How to start a freelance business
Published Nov. 3, 2020 by Andy L. in Entrepreneurship
So you want to start your own freelance business but you're not sure where to even begin?
Setting out on your own can be a daunting experience.
I have freelanced part-time my entire career with a few years of full-time commitment. I started my early college years doing odd jobs for friends, family, and sometimes people I've never met face-to-face (thank you internet!).
With each experience, I learned something new. Most of the time you learn what not to do with the next client. That experience compounds over time giving you more say in who and what you work on.
This guide is a collection of the paths I took to achieve a sound freelance business. With these points in mind, I had the freedom to pick and choose what I worked on as well as several other freedoms most freelancers want from this type of lifestyle.
Before we dive in I must emphasize that this guide is inspired by my own experiences. It will almost certainly differ from yours. Still, I think some insight here you might find useful.
Define your goals
Before diving in you should pause for a bit of reflection on your goals with freelancing. In my case, it was to be my boss and work on interesting projects. Your goals might include earning more money, having more free time, or simply working outside of the confines of a typical 9-5 job.
Write these goals down and put them in order of most importance to you. Pin this somewhere you can see it so you can always refer to it. Having this reminder insight will both inspire and remind you of the reason you are doing what you are doing. Freelancing and being your boss comes with many unknowns. You have to get comfortable with not knowing what lies ahead at times.
Not only are there unknowns with freelancing but as a business owner, you suddenly need to take on many roles to stay alive. Everything from living expenses to taxes needs to be addressed depending on where you live and your lifestyle.
Setting goals and making them present-day today will help you stay more consistent when the going gets tough because trust me it will get tough!
Define your ideal customer
In the freelance world, there is a common expression referred to as "client from hell". If you haven't come across one yet, don't worry, you will. On the surface, some clients seem like great candidates to form working relationships but little do you know they are a disaster waiting to happen. The longer you freelance the better you get at spotting red-flags early in the process. Once you do, get out!
Defining who you want your customer/client to help you remain selective in your search for work. It's not always easy to find exactly what you are after in a working relationship but do your best to uphold those standards. Accepting less pay and less control in a project is a drag though sometimes necessary. Sometimes those low-quality projects aren't worth your time.
Niche down your offering
Like many freelancers when I first started I thought it would be best to be multi-faceted in my offering. On paper, this is a great sell, but many contractors are looking for a specialist or specific roles to fill. If you can narrow down your skills to offer you have a higher chance of being found organically. Being found is only part of the equation because you need a "way" to be found. These days that might be through your website, network, blog posts, social media, or community contributions.
Being "known" for a niche allows you to get inbound leads without needing to go hunting yourself. That might mean writing about a specific tool, skill, or service you offer on a blog or sharing value in some way with an audience.
Don't forget the contracts
The boring stuff is quite important should you need to enforce terms of doing business. Contracts no matter the cost of the project is a smart idea to consistently use. These are typically written agreements with signatures that say what is expected of each party in the business deal.
In the past, I commonly sent out a project service agreement along with a general contractor.
- The contract was more legally binding than the agreement but both serve their purpose.
- The project service agreement defines project scope, timeline, and deliverables with estimated costs and payment milestones.
Supplying the service agreement before a project kicks off gives clients the sense that you've got your shit together and aren't messing around.
The general contract establishes more of " how I work" combined with what I'll do and not do should some events occur. You don't need to go crazy with either of these but it does give you a sense of security and professionalism so I recommend it!
Consider establishing a L.L.C.
While not necessary as a single freelancer, an L.L.C. (Limited Liability Company) (in the U.S.A.) is a nice addition to a business. Should you get sued, the person suing you can only go after the L.L.C. instead of you directly. There are also a lot of tax perks if you have an L.L.C. established that allow you to write off various expenses for your business including your office space (even if it's in your home), software, tools, travel, coffee, and more. I try to write off absolutely everything I can to avoid getting taxed.
Speaking of taxes, don't forget about these. In the United States taxes are commonly taken out of a paycheck at an employer during each pay period. This happens automatically so you don't have to worry about it.
Freelancers can do this as well but it's more overhead to keep track of. In the past, I've used estimated taxes to help lower the amount I have to pay towards taxes be lower on tax day. Using estimated taxes, you can opt into paying taxes four times a year in smaller batches. You're still paying pesky tax but it makes less of a dent each milestone. During dry months this makes all the difference.
Just like the tax scenario a lot of employers offer insurance solutions. Sadly, if you are self-employed you need to buy your insurance (in the United States). Insurance is not cheap but is quite necessary. In the past, I've used Stride to help make the process a little less painful. Stride is mostly a front for insurance companies that helps pair you with a plan depending on you and your family's setup. You can find Life, Health, Dental, and Vision insurance all in the same place. It's not perfect but it's pretty easy to get started.
Learn when to say no
As you progress as a business owner you will start to understand how time is more valuable than money.
Saying no to new work that isn't up to your standards is completely okay. This is true even if you are on the hunt for new work.
If you are having trouble finding any work at all then it's totally fine to suck it up and say yes to lower quality projects but I have ironically had more luck saying no and getting a much better quality of work as a result. Saying no leads to more time on my hands and more impactful work.
Repeat clients tend to abuse the "time" factor if you've proven them worthy in the past. They will come to you expecting you're not already busy with other work and expect a near-immediate turnaround. On one hand, you want to maintain the relationship and on the other, you want to tell the client to screw off. It's a tough call.
I think in the end it comes down to your goals I mentioned previously, what you want to work on, and who you want to work with. Saying no is fine.
Make the best use of your time
Being your own boss is fantastic. With such freedom comes more opportunities to get out and explore. Doing things mid-day for instance becomes an option since you aren't tied to a desk at some 9-5.
The problem with this might be that you're not making the best use of your time and growing your business. It's easy to slack, get distracted, or waste days doing nothing related to growing your business. Days like that should be a part of your life but to build a business you need to put in a lot of work and do it consistently. The saying always goes "Practice makes perfect" and that's completely true in the business world. The more time, iteration, and consistency you put into something the more likely you'll see success.
I've only scratched the surface of what it takes to start a freelance business in this guide. I hope it has proven useful if you have read this far. At a high level, starting and running a business is extremely hard work. Learning along the way is just about the only way you'll find success. Each business and person(s) operating the business is different. Making small changes as you press forward each day will get you what you're after.