freelance business resources

Freelancing Guide Explains Financial Considerations in Plain English

Some people envision freelancing as an escape from some of the more unpleasant aspects of full-time work — difficult bosses, office politics, rigid schedules, daily commutes, and unrewarding work. The truth is: freelancing may not really be much of an escape.

Yes, you do get the flexibility to work when and where you want to. But you won’t always be doing work that you love. Often, you must act as your own accountant, marketing person, and IT guy.  (Your computer will crash when your workload is the heaviest and the deadlines are the tightest.) Freelancing can quickly become like a never-ending job search as you keep your eye out for new opportunities and write proposals for potential new clients.

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Unless you prepare yourself for the realities of freelancing, you may struggle with an unstable and unpredictable cash flow, unexpected expenses, and the challenges of doing unfulfilling work for many difficult bosses.

Ultimate Freelancer’s Guide Tackles Financial Angles

So before you ditch a relatively decent and stable full-time job, you might want to take a deeper look at some of the financial realities.  One good place to start is “The Ultimate Freelancer’s Guide: Everything You Need to Know About Getting Jobs, Getting Paid, and Getting Ahead.” The guide was published by The Simple Dollar, a top personal finance blog.

The guide consolidates a lot of practical advice about some of the pain points and long-term challenges. For example:

  • Income isn’t guaranteed.
  • Not every hour you work is billable.
  • Employers don’t pay for your benefits (including holidays and vacations).
  • Financial due diligence is a must.

The guide notes that, “You need a head for business, especially when it comes to finances and expenses. It’s not just about taxes; you also have to learn about accounting, billing, licensing, and contracts. All of that extra work can be tough if you’re slammed during work hours with freelance projects.”

Useful Advice

In the section of the guide about “Business Structure and Registration,” the authors discuss the advantages of formally establishing a business if you’re planning to build a long-term freelance career: “A registered business can shield you from personal liability and provide tax advantages. Less tangible (but equally important), a registered business builds legitimacy, so your clients forget you’re working from home in your pajamas.”

In the guide, you’ll learn about the need to set aside sufficient funds for estimated quarterly taxes and retirement. Setting aside funds can be difficult because when you freelance: “It’s tough to predict when money will come in and easy to say, ‘I’ll save when it does.'” Many new freelancers forget about taxes and some report that they haven’t been able to pay their taxes at some point.

In order to stay in the black throughout the year, you need to book a variety of projects and should know where your work will be coming from for at least the next six months.

When pricing your work, don’t make the mistake of basing your rate on the salary you earned as a full-time employee. Your take-home pay didn’t take into account some of the new expenses you will face as freelancer, such as FICA taxes, health insurance, materials, and travel.

If you are offered a project that will take several months to complete, don’t be afraid to ask for an up-front deposit. Your client shouldn’t expect you to devote months of your time to an assignment, then wait an additional 30 to 50 days after the project is finished to get paid.

The Ultimate Freelancer’s Guide consolidates a wealth of other practical advice about

  • managing your finances
  • what to do if you’re not getting paid
  • setting your freelance rate
  • how to find great freelance jobs and submit proposals
  • building your brand, portfolio, and professional network

Whether you choose to build a career as a freelancer or find yourself doing freelance work out of necessity, The Simple Dollar offers sound financial advice. Their tips and recommended resources can help you avoid some painful lessons that can wreak havoc on your bank account.

Freelancing Guide Helps Newcomers Navigate the Universe of Opportunities

The creative people at FreshBooks’ cloud accounting service for freelancers and small businesses have developed “The Freelancer’s Guide to the Galaxy.”   Because I have been freelancing for a long time and use FreshBooks’ services, I accepted their invitation to comment on the guide.

FreshBooks_GuideGalaxyHeadlineThe infographic (published below) points out that the freelance universe can be complex place to navigate on your own. The guide highlights 9 places new voyagers can expect to encounter. Here is a quick recap of the 9 zones and what I have learned traveling through them.

CLIENT STAR FIELD: Potential clients abound but they can be elusive if you take the wrong approach.

My experience: This is true. The right approach matters because competition also abounds. You will also discover that not all clients and opportunities are right for you. At some point, seeking new clients becomes like perpetual online dating or job hunting. Eventually you may prefer to settle down with a few clients who value your work and treat you like part of the team.

LAND OF PEAKS AND PITS: Some months you’ll have to trek through mountains of work from multiple clients. Other months you’ll have to slog through a desert of dry spells.

My experience: Mountains of work are fraught with peril (e.g., missed deadlines, neglected marketing projects, overlooked accounting tasks).  The deserts can be unnerving because you never know when the dry spell will end. But slowdowns in paying assignments are great opportunities to pursue personal projects that refresh your skills and enthusiasm. Dry spells can also give you time to streamline your workflows, update your skills, or connect with clients who can give you a predictable flow of steady work.

