The traditional workforce is changing. Instead of permanent 9-to-5 jobs, many workers are opting for freelancing or for jobs that afford them more flexibility, greater independence, and significant financial potential.
A study from ManpowerGroup, Gig Responsibly — The Rise of NextGen Work, showed that 87% of workers are open to the idea of NextGen Work. In other words, more workers are looking for job opportunities offering freelancing, telecommuting, or remote work. The U. S. Census bureau reports there were close to 5.4 million new businesses formed in 2021, and more than 2.5 million businesses formed in the first half of 2022. This is apparent in the rise of the gig economy, a time when people look to supplement their income by participating in side gigs, or work with passive income.
Businesses like Uber and Airbnb lead the charge by allowing people to work on their own terms. These types of businesses have fueled independent workers, including women, seniors, and disabled individuals, who may find themselves in an unequal workforce environment. According to a study by Upwork, “Freelance Forward: 2021,” 59 million Americans perform freelance work, representing 36% of the workforce.
However, to maintain the freedoms that a freelance job offers, you’ll need to know the scope of the work thoroughly: how to find jobs, clients, projects, and ultimately, how to start a business if you want to set yourself up for success.
Also known as an “independent contractor,” a freelancer is someone who is self-employed and is not necessarily tied with a single company.
Some freelancers might use an agency to connect them with work opportunities, however, most freelancers use networking and their contacts to generate jobs. These types of workers are often working on several projects at once, and take care of the accounting, taxes, and other aspects of their business.
Generally, freelance work is short-term and is paid by the job or by the hour (though some may use a retainer if the client frequently uses their services). Though freelancers are similar to sole proprietors, there are major differences between the two. A sole proprietorship, refers to a specific legal business structure while a freelancer does not inherently refer to any legal status.
A sole proprietorship is the most common business structure for freelancers, however, many freelancers choose to register as a limited liability company (LLC definition). Our resources can help you determine whether you should form an LLC or a corporation.
The digital economy has made freelancing a more viable choice for workers. Video chat and collaboration applications, like Slack, allow workers to be present without being physically in the office. Common freelance jobs include:
Freelancing is not a cut and dry job. There are many variables that make it a considerable choice for some people while being deal breakers for others. Below are the common pros and cons of a freelancing career.
Choosing a freelancing career may sound idyllic, but there are some steps to take before the money starts rolling in. People have many questions before they start their freelancing career:
These are common questions that can be easily answered if you have the right tools and resources. While it may seem overwhelming, choosing a freelance career is very achievable, acknowledging that this career comes with many responsibilities.
Like any venture, it’s important to have goals. Without goals, you can easily lose track of your business plan or become derailed. Gaining a clear understanding of your long-term goals will help you set smaller short-term goals to help you along the way. Some questions to ask are:
After determining your goals, you’ll want to find a niche that you can be profitable and happy in. A niche is a narrow area of expertise. For example, instead of competing in a crowded market of writers, you could narrow the field to technical writing. This reduces the amount of competition while identifying specific skills to improve on. Instead of being a good writer in a general field, you can be a highly-sought-after technical writer.
Your clients can make or break your business. While it can be tough to turn away business in the early days of your freelancing, it’s important to narrow down the type of clients you work well with. This allows for better quality of work and greater results. When you are looking for new clients, ask yourself these questions:
Answering these questions will help you set up a client profile, which will make looking for new clients easy. By narrowing your focus on target clients, you can easily build your reputation in your niche. These clients can start to advocate for your business, which will go a long way in the business world.
Identifying your clients will help determine your pay rate. Some freelancers may try to compete with other businesses by cutting their prices. While this could be a good short-term strategy to gain clients, it is not sustainable. Instead, your pay rate should be determined by the value of your work and your client’s budget.
For example, if you are a writer that specializes in long-form blog posts, you can set your pay rate above someone who writes short articles. If you have a bigger client, such as a marketing agency, they would be able to pay a higher rate than a small business startup.
Marketing yourself can be one of the biggest obstacles a freelancer faces. No matter how skilled you are, a freelancer must be able to communicate with potential clients in a convincing way. When you start creating your proposal, make sure to:
Speaking of first impressions, your portfolio may be the first contact a client has with you. It’s important to ensure that it is up to date, shows your strengths, and gives the client a complete understanding of your business. Many people rely on website portfolios, since they are easy to share and update. To be truly effective, your portfolio should:
If you need inspiration, there are many sites that show different portfolios for different businesses.
If you are operating as a freelancer, sole trader, or are self-employed, you will most likely need to start your own business. You are considered self-employed if:
After determining if you are self-employed, you must then choose a business structure, register your business, and prepare for tax season.
Once you have determined whether you are self-employed, you’ll want to look at which business structure is right for you. Self-employed workers typically register as an LLC or a sole proprietorship. A sole proprietorship is the simplest business to form. It is run by one individual with no distinction between the business and the owner.
This means as the owner, you are entitled to all profits and responsibilities for all losses. You won’t need to take any formal action to form a sole proprietorship, however, you will need the proper licenses and permits.
LLCs, on the other hand, take a little more time. The average time to form an LLC is three to five weeks, though some states may have different laws which could extend the process. Start-up costs also differ. The average starting cost of an LLC is anywhere from $50-$500 — it all depends on where your business is formed. You can simplify this step by using a business formation service to form your LLC.
Normally small businesses do not have to register with federal agencies unless they need trademark protection. LLCs must register with the state the business is conducted in. You are technically conducting business in a state if:
If you are registering an LLC, make sure to register it under the business name. Naming your LLC can be tricky — it’s important to make it unique and descriptive. Most states require small businesses to register with the Secretary of State, a Business Bureau, or a Business Agency. LLC owners must hire a registered agent who receives all the paperwork and legal documents on behalf of your company. Generally, an LLC owner will need:
Since this process can seem overwhelming to many business owners, some opt to hire a business formation service that supports new business owners and helps them start their business.
