ResourceVisit www.irs.gov to learn about forming your business.
By now you have figured out that you can’t simply say, “I’m in business,” to be in business. You need to think strategically about your creative endeavor. In other words, you need to do some business planning.
Part of coordinating your business can be quite fun and allow you to integrate your creative gifts. For example, I was eager to write content for my Web site; when it came time to assemble a payment system, not so much.
This chapter is devoted to a few general aspects of business planning. Parts of it may be exciting, whereas others will make you wish you were watching Snooki drunk-dialing on an episode of Jersey Shore. Remember: We’re taking the good with the not-so-great here—the “good” being your talent and the “bad” being all the things about running a business that make you cringe. Some parts will appeal; others won’t. Do it all anyway. You’ll need to spend your time involved in things you don’t necessarily like, but you can do it. In the end, it will make your creative business stronger and you’ll be better for it.
Establishing the type of business you will have is often a starting point. Choosing your setup will affect everything, so it is important to select something that works for you.
The most common forms of business for self-employed professionals and freelancers are:
→ Sole proprietorship.
→ Limited liability company (LLC).
→ Partnership.
→ Corporation.
→ S corporation.
In my case, I am a sole proprietor because it offers the simplest structure and least tax hassle. Although it does not provide all of the legal protection I would have if I were an LLC, for example, I am comfortable with this model. From the start, I knew I never wanted to expand or form an agency, so this has worked as a long-term solution. Consider what you want to come from your business in the future during the start-up phase when you choose the model.
Karen Larson (www.lmstudio.com), a graphic designer and brand strategist from Michigan, started off as a sole proprietor, then formed a partnership. About 15 years ago, she and her business partner took on a huge client project and decided to hire subcontractors.
“Someone in the client’s accounting department started making waves about the fact that ‘a freelancer’ was making so much money, not having a clue about the projects we were working on,” she recalls. To avoid having an issue in the future, she said the pair decided to incorporate. “Appearing as a larger entity, this has never been a problem since.”
This is a good example of choosing a business model based on what works for you. Each model has benefits and disadvantages, so you’ll have to select one that is right depending on your individual situation. If you need to consult a lawyer or accountant, it may be a good investment; or you can connect with other freelancers for insight.
Resource
Visit www.irs.gov to learn about forming your business.
Which business entities, if any, require the use of a lawyer?
“An attorney will help you do three things: (1) select the right entity type; (2) set the entity up properly; and (3) help plan for problems. Can you do this without a lawyer? Maybe. However, if you don’t set up the entity properly you could lose the protection you thought you were gaining. Attorneys can help you talk through possible problems and set in place solutions to those problems before they happen, so that if there is a disagreement, you’ll already have a system in place to deal with it.”
—Kiffanie Stahle, lawyer, www.stahlelaw.com
Before you officially form the business and find a kick-butt dot-com Web site address, you want to make sure to name it appropriately. I never wanted to grow into an agency, so using my name was fine for me. If you think you may add a team member or employees in the future, you may want to give it a different name that doesn’t identify it as one person. Still, even some of the biggest brands use the lead creative in their names—take Diane von Furstenberg or Tommy Hilfiger.
You will also want to do a search of trade names (if you are in the United States, you can visit your state’s Secretary of State Web site) to see if the name is already in use. You then may also want to see what domain names are available. Nothing stinks more than having a phenomenal name but having to sacrifice it for a difficult-to-read URL. So do some research and whittle it down to a few choices, then make your selection.
What business aspects are important to include in planning?
“Marketing! Devising a plan to pursue the kind of business you want, the kind of clients you want, and how you will get them so you don’t have to take everything that comes along. You need a plan for how you will present yourself and your business to those carefully chosen prospects. It’s also important to realize that once you get moving, things will change. Nothing is set in stone. … For everything else, surround yourself with a network of other creative professionals. From there, you will have resources for just about anything you’ll need.”
—Ilise Benun, author/marketing consultant, www.marketing-mentor.com
Throughout the book, you are going to learn more about generating client leads and marketing yourself, but I wanted to touch on branding in this chapter, particularly, because it’s something you need to think about when you are in the conceptual stages of planning your biz.
Branding is not managing your reputation or advertising. Instead, it draws upon components of communication to give people an idea of what you’re all about and what to expect when working with you. It’s not about logos, though the visuals on your business cards and Web site are a key aspect of branding. It’s really more about the client’s experience. You want to use your brand—logos, content development, publicity, and the like—to build credibility, convey a message, and encourage loyalty. You want prospects and clients to want you and only you, as if another creative professional will never measure up.
When I think about branding, Bethenny Frankel comes to mind. She’s an entrepreneur behind the Skinnygirl alcoholic drinks; many of you may know her from her time on The Apprentice, Martha Stewart, The Real Housewives of New York, or Bethenny Ever After. Even if you are not a fan of these shows or her, I think you can learn a lot from how this woman created a business—and cultivated an empire.
Now, Frankel is creative, but she is not a creative professional like you or me. Though she set out alone, she now has a large company; she can hire people like you and me to be creative for her. From her delicious, low-cal Skinnygirl cocktails and nutrition bars to exercise DVDs and shapewear, they all have two things in common: Her sassy personality is fused into each, as well as her goal to make healthy living achievable for everyone.
Even though most solo-pros may never have that large of a range of products or services, you can still incorporate the same branding principles she used into your business. In Frankel’s case, she is all about healthy living, and to me that’s her “umbrella” for her nutrition, fitness, and wellness products. Another part of her brand is how she outreaches—through reality shows, speaking engagements, and books. Most people appreciate her honest approach and therefore buy her products because they like her, along with her attitudes on wellness.
