Fire, ready, aim. That’s the phrase I often think of when freelancers tell me how they got started. There’s nothing sweeter than landing that first gig. You, rainmaker. Yesssss.
But you don’t want to spin your wheels. Wasted motion, for freelancers, is money lost. This chapter will help you launch a calmer, more successful, more satisfying freelance life.
Maybe you’ve heard or read that you can’t make it as a freelancer unless you work and network 24/7, thrive on risk and rejection, are a fierce negotiator, and can do your own IT.
Ridiculous.
I’ve known freelancers who work around the clock and freelancers who shut down at close of business . . . freelancers who love to network and freelancers who’ve learned to network . . . tough-hided freelancers and tender-hearted ones . . . computer geeks and technophobes. They’re all freelancers. They all make it work.
So forget the myth of the Perfect Freelancer. There are no perfect freelancers. But there are smart ones. That’s what the questions below are about.
Do you want to make significant money, or supplement the family income? Do you want to grow your career, or taper down? Do you want to freelance on a limited basis (i.e., be a part-time freelancer) in order to have more family time? If so, can you still make the income you need, or will you need to change your lifestyle?
Being clear about what you want from freelancing will help you embrace it: “I’d always wanted to be a freelancer—I loathed attending meeting after meeting in sunless offices. As soon as I could, I ditched the corporate digs to work from home. I loved that I could focus on putting in exactly as much time as a project required and then go for a walk, run errands, or even take a nap.”
If you need courage to take the leap, knowing your objectives can help: “I’d been working in corporate America for as long as I could remember and was mentally and physically exhausted. I’m also a single parent and felt it was essential that I be present during my child’s middle-school years. The only way I could find to do that was to take a flying leap into the unknown and start my own business.”
Finally, your goals will be your baseline for all the major freelance career decisions we’ll talk about in this book: what kinds of projects you pursue, your rates, your work pace, and your marketing strategy.
Now think about your ultimate life aspirations. As a freelancer, how’ll you get there from here? “Look at your industry realities squarely against your dream lifestyle,” one freelancer advised. “I moved out of the city, and for people in my profession, moving far away is a problem. Can you really live in that fantasy cabin in the woods and still make the same good living, even in these days of virtual everything? I couldn’t. My revenue was cut in half within a very few years.”
On the other hand, freelancing’s inherent flexibility may offer unprecedented freedom to live life on your own terms: to pursue multiple work interests rather than being locked into a single career path; to hit the road without having to ask the boss for time off; to pick up and move in order to live closer to family . . . or in the climate you prefer . . . or where your favorite sports or activities are plentiful . . . or where taxes are lower or health insurance more affordable. With research and planning, you may find an exciting new life is within reach.
Take some time to sort things out. Working at a company can be killer stressful. Bad bosses, tight budgets, lack of flexible time, and other dissatisfactions have eroded workers’ confidence and sense of pride and reward in their careers. That’s a draining place to be.
Unless you’ve been building an exit strategy, you may have no idea what your goals are, or whether you can get there as a freelancer. People will ask what’s next—sometimes because they’re nosy, but often because they want to help. Test the waters: Tell them you’re “looking at a lot of options, including working on my own.” You might find gigs faster than you think: “I told a literary agent, ‘I’m open to another corporate job, but I’m looking at going out on my own, too. I’m a very hands-on editor, and I also write. I’ve written a relationships book—’ ‘You have?’ he interrupted. ‘I’m looking for a writer for a relationships book.’ That’s how I got my first gig.”
FREELANCERS SPEAK
Burned Out, Walked Out . . . Worked Out!
For a lot of people, the leap from unstable, unsatisfying company job to freelancing isn’t as crazy-scary as it used to be:
“The company where I worked wasn’t doing well. People were getting fired, and the environment had become toxic. I applied for a job in another division, but then thought: Do I really have what it takes to give 150 percent to a new job right now? I wanted to have kids, and I realized it made more sense to build a freelance business than devote myself to another in-house job. I withdrew my application, quit, and went freelance. One day, as a freelancer, I was sitting on my couch at home in the sun reading some really interesting research, and I thought, I can’t believe I get paid to do this!”
“My employment ended abruptly after a public blowup with the boss’s pet. Turned out my departure coincided with a travel promo where for $600 you could fly as often as you wanted for a month. I visited friends all over the United States. I met with someone who became a core freelance client, plus an old friend who became one of my editors at a popular magazine. It was one of the coolest things I’ve ever done.”
Technology can make the world your client. A click sends a project from your crib in Kokomo to a glass tower in Tokyo. Of course, it works in reverse, too: Companies have their pick of the indie talent pool. How will you stand out?
