Archive for the ‘Starting Your Biz’ Category

Dear Danielle: What If Our Term Is Not Well-Known in My Country?

Dear Danielle: What If Our Term Is Not Well-Known in My Country?

A new colleague from the U.K (I’ll call her Sue) came to me recently with a few questions and topics, one of which I’ll address today as I think it will be helpful to many people.

Hi Danielle. I came across your ACA website and it’s given me food for thought to go from VA to Administrative Consultant. I really appreciate you taking time out to talk to me. I’m doing research about admin consultancy as I’m not sure how well known it is in the U.K.

Thanks for reaching out, Sue. :)

Our conversation has inspired this blog post that I think will help you (and others) greatly.

What you’re really wondering is: If people in my country have not heard of “administrative consulting,” if it’s not well-known, how viable of a business will this be for me?

It’s good to be thinking about how a new business will succeed. The problem is you’re focusing on the term instead of the solution we’re in business to offer.

What you want to ask instead is:

Are there businesses in the U.K.? Do those businesses have administrative work they must stay on top of on a regular basis in order to run smoothly?

There is your answer. 😉

Whether a term or industry name is known in the marketplace or not is not important. I wouldn’t want you to waste your time and energy in that direction as it is irrelevant and plays no part in your ability to get clients, help those clients, and earn well.

It doesn’t matter whether they’ve heard of our industry before or are familiar with the terms we use. (Your term IS important, but for other reasons that have nothing to do with getting clients. You can learn more about that in these blog posts).

The only thing that matters is that you understand them, know what their overarching need/problem is, and have a solution to fill that need and solve that problem: namely, the need for more time in their business, the need to free up mental bandwidth and creative space, and the need for an administrative expert and support partner who can help take care of their administration which in turn will free up their time to grow their business (not to mention just live and enjoy life).

EVERY business needs admin support. It’s the very backbone of every business in the world. There is absolutely no shortage of clients who could use and benefit from our support. Every country has businesses, and every business has administrative work, systems and operations that require tending to throughout the life of the business.

BUT, while every business has administration it must take care of in order to keep organized, running smoothly and moving forward, not every business is the right fit or needs the solution we’re in business to offer.

The key, and the more productive effort, therefore, is to better understand what demographic in the business world has the greatest need for what we do and how we do it (our “solution”) and will in turn place greater value on it and be more willing to pay well for it. THOSE are the businesses that are the best fit for our kind of business.

Generally speaking, big companies have the kind of workloads that inherently require full-time, in-house, dedicated staff, and they have the resources to house and pay for them. They don’t really need us.

If they are even remotely interested in us, their typical motivation is to merely offload isolated, non-core functions as cheaply as possible. They could care less about the personal relationship, which is exactly what allows us to deliver our greatest value and impact. When there isn’t a real need, they don’t place much value on the service. And you can’t afford to be cheap, not if you expect to stay in business, be profitable and earn well.

So it’s important to understand who is the best fit (who has the highest and greatest need) for what we do so that you aren’t wasting your time barking up the wrong trees and making things more difficult for yourself.

An administrative support business works and earns best (and more easily) when there is a direct, personal one-on-one ongoing relationship, what we call a “collaborative partnership,” with each client.

In our business, the demographic that best fits that bill are the solopreneur/boutique/lifestyle businesses.

These are the business owners who are commonly running their businesses from home offices (like us), who like being solo/boutique-size; who need administrative help and support (as every business does), but have no interest in “big business,” having employees or managing people; who ARE their business; who are more interested in a particular quality and unencumbered way of life while earning well.

They’re the perfect fit because we can provide that one-on-one, right-hand personal admin support remotely and without needing to be an employee; the size and model of their business benefits most and works best within this dynamic; and because they need it the most, they place a higher value on it.

Now that you understand which demographic is best suited for our solution and why, the next step is to narrow things down to a specific target market, which is simply an industry/field/profession that you cater your administrative support to.

Why do you need to do this, you probably wonder?

Because your value depends on the business/industry/field/profession you are talking to.

How you speak to one group and craft solutions for them is necessarily different from one group to the next.

By narrowing things down to a specific industry/field/profession, you can more quickly and easily identify what their common needs, interests, goals and challenges are, come up with a compelling marketing message for them, and craft your admin support offerings more meaningfully around those things in a way that more powerfully speaks to and attracts clients.

Plus, you simply can’t work with everybody, any more than you can be all things to all people. To stand out, to be attractive, to be memorable and interesting, you have to get specific.

As Seth Godin says (and I’m fond of quoting): “You can be a meandering generality or a meaningful specific.”

The other benefit for you, of course, in choosing a specific industry/field/profession to cater your admin support to is that you can more quickly and easily pinpoint where to start looking for and interacting with those clients.

