Whether you’re new to freelancing or have been doing it for years, your number one concern is making money. These seven tips can help you run a profitable freelancing business.
Freelancing is of growing interest in the US. With more employees working from home, working from home for oneself seems increasingly possible and desirable.
Anyone who’s spent more than a few weeks in the business world knows that office life can be draining. Between nagging bosses and endless meetings, it’s easy to feel like you need a change of scenery. So, it probably comes as no surprise that an increasing number of Americans are abandoning their day jobs to go it alone as members of the freelance community.
Currently, 57 million Americans are classified as freelancers, up more than 3.7 million people since 2014. And there are good reasons behind this trend. Along with freeing employees from the hustle and grind of corporate life, this career choice enables workers to pursue their passions while dictating their own schedules. Freelancers can be home every day to see kids off to school, greet the plumber, or help care for aging parents.
Still, freelancing has its challenges, too. Chief among them is making money. As a freelancer, you’re responsible for finding your own clients, billing them, collecting from them, managing your time, and saving enough money to survive the lean times. To survive financially as a freelancer, you’ll need to develop these seven key skills.
1 – Minimize Unbillable Hours
Freelancers have the luxury of setting their own hours and pay rates, but that doesn’t mean they get paid for every hour they work. On the contrary, many freelancers spend hours each week doing work for which they can’t bill a client. These tasks include emailing, marketing, writing proposals, visiting prospective clients and networking. Then there are tasks such as invoicing, bookkeeping, and filing various tax reports. While there’s no way to avoid many of these non-billable tasks, freelancers can take steps to avoid wasting time and ensure their companies stay profitable.
Start by choosing a software program like Freshbooks or QuickBooks to assist you with the financial aspects of your business. Designed to minimize wasted time and overhead, these programs enable freelancers to track time, invoice clients, record and track tax-deductible expenses and generate reports needed for filing income taxes. Freelancers have to pay self-employment tax, which consists of both Social Security and Medicare taxes. These taxes are about double what you’d pay as an employee of someone else’s business because when you’re self-employed you pay both the employee’s share and the share normally paid by an employer. Thus, it’s important to make sure you’re taking advantage of all possible deductions.
Additionally, freelancers should consider unbillable hours when setting their rates. When bidding on new jobs and assignments, be sure to adjust your price accordingly to ensure you’re making enough money to survive. In fact, some freelancers advise tacking on 25 percent to the amount you’d typically bill.
2 – Focus on Time Management
As a freelancer, you don’t have a supervisor looking over your shoulder every moment of the day or a team counting on you to do your part. To that end, the best freelancers excel at meeting deadlines and managing their own time. The last thing you want to do is lose a client or contract because you can’t complete an assignment on schedule.
Along with keeping a detailed calendar, freelancers can increase their odds of success by setting realistic deadlines. You might be tempted to promise clients to get them assignments faster than the competition. However, if you set impractical goals, you will likely wind up disappointing those you hoped to impress. Additionally, freelancers should aim to communicate regularly, alerting clients to any issues or delays that could affect them. While you don’t have to answer the phone or email at every hour of the day, it’s important to be available and “present,” even if you’re not working in the office.
3 – Feel Confident Selling Yourself
Not everyone is comfortable talking about themselves and selling their skills to potential employers. However, if you want to find success as a freelancer, you have to get used to pitching your abilities. Along with sending in job applications and resumes, freelancers have to deliver proposals on the phone and in person. Additionally, they have to feel confident negotiating pay rates and asking for raises.
While promoting yourself is essential, you should also seek out testimonials from your customers. After all, people are more likely to hire someone who comes highly recommended by other business owners. Don’t be afraid to ask former and current clients to provide written and video reviews discussing your company and services. Post these testimonials on your website, social media pages, and online portfolio.
4 – Create a Strong Portfolio
It’s hard to sell your services if you don’t have samples of your work to share with prospective clients. Fortunately, modern technology makes it easier than ever to create a professional-grade portfolio showcasing your products and services. For example, a freelance writer might post links to their blogs and press releases. On the other hand, a graphic designer can include samples of logos they designed for former clients. Sites like Behance and JournoPortfolio enable business owners to create free, multi-page portfolios featuring URLs and PDFs. Don’t be afraid to include a professional photo of yourself on the site so customers can put a face to your name. According to research by LinkedIn, profiles that have photos are more likely to be viewed than those without them.
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5 – Know Where to Look for Work
Just because you’re good at what you do doesn’t mean you can always find clients to hire you. While traditional, full-time employees receive their assignments on a daily basis, freelancers have to learn how to find good freelance jobs. Although some business owners find jobs through professional mixers and meet up groups, most freelancers do their job hunting online these days. Don’t be afraid to check out job boards like Indeed, Monster, and even Craigslist. Although many of the positions listed on these sites are for full-time employees, some companies note that they’re seeking freelancers. Don’t be afraid to pitch your services to employers who say they’re open to remote or telecommute workers. If you have a strong resume and portfolio, there’s a good chance you can convince them to give you a shot.
6 – Pay Attention to Cash Flow
Cash flow is the movement of money in and out of a business, and it’s as important for freelancers and the self-employed as for businesses with employees. Unless you pay attention to cash flow – particularly the cash coming into a freelance business – you can have plenty of work, but dig yourself into a financial hole when payment doesn’t come in on time or doesn’t come in at all. To avoid the problem, stay on top of your invoicing and your collections and implement other cash flow strategies.
7 – Boost Your Emergency Fund
Everybody should put money away in an emergency fund to cover sudden, unexpected expenses such as auto repairs, replacement of major appliances that fail, or doctor and hospital bills that aren’t covered by insurance. But because self-employment income doesn’t arrive with the regularity of salary from a traditional job, freelancers need to keep even more in their emergency funds. In addition to covering those unexpected expenses, you’ll need your emergency fund to have enough cash in it to pay your everyday bills when clients pay late, you lose a major client or just hit a dry spell.