ISOLATION ZONE: Sometimes the life of a work-at-home freelancer gets a bit lonely. Stay connected to professional peers at networking events or informal get-togethers.

My experience: I am more productive and creative working in isolation than in an open-space office environment. But staying connected to the outside world is essential. Traveling to trade shows and educational conferences can expand your universe of contacts, opportunities, and ideas for new projects.

TIME WASTER’S BLACK HOLE: Online (and offline) distractions can be a powerful force.

My experience: You can’t afford to fall into the black hole of wasted time. As a freelancer, your time is your most valuable asset. Ultimately, your earning potential depends on how many hours you spend on income-generating projects.

GRAY AREA: The boundaries between work and home become especially blurry when working from home.

My experience: This was particularly true when my children were little. But children grow up and move out faster than you imagine.  So, I have never regretted the times I let my own work slow down to spend more time with them. Still, I have always appreciated my separate home office space. I close the door and leave work behind at the end of a busy day.

PLANET YOU: You are responsible for your own success.

My experience: Like other freelancers, I was shocked by how little time is spent doing work I truly love. Instead of “being your own boss,” you must adapt to the diverse work styles and expectations of multiple bosses. Plus, in addition to marketing yourself, there will be times when you must be your own IT person, accountant, and training expert.

Continuous training is especially important because it can help you differentiate yourself from competitors and become indispensable to your clients. Freelancers with leading-edge skills or unique expertise can command higher rates.

ACCOUNTING ALLEY: The land of taxes, deductions, and accounts payable can seem like entering a whole new universe.

My experience: In addition to exploring the brave new world of accounting, you may encounter clients who require specific types of business insurance and licenses. If you approach freelancing as a business instead of a sideline, you will be better prepared to handle the realities of taxes, local home-business regulations, and insurance.

CORPORATE TEMPTRESSES: Guaranteed health coverage and 401k contributions could lure you back into the life of a salaried employee.

My experience: Weaving between the worlds of freelancing and full-time work can be a good thing. I worked at home when my children were toddlers, and happily accepted a part-time job when the kids went off to school. When the part-time job morphed into full-time work, I forged valuable connections that guaranteed steady work when I opted to return to freelancing. In today’s world of “contingent workforces,” a full-time job isn’t necessarily more secure than freelancing.

RETIREMENT NEVERLAND: Don’t neglect the need to plan for your financial future.

My experience: Yes, it’s critical to plan for secure financial future. But if you reach the point  in your business where you can do more of the work you love, you may not want to retire. At some point during your freelance career, consider diversifying your work so that not all of your income comes from paying clients. Creative professionals today are discovering dozens of new ways to create and sell their own products.

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Final Words of Advice

With the rise of the gig economy and contingency work teams, dozens of new services have been developed to make life easier for independent workers.

I started using FreshBooks several years ago, when I learned about it during a virtual conference on International Freelancer’s Day. The founder of FreshBooks was a freelance designer who learned the hard way that general-office tools for creating documents and spreadsheets aren’t sufficient for the needs of independent business owners.

At first, I used FreshBooks primarily for time tracking, invoicing, and preparing 1099 forms for independent contractors I managed for a major project. Today, I also use FreshBooks to track and categorize tax-deductible expenses. I can access FreshBooks on my iPhone, iPad and PC.

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Today, companies that hire freelancers may ask you to provide specialized services that you don’t yet offer. FreshBooks’ partnership with Elance makes it easy to connect with a vast pool of other freelancers who could help deliver additional services a client might want.

The FreshBooks partnership with PayPal makes it easy for to give clients several options for how they want to pay (including credit cards).

Many other apps and services exist make it easier for freelancers today to find new clients, submit proposals, and provide a wider range of services.  I will share some of the services that have worked well for me in future posts.

FOR MORE INFORMATION

FreshBooks

 

Study Estimates About 53 Million Americans Are Freelancing

 

CoverofFreelancingReport (2)More than one in three workers — 53 million Americans — are now freelancing, according to the most comprehensive survey of the U.S. independent workforce in nearly a decade.

The study, “Freelancing in America: A National Survey of the New Workforce,” was conducted by the independent research firm Edelman Berland and commissioned by Freelancers Union in partnership with Elance-oDesk.

“Freelancing is the new normal — and this survey shows that America’s new workforce is big, crucial, and here to stay,” said Sara Horowitz, Founder and Executive Director of Freelancers Union.

“The 53 million Americans who are freelancing already contribute more than $700 billion to our national economy and help U.S. businesses compete and find the skills that they need. This is just the start: The connected era we live in is liberating our workforce. The barriers to being a freelance professional — finding work, collaborating with clients and getting paid on time — are going away,” said Fabio Rosati, CEO of Elance-oDesk.