We aren’t all excellent, and we aren’t all excellent all the time. Do you need to get up to speed, get training, retool, recertify, add credits? The greater your skills, the higher you can set your prices. If you’re working full time, carve out some time and money for some skill upgrades while you still have the security of the regular paycheck. If you’re already freelance, you might have to take midlevel gigs while you save for that workshop, class, or certification. Talk to some successful freelancers about what kind of training or retooling they recommend.
If you’re new to your work or coming back after a hiatus, you may need to set your rates lower at first to get clients and experience: “I figured out what to charge for copywriting from a friend who’s a copywriter. I lowered his rate by about thirty percent, since he’s a career communications guy, and I was transitioning back into copywriting after nearly a decade.”
Consider working part time to stabilize your income while you grow. Could be clerical work, waitstaff work, retail sales during holidays or tourist season, filling in for employees on vacation or maternity leave, or temping at companies going through a hiring freeze. “I waited tables at night and took my portfolio around in the daytime. Gradually, I built my freelance design work, getting one assignment in, then three, then ten. Having that part-time job allowed me to build the funds to promote myself and buy equipment. It was also a good lesson in managing with just the basics and getting creative about becoming visible in the industry.”
Make a two-sided list. One one side are the skills you love to use and could happily exercise daily. On the other side are skills you don’t enjoy as much, but they’re in your bag of tricks.
Include all your skills, from all the parts of your life, that you can legitimately offer for a fee. Freelancing lets you bring the whole you into making a living. All sorts of abilities can pay—including stuff you’ve never thought of charging for (helping kids with their math homework . . . fixing things around the house . . . figuring out frozen computer screens) or stuff you love doing (knitting, cooking, coaching, improv, making playlists for your friends, or taking the best pictures at parties). In fact, the whole you may turn out to be hugely important to your freelance success. There are two sample lists on the next two pages:
Your Key Skills List will help you see different ways to market yourself and find the project mix likely to be most satisfying. Is there work you love that others find not-so-fun? Congrats—you might have just discovered a high-paying niche.
Sometimes the best-paying skills aren’t ones you like the most. In lean times, you might tap your “Other Skills” column more. But ideally you shouldn’t “live” there for too long: “I was a book packager for about a year. I hated every minute of it. I was an agent for six months but was terrified to negotiate. Eventually, I realized that if the main aspect of my work was making me unhappy, I had to change it because I wouldn’t relish it.”
Hey—if you want to be unhappy with your job description, go work for a company!
Competence doesn’t make clients want you. You want to be irresistibly valuable. Think of someone you know who is an amazing professional. There are probably one or two things they do that they’re absolutely the best at—the things you mention when you rave about them to others.
What are those top-rated skills for you?
Recall a work achievement or obstacle you’ve overcome. Pull out the value results:
• Did you do it faster or more efficiently?
• Was it safer . . . more beautiful . . . more ingenious . . . more “out there”?
• Did it save money . . . make money . . . gain customers?
• Did it find a new market . . . win votes . . . win awards?
• Was it an against-all-odds on-time delivery?
• Did it produce a perfect result from a mess of mistakes?
• . . . or what?
Your top skills create your reputation—which drive your marketing message, your negotiating leverage, and your pricing. Employees can hide their mediocrity inside the bureaucracy. You, freelancer, are out there. Clients learn fast who’s excellent and who’s phoning it in. If you want them to return and bring their friends, provide value.
SAMPLE KEY SKILLS LIST 1
Preferred Skills
• Editing books and articles
• Writing books and articles
• Project development
• Teaching editing/writing/publishing
• Proofreading
• TV/film script doctor
• Character actor/understudy
• [et cetera]
Other Skills
• Editing brochures, ad copy, press releases
• Writing Web content
• Project management/production
• Fact-checking; research
• Transcribing
• TV/film script reading
• Theater usher
• [et cetera]
Preferred Skills
• Financial analysis and accounting, corporate
• Financial analysis and accounting, small business/start-ups
• Nonprofit accounting
• Business plan consulting
• Math teacher/tutor
• [et cetera]
Other Skills
• Compliance assessment
• Bookkeeping
• Tax preparation
• Data entry
• Teaching accounting/bookkeeping
• [et cetera]
We live in a data-obsessed world. The more measureable your work successes, the better.
• How much did sales increase?
• How much traffic did your campaign drive to the website?
• How much time was saved?
• How much money was made?
• By what percentage were losses reduced?
• How many bestsellers have you worked on?
• How many design awards have you won?
• How much grant money have you raised?
