freelance business tips Archives

Freelancing Guide Explains Financial Considerations in Plain English

May 21, 2017

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.

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

February 16, 2016February 8, 2016

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_GuideGalaxyHeadline The 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.

FreshBooks_GuideToTheGalaxy600pix-

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.

FreshBooks-ProductFamily

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

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

March 16, 2014

WRITERS. 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

Freelancers Can Thrive in New Era of Independent Workers

September 26, 2012September 25, 2012

Plenty of opportunities await professionals who aspire to the flexibility and independence of freelancing. That was the theme of the keynote presentation delivered by Erik Vonk, during the 2012 International Freelancer’s Day Conference held online by the International Freelancer Academy.

Vonk is CEO of Back of The House, a privately held company that offers portable health, retirement, and liability protection to independent professionals. The firm also can handle distracting administrative, accounting, tax, and IT tasks for solopreneurs. Vonk’s speech was titled “How to Thrive as a Free Agent in the Upcoming Era of Independent Work Arrangements.”

The growth of global commerce, online communications, changing demographics, and the speed of technological change have created both confusion and opportunity. In addition, these mega-trends are creating an increasingly dynamic workforce, said Vonk.

Exchanging our competencies for income today is no longer tied to a specific job with a specific employer. Since 1980, the percentage of people who work independently or on a contract or project basis has more than doubled, rising from around 15% in 1980 to 31% in 2011. Over the same period, the average length of time a person held a specific job has declined from about 15 years to less than 4 years.

“So there’s nothing permanent about work anymore,” observed Vonk. Now that organizations are under pressure to have access to talent and competencies on an as-needed basis, he said, “It no longer makes sense for organizations to make open-ended commitments to workers.”

To replace fixed employment costs with the variable expenses associated with contract workers, many companies now use their business plans to determine what kinds of employees they will need and for how long.

To Vonk, this progression is simply part of societal evolution. The way work worked in the past was steeped in the evolution from an agricultural era to the industrial era. In the industrial era, professionals were all dependent on the employer. As workers, our identities, status, security, and destiny in life were all tied to our place of work. As we have evolved through the information age, our identities as workers have become further and further detached from our place of work, and more attached to ourselves, as individuals.

“And that is where we are today, in the conceptual age, where worker identity is attached to the self,” said Vonk. “The worker has become global and independent, and no longer attached and dependent.”

During the heyday of permanent employment, freelancing was often regarded as something to be tolerated if you happened to find yourself between jobs. Freelance work started to become more desirable as people wanted the flexibility to design their work schedules around family life, travel, and personal interests. Now, independent work is becoming something that more and more people are aspiring to.

Vonk acknowledged that some misperceptions still exist about what the U.S. government still calls “the contingent workforce.” The Back of the House website includes a list of Ten Myths and Realities regarding taxes, terminology, and employee quality and loyalty. He advised freelancers to educate themselves about these issues, and discuss them when negotiating contracts for new assignments.