In the same sense, you could create an umbrella. I am a copywriter, but I am also a journalist, editor, proofreader, and author. Those are different services in my brand umbrella, but that umbrella also includes the values I bring to work that others do not. The brand is also part of my image.
When a client uses my services, I want them to love working with me so much that they turn to me for every future job—and tell their colleagues, too. I want them to think of me for positive values; in my case that’s being a good writer, easy to work with, and affordable. I integrate customer service to retain and satisfy the client. That keeps them coming back to me. Me—not anyone else. As a solo-pro, you are your own brand.
Who are you, what do you have to offer, and how can you build trust with potential and current customers? Maybe they have read your blog for months before hiring you; in doing that, you’ve fostered a connection and established yourself as a dependable professional through effective branding. The customer hires you—and hopefully tells others about you—based on that loyalty, which came from establishing and consistently promoting your brand. That’s brand success.
You can express your brand and engage people with it even if they are not clients. In fact, plenty of my customers have hired me after “following” me for a while or seeing some of my work elsewhere. I established my brand and they came to me because they wanted me, specifically, to work on their campaign.
To start branding, think about who you are. What aspects of your personality shine through to your services? Maybe you really think outside the box. Perhaps you have a whimsical design aesthetic that stands out. Maybe the tone of your writing is punchy and distinctive. Or you consider yourself to have more of a classic flair that seems to have eroded as time has gone by, so you offer a hard-to-find traditional approach. What do you want people to count on you for? These are all things to consider when thinking about your brand. Let me show you more about how I put together mine.
I have always considered my brand to be based around the concepts of straightforward and affordable copywriting services. When clients come to me for help with their writing, I make it as easy as possible. Everything is upfront so they can see what you get. Visit my Web site, for example. The design is simple yet distinctive. The tagline is direct: “Your words are worth a lot. Mine only cost a little.” In the content, I detail my business processes. I show samples so prospects can see the type of work I can deliver—solid copy, not fluff. My writing style is equally simplistic for the most part, as well.
Not only do my uncomplicated Web site and logo tie things together to create the visual aspect of my brand, my no-nonsense approach is evident throughout everything I do as a copywriter. On the Freelance Radio podcast, I’m known for my practical tips, along with a blunt, sometimes-sarcastic, and humorous approach to freelancing. Heck, even this book is part of my individual brand because I’m going to be quite direct as I tell you about life as a self-employed creative professional. I want people that need a copywriter to choose me because they know they will get quality work and not pay hundreds of dollars an hour to do so. And I want them to be loyal. (Oh, I also want them to tell their friends and colleagues about me, too. Tall order, right?)
That’s the goal of branding—to create something that only you can offer and drive prospects to buy in to it.
In the same sense, Frankel wants to be the source you turn to when you think about staying healthy. Because people tend to like her personality, or at least admire her sense of humor and candid nature, they typically want whatever she puts out. (I’ve purchased one of her books, adore her cocktails, and gave her yoga DVD a shot.) She’s not the only brand I turn to for health and fitness products, but I consider her a good source for them.
Apple, for example, has become a trusted brand for many of us. I’m a huge fan of music, so when it comes time to purchase a new digital music device, I’m only going to be looking at iPods because I like the product. In fact, I will still buy another iPod even though my first one gave me the “sad Mac” indicating it was out of service sooner than I thought it should have been. My brand loyalty is to Apple, but even though they make computers, I am still an IBM girl. Knowing that, however, I will only use Dell and HP products because I have had a positive experience with those brands in the past. That’s the loyalty that good branding creates. Still, people have to use the product or service and be satisfied with it to keep coming back. That’s where customer service comes in.
As a creative professional, you either create products or services. Whatever you produce, make sure everything stays consistent and authentic. In all you do, think about whether or not it aligns with your brand.
Dan Schawbel (www.personalbrandingblog.com), a personal branding guru from Massachusetts, says traditional branding methods include business cards and resumes, whereas nontraditional tools include your LinkedIn profile or blog. Together, they can work powerfully to show the world who you are as a creative individual—and why clients just have to have you on their next project.
Branding isn’t just creating a logo and slapping it on your Web site and business card; it’s about thinking who you want to be and exuding it in all you do. It’s all part of that umbrella—what you create, the values that you emulate, how you represent your brand, and your brand’s visual appearance.
When Sara Robbins-Page, a jewelry designer from Maryland, launched her line, Heavens to Bessie, she found that marketing her jewelry as “handcrafted” wasn’t exactly turning heads because there are so many jewelry designers out there. When she would tell others she was a jewelry designer, she knew they were trying to envision her work and discern how it was different.
If you visit her Web site (www.heavenstobessie.com), you can tell off the bat that she has a flair for intricate, personalized designs that are neither too elegant nor eccentric.
“My work focuses on words. Funny quotes, random thoughts, and shouts of devotion have all made my work what it is,” explains Robbins-Page, as many of her charms are personalized, often with lively phrases. “The truth is, I sell wit more so than jewelry but my marketing was not so specific.”
A client had told her that she did not view her creations as jewelry, but more so as a means to make people smile and express positive messages. That’s when Robbins-Page gave herself a branding makeover.
“I began to really market what my work means versus what it actually is,” Robbins-Page explains. “This changed what kind of ads I did, where I marketed, and broadened who I marketed to.”
The branding and marketing alteration made a huge difference in her business, and she says orders have increased as a result of the revamp.