None of that requires that they know what you are called or have heard of our industry before, only that you know who they are.

If you haven’t yet, be sure to download my free guide on How to Choose Your Target Market. It elaborates further on this topic and walks you through some exercises to help you narrow things down and decide.

Convo with a Colleague: Finding Clients Starts with This

Finding Clients Starts with This

A new colleague who was having trouble finding her first client reached out to me the other day.

Many of you coming up have the same questions and challenges so I thought it would be helpful to share our conversation. (I’ll call this colleague “Jane” to protect her anonymity.)

JANE: Do you have any posts on marketing. Specifically article marketing?

ME: Not per se, because it’s really not the most productive effort if you’re doing it in a general way. Writing articles specifically for your target market is more what I talk about. What are you trying to do or looking for with article marketing? If you can elaborate, I may be able to give you some better direction. PS: You can find all my blog categories on the right sidebar of my blog.

JANE: Target market… well I am pretty diverse in my administrative tasks that I don’t really have a target market. I suppose that currently I am a generalized admin. Would love to have a target market, just not sure what that might be right now. I am geared toward graphic design/web building, but… again that can be for anyone. :)

ME: Graphic design and web design are different professions/businesses. Are we talking about the administrative support business or the design business (because they aren’t the same thing)? You probably first want to get clear about what business you mean to be in. Until you do that, you’re going to struggle with finding clients. That’s because if you don’t know intentionally/consciously what business you intend to be in, you can’t expect clients to understand what you do either, and there’s no way for them to see or hear you. It also sounds like you haven’t downloaded my free guide on How to Choose Your Target Market. Deciding on a target market is one of the most important first steps in a business.

JANE: (Downloads free target market guide and comes back a little while later.) Well, let me clarify. Those are my interests, but after briefly looking at your guide, it has settled that I would like to work with realtors. Reason being, for one they can afford me. And I can still do the other computer stuff I like: working with websites and designing stuff. However, I have no experience in the field other than I know a realtor who is really successful. Any suggestions on how to break the ice on a field I am not totally familiar with?

ME: That’s great! Doesn’t matter if you have experience with them or not. You can research and learn. In fact, I always tell people, make it your goal to always be learning your chosen target market and what their business is all about and what work is involved in running it almost as if you were going into that business yourself. Because the more you know and understand them, the more you will know what their common needs, goals and challenges are, how you can best support them and how to craft your solutions and offerings geared specifically to their needs and interests.

It also doesn’t matter what your administrative skills are. General is a misnomer. Don’t use that term or terms like boring and mundane and the like in describing what you do. Words like that devalue the very vital and important work we do and in turn makes clients devalue it as well. Administrative skill and sensibility can be applied to any target market. Plus we’re all always growing and improving our skills. So that’s the the angle you want to be looking at things from. The more you learn your target market, the more you’ll know which skills will be need to be applied, honed or acquired. I have blog posts that answer all of your questions. I invite you to explore the blog and settle in for some reading. I think you’ll find it quite illuminating and helpful. Here are a few to start with:

On words to avoid in your marketing, read this category of blog posts:
Don’t Use These Words

On the difference between administrative SUPPORT and project work:
Do You Understand the Difference Between a Project-Based vs. Ongoing Administrative Support Business?

On how to research a target market you have no experience with:
Dear Danielle: How Do I Market to a Target Audience I have No Experience With Yet?

Hope this helps!

JANE: Has anyone told you how AMAZING YOU ARE!!! You are like God-sent. Thanks sooo much. I will be sure to read these.

ME: Aw, thanks. I’m glad to help. :)

YOU Are the Captain of Your Ship

YOU Are the Captain of Your Ship

You have to decide — specifically and clearly — what you’re in business to do.

If you fall to pieces and think you have to start over the second one uninformed client doesn’t get it or looks at you cross-eyed…

If you blow with the wind every time a client thinks you should be doing this and doing that…

If you bend over backward twisting yourself into pretzels to be anything and everything for anyone and everyone…

You are never going to get anywhere, and your life and business will be anything but your own.

You can’t please everyone.

Not everyone is going to get it.

And you can’t be in business to do everything that everyone wants.

(Originally posted July 13, 2010)

Here Is How to Stop Spinning Your Wheels in Your Search for Clients

Here Is How to Stop Spinning Your Wheels in Your Search for Clients

So I saw this question fly by in my Google Alerts:

“I am still working on getting my business off the ground and feel like I’m still spinning my wheels. I need to get clients so that I can invest in more learning and certifications and such. I keep researching, but I’m starting to come to the point that I don’t know what I’m looking for anymore. What daily tasks should I be doing every day???”

One of the most common problems in getting clients that I see in our industry is that people jump into business without doing any of the necessary business planning and foundation work that is key to moving forward smoothly and successfully.

