16 Business Lessons for Freelancers
The vast majority of freelance designers and developers have chosen to embark upon a career as a freelancer because of their interests and abilities that are related to the work that they’re doing. Running a business is just a necessary evil for most of us, rather than being the ultimate focus of an occupational decision. In many cases, the most dreaded duties for a freelancer are those that only deal with the business aspects, such as invoicing, tracking finances and working on taxes.
Regardless of how much we like or dislike the requirements of the business side of our work, running an efficient and legitimate business is essential. While some freelancers have more of an entrepreneurial nature than others, there are plenty of lessons to be learned by all. Whether you freelance part-time or full-time, paying attention to the lessons that you’re learning will drastically improve your chances of success.
1. Not All Expenses Are Bad
One of the most damaging mindsets that a freelancer can have is that business expenses should be avoided. While it’s certainly valid to believe that expenses should be limited in order to maintain profitability, it’s all too common (especially for part-timers) to always look for free resources and free options. Freelance designers are fortunate to have a wide variety of tools that are freely available, however, there is a time when spending some money is an excellent decision.
Those tools that are critical to your job should not be compromised. Ultimately, in order to be successful you’ll need to do the best work that you’re capable of doing, and without the right tools and resources that is not possible. Additionally, there will be situations where a free option is available, but a paid option could save you some time and allow you to get more accomplished during the day.
When it comes to business expenses, if it will help/allow you to make more money than it costs you, consider spending the money. In the long run you’ll probably be glad you did, not to mention that legitimate expenses are tax-deductible.
2. Referrals Are Golden
Chances are, you’re a skilled designer and producing something that pleases your clients is well within your ability. The problem is that there’s no one to please if you can’t find the business. Seasoned freelancers typically will have much more control over their workload and their clients, but new freelancers usually struggle with finding enough work to stay busy. It’s just natural that it takes time to build up your business. But what can you do about it?
There are any number of lead generation methods that freelancers can use (PPC, bidding sites, a high-visibility portfolio site, blogging, etc.), but none can top a steady stream of referral business. Potential clients who come to you by word-of-mouth will be more likely to trust your judgment, will often be more pleasant to work with, and they’ll be less likely to shop around for the lowest quote. They’re coming to you because someone that they know and respect has recommended you, and that means more than any type of advertisement could accomplish.
The biggest advantage to referral business is that it saves you from the need to go out and actively search for work. The time that you’re not spending on those activities can all be spent on income-generating work, which will obviously improve your bottom line. Treat every client right and pursue opportunities to develop referral sources. Make sure that others know what you do for a living, and most importantly, ask for referrals.
3. Weed Out the Tire Kickers
One of my primary sources for finding clients is through my portfolio website/blog. When I first started getting traffic to the site and inquiries started coming in, one of the very first lessons I learned is that a percentage of people that fill out the contact form are highly unlikely to do business with me, even though they say they are interested. Many people fill out a contact form expecting very low-priced services, or they want to enquire about a business or a website that they plan to start but have done nothing as of yet.
Initially I was wasting a lot of time with too much follow up to these people. The difficulty, of course, is determining which leads are tire kickers and which ones are solid leads. Over time I made a few changes to the site and to my business practices that resulted in less time being wasted in this way. For starters, I removed all prices my my services page. When I started freelancing I decided to used set pricing for sites that fell into various packages, and they were priced low because I was just getting started and uncomfortable with charging more until I had some additional experience. I thought it would be easier for potential clients if they could see the price, but what I found was that it was attracting people who were shopping only on price. These types of people accounted for a large percentage of the time-wasters that ultimately never made a decision one way of another. All they knew is that they didn’t want to spend much money.
Removing the prices immediately helped to reduce those types of inquiries, but it didn’t seem to decrease the number of strong leads that came through the site. The second change that I made was to add a budget range to the contact form so the potential client could specify roughly what they were willing to spend. Now I can also use this additional info to gauge what people are really after. Of course it’s fine for them to enter a low budget, but when they want a complex site at a low-end price, I can decide how much time should be spent pursuing that lead.
For more on the subject, see my post Improving the Quality of Leads Through Your Online Portfolio.
4. Charge Up Front
Every freelancer will at some point learn a few lessons about their practices for billing clients. Almost all freelancers strongly recommend charging at least a portion of the payment up front before work is started. From my experience, collecting money isn’t really even the biggest issue here. Sure, it’s nice to have that money up front, but the impact on the client is more important. By charging up front you’re ensuring that the client is committed to the project and that they are serious about working with you. If you don’t charge up front, you’ll eventually get paid in most cases. However, these clients will tend to take their time getting necessary information or feedback to you, and they’ll really be in total control of the situation. Do yourself a favor and nail down the commitment by charging a portion up front.
5. Accurate Record Keeping is Critical
Keeping tabs on expenses, income, and outstanding invoices are not enjoyable activities for most of us. However, without accurate records your business will be put at risk. Not only is this important for tax purposes, but you could be missing out on income by not keeping good records, and you could be missing opportunities to do better. Set up a system that will work for you. Ideally it will provide you with all the record keeping that you need with a minimum of time spent on these activities.
7. Plan Ahead for Down Times
Freelancers are bound to have some ups and downs in terms of workload, it’s just the nature of the business. In order to achieve maximum success, you’ll need to recognize these situations and make the most of them, even when there’s not much work available. When things are slow with client work there a number of different things you could be doing to strengthen your business, including working on your portfolio site, blogging, networking, contacting past clients, pursuing projects of your own, getting your finances in order, etc.