Part of the reason why Robbins-Page has been so fruitful is because her Web site rocks at conveying her brand. I think the days are over when freelancers can run a thriving business without one. You’re going to need to generate leads, showcase clips, describe your work practices, and enable prospects to reach you. Even if you don’t know how to design or create a Web site, that’s no excuse to skip having one.
Start by nabbing a knockout domain name that goes with your branding strategy. The majority of solo-pros use their name (I do at www.kristenfischer.com) but others use other designations, such as the name of their studio. Calvin Lee, a designer from Los Angeles, uses two that redirect to the same page (www.calvinleedesign.com and www.mayhemstudios.com). A solid design is crucial, so if you are not talented in Web site design, hire someone to help.
Next, you must select a Web site host. Then it is time to build the site. Use a little foresight to think about what you want to create now and as your business grows. Maybe you intend to add a client page to list your clients once you acquire more, or you want to eventually build a blog on to the site. Keep those things in mind as you construct your Web site.
It should include the basics: a homepage with an overview of what you offer, a page with details about your services, a biography, a portfolio, and a contact page. You may also want to consider pages on testimonials or a page dedicated to explaining how you conduct business.
Your Web site doesn’t have to be super-fancy, either. Something somewhat plain will do so long as it is functional, the links work, and it does not contain typos.
So here we are with a chapter on business planning, and you’re probably going to be shocked to hear that I never created a business plan. Though I do not discount that having a formal business plan can be a valuable tool, it’s not imperative for solo-pros. Business plans are more of a necessity when you are looking to raise capital, form a partnership, or expand your business in the long run.
That is not to say that a business plan can’t be valuable. Should you choose to draft a business plan, make sure to think of it as a strategic roadmap that not only includes market research and details on competitors, but also sets goals for the future. A business plan can also include operating procedures, financial details by month and quarter, licenses, and tax details.
Resource
Visit www.sba.gov for details on drafting a business plan.
Although I am not a huge advocate of formal business plans, planning for your business is vital.
I like to approach business planning the freelancer-friendly way. That is, I don’t want it to be daunting or overly complex. Enough aspects of launching a business are intimidating; the planning, at least, should be somewhat exciting! You have the chance to decide what works for you, because it’s your business and no one else’s.
Instead of business planning, I like to use the term business blueprinting. To use this technique, I recommend that you think about the following questions objectively and be as honest as possible in your answers. Instead of giving you an outline, I like this approach because it helps you think things through without a constricting formula to follow.
Perhaps you jot down your blueprint in a notebook; that’s fine. Or you go heavy into graphics and come up with some color-coded montage of goals; go for it. Just write something down, or at the very least think about these things. The questions will help you contemplate all aspects of running a business so you are well-equipped to deal with whatever comes your way.
Keep in mind that it’s never too late to create a business blueprint. Additionally, I advise that you review your business blueprint regularly so it evolves as you do.
1. General Goals
→ If you are just beginning, what is the overall objective of your business?
→ If you could change one thing about your business, what would it be and how can you make that shift?
→ Would you consider going back to full-time work or moonlighting for the right opportunity?
→ Do you ideally want to moonlight for the long-term or eventually be self-employed?
→ How will you approach professional development, client relations, administrative tasks, and customer service?
→ What do you want a typical day to be like?
→ How do you envision your business in the next year, three years, five years, or 10 years?
→ How can you better develop your talent?
→ Are there any ways to make more passive income related to what you do?
→ Do you want to be a thought leader in your field or simply work?
→ Who are your creative role models?
2. Marketing Goals
→ What values and services make up your brand? What is your branding goal?
→ What kinds of tools do you think would help you execute or improve your marketing?
→ What types of marketing tools will you use to get clients? Retain clients?
→ Which marketing strategy comes easiest to you? What marketing strategy will not work for you?
→ How will you obtain referrals?
→ What does your Web site need to make it better? Any new sections to add?
3. Financial Goals
→ How much do you want to make per year? What do you need to do in order to achieve that objective?
→ What kinds of returns are you getting on your investments?
→ How can you optimize spending?
→ Do you need to create or revisit a pricing platform? Are you charging competitively for your skill level and geographic area?
→ Will you charge hourly or by project fee? Will you require a deposit? When will invoices be due? What methods will you use to collect payments? How will you respond to late payments?
→ How will you monitor bookkeeping, invoices, and payments?
→ Will you hire a tax professional or do taxes yourself? Do you need to pay quarterly taxes? What kinds of deductions will you take? What receipts and documents must you keep?
4. Legal Goals
→ What type of business model will you/do you use? If you are already in business, do you need to switch the model?
→ What do you think of your contract? Has anyone else reviewed it? If you are already in business, is your contract missing any clauses that you find may come in handy? (Most freelancers create their own contract and have a client sign it. I advise that even if your clients have their own contracts, which you can use, it’s good to have your own.)
→ Do you need to hire a lawyer for anything?
5. Client Goals
→ Who is your ideal client? What types of clients would you like to reach?
→ Would you rather have a few regular clients or a larger quantity of clients?
→ Do you want larger projects or shorter gigs? Do you prefer long-term projects?
→ Do you have a specialty area or niche?
→ Will you work on-site, take temporary contracts for part-or full-time work, or hold any part-time/steady gigs?
→ Are there any clients you want to end relationships with? If so, how will you approach them?
6. Administrative Goals
→ What kinds of administrative tools do you need in place?
→ What types of improvements can you execute to make things easier on yourself so you can focus more on the aspects of business you enjoy?
→ What is the ideal office setup that you will work best in?