Ask clients (or coworkers, if you’re transitioning from a staff job) if there are sales figures, financials, or other measurable results from your work that you can use in self-marketing.
Specialization heightens reputation. Is there a very specific product or service you know customers want? You want that well-paid specialist to be you.
Really get into brainstorming this. Maybe you perfect a gourmet mini-cupcake recipe that’s the surprise hit at the parties you cater. Voilà! You’re the go-to chef for luscious finger-food desserts. Or you wed your training as a videographer to your love for music and make music videos for new bands. Or you specialize in physical therapy for the elderly, with a subspecialty in PT following hip surgery. If training or certifications would help, budget for them (see Chapter 15 for info on taxes and professional education).
The best specialties are where your skills and passions intersect. “I know a dancer who’s also a writer,” one freelancer told me. “He writes dance reviews, blogs on dance, designs related websites, and is starting to teach dance. It’s so cool to watch him build his career by combining these things he loves.”
You can—and should—have multiple specialties. It’ll tide you over through dry time and make you a rainmaker year-round. The mini-foods chef might be snowed under with holiday catering gigs. Come summer, she morphs from chef to teacher, teaming up with a kitchenware store to lead classes on grilling and fancy picnics. She can also handle computer emergencies and tutor the inexperienced. Most of us have disparate abilities like this. Tapping them all is one of the great joys of freelancing. Stumped for a specialty? Not sure if yours is marketable? Check freelance job boards and employment listings for posts relevant to your skills and interests.
Work drying up in your biz? Let others wring their hands. Be nimble. Jump to a different pool. If you’re an architect struggling in a housing slump, maybe you help homeowners save money and improve their property value by making their homes more energy- and space-efficient. If you’re a real estate agent in the same market, maybe you and the architect team up to do community seminars and you share your contacts list to find those homeowners, taking a percentage of the fee.
Others may miss these connections. But you, nimble freelancer working outside the box, are more likely to discover income opportunities hidden in plain sight.
Communicating well, being able to lead and follow, to problem-solve, be curious, and keep your cool—all these are part of your freelance identity, too. They improve with experience and are often what clients remember best about you. They’re the basis of your reputation and are what will ultimately distinguish you from other, equally talented workers. Sometimes you can boast measureable results: You drive a monster project to the finish line and it becomes the company’s holiday bestseller. Other times you’ll get glowing references and testimonials. Build these traits by spending time with people who embody them. Read up on qualities of leadership, teamwork, and social and emotional intelligence. Consider taking some personality assessment tests to help identify your particular strengths.
Don’t you hate people who are always selling? Or the nice but clueless who drone on about their work? We pitch their cards when we get home.
This, of course, will not happen to you. Because you know:
The best freelancers hit this trifecta:
1 They’re empathetic in their analysis of what their clients need.
2 They’ve matched their skills to those needs.
3 They’ve distilled it into a pitch of utter simplicity.
Go back and match your skills, your metrics, and your specialty ideas to what your market needs—not what you think they should need, but what they actually need. If your specialty is “I’m the most detail-oriented freelance animator in town,” but your customer’s need is “We need it fast, not perfect,” you’ll quickly become the most detail-oriented unemployed freelancer in town.
What’s important to them, and in what order? Speed? Efficiency? Accuracy? Beauty? Durability? Luxury? Affordability? Simplicity? Health? Security? Reliability? Profitability? For hints, look at:
• Feedback on your work
• What others say when recommending or complimenting you
• Why prospects decline your services
• How people in your field describe others they see as excellent or inferior
If your customer isn’t happy, it won’t matter that you beat out fifty other freelancers for the job. Besides, your fellow freelancers are a community that could be helping you. More on that later.
Now that you know your freelance identity/ies, come up with one succinct sentence that says what you do. Sometimes it’s called an elevator speech. Or think of it as a “tweet.” Here are some to get you started:
“I help people prepare to publish.”
“I design costumes, restore textiles, and lecture on fashion history.”
“I develop websites, with a special focus on helping small businesses move their online presence to the next level.”
WHAT’S IN A NAME?
If you want to give your business a name besides your own, to avoid brand confusion and possible legal hassles, make sure it isn’t already in use and that it’s not trademark or service mark protected. Check local listings and online sources such as Switchboard (switchboard.com) and The New Ultimates (newultimates.com). Your state’s website may have the secretary of state’s database of reserved corporate names. Log onto the U.S. Patent and Trademark Office (USPTO) website (uspto.gov) for a free trademark search. Consider paid searches of databases such as Trademarks, Etc. (trademarksetc.com). For best assurance, consult a patents and trademarks lawyer. For an overview of the issues, check out the Small Business Administration’s article “How to Name a Business” (sba.gov).