They slap up a website (or worse, a mere Facebook page or LinkedIn profile) thinking clients are going to magically rain from the sky.

They then proceed to go about things as if they were looking for a job.

That’s simply not going to get you clients. That’s not how business works.

I mean, sure, if they’re lucky, they might get some nibbles here and there. But generally speaking, they only ever earn spare change from those types of prospects.

Getting clients — real, honest-to-goodness clients willing to pay the kind of real bones you can actually live on — requires more methodical and intentioned approach and set-up.

You simply can’t skip the parts in-between.

If you do, and you happen to hit upon a piece of real business, you aren’t going to be set up with the proper infrastructure to keep that business.

That’s why one of the most important steps in your business planning is deciding on a target market.

(For those who are confused, a target market is simply an industry/field/profession that you cater your administrative support to.)

This question about what they should be doing every day wouldn’t even arise if this person had a specific target market to give direction to her actions and thought processes.

That’s what a target market does: it gives you direction for your message and marketing efforts, and informs all your next steps accordingly.

If someone asks where should they look to find clients, the answer is “Well, where is your target market?”

When you know who your target market is, you can then research where they hang out online and off and go to those places and get active and involved.

If they ask what they should write about, again, you look to the target market.

What are your target market’s common pains, challenges and interests? What problems can you help them solve? What questions do they commonly ask? What can you educate and inform them about related to these things?

When you know who your target market is, you can more easily identify those things and then speak to and write about them.

If you don’t know who you’re writing for, it’s much more difficult to figure out what to write about because your looking at some nameless, faceless void.

Every single question you have in your business can be answered if you first decide on who you intend to cater your administrative support to (i.e., a target market).

Here is a list of how a target market can help you establish your business and get clients more quickly and easily:

  • A target market simplifies and streamlines everything in your business:  operations, marketing, administration, work processes, billing structures, policies… everything!
  • It’s much easier to systemize and manage your business when you cater to a specific clientele.
  • Your expertise in serving that market increases, allowing you to command higher fees, work with fewer clients and make more money.
  • When you know who you’re concentrating on, it’s easier to learn everything you can about a particular market and its common needs, goals and challenges.
  • When you know who you are talking to, you can create a message that will be music to their ears.
  • You’ll be able to tailor your solutions in ways that are more attractive and meaningful.
  • When you have direction, it’s far easier to identify what marketing actions to take and where.
  • It’s easier to find your would-be clients, online and off.
  • With a target market, you can extend your reach beyond the local/in-person market.
  • Instead of trying to be everywhere, talking to everyone (and reaching and resonating with no one), you can focus your efforts on just those places where your target market is found (online and off).
  • In turn, you’ll have far more time and energy for actually working with clients once they start coming through your doors.
  • You’ll get more and better referrals because people find it much easier to send business your way when they know who you specialize in supporting.

If you haven’t yet, be sure to download our free guide on How to Choose Your Target Market

Dear Danielle: What Is the Best Approach to Physically Obtain Quality Clients?

Dear Danielle: What Is the Best Approach to Physically Obtain Quality Clients?

Dear Danielle:

I am very new to the Administrative Consulting business although I have almost 20 years of experience supporting senior-level executives. I agree with you that we are so much more than “virtual assistants” and I would like to attract customers who understand that and value what we bring to the table, if you will. Therefore, my question to you is now that I’ve created a website and all other social media accounts, what is the best approach to physically obtain quality clients? Eventually, I may narrow my target but for now, my target is Small Business Owners. Thank you. —ND

Hi, ND. Welcome and thanks for reaching out. :)

Sounds like you’ve got the perfect background and a solid body of experience to offer clients. Wonderful!

Of course, there’s much more to business than simply knowing how to support clients and do the work, as you realize.

Learning how to run, manage and market a business and get actual clients (much less good ones) is a whole other skillset and area of education in and of itself.

This is why your question is more of a training one, rather than something that can be answered in a simple blog post.

It requires a more in-depth, systematic process of learning to understand the components, dynamics, and psychology involved.

To get that kind of knowledge and learning, I will refer you to my step-by-step self-paced training guide I created specifically for that purpose: How to Build a Website that WORKS!

This guide is centered around your website because your website IS the critical link in connecting your marketing and networking to actually getting clients, and not just any clients, but the kind of clients you want to reach: quality clients who understand your value.

This involves pre-educating your site visitors so they are in the right mindset, setting the right expectations, and prequalifying clients to help ensure you are productively spending your time in consultation with your most ideal and likely client candidates.

In the process of going through the steps and exercises, my guide also gives you a crash-course in inbound marketing because the two go hand-in-hand. You can’t set up an effective website and conversion system that gets results unless you understand all the components and mechanics involved.