Must-Read
The Right-Brain Business Plan: A Creative, Visual Map for Success by Jennifer Lee
When you write out or really think about your goals, you are more likely to make them a reality. Some people need to create action steps and assign time lines to each. Feel free to do that. However in-depth you draw out your business planning, make sure to do it in some way, shape, or form. Throughout the rest of the book, we will touch on several of the aspects in this business blueprint, so you’ll want to revisit it later.
Let’s take a look at some numbers so you can see how other free-lancers are charging clients. According to the 2012 Freelance Industry Report published by International Freelancers Academy (www.internationalfreelancersacademy.com), 60 percent of freelancers quoted and charged flat project fees, 35 percent billed by the hour, 4 percent used retainers, and just 2 percent utilized other performance-based models.
The report says that 49 percent of freelancers earned anywhere from $20 to $59 per hour (up from 45 percent in 2011) and 33 percent earn more than $70 an hour (down from 36 percent in 2011). These figures lumped together wages from designers, marketing consultants, writers, editors, and the like.
Take a look at some more hourly rates for solo-pros:
→ 11.7 percent made $20 to $29 an hour.
→ 12.2 percent earned $30 and $39 per hour.
→ 10.3 percent made $40 to $49 an hour.
→ 15 percent earned $50 to $59 per hour.
→ 8.2 percent made $60 to $69 an hour.
→ 10.5 percent earned $70 to 79 per hour.
→ 4.1 percent made $80 to $89 an hour.
→ 4.1 percent earned $90 to $99 per hour.
It goes on from there, with some escalations and dips, but it’s interesting to notice that 10.6 percent of those surveyed report bringing in $100 to $150 an hour; 2 percent report earnings from $151 to $200 an hour, and another 2 percent say they earn more than $200 hourly.
The survey found that 17.7 percent of Web developers earn $40 to $49 an hour, 18.7 percent of copywriters made $50 to $59 an hour, and 17.2 percent of designers earned $70 to $79 per hour. Check out the report (www.internationalfreelancersacademy.com) to learn more about your specific field. The results are interesting and can give you some perspective when putting together your prices.
Let’s focus on copywriters’ rates so I can illustrate a point. According to the aforementioned report, 5.8 percent of copywriters make between $20 and $29 an hour, 5 percent make from $30 to $39 hourly, 6.5 percent earn from $40 to $49 per hour, and 18.7 percent of copywriters make $50 to $59 an hour. The number of copywriters that earned from $70 to $79 an hour was 16.5 percent in 2012, whereas 17.3 percent said they made $100 to $150 an hour. On the high end, 2.9 percent earned from $151 to $200 hourly, and 3.6 percent made more than $200 an hour.
I like looking at numbers, but basing your rates on these can leave you confused because data differs depending on the source. PayScale, for instance, states that copywriters only get up to $75 an hour when they have at least 20 years of experience under their belt. A Writer’s Digest guide dubbed “How Much Should I Charge?” breaks down project fees and hourly rates according to different types of writing. It says advertising copywriters can earn anywhere from $35 to $150 an hour.
This is why I don’t believe in following just one guide when setting your rates. Look at those figures; they are all over the map! According to them, I could make anywhere from $10 to $200 an hour. Rookie solo-pros may wonder, “How on earth should I charge?” while those with more experience say, “Can I give myself a raise yet? If so, how much should I increase it?”
Must-Read
The Designer’s Guide to Marketing and Pricing: How to Win Clients and What to Charge Them by Ilise Benun and Peleg Top
Whether you work on an hourly rate, a project fee, or use a mix of both, it is a good idea to have what I call a baseline hourly rate to help you establish those rates. The baseline isn’t your hourly rate, per se; it’s a starting point to base your pricing on.
Your baseline hourly rate will probably differ from your hourly rate because you may not necessarily advertise it; it’s just the lowest rate you can make an hour so you always know you wind up having enough to cover your butt—and your taxes. You can probably figure it out after you devise your hourly rate.
Here’s a common tactic to figure out your hourly rate: Formulate how much you want to earn taking into account your skill level, geographical region, and other applicable factors. Keep in mind that you will need to pay for taxes and probably health insurance, too. Account for your administrative time, too—that is, the time it takes you to prepare a contract, process a deposit, and invoice for the job. Look at your living costs and other expenses, and any overhead. See what you need to make not only to break even. As you gain more experience, you can always raise your rate.
Next, guesstimate your billable hours, which may be anywhere from 1,000 to 2,000 hours per year, depending on how much you want to work. For example, if you earn $50 an hour and estimate to have 1,000 billable hours, you would earn $50,000 a year. Keep in mind that if you want to earn $50,000 a year, you actually need to pull in much more, because approximately 30 percent of it will go toward taxes. In that case, you’ll need to charge more than $50 an hour to make $50 an hour or you could just charge $50 knowing you actually make less.
Now that you have an hourly rate, here’s why you probably won’t use that in most cases. First off, many clients will want a project fee so they can work it into their budget (otherwise, you can feasibly charge for as many hours as you want). When I charge an hourly fee, I try to give the client a cap—or maximum of hours I will use—so they can work my costs into their budget.
Here’s why most freelancers stick to flat fees. Let’s say a project pays $2,000 and you estimate it will take 40 hours to complete it; in that case, you’ve made $50 an hour. What would happen if it took you 45 hours to finish, though? Now you are only making about $44 an hour. Without an extra cushion, your hourly rate goes down. If you finished that same project in 35 hours, now you are earning $57 an hour. That’s not too shabby if you want to earn $50 an hour, because you have some extra money to play with, but if you haven’t accounted for taxes in that hourly rate, you’re going to wind up making much less.