Sound familiar? Your goal isn’t just to pay your bills, but to be paid what you’re worth. We’ll get you started here, but it’s something you’ll continue to evaluate throughout your career. In Chapter 5, we’ll talk tactics for discussing money with prospects and in negotiations. And in Chapter 17, you’ll learn about taking freelance finances an important step further: making money today and saving money for tomorrow.
You’ve already taken the first step in pricing: knowing your skills and your value. Also, look at the norms in your profession. Fee structures and norms vary widely, but here’s a rundown of common fee structures and their pros and cons:
PRICELESS ADVICE
One reason finding out about pricing is so difficult is because laws restrict activities that could result in overcontrol of an industry or restraint of free trade. For example, the Sherman Antitrust Act prohibits industries or groups from engaging in price fixing. The only exceptions are unions, and it was a hard-fought political gain to demonstrate that workers uniting to agree on pay scale doesn’t restrain trade.
One of Freelancers Union’s goals is finding ways to establish some reasonable pricing practices or standards so freelancers aren’t operating so much in the dark, and so they have some leverage against market forces that tend to push prices as low as possible. Otherwise, pricing becomes a race to the bottom—and the bottom could be an income that puts freelancers’ standard of living at modern-day Dickensian levels.
Sharing info with other freelancers about pricing and deal making is priceless not just because it helps you get paid what you’re worth, but because it helps all freelancers be paid what they deserve: “If we don’t talk about money, we’re at the mercy of low-balling clients who drive down the value of our work. We’ve divided and conquered ourselves.”
Here’s what other freelancers had to say:
“Soon after I became a freelancer, I joined a small networking group. In one meeting, one member stated what she charged per hour. There was this short silence. Then conversation resumed. And a member whispered to me, ‘I’d never charge that much!’ We were all doing similar work and had similar levels of experience. So, why wouldn’t she charge as much—and why weren’t we all talking about it?”
“It was hard to set fees because I had no frame of reference. Luckily, friends who’d been freelancing awhile helped me figure it out. But there’s definitely been some trial and error. I undercharged for one project—I won’t do that again. Ask as many freelance friends as possible for advice on what to charge.”
Type: Hourly
Pros: Accommodates variable job scope. Less stressful to negotiate, since the rate is fixed. A rush rate can be established for timesensitive jobs.
Cons: Penalizes skill and speed: The faster you finish the job, the less you’re paid. No rate flexibility for a challenging project or client. It can be hard to predict your income. Clients may dislike open-endedness. And you may reach a market ceiling that doesn’t reflect your abilities.
Type: Unit- or quantity-based (per word, per foot, per dozen).
Pros: Once calculated, easy to negotiate.
Cons: Penalizes you on jobs that are small in size, yet complex or time-consuming. Not flexible for rush schedules unless you set a rush rate. No flexibility for a challenging project or client.
Pros: Can be tailored to job scope and client. Enables you to predict your income. Adjustable, depending on personal financial requirements, available time, market changes.
Cons: Can be difficult to calculate. Must renegotiate if job scope changes, unless ranges or provisions are built in to handle “scope creep” (incremental or sudden increases in project specs or requirements).
Type: Pricing package(s). Example: X amount will buy X/Y/Z service(s)
Pros: Can be posted publicly. Streamlines negotiating, since many clients can select the package or choose from a menu of services. Less time is wasted negotiating with tire kickers. May be efficient with a long-term client you know well.
Cons: No flexibility for challenging project or client.
Type: Minimum amount
Pros: No need to negotiate. Useful for a small project that wouldn’t be cost-effective otherwise. Example: a carpenter going to the client’s house to put up a single shelf.
Cons: Little recourse in a dispute over project scope or duration.
Type: Day rate
Pros: See Minimum amount, above. Efficient if your work is specialized (i.e., the projects have similar scope) and if you’ve correctly calculated your costs, overhead, and project requirements. Can be broken into time increments spaced over a longer period. Example: a day rate of $1,000 for an eight-hour day can be broken into four hours a week worked over two weeks.
Cons: You may be underpaid if the job scope outpaces your rate, or if you’ve miscalculated your costs or overhead. Can be difficult to raise once word gets around about what it is.
Pros: Potential for ongoing income after project is complete.
Cons: Risk of no income, unless a recoupable amount is paid up-front.
FREELANCERS SPEAK
Pricing with Pride and Purpose
Think of all the nail-biting employees do around negotiating their salary. Now multiply that by every gig for freelancers.