Another thing I show you how to do in my guide is how to articulate your value and write your marketing message (and I have a clever system that helps you do that, no writing talent required; couldn’t be easier).

This is where having a target market is absolutely vital.

If there are any “secrets” in business and getting clients (and there aren’t), this is it.

And that’s because it’s not so much a “secret” as it is an area of misunderstanding and resistance for so many people.

You mention that right now your target is “small business owners.” But that isn’t a target at all, you see.

“Small business owners” is merely a demographic, and a very vague, general one at that which isn’t going to be helpful to you in any meaningful way whatsoever in creating a compelling marketing message and getting those ideal clients who value what you do.

It’s like saying “people” are your target market. That’s literally anyone and everyone in the world — which is the opposite of a target market (which by definition is a specific market).

A target market is simply an industry/field/profession that you cater your administrative support to. That’s it. However, it’s a vitally important component in getting those quality, ideal clients who understand your value that you wish for.

And this is where people struggle because they resist the idea that they actually expand their attractiveness and opportunities if they narrow their focus to one specific group.

Because here’s the thing: you can’t articulate your value in any truly meaningful, compelling way until you know who it is you are providing that value to. And that requires you to decide what industry/field/profession that will be.

Because it’s all relative.

Your value — what you provide, the solutions you offer, how you deliver those solutions and the results you create — all depends on who your audience (i.e., target market) is: who they are, what their commons interests, needs, challenges and goals are, what work they do in their profession, how their businesses are run, who their clients are, how they get those clients, and so much more.

You have to decide who it is you specifically intend to help in order to identify, understand and articulate your value in a way that speaks to these things as it relates to them. Otherwise, all you’ll ever accomplish (by trying to create a message for anyone and everyone) is being generic and forgettable.

To stand out, to create real meaning, to get focus and direction for your message and your marketing, you need specificity.

That specificity (i.e., deciding on a target market to cater your administrative support to) is what is not only going to get you more ideal clients who value what you do, it’s also going to make your business and marketing easier, you’ll have an easier time charging higher fees and making more money, and you’ll be able to get more clients more quickly and easily.

If you haven’t yet, be sure to download my free guide on How to Choose Your Target Market.

Start there, decide on a target market and then get my marketing/website guide, and you’ll be well on your way to getting those ideal, quality clients who absolutely understand how valuable you can be to them.

Dear Danielle: Do I Need a Professional License to Be an Administrative Consultant?

Dear Danielle: Do I Need a Professional License to Be an Administrative Consultant?

Dear Danielle:

I am very serious about becoming a full-time Administrative Consultant. I have done quite a bit of work on the side and really enjoy the business. I have one question:  Do I need any type of professional license to work as a full time Administrative Consultant, something similar to a real estate agent being licensed by the state or an accountant, lawyers, etc.? Thanks very much. —RD

This is not a regulated industry in the U.S. (or anywhere else that I’m aware of). You don’t need any special kind of license to start an administrative support business.

Depending on your state or country, however, there may be some required business licenses and registrations to be in business, that you may need to pay either annually or on a one-time basis. That’s something you would definitely need to look into.

I always advise people to contact their respective city, county and state agencies to determine what their business taxing, reporting and registration/licensing requirements are.

In the U.S., you would also need to educate yourself about the federal IRS self-employment business taxes and reporting.

Hope that helps!

You Don’t Get Clients by Sending Them PMs; Here Is What to Do Instead

You Don’t Get Clients by Sending Them PMs; Here Is What to Do Instead

You don’t get clients by mass-messaging people who don’t know you.

You’re going to waste a lot of time and energy (and annoy a lot of people) that way.

There are far more effective methods that will have people come to you of their own accord and interest.

In the professional services business, it’s not about soliciting strangers and indiscriminate cold-calling.

In our business—the administrative support business—the name of the game is trust and credibility.

And that is established through relationship-building and nurturing the know-like-and-trust factor: allowing a group of people to get to know you and come to you after becoming interested in how you might be able to help them.

When I was having this conversation on LinkedIn, someone asked me:

“I was just thinking about this today! I want to let everyone know about me venturing out on my own, but I don’t want to annoy people either. I thought about sending out an email with some very brief information and then asking them if I can send them more information. Is this a good approach or would you advise a different way?”

This falls in the same category of soliciting people that you don’t know are even interested. It’s a waste of your time, money and effort when 99.99% of these people are just going to toss your letter in the round file.

Instead, I have a Business Letter of Introduction that does this job in the right way so it doesn’t look like you are desperate and begging for business, which turns people off. This letter comes as a free bonus with my Administrative Support Business Set-Up Success Kit (Set-01 in the ACA Success Store).