Name Your Business
Enter your freelancing business name to register
Tax season can be a tough time for freelancers. Since you are considered self-employed by the Internal Revenue Service (IRS), you must file your taxes as a business owner. That’s why it’s important to save every invoice and receipt to track expenses and income.
Typically, freelancers should save 25-30% of every freelance check they receive. This amount will cover the self-employment tax and the income tax you’ll have to pay. Self-employment tax is about 15% of your income, and helps supplement the benefits and Social Security ordinary employees pay. It also includes the employer’s share of the taxes.
Luckily, as a freelancer, you’re entitled to more business expenses than an ordinary employee. Common deductions for a freelancer include:
Finding work can be the hardest part of freelancing. During the beginning of your freelance career, you may not have many clients to financially support yourself. When these situations occur, you can turn to the internet. You’ll be able to find work while continuing to build your portfolio.
The internet has made finding job posts very easy. However, it’s important to check in frequently to see if they have been updated. Nowadays there are many online job sources, such as:
|Online job source||Pay||Freelance job types|
|UpWork||Hourly or fixed price||Mobile, web, and software development, design, writing, sales and marketing, engineering and architecture, customer service, admin support, and data science and analytics|
|Guru||Hourly, fixed price, task-based or recurring payment||Programming and development, writing and translation, design and art, administrative and secretarial, sales and marketing, business and finance, engineering and architecture, and legal|
|Freelancer||Hourly or fixed price||Website development, graphic design, logo design, marketing, writing, mobile app development, internet marketing, search engine optimization, 3D modeling, writing, software development, accounting, finance, legal, manufacturing|
|FlexJobs||Depends on the employer||Account management, accounting, finance, administrative, marketing, art, communications, data entry, education, project management, insurance, news, real estate|
|Fiverr||Fixed price||Development, design, finance, project management, product managers, writing|
|Toptal||Hourly or fixed price||Development, design, finance, project management, product managers|
|Simply Hired||Salary||Warehouse worker, retail, sales, medical assistant, call center representative, receptionist, accounting, nursing, human resources, administrative, marketing|
|PeoplePerHour||Hourly||Technology, programming, writing and translation, design, digital marketing, video, photography, business, music, marketing, sales, social media|
|Aquent||Depends on the job||Marketing, creative services, project management, user interface/experience design, content and writing, development|
|TaskRabbit||Depends on the job||Mounting, installation, moving and packing, furniture assembly, cleaning, general handyman, heavy lifting|
Many freelancers lean towards non-profit organizations when beginning their careers. These types of companies are more willing to accept work from an entry-level freelancer because their budgets are usually smaller than other companies. This way, the nonprofit will get the resources they need while you can use the work to expand your portfolio to show future clients.
Attracting clients to work with will be the backbone of a freelancers business and source of money. You will need to market yourself and network to find these clients. Basic networking tactics include:
Social media is a quick way to connect with people while easily sharing your product or services. You can also meet with people at networking events or get recommendations from your previous clients. Tools like Eventbrite and Meetup can provide local networking event details using your location.
Being a freelance worker means dealing with clients on a daily basis. You may come across great clients that you’ll want to work with every day, but you’ll also have to work with clients you don’t see eye-to-eye with. To keep a steady flow of work, it’s important to know how to work with all kinds of clients so you can manage workflow and get paid on time.
Once the various client projects start coming in, you’ll need to keep track of the different deadlines to deliver the work and keep the clients happy. Luckily, there’s a lot of project management software available, such as:
Constant communication with clients will help both parties determine the nature and the scope of work that needs to be done. You’ll be able to set up expectations, learn their objectives, and avoid misunderstandings. There are many free communication tools including:
You can also look at customer relationship management (CRM) tools that will help you keep in contact with your clients. CRMs provide all the client’s details, like email, employer, company position, and more. Common options include:
Every freelancer has toiled with how much they should charge. There are many variables to consider: where you live, what services you provide, and the quality of your work. Negotiating prices is a skill every freelancer should have because odds are they are going to encounter a client that doesn’t want to pay full price for their product or services. When that happens, keep these tactics in mind:
In addition to negotiating your fee, you also need to be sure you send out invoices quickly and get paid. Using ZenBusiness Money will help you stay on top of invoicing, accepting credit cards, and managing clients.
Many freelancers use various resources when starting their own business. Obtaining new clients can be one of the hardest aspects of a freelance career. In fact, a third of freelancers surveyed stated securing enough work is a freelancer’s biggest struggle. These resources have helped many self-employed workers prepare for issues and obstacles that might arise when starting a business.
Freelancing can be equally rewarding and overwhelming. Some people may feel pressure and uncertainty when they quit their 9-to-5 jobs. However, there are many best practices that will help you succeed at freelancing.
Your workspace can significantly affect your productivity. For example, having plants in your office can lower risks of headaches and scratchy throats. Additionally, workspaces that create happiness lead to an increase in productivity. Here are some ways to create a more productive workspace:
A set schedule is important for a freelancer. You don’t want to end up working 15-hour days and overextending yourself. It’s also important to set time boundaries with your clients to let them know when it’s appropriate to contact you. Some tips to stay on schedule are:
Every freelancer has their arsenal of tools to make their job easier. Some common tools include:
Though freelance work can be overwhelming, there are many tools and services out there to help you build your own business. These tips can increase your success rate and provide you a better experience as a freelancer.
Here at ZenBusiness, we can start your freelancing LLC for free (+ state fee), helping keep your startup costs low and providing a resource you can count on.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
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