Undercharging hurts you and other freelancers in your profession by dragging down what your skills are worth in the marketplace and conditioning buyers to expect lower prices. Help hold the line in what the market will bear: Price yourself right! It’s not only a matter of calculating what you’re worth, but accepting it:
“I love the work, and I hate talking about the money. But I’ve realized that I deserve to earn a decent living, and that it’s important to be forthright about money.”
“Be fearless about charging high. Other people are already charging more than you are.”
“After several years of barely beating insolvency as a freelancer, I discovered I’d adopted a very constrained earning ideology: To win, I only had to ‘make ends meet.’ If I needed another $1,500 to make my monthly expenses, I’d seek $1,500 and, in many cases, get it, nothing more, sometimes less.
“But what if I started quoting my jobs not to meet just my financial obligations, but to meet my financial desires? What if I wanted to make $80,000 a year, and the only way to make that amount was to actually charge it? Plus expenses! The first quote I generated using this philosophy was $5,000 to help a company name a new product and assist with their concept art. The job would take an estimated three weeks, or roughly 6 percent of my work year, so the quote was easy. I had my floor and displayed confidence in it—and it paid off, leading to a nine-month contract at $5,000 per month plus expenses!”
Whatever rate structure you choose, it should take into account the following:
Billable time: I can’t emphasize enough how important it is to know how long specific tasks take, whether or not you actually quote an hourly rate: “I based my prices on an hourly rate, even though I didn’t necessarily relay that to the client. It was a baseline.”
Purchases connected with the project: Unless the client agrees to buy them, these could include supplies, ingredients, ad space, domain names, photo research and procurement, or any other expenditure you have to lay out to complete the project. If you bring especially strong knowledge or skill to the task, such as photo research, your price might reflect that.
Overhead: This is a percentage of the proverbial “what it costs to keep the lights on.” It includes everything that enables you to live and be in business, from your mortgage or rent to your Internet bill to your insurance to your accounting costs, equipment, marketing costs, and more.
Your profit: This added percentage reflects your value: your experience, your specialty, or that certain something that distinguishes you. It may grow as you grow: “I do a lot of writing projects for my main client that only take thirty to ninety minutes. I’ve realized that I’m adding more value than I’m being paid for. The changes don’t take much time, but it’s clear that they’re pivotal to the way the material and messaging are understood.”
How much you charge for profit also depends on industry norms, your region, your level of excellence and expertise, what you want your annual income to be, and what percentage of your annual earning time this project is likely to take.
Market considerations: You can be the best on the planet but be sitting idle if there’s no demand for your kind of work, your industry’s in a slump, or the same work can be had for much less. The larger economy affects demand for what you do, as does the type of client: “I learned when the economy was good, it was good to set my prices high. When companies were paying as opposed to individuals, I charged more. My hourly rate now is a hundred dollars less than it was in 1983 because when I started I had very little competition.”
Having a specialty can help stabilize your income against market changes because it’s perceived as having higher value. Value-adds such as degrees, certifications, training, and awards help, too.
Below are some guidelines and resources you might find helpful in getting a handle on your rates. But this is definitely an art, not a science. Run your numbers, talk to your peers, trust your gut, and learn from experience. Everyone else does. If there were set formulas for pricing, it would be illegal and called price fixing.
The Freelance Switch Hourly Rate Calculator is an online tool that helps you get a great start on calculating your hourly rate. Developed by Freelance Switch and Errumm Web Consulting, the tool walks you through plugging in your annual business costs, personal costs, the number of hours you’ll work (allowing for vacation, holidays, and personal or sick days), and your desired level of profit or savings. Then it does its calculating magic and gives you a break-even and an “ideal” hourly rate. From there, you can fine-tune the results using your knowledge about your profession and the marketplace. Type into your browser: freelanceswitch.com/rates.
In their book The Designer’s Guide to Marketing and Pricing, Ilise Benun and Peleg Top provide a clear step-by-step process for calculating a basic hourly rate derived from your desired salary, your business overhead, billable hours, and desired profit—which you then adjust based on other factors in play (the nature of the gig and the client, how fast they need it, et cetera).
You really need to personalize this for yourself, but a very general equation to keep in mind is:
(annual salary + annual expenses + annual profit) ÷ annual billable work hours = your basic hourly rate
Annual Salary: How much would you like to make?
Annual Expenses: Your rate must cover your business overhead. Remember to include taxes and health insurance. What about living expenses? For ways to figure a reasonable estimate for taxes and your monthly living expenses, see Finances for Freelancers in Chapter 17.
Annual Profit: Benun and Top point out that profit isn’t the same as salary. Consider your salary a business expense (paid out to you as your own boss). Profit is charged over and above your expenses. Benun and Top suggest 10 to 20 percent as the norm.