In order to devise project fees, you do need to have some sort of hourly rate to go by. Then you can build in extra fees to cover other factors such as taxes, the time it may take to revise the work, or that ever-important “hassle fee.” Of course, some projects will run over, and others will run under what you expect. In time and over time, you will be able to adjust your pricing so you consistently earn or exceed your hourly rate.
Susan Johnston (www.susan-johnston.com), a freelance writer in Massachusetts, says she uses both flat fees and hourly fees depending on the scope of work. Some freelancers have different rates depending on the task performed; some clients prefer one billing method over another.
“If a project is clearly defined then a flat fee can work, but if I sense there’ll be a lot of back and forth or potential scope creep, an hourly rate ensures that my pay scales according to the time required to get the job done,” she notes. “However hourly rates don’t reward efficiency the way a flat rate does.”
Amy Philip (www.careercertain.com), a leadership career consultant from Brooklyn, doesn’t believe in hourly fees when you are a creative service delivering a product to a client, but she works mostly with individuals so she can elect to use this method.
“Clients want to know up front what the final cost will be and are not interested in how long it will take to complete the work,” she says. “While I do calculate the numbers of hours I anticipate it taking on my end to complete a project to determine my fee structure, I always provide my clients with a flat-rate quote.”
She once asked a writer to create a marketing piece for her and was told it would cost $120 per hour. So she asked the next logical question: How many hours will it take?
When the writer said she would not know until she got into it, Philip was puzzled.
“I thought this was really odd and said to myself, ‘I’m not interested in how long it’s going to take her; I just want to know up front what it’s going to cost me,’” she recalls. “From a client perspective, I was only interested in the end product and what the total fee would be. It could take her an hour or 10 to do the work, but that wasn’t my concern.”
After the experience, it’s easy to see why Philip isn’t drinking the hourly rate Kool-Aid—and you can probably understand why!
I don’t drink the hourly rate Kool-Aid much, either; I use mostly flat fees. I advertise that my copywriting rates start at $35 an hour to give clients an idea of what I charge. Clients in the marketing arena know the going rates copywriters make for the most part, but clients in other industries typically do not.
My starting hourly rate is on the low- to mid-end of pricing for copywriters, but I typically earn anywhere from $50 to $100 an hour, and I have earned up to $200 an hour. How do I do it? Am I the queen of deceit?
That $35 an hour is my advertised starting hourly rate (not my baseline rate). I often use that rate as a foundation into my pricing, then add more for other factors.
Most copywriters may balk at earning $35 an hour, but that rate is what enables me to attract a wide range of clients. Let me explain.
Let’s say that a prospect approaches me to write a Web site. They may be really put off if I said I charge $100—or even $50—an hour. My advertised hourly rate lets them see that I am more on the affordable side of the fence but indicates not to contact me if they can’t offer at least that much. When I quote my hourly rate or a project fee to a client, I base it on what I feel is appropriate for a specific project. I may very well start at $35 for some, but I can go higher because $35 was only the starting point. This gives me tons of flexibility.
A client doesn’t need to know what I make an hour. If they agree to the project fee I devised, then it’s a win-win because I won’t go over the fee (or their budget). If I work efficiently, I can make a great hourly rate well over my baseline rate and hourly rate—and they’ll never know. So long as they receive what I promised, it’s all good.
When I put together a quote, I try to guesstimate how many hours the work will take me, including factors like geographic area, timing, research, and experience. I always build some time for miscellaneous things that could come up, such as a “quick call to touch base.”
In The Designer’s Guide to Marketing and Pricing: How to Win Clients and What to Charge Them, authors Ilise Benun and Peleg Top bring to light an important factor. The same project that would have taken you 20 hours when you started freelancing may only take, say, 10 hours just a few years later. If you’re charging the same hourly fee 10 years after you start, you may earn less because you put in fewer hours. That’s why raising your fees can be useful. But it’s more than that, according to Benun and Top.
They say that when devising fees, you are selling your years of expertise, the effort you have put into developing your talents, and your consulting acumen. You are also selling peace of mind to clients that they will receive what they want based on your track record. Therefore, the price encompasses timing, but also takes into consideration your location, project urgency, how much you need the work, and even what they call the “aggravation factor.” Include costs for any on-site travel, and I always take into account the client. (A startup will likely have less to pay.) All of that should be built into your hourly rate, or your project fee. Though you have to cover other costs to account for these factors in your fee, it’s a tough balance because you don’t want to penalize the client with a higher rate just to cover things like taxes, benefits, and administrative costs.
Resource
Visit www.freelanceswitch.com/rates for an hourly rate calculator.
When should you accept a job that pays lower than what you would like?
“Sometimes you have to bite the bullet on price if there’s some other payoff. For example, I’ll take on an assignment for a reduced fee if I really want a particular company on my client roster but they can’t pay my standard rate, or if the finished project would enhance my portfolio. I also think it’s important to lend my expertise to charities, so I’ll occasionally donate my work or offer lower rates to these organizations. Be discerning about how many of these ‘freebie’ projects you take on, though, because you can easily find yourself overcommitted to non- or low-paying work. Know when to say no!”
—Lisa McComsey, writer/editor/marketing consultant, www.lisamccomsey.com
Coming up with a price is a big challenge for just about every creative business owner I know. You want something competitive, but you also want to be able to attract enough clients to keep money coming in. You probably know what is too low for you, but what is too high? What’s just right?
I advise freelancers to do their research and come up with a starting point, then go up from there. Know your baseline rate and use it to formulate lump-sum fees. If you advertise one rate as a rookie, you can always change it in the future; you are entitled to.
