So You Want to Be a Freelancer ...
What's the difference between running your own home-based
business and freelancing? (tick, tick, tick ...) Give up? Me
too. If you want to work for yourself from home and have a
special talent or skill that you think others would be prepared
to pay for on an hourly or per-project basis, why not stop
thinking in terms of the traditional "home business" paradigm
and start thinking in terms of freelancing instead?
WHAT IS A FREELANCER?
Quite simply, a freelancer is an independent contractor who
earns his or her living by contracting for projects on a project
by project basis. A freelancer is not an employee of anyone and
so he or she must actively seek out work, negotiate the terms
and conditions of the project (the contract) and complete the
work to the satisfaction of the client. Once the project is
complete, the freelancer seeks out and enters into another
contract for another project.
Alternatively, the freelancer may have obligations under a
number of different contracts with different clients at the one
time.
Another variation involves the freelancer producing work and
then seeking buyers for that work. A freelance writer of
magazine articles, for example, would fall into this category.
WHO HIRES A FREELANCER?
Those who hire freelancers are as diverse as freelancers
themselves. In some cases, companies will hire freelancers to
complete a short-term project as an alternative to hiring a new
employee. This is often the case where the work in question is
spasmodic or ad hoc and the company cannot justify hiring an
employee for such work. Companies also hire freelancers to help
smooth out the peaks and troughs of workload. Again, where there
is a temporary oversupply of work, the company will hire the
freelancer on a short-term basis to help cope with the backlog.
In other cases, companies hire freelancers for their special
expertise in a certain area. A company may want to create a new
website, for example. Hiring a freelance website designer for
such a project makes more sense than hiring a website designer
as an employee since once the website is complete, the function
will no longer be required.
Magazine and newspaper editors also hire freelancers or, more
precisely, buy rights to freelancers' work. A freelancer in this
type of situation may write a piece and submit it to a number of
different editors in the hope that his or her work will be
"picked up" by that editor and published, in return for which
the freelancer receives payment. By its nature, such an approach
is speculative since the freelancer can't be sure that anyone
will actually buy the work. Of course, once the freelancer has
been published, it is relatively easier to get the editor to buy
the freelancer's work in the future and, as the freelancer's
reputation grows, so too do the opportunities for future
business.
WHAT QUALIFICATIONS DOES A FREELANCER NEED?
To be financially successful, a freelancer obviously needs
marketable skills. A freelancer therefore needs the same
qualifications, skills and talents as someone who had been hired
as an employee to do the job would need. In other words, if you
are seeking work as a freelance website designer, you must
possess the same skills and qualifications that a full-time
employee website designer would possess.
IS A FREELANCER RUNNING A BUSINESS?
In short, yes. If you do not have an employer, if you have to
source your own work and negotiate your own terms, if you have
to chase payment, if you have to pay your own taxes (i.e. no one
is withholding them from your check), you are, in essence,
self-employed. Ergo, you are running your own business.
There are a number of consequences you need to think about. The
first is taxation. You need to set aside from every payment you
receive an amount sufficient to cover your state and federal
taxes on the income you receive. Likewise, you need to keep
proper books and records so you can claim the deductions and
expenses you are entitled to as a self-employed person.
As a freelancer, like any independent contractor, you will also
be expected to provide your own equipment and supplies. If you
are a website designer, you need to have your own computer,
software and other tools of the trade. The party hiring you will
not provide this stuff for you. Similarly, if you are a
freelance editor, you will be expected to have all the reference
materials and style books, word processing programs and other
sundry items any editor would need to do the job.
From a legal point of view, you should also give some thought
to the legal entity of your business. Will you be a sole
proprietor or will you incorporate? If you incorporate, will you
choose S-corporation status? There are important tax
consequences of each of these alternatives so be sure to get
advice from your accountant before starting.
Think also about what licenses you may need as well as insurance
(health, life and liability depending on the nature of the work).
WHERE DOES A FREELANCER FIND WORK?
OK, onto the nitty gritty. You've decided to start work as a
freelance website designer. You have the appropriate
qualifications, training, experience and equipment and you've
consulted your accountant to determine the most tax-effective
business structure and your lawyer to set up your new company
and advise you in relation to issues such as business licenses
and fictitious business names. You're ready to hang out your
shingle. Now what?
=> Approach Your Warm Market
Start with who you know. Where did you get your website design
experience? If it was with an employer, consider whether that
employer may not be a source of business for you. That will
obviously depend on the circumstances under which you parted
company but if you left on good terms and didn't burn any
bridges on your way out, by all means contact your former
employer and let him or her know that you are now in business
for yourself and ready, willing and able to take on new
projects. If possible, get a reference or testimonial too. That
will come in handy when it comes to touting for new business
from strangers.
Next, turn to your network of business associates you developed
while working for your former employer. Note, we're NOT talking
about clients of your former employer, rather your own network
of colleagues. Contact them and let them know about your new
venture and your availability for project work.
Be extremely cautious about approaching clients of your former
employer if your current business puts you in even indirect
competition with that employer. You may be constrained from
approaching former clients if you signed a non-compete covenant
in your employment contract, for example.