Beyond that, here are some basic steps to make getting clients faster and easier (and this is where I would have you focus your time and efforts more productively for more fruitful results):

  1. Choose a target market. A target market is simply a field/industry/profession that you cater your administrative support to.
  2. Learn about your target market inside out as much as you can. When you know your market intimately, you can better and more easily identify their problems and pains and cater your solutions accordingly.
  3. Get out there and interact with the people in your target market, online and off! When you have a target market, it also makes it vastly easier to figure out where to find them.
  4. In all of your marketing communications and networking conversations, direct everyone to your website. This is the vital link that educates your site visitors about what you do, who you do it for and how you help and moves those who are actually interested further in the process so that you are wasting your time willy nilly on every Tom, Dick or Harry who isn’t going to ever be a client.
  5. Make sure there is a lead capture system on every page of your website. What this means in simple terms is give your site visitors a gift in exchange for their email address. It could be a free how-to guide, a free report, some free DIY training, a form or e-book, you name it. It just has to be highly compelling and of value and interest to your target market (which is another reason to have a target market: it’s easier to identify what will be of great, specific interest to them.). This is so you can get them on your mailing list and continue to keep in touch with them and nurture the relationship. This is where an autoresponder/list management service like Aweber comes in; it automates this process and allows you to send out personalized messages to thousands of subscribers all at once.
  6. Keep in touch with your subscriber list of client prospects on a regular weekly basis. Consistency is critical here. If you are irregular or there is too much time between communications, they’ll forget who you are and why they are hearing from you. You want to allow people to get to know you so this frequency is very important in keeping those on your mailing list subscribed and interested.

What next? The best place to start is to get my free guide on How to Choose Your Target Market.

I Can’t Work for Pennies, How Are You Making This Work?

I Can't Work for Pennies; How Are You Making This Work?

I am still trying to lock down clients. Any suggestions as to how to obtain clients? I have been using Fiverr for sample gigs (decent income for small projects). I am reaching out to people on Linkedin as well as my previous employer (we have a great relationship so it’s no fluff, but no clients need me yet), but once I move to the pricing for everyone else, they are no longer interested. I feel my price point is comparable, but I can’t work for pennies on the hour. How are you guys making it work? —RB

Fiverr might be good for pocket change if that’s all your needing out of it. But you’re never going to find real clients there (i.e., the kind that pay the kind of money you can actually live on), much less retainer clients who pay a monthly upfront fee for across-the-board administrative support.

“Decent income” is relative. What does it mean to you? Have you done any cost and pricing analysis on what it takes to run your business, earn an income (yes, they are two separate things) and earn a profit? (Profit is yet a third category of earning; you don’t have a business unless you are earning above and beyond your operational and income needs.)

It’s important to understand that there’s a big difference between the economics of employment and the economics of business. That is a huge area of education for a lot of people who are new in business. They often don’t initially understand that $12/hour employee wage will not begin to earn them a living as a business.

You’re also looking at things from the wrong angle and going about the process too generally. Because it’s not about the price point.

(Don’t worry. Everyone goes through this thinking when they’re new in business—it’s a process of education, and I’m here to  help you with that). 

Getting clients begins and ends with WHO your target market is. Have you done that work yet?

RB: I have my target market (insurance), I guess it’s that I am not known maybe? Yeah, I love Fiverr for some quick cash, but trying to convert the folks I am talking to is what I am having trouble with (none from Fiverr). Maybe I need to reevaluate.

You’re not going to be able to convert those people because they aren’t the right audience, and it’s the wrong process/intention on the wrong platform. You’re trying to fish in an empty pond basically.

It’s not about being known. You don’t have to be known. Prospective clients don’t even need to have ever heard about our industry whatsoever.

It’s about YOU understanding THEM (your target market), their business, their industry, how their business is run and how you can support them, a
nd you understanding what they gain and how they benefit from this solution (this is how you will articulate your value to them).

And, of course, choosing the right market.

“Insurance” is pretty broad/generic. What does that mean? What kind of insurance specifically? Who in the “insurance” field are you focusing on?

Because insurance “companies” don’t need what we do. When a company is large enough that the workload inherently requires in-house staff, and has their own staff, you are barking up the wrong tree.

You want to target solo/boutique business owners. They are the ones who have the highest/greatest need for the solution we’re in business to offer, value it more, and are thus more interested and willing to pay for it.

Once you get clearer about all of these things, that is going to tell you where you should be focusing your efforts for more fruitful results.

And the smarter you get about that, you’ll find that you won’t want or need to waste your time in places like Fiverr. 😉

Here’s what I recommend:

1. Get my free ACA Income & Pricing Calculator and go through those exercises. It’s important to get very clear about your numbers and know your pricing baseline.