Philip advises to think about where you want to position yourself in the market: Do you want to be on the low end, marketing yourself as a value player? Do you want to be in the middle, or do you want to be a premium service provider and charge on the higher end?
“Pricing in many ways dictates how you will be perceived by clients. I have found that people believe that you get what you pay for,” she adds.
One of the nicest things about being your own boss is being able to negotiate your rate. Everything is negotiable; don’t be offended too much if a client asks you to come down a bit, but do know that you have the power to negotiate just as much as a client.
Philip says she never negotiates her fee structure; doing so devalues her services and products and is not fair to clients who paid the full rate. Most of her projects take a similar amount of time based on the individual service, so that works for her.
What happens when you provide a wide range of services and the projects can go from small to massive? For instance, I have clients that contact me for an hour of editing and also have clients that have month-long projects that require 12-hour days. In both cases, I charge differently. Although I don’t negotiate my rate to a point where I don’t make out financially, I have lowered it when I thought it would be to my benefit. For example, I’ll give a break to a client who can guarantee more large-scale projects that will give me a chunk of money to bank for leaner months over negotiating my rate with a smaller project. Why? Smaller projects tend to take more time administratively to process. I will also consider taking less than what I want if the work is regular, or if it is for a client whose name will look fantastic on my client list.
When you set your rate, make sure you go high enough so that if you decide to come down in price, you are still making enough money to turn a profit on the project. Nothing stinks more than realizing you are making below your baseline rate after a “successful” negotiation. I always leave a little wiggle room in my fee or rate for a client who wants to bargain, but I always make sure that I never go below that baseline rate or fee—no matter how nice someone is or what he or she promises.
Keep in mind what I just said: You can choose to negotiate or not to. Certainly, there is nothing wrong with letting a client know that you will not adjust your rate, but do expect some clients will want to see if they can score the best deal. They can easily find another freelancer who can do just as good of a job for a little less. It’s a tight rope to walk—your desire to secure gigs while earning enough to turn a profit.
One more thing when it comes to pricing: You can charge on the higher end of fees, earning upward of or more than the $100-an-hour mark like some of the creatives mentioned earlier in those statistics I rattled off. As a solo-pro, however, you may not be working an average 40-hour week. You may work more, but not all of those hours are billable. If you price things too high, especially if you are not a seasoned pro, you may not receive the quantity of projects to make ends meet.
Freelancing can be very lucrative once you get the hang of it, so if you are just starting out remember that you don’t always have to charge the rate you earn now. There is this little-known treat called giving yourself a raise, which we’ll discuss next.
Every time someone asks me for my hourly rate, I think about how far I have come because it used to be quite paltry.
It took me a while to become comfortable with fees I charge. As you build your skills and have more to offer clients, it is inevitable to consider upping your fees. I read more often than not that freelancers do not charge enough, and that’s true; some don’t. Heck, many colleagues would say that I still don’t charge enough. Still, I find that more freelancers overprice their services because they try to charge what a report says they should make or what seasoned pros earn.
That said, it is natural to want to increase your pay from time to time. How do you know when it’s time for a boost? You have to give it time and constantly re-evaluate. If most clients aren’t trying to talk you down on a regular basis, they likely find your pricing appropriate. The goal is not to make your prices so high that you’re always negotiating; it’s to stay on top of what’s competitive in your field, geographical area, and all those other factors mentioned earlier. Gradually, over time, you may find it only makes sense to boost your rates; you may find what you made isn’t really covering your expenses or skill level well enough.
Raising your rate doesn’t require a big public relations campaign or anything; just raise them and update any collateral with the change. In fact, you may grandfather the rate in for existing clients that you really enjoy working for if they will not be able to afford the increase. Eventually, you will get to a rate you feel good about.
How do you know if you’re charging too little?
“A good client will tell you when your price is too low and insist that you raise it. Otherwise, you may suspect that’s the case when the prospect accepts your proposed price immediately, almost as if they want to lock it in before you change your mind and raise it. But the best way to know for sure is to ask selected peers and colleagues how much they charge, and the best technique is by offering up that information first. They will often reciprocate.”
—Ilise Benun, author/marketing consultant, www.marketing-mentor.com
Once you have an idea of how much you will charge, should you tell everyone about it? That’s a common debate among freelancers. Some say that giving your rate or a range “weeds out” low-balling clients. On the other side, freelancers advocate keeping rates private so they can explain, one-on-one, the value that goes into pricing.
Some solo-pros do not advertise their rates; naturally so, because rates may fluctuate depending on a variety of factors including different services. If you put your rates online, you may feel locked into that amount, which leaves you little wiggle room should you need or want to bill more.
You can also give a fee or rate range, though personally I think that is difficult because all projects are different. Still, a range gives a prospect some idea of where you stand.
Finally, you can give your starting rate, which can obviously go higher depending on various aspects related to the project. This is what I have chosen to do, because it tells low-ballers that I am not interested. It doesn’t lock me in to any one fee, but it does give clients a ballpark. In my case, I would rather not spend the time trying to talk a low-baller prospect into my rate or fee because that’s a waste of time.
You don’t have to promote your fees, your rates, or even a range. You can simply have clients contact you directly about pricing. Being able to choose how you do or do not promote your fees is part of the beauty of having your own creative business—and this is one area where you have complete control.
There is no one “right” answer or one-size-fits-all solution to the issue of establishing or promoting your costs. The good news is that you can always change your mind not only about what you charge, but how you tell the world about it.
