The vast majority (90%+) of businesses in Germany are small to medium enterprises and freelance and self employment is on the rise. Many people are considering the move to this lifestyle because of the obvious benefits of 'being your own boss''. In addition to that, many industries are actually beginning to rely on freelance workers as it is often a cheaper alternative to hiring a full time employee, especially if it is on a project-by-project basis.
There are lots of pathways for workers to move into this lifestyle. However, one of the most common mistakes when you have people from so many different backgrounds, is underestimating the cost of setting up and starting a business. Not just tangible money, but also the time resources required to do everything above board. In this article, we are going to break some of this down for you.
There is quite a large 'to-do' list when it comes to starting a business, in general. However, this would not be a blog about freelance or self employed life in Germany without mentioning, there is a particular process here in Germany - very detailed, and likely in some ways very different if you are coming from countries like the U.S.A, Australia or the U.K. We have discussed what you need to do when registering a business before on the blog, but we are going to get into the more nitty gritty. Often times self employed people are employing themselves because of a great idea that has nothing to do with the administration of starting a business, and that's why we are going to do this in this article.
Quickly, let's refresh on some of the more difficult parts of business in Germany:
- Strict intellectual property protection policies are strict and protected by -German intellectual property act at a European level.
- Strict employment laws, highly regulated by the government;
- Complex tax system, where hiring a financial consultant might be the best solution;
- Growth opportunities, that require substantial expenses, especially if the business requires highly skilled labor or high levels of productivity.
Many self-employed people have to struggle with the question of what really matters in the beginning. What things are time-wasters and what should you focus on?
One of the key tasks to build a business is preliminary costing. With it, you know exactly how much income you need to generate to balance your spending and what's left over. With cost calculations, you can better define the future, make more strategic investments, and have a better view of your financial movements. The way you want to earn your money depends on your business strategy. The basis for this must be that the surplus value more than covers all the expenses you regularly have to generate it. The positive amount must be enough to pay out an appropriate hourly wage for you and possibly your employees. To find out if this is the case, cost calculations are an integral part of preparing your business. In the cost calculation, the profits are taken into account in addition to the costs, whereby the costs play a greater role here.