2. Download my free guide on How to Choose Your Target Market and go through those exercises. This is a necessary part of the process of getting clients. If you don’t know and specifically define who you are talking to, how can you ever find them much less know how to support them administratively? 😉 Once you get clearer about who it is you are seeking, that will inform all your next steps and answer all the questions you have about how to find them, where to find them, how to support them, how to craft your solution and speak their language. This is such a vital step that will make finding clients so much easier.

There’s a lot more to it than this, of course, but these two exercises are the best place to start.

You CAN do this! It’s work, but it’s legwork that must be done first if you’re going to start seeing results. The alternative is to keep plodding along for years on end as many people do.

SEE ALSO:

Dear Danielle: What Do You Think of Odesk and Elance?

Dear Danielle: Should I Market on Craigslist?

What Zirtual (and Any Virtual Staffing Agency) Workers Need to Know

What Zirtual Workers Need to Know

You may have heard that virtual staffing agency Zirtual abruptly ceased operations August 10 without any warning or notice to workers or clients.

Today, we learned that Zirtual has been bought by Startup.co.

There were a lot of problems with this company, not the least of which was poor business planning, unsustainable growth, and the illegal misclassification of employees as independent contractors, the latter of which is my biggest peeve.

A business model based on exploiting workers and disregarding employment laws is bound to fail sooner or later.

This is why it’s so important for business owners to do business with companies and independent professionals who operate legally and ethically.

It’s also why it’s important for you, as a worker, to recognize going in whether a company you consider working for is operating legally and going to treat you fairly and lawfully.

Nothing angers me more than people being taken advantage of and exploited without their knowledgeable and fully-informed consent.

For anyone who worked at Zirtual (or any virtual staffing company), before you jump from one exploitive situation to another, I want to shed some light on employment and business so that you cannot be taken advantage of so easily in the future.

First, Some Basics

In the world of work and services, you are either an employee or you’re a business.

There is no legal middle classification where someone “works like an employee but is paid like an IC.”

That is illegal.

Independent contractor, 1099 contractor, freelancer, self-employed, independent professional… these are all just different terms that mean the same thing: business owner.

As an IC, you are required to pay 100% of your own employment taxes whereas when you are employee, your employer pays half as well as other taxes that are fully employer-paid.

There is also no such thing as a 1099 employee. That’s a made-up, imaginary term for a classification that does not exist and is in fact illegal.

You are either an employee (in which case you enjoy the rights and benefits provided to employees by law) or you are a 1099 contractor, which (again) is just another name for independent contractor and means you are in business for yourself and as such are responsible for all the duties, taxes and reporting obligations that entails.

This is where the problem starts because most of these workers do not understand the difference and the legal and financial implications involved. They don’t realize that when they allow an employer to call them an IC, they just became self-employed business owners.

That’s not what most of them bargained for. Most aren’t fully aware of all the rights and benefits that they are deprived of in the process.

What this also means is, even if a company classified you as an independent contractor (even if you signed a contract), the law may still consider you an employee. The law does not uphold contracts that are illegal in the first place.

What Is an Employee?

An employee is someone who works for a company in exchange for a paycheck.

Being an employee or independent contractor isn’t something individual employers get to arbitrarily decide.

There are legal standards and definitions about what constitutes an employee, control being first and foremost.

As an employee, the company you work for has the right to dictate (among other things) your work schedule, hours, pay, where you do the work, what equipment to use, and when, where and how to do the work. (When you are an independent, self-employed business owner—in other words, independent contractor—clients MAY NOT dictate ANY of that whatsoever. YOU are the one who decides your fees, when, where and how you will work, what you will and won’t do, etc., and you do NOT “report” nor are you managed by clients in any way, shape or form. The only thing a client has the right to convey to you is what they would like accomplished, what outcome/result they desire for the work to produce, and what their timeframe/deadlines are.)

As an employee, you are supervised and directed by your employer who requires you to report to them and turn in timesheets. You may also be required to undergo training at the company’s direction.

If a company exerts any measure of control and management over a worker, that worker is an employee (and must be lawfully classified as such).

Likewise, if the workers ARE the very product of the biz (as is the case with temp agencies, staffing agencies, virtual staffing agencies, etc.), they must be classified as employees.

In exchange for this luxury and privilege of control and the benefit that is gained therefrom, an employer is held to some legal and financial obligations and requirements.

How Are Employees Paid?

At the start of employment, an employee completes an IRS Form W-4.

The employee is then given a paycheck in exchange for their work at the usual established company pay cycles and in accordance with local, state and federal laws.

By January 31 of every year, the employer is then required to provide the employee with an IRS Form W-2 Wage & Tax Statement which summaries the total monies you earned the previous year, the amount of taxes that were withheld from your pay, as well the employer-paid half of your FICA taxes (Social Security, Medicare, FUTA) and any other particular taxes (eg., unemployment) as may be required by local, state and federal law.