When a client asks for a quote or estimate, I never give a price off the bat. Instead, I take time to learn more about the project then crunch some numbers before putting together the quote or estimate in writing. A quote or estimate is just that—an assessed fee for services. Sometimes you only need a quote or estimate for simple jobs, but you probably want to go further and include a little bit about the scope of work involved for a larger gig.
In that case, creating a proposal is a solid way to take the time to think your quote through and tailor your pitch to meet the client’s needs.
From time to time, you may have to give a prospective client more than a quote or estimate, so it’s a good idea to learn about proposals. A proposal consists of more than just a financial estimate; it contains specifics about how you will approach the job and what the scope of work entails.
Clients often need written proposals for their records or for budgeting purposes, and it’s good to have everything in writing so you can avoid scope creep, a term coined for when a client tries to get more than you originally agreed to.
Depending on the type of proposal you create, it could require minimal work or a chunk of time.
“Writing proposals is very time-consuming,” says Benun, who also created The Proposal Bundle, an in-depth resource on proposals. (Visit www.proposalbundle.com and www.marketing-mentor-toolbox.com to check out some of her very useful resources.)
Benun says that proposals take time to prepare, so it’s a good idea to make sure the prospect has enough money for your services. (Another reason to promote a fee and rate range!)
“Make sure the prospect can afford you in the first place,” Benun says. “That usually means talking about money early on—a good habit to get into no matter what.”
By the time you get through the proposal process, you should have already had multiple communications with your prospect, addressing all the important issues and asking all the right questions, she advises. The proposal is essentially a detailed confirmation, recap, or expansion of what’s been discussed, including the project’s budget.
Benun notes that there are four general types of proposal to choose from depending on the scope of the project and your familiarity with the prospect or client. Keep in mind that most clients will not pay you to put together a proposal.
I use this format most commonly. It’s not really much of a proposal, aside for the fact that I write out a short (maybe one or two-line) scope of work. It is best used for small projects and/or projects for an ongoing client. It should take very little time to generate; just form a template and plug in the details. I put mine on letterhead so it looks professional. Time: 15 minutes or less.
The structure of a short proposal is similar to that of the one-pager and almost as minimal. It’s ideal for a new prospect that’s already sold but wants the details of what you’ll do in writing. Like the one-page agreement, it outlines project basics but adds more detail such as the amount of concepts delivered or words per page. Benun recommends it if your prospect has not worked with a creative freelancer before. Time: One hour or less.
Benun says that this proposal is ideal for a medium to large project for either a prospect or an existing client who will be selling you up the chain to others who don’t know you. This proposal typically requires more pages because the client has higher expectations, Benun notes. Again, you can create a template, then “plug and play” some of the details to save time, but you will have to write a little. Time: No more than four hours.
For a major project with Ideal Client Inc., the long proposal is an important marketing tool. “As a general rule, the higher your fee, the more pages your proposal will need to have. A longer document provides substance and shows that you’ve thought through the project and know what you’re talking about,” Benun says. Include lots of relevant examples and figures that will reflect on you as an expert, so you can show that you have the experience and knowledge for the project. Time: One to two days.
Must-Read
The Fire Starter Sessions: A Soulful + Practical Guide to Creating Success on Your Own Terms by Danielle LaPorte
Writing can be overwhelming even for some wordsmiths, so Benun recommends an in-person meeting or phone call for bigger jobs.
Benun suggests asking these questions in order to create a proposal that will get you the job.
1. What are the big-picture goals of this project?
2. What is the specific objective you need to achieve?
3. How will you measure the success of this project?
4. What/who is the market for this product or service?
5. Who is the main decision-maker on this project?
6. What models are you using for this project?
7. Where is the source content coming from?
8. How much research will be necessary?
9. Are there specific technologies you do or do not want used?
10. How does this project fit into your big picture?
11. Have you ever done something like this before? If so, what?
Also, be sure to find out when the prospect expects the proposal so you can deliver it in a timely manner. From there, you will hopefully win the job and can start working on it.
When you go into business for yourself, assembling a portfolio can help you showcase your work in order to boost credibility and ultimately land more clients. This valuable must-have defines you and your talents. Whether it includes photos of your crafts, clips of your articles, or samples of print marketing collateral you designed, what goes into your portfolio matters—big time.
As a beginner, you will strive to populate your portfolio with samples of your work, but as time goes on, you may find yourself being more selective about what goes in the portfolio because you want it to represent your very best work. Sometimes you love something until a client changes it, and then you may not want to include it. This is your call.
The goal of a strong portfolio is threefold: You want it to highlight the range of services you offer, show off your capabilities, and resonate with the prospect so they will hire you.
For a writer like myself, I want to show that I can handle print collateral such as brochures and also craft press releases, blog posts, and newsletter articles. My portfolio has a blend of projects to highlight my diverse capabilities. When a prospect sees it, I want him or her to think, “Wow, this piece of collateral looks great—I think she can do the same for me!”
You can have either a printed, tangible portfolio to bring with you on meetings (an iPad is a nice touch if you have one), or a section on your Web site for samples. Like many solo-pros, I use both. My hand-held portfolio, a leather-bound book with scrapbook-like pages, holds press releases, magazine articles, and brochures. As a newbie, I used it a lot because I would travel much more on-site to meet with prospects; nowadays, I don’t have as many meetings so I rely on my Web site portfolio.
Depending on what you do, you can organize your portfolio into different sections. Mine goes by the type of collateral to show prospects the breadth of my experience. You may want to structure the portfolio by industries you have worked in so you can show your expertise in different arenas.