Annual Billable Work Hours: Allow for vacation, sick time (including the kids’), and weekends off. And “billable work hours” means project work time, not time you spend doing administrative or other non-billable work—so figure a percentage of total hours.
Basic Hourly Rate: This is for you to know, not your client (unless you’re comfortable sharing). You might use it as a guide for coming up with a project fee. And you can adjust it based on any number of factors: your experience; how fast they need the job done; how high-maintenance the client will be; how this project would advance your career, et cetera.
Are you wondering how high to set your rates—and how to raise them with clients you’ve worked with in the past? If you’re new to your field, right out of school, need someone to take a chance on you, or are trying to break into a higher level of client, you’d likely be in the low-to-middle range, increasing with experience.
If your fees are high or super-high, you’d better be excellent.
It’s cool to be a middle-of-the-pack worker if you’re OK with a middle-to-lower pay range. Since you’ll be in a larger pool of freelancers looking for gigs, you’ll be more vulnerable to market slumps, when there are fewer projects to go around. If you need to make more money, your choices are either to increase your project volume or raise your value (skills, experience) so you can raise your prices.
It can be tough to raise rates with existing clients. If the client’s a steady income source, it may not be worth jeopardizing your relationship for an incremental rate increase of, say, 10 percent. Instead, prospect for new clients and quote higher for them. Maybe you’ll find a new steady. Then you can negotiate with the lower-paying client from a more secure place financially.
1 Track your time. Task by task. You can track it pencil-to-paper or use an online tool (try searching under “personal time tracking,” “free time tracking software,” or “time tracking freeware”).
2 Avoid feast or famine pricing and know your rock bottom. Find the zone that reflects your value, but leaves room to negotiate. This means doing market research and getting a sense of job scope and, if possible, budget from the client before you crunch numbers (we’ll talk about talking money in Chapter 5). Going too low or too high causes stress and costs time. “When I’ve undercharged, I feel taken advantage of, even though I know it’s my fault.” Or: “I once spent days pricing out a project. When l laid it out on the phone to the prospect, there was dead silence. Then he said, ‘Wow. We’re way far apart.’ The call ended fast, with disappointment on both sides.”
Also know your lowest number—the one you won’t go below, no matter how great the gig is.
3 Do your homework. Learn the benchmarks for rates in your industry. Some professional organizations post info on their websites (for example, the Editorial Freelancers Association: the-efa.org/res/rates.php) or have a legal/contracts arm that can offer negotiating help. Check industry discussion boards and professional networking sites where people swap stories and strategies, and magazines and books, too: “When I started freelancing, I often referred to various industry standard books, like the Graphic Artists Guild Handbook of Pricing and Ethical Guidelines.”
You can even talk to trusted pros who use services like yours: “I had breakfast with an agent who’s also a friend, and asked her if my rates were OK. I was relieved to learn I was in the upper third of what she usually gets for her clients—and really glad I’d raised my rates from where I’d begun.”
4 Educate the client about what you’re worth. Calculating and communicating your value to your clients is your job: “I see it as a service to my client to be clear about what I’m worth and why. It’s not their job to know what I do. A really good freelancer makes it look effortless. So I make sure my clients know something of the skill and thought that go into my work. It shows my chops and shows that I care.”
5 Don’t fear fluctuation. In some industries, it’s pretty much “one price fits all” for a given task. But if there’s a price spectrum, quote ’em as you see ’em. Do you see hours of meetings and revisions in your future? Think of the cost to you of serving that client—the time you won’t have for other projects, plus the aggro factor. And if it’s your busy season or you’re cramming this gig onto a full plate, that can be another reason to raise prices.
On the other hand, will this gig boost your career, add visibility, or give you a new skill? Do you believe in the project and want to help it happen? Do you need work? All are valid reasons to allow a discount.
ADVOCACY ALERT
BUILDING A FREELANCE MIDDLE CLASS
For employees, performance reviews and promotions serve as built-ins for improving economic security. Freelancers have to build their own economic sustainability, client by client, year by year. A single big job, underpaid—or worse, unpaid-for—can wreck the most careful budgeting. That, plus an industry or economic downturn, or a personal or medical crisis, can spell financial disaster. That’s why it’s essential to have a community of freelancers around you to help you gauge whether you’re undershooting on pricing, and why we must advocate for government policies that support greater economic security for freelancers.
Why didn’t I make this the first step? Because I didn’t want it to stop you from envisioning your future as a freelancer. Now that you’ve done due diligence about your skills and your value, you’re in a better position to look at the fit between freelancing and your finances.