I highlight that last part because this is what many people don’t understand.

They don’t realize that when an employer illegally misclassifies them as an IC (self-employed independent contractor), that employer is essentially stealing from them.

Those are rightful monies owed to you that they are legally required to pay when you are an employee according to the legal definition.

What that means is that by illegally misclassifying you, they are shifting 100% and more of those costs onto you instead of paying their legally-required share.

Understanding Employment Taxes

Everyone who works and has earnings must pay FICA (Federal Insurance Contributions Act) taxes.

FICA consists of 12.4% Social Security tax (up to whatever a given year’s wage cap is; for 2014 the cap was $117,000) and 2.9% Medicare (there is no wage cap on Medicare tax; however, beginning in 2013, if an employee earns more than $200,000, there is an additional 0.9% Medicare surtax that must be withheld from their wages).

If you are an employee, 6.2% Social Security and 1.45% Medicare tax is withheld from your paycheck, and your employer must pay the other 6.2% Social Security and 1.45% Medicare taxes.

FUTA (Federal Unemployment Tax Act) is another tax that must be paid, which is 6.2% up to $7,000 in wages. This tax is paid 100% by the employer. If you are an employee, there is no employee portion to be withheld.

If you are an employee who has been illegally misclassified as an IC, this is more money that is rightfully due to you that the employer is cheating you out of.

FUTA, in conjunction with state unemployment insurance systems, provides for unemployment compensation to workers who have lost their jobs.

This is another of the rights and benefits that an employee enjoys that an independent contractor is not eligible for.

Why Do Companies Classify Employees as Independent Contractors?

Why do they do anything? Because of the money.

Employees cost a business a lot of money. And I don’t mean only in terms of pay.

Besides their benefits and pay, it costs a lot to manage them. Taxing and reporting responsibilities must met. There are employee rights and labor laws that must be observed and complied with.

Compared with all that, it’s easier and cheaper to work with ICs than it is employees.

So a lot of companies will think, “You know what? We can’t afford these employees. Let’s call them independent contractors instead.”

But here’s the problem with that: it’s illegal.

The legal phrase is “illegal missclassification of employees.”

They don’t get to have their cake and eat it, too. Not when it cheats those workers out of their lawful, rightful employer-paid taxes and benefits.

If they don’t want the cost and headache, then they have to give up the control.

And if they don’t want to give up the privilege and luxury of control that comes with beck-and-call employees, then they have to comply with the law.

That’s just how it works, folks.

Companies don’t get to decide at their whim whether to classify someone as independent contractor just because it’s cheaper and more convenient for them.

The second they start exerting the control of an employer over a worker, that worker becomes an employee.

What to Do if You Feel You Have Been Misclassified as an Independent Contractor

As I said before, even if a company you have worked for classified you as an independent contractor, even if they had you sign a contract, the law may still consider you an employee if that company exerted any of the control that only an employer is allowed to exert (see Independent Contractor or Employee?)

The first thing to know is that it is 100% the company’s duty and responsibility to properly classify workers. The worker is never responsible for this.

I mention this only because many workers worry about taking recourse for fear the law will come down on them, and that is not the case.

Keep in mind that if you were an employee missclassified as an IC, you were missing out on all the usual rights, benefits and perks afforded regular employees of the company that ICs are not eligible for such as : unemployment benefits; worker’s comp benefits; severance pay; workplace rights such as minimum wage, overtime pay, sick pay, rest breaks, vacations; healthcare coverage under the Affordable Care Act.

The law may determine that you were entitled to those as an misclassified employee.

And if you worked for a company that closed up shop and left you high and dry, you’re going to want those unemployment checks.

The good news is that you have nothing to lose by looking into these things and possibly a lot to gain.

If you were feel you were misclassified as an IC, one of the simplest things you can do is fill out an IRS Form SS-8. The IRS will do the rest of the work after that. If they find that you were misclassified and should have been an employee, it’s the employer who is on the hook any penalties and back taxes you were deprived of.

If you’re young, it may not mean much right now, but when you get older and near retirement age, those retirement funds and medical benefits become more real and relevant to you. No matter what your age, those are accounts you should be concerned about and attentive to. They are part of your rightful benefits.

Another way a lot of these misclassifications come to light is when people file for unemployment insurance.

Yes, even if you were told by the company that you were an independent contractor, even if you signed a contract, I  encourage you to file for unemployment insurance.

Once you do that, they will also examine the relationship and make a determination. If they find that you should have actually been classified as an employee, it’s the employer who will be liable for those benefits and back tax payments.