Key Findings

The economic impact of the 53 million Americans who are freelancing is significant. Collectively, they contribute more than $715 billion in freelance earnings to the national economy. And that impact is expected to grow in the coming years. Findings show that:

Freelancers are seeing more demand for their work. Twice as many freelancers have seen an increase in demand in the past year as have seen a decrease (32% increase, versus 15% decrease).

Technology is helping freelancers find work. Nearly seven in ten (69%) freelancers said technology had made it easier to find freelance work, and 42% said they have done freelance work via the Internet.

As demand increases, so does their reputation. Almost two out of three (65%) freelancers said freelancing as a career path is more respected today than it was three years ago.

The potential for earnings is helping to drive the growth of freelancing.  80% of non-freelancers surveyed said they would be willing to do additional work outside of their primary job if it was available and enabled them to make more money.

There is room for growth. Three times as many freelancers expect their hours to increase in the next year as expect their hours to decrease (38% expect to increase hours, versus 12% expect to decrease).

Millennials (workers under 35) are more likely to freelance. 38% of Millennials are freelancing, compared to 32% of those over 35. Millennials are also most optimistic about the future of the freelance job market, with 82% saying that the best days are ahead (compared to 74% of those over 35).

Five Freelancer Segments

The study identified five segments of freelancers, covering the diverse range of people who are freelancing today:

Independent Contractors (40% of the independent workforce / 21.1 million professionals). These “traditional” freelancers don’t have an employer and instead do freelance, temporary or supplemental work on a project-to-project basis.

Moonlighters (27% / 14.3 million). This professionals have a primary, traditional job but also moonlight doing freelance work. For example, a corporate-employed web developer may also do projects for non-profits in the evening.

Diversified Workers (18% / 9.3 million). This group includes people with multiple sources of income from a mix of traditional employers and freelance work. For example, someone who works at a dentist’s office 20 hours a week may generate the rest of his income driving for Uber and doing freelance writing.

Temporary Workers (10% / 5.5 million). These freelancers work for a single employer or client on a temporary job or contract project. For example, a business strategy consultant may be contracted to work for a startup client on project that lasts several months. .

Freelance Business Owners (5% / 2.8 million). These freelancers are small-business owners, with between one and five employees. The freelance business owner consider himself both a freelancer and a business owner. For example, a social marketing guru still identifies as a freelancer even after hiring a team of other social marketers to build a small agency. .

Mikki Morrissette of Minneapolis spent more than a decade in corporate publishing in New York City before switching over to become a freelance writer and communications specialist 15 years ago.

“I am so much happier in this new stage of my career,” Morrissette said. “As a single mom with two kids, and an itch for travel, I love the flexibility. I get to choose the projects I work on and mostly work with other eclectic entrepreneurs like me. I love being free to pursue my interests where they take me.”

About the “Freelancing in America” Study

For the study, more than 5,050 U.S. working adults over the age of 18 were surveyed online between July 19, 2014 – July 31, 2014. Of those, 1,720 were freelancers and 3,332 were non-freelancers. Results are weighted to ensure demographic representation in line with the United States Bureau of Labor Statistics 2013 Labor Force Statistics from the Current Population Survey. The study has an overall margin of error of ±1.38% at the 95% level of confidence.

About Freelancers Union

The Freelancers Union serves the needs of the growing sector of independent workers. More than one in three working Americans is an independent worker. They are lawyers, nannies, graphic designers, writers, artists, photographers, illustrators, marketing specialists, and more.

About Elance-oDesk

Elance-oDesk is one of the world’s largest online workplaces. More than 2.5 million businesses and 8 million freelancers tap into www.Elance.com and www.oDesk.com to work together via the Internet.

LINKS

Freelancing in America: A National Survey of the New Workforce

About Freelancers Union

 

E-Book Offers 50 Tips to Help You Freelance with Confidence

FreelancewithConfidnce-E-Book-350WRITERS. Laurie Lewis, author of the book “What to Charge: Pricing Strategies for Freelancers and Consultants,” has published a new Kindle e-book, “Freelance With Confidence: 50 Proven Tips for a Successful Freelance Career.”

While providing useful guidance for any freelancer, the e-book will be especially valuable for newcomers to the field and for those struggling to build a successful business.

The 50 tips in Freelance With Confidence fall into five categories:

  • 10 crucial things to remember about freelancing
  • 10 start-up instructions for new freelancers
  • 10 reminders about working alone and as part of a team
  • 10 pointers for keeping up in a technology-driven world, and
  • 10 insights about freelancing as a lifestyle.

The author has supported herself as freelance medical writer and editor in New York City for almost 30 years.

The second edition of her book “What to Charge” was selected as a finalist in the USA Best Books 2011 competition. It tied for first place in a business category and came in second in the writing division of the 2012 Reader Views Literary Awards competition.

LINKS

Freelance With Confidence: 50 Proven Tips for a Successful Freelance Career

What to Charge: Pricing Strategies for Freelancers and Consultants

Freelance Fee Setting: Quick Guide for When a Client Demands a Price NOW