One challenge in creating a portfolio is that some clients do not want their work in your portfolio. This is not entirely uncommon for freelancers. I typically let clients choose if I can use their project in my portfolio; most say yes. A few agencies, however, have had me sign off that I cannot use the collateral—or state that I have worked for the client, because it is really their client. Some agencies and firms inflict this rule so their client doesn’t see their work was “farmed” out to a contractor. Sometimes, not being able to show off the work you did—or even name the client you worked for—is a complete bummer, but it can be part of the business.
If you are concerned about not being able to put project collateral in your portfolio, talk to a client directly; perhaps if you cannot use the collateral you have created, you can still state you have worked with their brand name. It may sound like listing brands or companies you have worked with is a bit shallow, but prospects and existing clients like to hear their contractor can win over the big guys and identify with companies they have heard of. Again, your image is everything when you’re a solo-pro, so you need to make that an important aspect of your business planning.
How can moonlighters best manage their time between their creative business and their 9-to-5 jobs?
“Working 40+ hours per week for an employer while adding your own business to your plate is certainly a challenge. Without much time for charging your batteries, it is a recipe for creative burn-out. I won’t lie; I did call in sick from my day-job a couple of times to make myself available for client meetings or projects for my own freelance business. I even brought a USB key to my day-job a handful of times when it was slow and plugged away on freelance projects there (who was to know unless my boss wandered around the corner?). Basically, I learned that if I wanted to be my own boss eventually, I’d have to make the sacrifice of my own personal time for a while. It’s a busy transition and leaves very little free time, but it worked out in the end.”
—Angela Ferraro-Fanning, graphic designer, www.1331design.com
It seems that the concept of bartering, or trading services, comes up for a lot of rookies and those that work with start-ups. This occurs when both parties agree to swap services and waive the fees so it’s an even trade. Doing this offers a cost-effective way to receive the services you need.
For example, if you are starting out as a writer or blogger and need a Web site, you might contact a Web site designer and offer to write the content for his site if he creates your Web site. It can get tricky, however, when one party does not need the service right away, or if a service is worth more money than the one being traded.
You can also barter or trade services with clients—that would have nothing to do with obtaining a service you need to start your business. In that case, a writer would provide writing services in exchange for a client’s service. If your client was a spa, that may be a great idea because a free massage or two is pretty useful; on the other hand, if your client was a podiatrist and your feet are perfect, you wouldn’t need his services—so the barter would be a bust.
Use your judgment to see if bartering is a smooth move, or if doing so will require you to trade in your sanity instead. It is definitely something to consider when you look at all the services you may need to set up a business.
In addition to swapping services, you can always hire outside professionals to take care of the things you don’t like to or cannot do. There is nothing wrong hiring a bookkeeper, for example, to handle your records. Realizing your weaknesses (or tasks that you’d rather not give too much attention to) helps you to focus on parts of business that let you use your talent.
Accounting is a facet of business that Robbins-Page said she knew she needed help with from the start. She proceeded to interview an accountant when she was forming her business, and pays the accountant a retainer to answer questions along the way. Hiring professionals with complementary services not only frees up her time to create; it gives her credible advice she can count on. This expertise is worth every penny for Robbins-Page, who says she has turned higher profits as a result.
In the next two chapters, we’re going to delve into a few of those areas that I think the majority of us detest a little (or a lot): legal matters, accounting, bookkeeping, health benefits, and retirement planning. When you hold a traditional job, the company handles these things, but as a solo-pro you will need to have a basic understanding of them. If you choose to hire a lawyer or accountant that’s perfectly all right, but you still need to be familiar with these matters because they impact your business and reflect upon you—personally and professionally.
I promise, I will make it as painless as possible. Don’t pass these next chapters by. Start stepping up like the pro you are and get on the road to running a profitable, legitimate, and fulfilling business you can feel good about.
Sweet Success
A Fishy Offer?
Jay Rogers, a designer and illustrator from Georgia (www.jayrodesign.com), says he was once paid for a project in fish. Yes, real scaly fish.
When Rogers was in school, a classmate who was also a fisherman, was studying wildlife illustration. He asked Rogers to help design business cards and offered to pay him—in fish. Mahi, to be exact.
Never one to turn down fresh fish, Rogers took on the project and the whole thing worked out well.
“It was probably the most delicious of the designs I’ve done in my career,” he jokes.
In this case, it was the perfect bartering deal—even though it may have sounded fishy at first!
Beginner Mishap
A Gem of a Business Plan
When Sara Robbins-Page, a jewelry designer from Baltimore, wanted to expand her jewelry-making side gig into a full-on creative business, she didn’t think the transition would be too hard.
“I would just continue to create jewelry, only now I would make more of it,” recalls Robbins-Page, whose line is dubbed Heavens to Bessie (www.heavenstobessie.com).
Ironically enough, she knew how to create a business plan but didn’t think she would need it since she already had a taste of what it was like to run her operation.
“I couldn’t have been more wrong,” she admits. “Without a clear plan, I really had nothing to focus on in between orders.”
After working for a while without a strategy, Robbins-Page decided to draft a formal business plan. “I am the sort of person who has a list and a plan for when I go to the grocery store, but somehow I thought I could make my business grow without one,” she adds.
Ever since she drafted the plan, it has worked wonders for her.
“Every day I have things that need to be accomplished. There are none of those spaces in between orders where I sit and twiddle my thumbs,” she notes.
Every few months, Robbins-Page reviews the plan to get a better idea of what she has accomplished and what she will do next. Her story highlights the importance of good planning—whether it is formal in writing or not!