First, pour yourself a drink. Then get your checkbook, your credit card and bank statements, and any other financial records from the last twelve months.
If you want to make a detailed budget right now, check out the My Budget chart in Chapter 17, and the instructions for filling it out. To download a customizable family budget form, check out BizFilings’s Business Owner’s Toolkit’s “Personal Monthly Budget Worksheet” (toolkit.com/tools) or look for other examples online. What follows are some basic strategies for measuring freelancing against your finances.
Use your records to make a list of your family’s expenses month by month, from mortgage or rent to vacations and medical bills (if there’s an unanticipated expense in a given month, such as a big vet bill thanks to your beagle taking on the neighborhood Weimaraner, exclude that as a one-time cost). You’ll quickly see how much you need to earn per month to cover your expenses at home—including months where you’ll need extra cash for tuition or other large sums that are due. Obviously, you should be looking for places to cut costs if necessary.
If you’re employed right now, write down your income (and your partner’s, if you have one) and break it out month by month.
Now, revise the income numbers to reflect freelance income. Suppose you’ll be freelancing full time while your partner works. Subtract out your employment income and you’ll quickly see the shortfall each month. That’s what your freelance work needs to bring in to meet expenses.
But freelance work doesn’t always bring in the same amount each month. That’s why you need to be saving to pay expenses, plus for taxes and retirement. You’ll learn more about all this later in the book, but for now, know that each check that comes in from a client, you’ll want to apportion into these buckets (you’ll learn how in Chapter 17):
• For emergencies
• Retirement
• Estimated taxes
• Expenses
Now let’s look at what it’ll cost to start your freelance career.
List any necessary start-up costs, from “one-time” costs such as equipment to “ongoing” costs such as supplies. Some will be unvarying “fixed” costs such as insurance; some will be “variable” such as shipping costs. To find free start-up calculators online, search under “start-up costs calculator.”
We’ll talk bookkeeping and taxes in Chapters 14 and 15, but during your start-up, whether you’re doing your own taxes or hiring an accountant, attend to the following:
Show you mean business. The IRS wants to make sure you’re not dabbling at a hobby and deducting it as a business, so one assessment it applies is whether you report a net profit in a minimum of three out of five years. Since that can be a tall order for a start-up, there are also standards to assess whether you’re putting in time and effort to make this a profit-making endeavor. Keep a business diary of all your appointments, client sessions, and project deadlines; have business cards, promotional materials, website, or other items showing you’re going after business, and:
Start right with record keeping and accounting. From the get-go, keep careful records and receipts of every business-related expense. You’ll need them as documentation if you itemize business-related tax deductions.
Separate your business and personal accounts. This will put all your work-related income and expenditures at your fingertips for financial planning, your accountant, and just in case you’re audited.
Home in on your home office. The IRS has specific requirements for deducting expenses pertaining to business use of your home. For starters, your home office needs to meet IRS rules of exclusive and regular use as your principal place of business. So the dining room table or den where you also watch TV won’t cut it. For more specifics, see Chapter 2. And if you’re game for some scintillating reading, see the IRS’s “Tax Topics: Topic 509: Business Use of Home” and IRS Publication 587, Business Use of Your Home (irs.gov), which even has a handy flowchart.
As part of your prelaunch due diligence, make sure you have the official paperwork you need. For example:
Business structure: Generally freelancers start as sole proprietors and later decide whether it makes sense to structure themselves as an LLC (limited liability company) or incorporate (see Chapter 10). The other options involve legal paperwork and specific duties and paperwork going forward. If you have any questions about which structure’s right for you, consult a knowledgeable lawyer or accountant. The best way to find one is by asking a couple of established freelancers. Also check out the guidelines in Chapters 5 and 15.
Business permits, licenses, and registrations: It’s very possible you’ll need one or more of these. Make sure. Look it up using the “Search for Business Licenses and Permits” tool from the US Small Business Administration (SBA) (sba.gov). Requirements vary by industry and location. Also check state licensing requirements at CareerOneStop under “Licensed Occupations” (careerinfonet.org), sponsored by the US Department of Labor, Employment and Training Administration.
Sales tax and seller’s permit: You may need to collect, report, and pay county, city, or state sales tax (or in some states, a sales-type tax) on your product or service. If so, you’ll also need a seller’s permit (also called a resale license or certificate of authority) so you don’t have to pay sales tax if buying items from wholesalers for resale.
