At it’s core, a location independent business needs three components:
- Product or service
- Method to deliver the product or service
- Platform to get paid
Depending on your business choice (which varies in the location independent world), the overhead costs you need to set up and maintain this system can range from minimal to…more.
Overall, location independent businesses have less overhead costs than conventional businesses, due to two factors:
- There are no physical office costs, nor commuting expenses
- You have the freedom to manoeuvre yourself to live in a place and way that saves you money (I have proven a few times over that the cost of living full-time on the road has consistently been sustainable given a varying location independent income.
Overhead Costs for Location Independent Businesses
Most of these are fees – hidden or otherwise – that you’ll have to pay in order to run your location independent business.
Internet is the lifeblood of location independence, whether it’s internet cafes, free hotel wifi, or a subscription plan.
Computer & Equipment
These are capital costs, but ones that will also require upgrading and maintenance.
You’ll pay a one-time fee to buy your domain (under $100), plus a minimal annual fee to maintain it.
Once you have your domain, you need a service to host your site. Annual fees vary depending on your site’s needs, but they start at less than $100/year.
You’ve got to file your taxes (unless you’re structuring your business/residency to be a tax-free off-shore deal – in which case you’ll still need accountants and lawyers.) It’s a good idea to set aside a percentage of your income in an online savings account to cover anticipated tax needs.
Currency conversion charges
If you’re working from the road, you’re probably juggling different currencies; you might be paid in British Pounds, convert them to an American bank account, and then access/convert the money to pay your expenses in Thailand. Every time money is converted, you’re getting dinged for currency conversion charges, running up to 3%. They’re less painful because most often they’re hidden.
Payment platform fees (Paypal, bank transfers)
You need a way to get paid online, and Paypal is generally the platform of choice. Again the fees come off the top, and range from 3-5% of the amount you are paid. (They get you again with currency conversion charges when transferring money to your bank account).
You may or may not need to incorporate these overhead expenses into your location independent business:
Mailing List/Newsletter Service
If you have an e-course to offer, or are building a mailing list through subscription newsletters, you’ll have to use a service like Mail Chimp or Aweber (I use and endorse Aweber). Fees vary depending on the volume of mail you send and the number of subscribers you have.
There’s a cost to getting clients; and unless you’re building your clientele/following entirely organically (which is possible), you might have to pay for some exposure.
Merchant Platform Fees
If you have a product to sell to the public, then you need to establish a merchant platform for people to pay you. Paypal is popular, and E-Junkie is an example of a site that you can use to sell a digital product like an e-book. Monthly fees depend on the number of (digital) products you have to sell and how large they are.
Depending on how sophisticated your business and tax/residency situation is, you may wish to incorporate. There are hefty fees to establish a corporation, and some ongoing accounting and legal fees to maintain it.
Design & Development (initial and ongoing)
You may hire a designer to set up your website, design deliverables like e-books, or set up your sales pages and merchant platform. Although I initially designed my own site (in a haphazard fashion), I eventually started outsourcing this for a better return on investment.
Shipping (products, as well as supplies to wherever you are)
There are overhead costs with shipping a physical product, as well as with having supplies or products shipped to you – wherever in the world you may be.
Virtual Mailing Services
If you have no fixed address, you might subscribe to a virtual mailing service to give you an official address (for your taxes and driver’s license for example); they’ll scan your mail and email it to you, giving you the option to have them trash it, forward it, or hold it. (See Financial Travel Tip #109: Virtual Mailing Services)
Depending on your industry, you might need business (liability) insurance, and depending on your equipment, you might need property insurance.
Optional Cost/No Cost Expenses
These optional services can be acquired for a fee or for free, depending on your needs:
Communication (Phone/Video conferencing)
Depending on how creative you are (and how good your internet connection is), you can accomplish most of your communication needs for free. You may wish to pay extra for a phone number that is local for clients to call you on (with services like Skype and Google Voice), or for sophisticated video conferencing needs, etc.
Invoicing and Task Management Programs
If you’re managing a team, or have complicated invoicing needs, a task management and invoicing program may help. There are both free and paid versions.
You’ll want to back up your data, which can be done many different ways. If you have a lot of data to back up, or want to encrypt the backups, or if you need to purchase external hard drives, you’ll likely pay for it.
Photo-heavy sites often use photo-hosting services to relieve the burden on their site’s server, as well as to back up – and even have a platform to sell – photos. I use Zenfolio for backing up and hosting my photos (use the discount code K5N-RQA-X23 for 10% off).
If you’re using dodgy internet connections, have extra sensitive data, or want to access country-restricted websites, you’ll want to use an external VPN service such as TunnelBear or IP Vanish. I’ve used both and enjoyed them; the biggest difference between the two is that IP Vanish can accommodate Windows phones. Here’s some more information on VPN services in general.
What did I miss? What are your own location independent business overhead expenses?