing your own video marketing strategy. Through the use of informative and, oftentimes, comedic videos, the company shares useful plumbing tips, introduces its core team members, and shows off its impressive kitchen remodels. Not only have they amassed a following of over 20 thousand users, but they've also established themselves as friendly, approachable experts within the industry.
Promote your budding business on Nextdoor
Before launching your independent contractor business, get the word out within your community through Nextdoor - the neighborhood hub that allows you to connect with potential nearby customers or clients who are right in your own backyard.
When you create a free Business Page, you can share the details of the products and services you provide, invite satisfied customers to leave a review of your business, and even promote special offerings to help grow your business.
Start your business on the right foot by claiming a free Nextdoor Business Page today.