=> Create Brochure/Resume
Go to the time and expense at this stage to prepare some sort of
resume of your experience and services. Get this professionally
printed as a brochure and send it, together with your business
card, to your former employer and colleagues as a follow-up to
your conversation. By giving them something tangible about you,
it is more likely that you will come to mind when next they have
a need for your services. If you've already provided them with
your brochure/resume, when the time comes, the person concerned
will think "hey, Joe's doing this sort of thing now. Where's
that information he sent? Oh, here it is. I'll give him a call
and see if it's something he might be able to do for us."
=> Approach Your Cold Market
Once you've approached your so-called "warm market", it's time
to start on the cold. Start by gathering up a list of businesses
in your local area or industry that you think would have use of
your services. Prepare a letter of introduction and send it,
together with your business card, to your list of prospects.
Your letter of introduction should make if very clear why you
are writing. Identify yourself and the specific skills that may
appeal to the reader and why.
Follow up in a week with a telephone call to make sure the
materials arrived safely. If the other person is approachable,
try and strike up a conversation about what you could do for the
business. Otherwise, thank the person for their time, ask them
to keep you in mind for future work and calendar to contact them
again in 30 days' time.
Continue to work your market like this. Remember, persistence
pays off. Don't be discouraged if you receive little warmth or
interest in response to your approaches to your cold market. It
takes time and persistence. Just don't take it personally. A
good way to approach it is to tackle a fixed number per day.
Start out by making a list of, say, 300 businesses you want to
approach. Develop your list from the Yellow Pages, local library
and the web to start with. Calendar to approach 10 businesses a
day for the next 30 days. That means ten calls a day, followed
by 10 letters of introduction (together with a copy of your
brochure/resume and business card) and a follow up phone call a
week later.
Where there is interest, you may be able to schedule a meeting.
Where there is no interest, schedule for a further follow up
call in 30 days. If there is still no interest, schedule for a
further call in 90 days. Or maybe you would prefer to do
something else to stay in contact. A good way is to publish a
newsletter for your clients and colleagues. Make it relevant to
the recipient and it's a good way of keeping your name in front
of your prospects. A quarterly newsletter is probably frequent
enough. Send it, with another of your business cards, to your
list and, over time, you will see that it will start paying off
in the form of business.
=> Samples
Another idea to think about is to produce a set of samples of
your work; a portfolio if you will. Make 8.5 x 11 copies of your
work and keep them in an artist's portfolio for presentations
when you're able to arrange face to face meetings with potential
clients.
=> Advertising and Promotion
Next comes advertising. If you're a website designer, possibly
your best advertisement is your own website. But don't stop
there. Advertise in the publications your target market reads.
Another good way to generate business is to join associations
and groups affiliated with your industry. Chambers of Commerce
are a good place to make handy contacts.
You will probably find that in the early stages of your
freelance career you spend more time marketing yourself and your
services than you spend actually working. There's a financial
cost to that, of course. How do you finance your marketing if
you don't have any money coming in? For this reason, the early
days will be lean and mean. Make sure you have the financial
wherewithall to survive this period.
HOW DOES A FREELANCER MAKE MONEY?
You will only make money as a freelancer if you charge more that
it costs you to do the work in terms of your time, expenses and
materials. Factor in a profit component to every job you quote
for and make sure that that profit component is in ADDITION to
an allowance for your time. For more on pricing your services,
see "Pricing Yourself To Get and Stay In Business", at
http://www.ahbbo.com/pricing.html .
Some freelancers charge by the hour and others by the project.
In reality, you will probably use a combination of both methods
depending on the nature of the job and the client.
You can get an idea of current market rates by surveying your
competitors. Don't be obvious about it though; competitors are,
naturally enough, reluctant to divulge information about their
businesses to their competitors. So you'll probably need to
employ a bit of subterfuge here by posing as a potential
customer, for example. In fact, it's in your legal interests
that your competition doesn't give you pricing information if it
knows you're a competitor. Such conduct can be construed as
price fixing which can land both of you in extremely hot water.
So, keep it safe and use circuitous methods of obtaining pricing
information from competitors.
PROTECTING YOURSELF
A question often asked by freelancers is "do I need a
contract?". Well, to start with, once you've negotiated a deal
with a new client you have a contract. The question is whether
it's oral or in writing. An oral contact is just as enforceable
as a written one but the problem becomes one of proof. How do
you prove the terms of your contract if all you have is one
person's word against another's? For this reason, a written
contract is always a good idea. It needn't be anything too
elaborate. In fact, even an exchange of letters will do. Just be
sure to include the basic terms:
=> Describe the job
What must you do to perform the contract? Be as specific as
possible here and try not to be open-ended. "Create a website
for client" is too vague. What would you do if the client came
back after you'd finished and said, "but there's no shopping
cart, there's no feedback form?" and you hadn't quoted your time
for these things in striking the price? Better to say, "Create
website at client's direction consisting of (a) home page; (b)
products and services page; (c) order page; (d) shopping cart
and (e) feedback form". By requiring the client to be very
specific about what it is they want from their website, how they
want it to look etc. you can go a long way to avoiding
misunderstandings caused by vagueness.
=> Set the price
State in unequivocal terms the price you are to receive for the
job. This can be either a project cost such as $5,000 or an
hourly rate such as "$150 hour or part thereof; minimum of ten
(10) hours" or whatever.
=> State time for performance
Performance means not only when you will complete your part of
the bargain (i.e. delivering the completed website to the
client) but when the client must complete his or hers (i.e. by
paying you).