And, talk to a local employment law attorney. Because I am not one and I don’t want any of this information to be construed as legal advice. I only share this information to point you in some directions where you can get the full information and advice from the proper agencies and legal advisors.

That kind of attorney can better and more fully explain all the ramifications of being misclassified as an IC, what benefits and rights you may have been deprived of, how long the statutes of limitations are in your case, the recourse and remedies available to you, and what the next best steps are.

There may even be, as we speak, some attorneys or law firms working on some kind of class action.

Moving Forward

Armed with this information, you can be more knowledgeable of your rights and how things are supposed to work should you decide to work with another company similar to Zirtual.

If you work for anyone who dictates any of your working conditions to you, you know now that you must be classified as an employee, that there are employer-paid taxes and other employee rights and benefits that are your right.

And if any employer exerting a level of control over you tries to tell you they are going to start paying you as an IC, you can say:

“Hold up! Not so fast! That’s not correct. People who are in business for themselves as ICs, know they are in business for themselves. Last I checked, I don’t recall starting a business, and I am not in business for myself. You are exerting a level of control over my pay, schedule and work conditions that constitutes employment. As such, I am an employee and must be paid accordingly, including all the rights and benefits afforded to employees. If there’s any question about that, we can have the IRS make the determination.”

Okay, I’m being a bit snarky, lol. But you get my drift.

Now that you are better informed, in whatever pleasant or diplomatic fashion is your preference, you can be more assertive and point people in the direction of the resources I have linked throughout this post.

If you have any questions about any of this, I am happy to answer and help in any way. Please post your questions in the comments.

And if you are in a former Zirtual worker, I understand several groups have been started to support each other.

I would be happy to speak to your group, either by phone or online, and help shed further light and answer any questions you may have about any of this information about employee classification.

Likewise, if any of you are interested in actually starting your own business (otherwise known as self-employment, being an independent contractor), I can definitely answer any of those questions as well. As a business owner since 1997 and the founder of the Administrative Consultants Association, that is my specialty!

RELATED ARTICLES: The topic of subcontractors is another important area for people in business to understand. I have a whole category on my blog that covers subcontracting:

ACA Blog: Subcontracting Articles 

Definition of Subcontracting

What You Need to Know About Subcontracting

Dear Danielle: Sole Proprietor or LLC?

Dear Danielle: Sole Proprietor or LLC?

Dear Danielle:

Would you recommend filing a state business license as a sole proprietor or an LLC when doing business as an Administrative Consultant? I’ve looked on the Nevada state business sites and am unable to find the information needed. Please advise and thank you in advance. —Tiphenie Montes

Hi Tiphenie :)

So here’s the thing. States aren’t in the business of advising you about what corporate formation you should seek. That’s why you aren’t finding that information.

You might find something on their websites that explains what the different corporate forms are to choose from in your state, but they aren’t going to tell you or advise one way or the other which one to choose or which one may be best for your business.

That’s a question for an attorney or CPA in your local area or state.

Whenever it comes to legalities, it’s so important to talk to the proper, licensed professionals. No colleague, even the most experienced and knowledgeable one, is qualified or licensed to give you advice on that kind of thing.

And you definitely don’t want to rely on the guesses and “legal opinions” of unqualified, unlicensed laypeople because that could cause you some serious harm or get you into legal hot water at some point or in some way or another.

When you start a business, you are by default a sole proprietor (or a partnership if there is more than one owner). And there’s no special incorporating you need to do for that (although, you may still need to register the business with your local and/or state agencies, but you’ll have to research that as every city/county/state is different).

If you do incorporate, there are possibly some protections and advantages. There is also a lot more filing and reporting obligations and tax designations you may also need to determine.

You might hear around the industry that LLC is the most common form of incorporation for our kind of service-based business. However, that’s a generalization that doesn’t take into account your specific and unique business circumstances and information and the kind of work you are doing in your business and how you are doing it.

If you were to talk to a CPA or attorney, it’s possible they might tell you that depending on your stage in business, incorporating is too soon or not the right time just yet, or may be overkill, or may not give you the kind of tax breaks or protections you thought you might get.

There are just SO many variables unique to your business and your circumstances that have to be weighed and considered by those who are licensed and qualified to advise you properly.

So I can’t recommend highly enough that you do that so you can make the best decisions for your new business based on the right information from the right people. It would be irresponsible and unhelpful for me to tell you otherwise. And I wish for the best for you as well so I won’t tell you otherwise. 😉

Here is another blog post that touches a little bit more on this topic from another angle that you may also find some helpful tidbits in:

Dear Danielle: How Do I Pay Myself?

Also, just to let everyone know, you get an Introduction to Business Formations guide included when you purchase the Administrative Consultant Business Plan Set (FRM-32) from the ACA Success Store.

Thanks for the question. Hope this has been helpful. :)