One of the people who has gone through Blue House Energy’s Foundation Exam Prep and Energy Advisor Exam Prep program wrote to me and asked this question:
“I currently have two offers of employment to get me going as an EA. One is as a contractor, paid on a per file basis. The other is a salaried position with a file quota. Being very new to this world and not really knowing how things will transpire I’m struggling to see which is the best option.”
Here’s my answer: It really comes down to whether you want stability with regard to salary + benefits, or a slightly more freewheeling income generator with opportunity for you to do as much work as you like. Both choices have opportunities for growth and a career path.
Independent Energy Advisors need self-discipline
If you've never been an independent contractor, you might find some bumps in the road in terms of self-discipline, scheduling, and budgeting for expenses that would be covered by a salaried position. Flexibility and self-motivation do come with a ‘tax’. On a pay per file offer, you won't make as much money in the first month, or even the first year or two, as you will later because you're still on a learning curve.
It's a very personal decision based on how candid you are willing to be with yourself: you need to do a sharp analysis of your abilities to organize, schedule and budget when you are an independent contractor working on a per-file basis.
Another question to ask yourself is what do you want to focus on: Existing or new housing? Service Organizations can be specific to one or the other, or they can offer both services. Is there an option for you to get qualified to do MURBs in the future? Does that interest you?
For most of us, the priority is finding security.
But security is hard won these days!
Being a salaried employee is what most people are accustomed to, and certainly it’s what banks and other lending institutions are accustomed to. A mortgage lender is going to be happier to finance someone who is a 'regular' employee w/salary. That’s what their lending model fits. After many years of being self-employed and having to negotiate mortgages, I can attest to the fact that lenders just don't know how to deal with non-regular work arrangements. (You might be well-served by working with a mortgage broker whether you are an employee or contractor.)
Whether you’re an independent contractor or on a payroll, you’ll benefit from some training in ‘soft skills’, because you’re going to bump into situations that are not easy. Try these online courses from The Conscious Builder: tough conversations, conflict resolution, managing clients.
Independent Energy Advisors need some business savvy
Choices like this are hard, but what if you don’t have a choice of job offers? What if the only option is a per file contractor position? What do you need to know about how to set yourself up as a self-employed person? How do you parse a contract? What are your responsibilities and how do you protect yourself financially and legally?
We’re not a business consulting firm, but we do know a lot about what it takes to be a consultant - several BHE employees have worked as independent contractors, and we have a mix of employees on payroll and a roster of contractors who work with us regularly.
So here’s some thoughts on how to set yourself up from our real-world experience as contractors and consultants, with some excellent inputs from Chelsah Thomas, co-founder of Sol Invictus Energy Services, energy advisors and much more out of Red Deer Alberta.
How are you going to do business?
Are you going to do business as a sole proprietorship, or a corporation? Most people in our field go for either a ‘sole prop’ or a corporation - partnerships are complicated. There are costs and benefits to both. If it’s overwhelming to consider what you should do, you can begin as a sole proprietor and change to a corporation when you are able to afford both the time and the cost to set it up legally.
A sole proprietorship is typically used when the business is owned and operated by the individual responsible for the business and its liabilities. To become a sole proprietor is very simple. Essentially, you need to have a business license and register your business name. The big caveat here is that the liability of the enterprise is all on your head. Meaning that YOUR assets are at risk if the liabilities of the business come knocking at the door.
In Canada, a corporation has all the legal abilities of a person: it can own property, borrow or lend money, sue or be sued. There are more requirements for legal documentation and taxation obligations, but a corporation takes a big chunk of liability off you personally, and allows the transfer of assets, among other benefits.
Choose and register your business name
For sole proprietorship, using a business name can be seen as more professional, but you can use your own name if you want. To register a sole proprietorship business, you need to register your trade name with the registry agent. For a corporation, you need to complete the articles of association notice of address form and take all the information to a registry agent for incorporation.
Get a business license, permit and business number
Licenses and permits are legal requirements you need to operate your contracting business. Without them you could be subject to fines or orders from authorities for you to stop operations. You can get your licenses and permits from your municipality or town office. You need a business number for taxation requirements. Find out how to get a business number here.
Know your taxation requirements
For sole proprietorship, business income is reported on your personal income tax returns. The profits of the business flow through to the individual and are taxed that way, so you need to tuck money away throughout the year to cover your tax burden.
Since a corporation is a distinct legal entity, it must pay tax on its income. For a corporation, you file a separate income tax return (you still need to file a personal one). The Canadian Revenue Authority (CRA) requires independent contractors to keep track of all the income received.
Here is a handy checklist from CRA for starting a small business.
Insurance is important for any contracting business, you don’t want to lose assets or revenue because of a mistake or an accident. It is mandatory for Energy Advisors to carry minimum levels of Errors and Omissions liability insurance along with Commercial General Liability insurance.
Manage your business
Open a bank account for your business cash flow. Look at existing systems that make invoicing, scheduling, and filing taxes efficient. This is really important so you can keep track of money in and money out, your billable hours, invoicing and expenses like mileage, and prepare your taxes. There are several excellent programs for money management (we use Quickbooks). Time management is also important to success, so finding a tool that helps you schedule yourself is a good idea (we use Asana, there’s a free version).
Become a member of the Canadian Association of Consulting Energy Advisors (CACEA – www.cacea.ca), regardless if you are an employee or an independent contractor. Take advantage of the professional hub, connect with other EAs and keep up to date on changes and updates to the EA role across Canada. In addition, CACEA has a range of affinity partners that offer members good deals on insurance, equipment, gear, and other services that you will need.
Interested in finding out more? Contact us and our program coordinator, Carla, will give you a call.