Find the trusted inner circle who can help you as you launch and grow, offering advice and ideas, referring prospects, problem-solving, and cheering you on. It could be fellow freelancers, company buddies, relatives. They should be people you feel you can be totally honest with. Your Brain Trust has your back and you’ve got theirs: “When I started freelancing, a former coworker-turned-freelancer took me to lunch and was incredibly encouraging—and forthcoming about pricing. Another advised, ‘Give it a good six months to get rolling’ and told me where to order great-looking business cards online. Another spent forty-five minutes coaching me through a big negotiation, even though she was on a deadline. Now I answer questions from a guy who calls me his ‘freelance mentor.’ It’s like there’s this chain of people helping one another, opening up to let newcomers in. I’m so moved by how generous these freelancers have been. And it makes me want to be that way myself.”
When I started Freelancers Union, it was pretty much just this crazy idea hatched from my years of studying labor, history, and politics. When I told people what I wanted to do, I’d get this blank look, like, Whaaaat? I learned that I had to put some friendly distance between certain people and what I was doing. We still stayed in touch; I just didn’t bring them into the discussion about what was going on in that part of my life.
With indie workers comprising one-third of the workforce, the time’s long past for viewing freelancing as a euphemism for slacker dudes or the unemployed. Surround yourself with people who are practical and positive about freelancing. There’ll be some who say the wrong thing for the right reasons: They care about you and want everything to be great. For others, though, it might be a case of envy. Questions like: “How can you afford it?” “What about health insurance?” or “Isn’t it lonely?” might seem undermining or depressing. But often people who ask them are secretly wondering how someone might actually make freelancing work. So talk about it. Not like you have to defend yourself, but like any businessperson having a serious business discussion: what’s great about it, what’s challenging about it, how you’re going about it. Who knows, you might be giving them the information and the courage they need to take the leap.
You’ll share the news a little differently with cousins than with work colleagues. But here are the common denominators:
1 Tell everyone. The first law of freelance life: Everything is a marketing opportunity. Don’t be shy about saying you’re building your network and looking for work: “Here’s what I’m doing/here’s my card/here’s the link to my website, if you know anybody who needs this kind of work.” People will want to help. Give them what they need to spread the word.
2 Don’t be pushy. Watch out for the glaze-over that says they’ve heard enough. They’re people first, prospects second.
3 Make it professional. Start strong. Have your one-line or short pitch polished. A great first impression takes seconds and lasts years.
Your business card is your stand-in, reminding people of how you can help them. Between make-your-own templates and online ordering options that let you choose from a bewildering array of colors, fonts, and decorative motifs, getting your business cards may be your first serious foray into the fine art of freelance procrastination. Your card can be simple or info-packed. To figure out what’s right for you, remember what a business card is for. It’s meant to explain and remind others about:
• Who you are
• What you do
• Your unique value
• How to contact you
Consider what contact info to include. Real estate agents pretty much live on the phone, but a writer may decide a phone number isn’t essential and just include an email address. Consider privacy, too: “Most of my business is done by email. Pretty much the only reason clients need my address is for mailing a check—so I put that on my invoice.”
Lure them with links. If you have a website, professional blog, are active on social media for business reasons or are listed on a professional networking website, include the links. Watch out for using too many. Two or three is a good number; more than that and people don’t bother looking up any. If you have your own website, that’s the one they’ll look up and all you need to include.
See both sides. With two-sided printing, you can put your contact information on one side and a tagline, bullet points, or distilled elevator speech on the other.
A picture’s worth . . . If your image is part of your professional identity, a profile picture could work. It’s a good idea to use the same image in all your media. If a photo is not part of your work, then it may look odd or unprofessional to include it.
Quick Response (QR) Codes on cards. These two-dimensional codes can contain hundreds of times the data of a conventional bar code. Contacts with the appropriate app on their smartphone can scan the code and get your contact info—or links to your website, images, videos, or music—so people who meet you can immediately save your data or take a deeper dive into what you do. Generating the QR code itself is generally free; putting it on a print item such as your business card or other promo piece would be part of your printing costs.
Go digital. A virtual business card eliminates the chances of your business card ending up in someone’s garbage can, because the data goes digitally directly from your device to the recipient’s. While it’s fast and green, not everyone networks this way, so carry physical cards for contacts who prefer those. To find apps and services online, search under “virtual business cards.”
And here you are, ready to go. Trust yourself. Have confidence in what you know as a pro. Whatever else you need to learn, you’ll learn. Welcome to the ranks!
“My husband and I are both freelancers, working at home. Our house has a pool and we spend all year looking forward to enjoying our pool and our backyard. During the summer, he’ll walk down the hall and poke his head in my office, at six o’clock or five o’clock or sometimes even four, and say, ‘Are you ready for a dip?’ And I can say yes. Because I’m a freelancer.”