For more on this subject, see my post 19 Ways to Build Your Business When Work is Slow.
8. Emphasize Time Management
When you are working for yourself as a freelancer, time management and efficiency become huge factors in determining how much money you’re able to make. If you’re used to working for a larger design studio or if you come from some other type of background as an employee, time management has probably never been as important to you as it is now. With a salaried job you may need time management skills to keep stress under control or to keep the boss of your back, but as a freelancer it’s critical to your own financial well-being.
The biggest thing you can do to improve your use of time is to recognize where your time is currently being spent, and plan ahead to keep yourself on track. It’s very common for anyone to be unsure about how they really allocate their time. It’s difficult to improve and to accurately schedule your days if you’re not certain about where you’re starting from.
For me, planning my daily and weekly tasks ahead of time are absolutely critical. Without a basic to-do list I can easily get side tracked by tasks that may not really be that important. But with a short list of important things that need to get done, I’m much more likely to end each day having accomplished something significant. Typically I’ll develop a to-do list at the end of the day for the following day, and over the weekend I’ll work ahead on a weekly plan.
9. Taking Every Job is Not a Good Decision
Freelancers have a powerful opportunity to choose which projects they accept. Of course, the more options you have the easier it is to turn away the “bad” jobs, but even for freelancers without a lot of prospects there are times when it is best to walk away from an opportunity. Before you accept work, make sure that the money you’ll make will be worth your time. Newer freelancers will often have to take less money than what they would like, but it may help you to build a portfolio or to start to get some referral business.
If there are other things you could be doing with your time that would be more beneficial to your business, don’t be afraid to turn down the project, or at least quote a higher price. There’s nothing worse than spending excess amounts of time and dealing with endless headaches for a job that’s only paying a small amount. Even if you don’t have much other work at the moment there may be other things you could do for your business that would be a better use of your time.
The pay isn’t the only determining factor here. We all know that some clients are a pleasure to work with, and others are a nightmare. If you get a bad feeling about a potential client you may want to be more cautious about accepting the job.
10. Repeat Clients Are Priceless
Developing referral business isn’t the only way to avoid spending time looking for work. Ongoing clients will have the same impact, you’ll be able to spend more time working and less time prospecting. Repeat clients will already be familiar with you and your work, and you’ll be familiar with their websites, which can save you even more time. You’ll also have a chance to build stronger relationships with repeat clients and you may be able to offer a wider spectrum of services to them.
11. Networking is Critical
As a freelancer, who you know is almost as important as your skills and abilities. And not just who you know, but how you know them. A well-connected freelancer will come across far more opportunities than an equally skilled designer with no network. Not only is a strong network useful for finding clients and getting referrals, but it’s also incredibly useful when you need some help or advice. There have been a few occasions in the past year where I emailed another designer in my network to ask their opinion or advice, and this has been extremely valuable for me. Online social networks and blogs are excellent resources for networking. I’m using Twitter more than I did just a few months ago, and it’s pretty common that I’ll see another designer or developer get a question answered or get feedback simply by sending out a message that’s seen by all of their followers.
12. A Comfortable Working Environment is Essential
A big part of productivity and efficiency when you’re working from home is your working environment. Your office or work space should be conducive to getting things accomplished and not full of distractions. It’s highly recommended that freelancers separate their living space and their working space. This way you will be in the mentality of work when you should be, and you’ll be able to leave work behind at the end of the day when you’re in the living area.
13. Getting Profession Tax Advice is a Good Idea
Taxes can be complicated, and freelancers have much more that they need to be aware of for reporting income and expenses. In order to stay in line with the laws and to maximize your effectiveness with deducting eligible expenses, hire a professional account to do your taxes or at least to consult with you so you can do things properly yourself. Accountants aren’t cheap (at least the good ones aren’t) but they can save you a lot of grief and they can help you to legally reduce the amount of taxes that you pay. By trying to do everything yourself you’ll probably spend way more time than needed.
14. Leverage is Key to Long-Term Success
Being a freelancer is a great job, but many don’t intend to do it for a career. The bad part about freelancing is that you’re trading your own time for money (even if you’re not charging hourly), and you’ll always be limited because you can only work so many hours. In order to increase your income over the long-term, leveraging yourself is key. Maybe you simply want to start by hiring someone to convert your PSDs to HTML for you, which will free up more of your time. Additionally, you may want to outsource some of your work to other freelancers. Others have devoted time to building assets or businesses that can produce income on an ongoing basis (like Collis Ta’eed of Envato).
15. Standardize Your Processes
Whether you’re talking about the design and development process, or other aspects of business like invoicing and record keeping, developing habits and setting standards are important. Find ways of doing things that work well for you, and get in the habit of doing them this way each time. By developing good processes you’ll improve your efficiency and your effectiveness.
16. Pricing is Difficult and Not an Exact Science
Almost every freelancer will struggle with pricing their services, so don’t feel like you’re alone. As freelance designers we get paid for work that is difficult to measure in many ways. Learning how to price your services is an ongoing process that will probably never end. The good news is that as you learn from your experiences and from your mistakes, you’ll get more comfortable and you’ll have more of an idea why you are charging a certain amount.
There is a great deal that could be said on the subject of pricing, but instead of going in too much depth here I’ll point you towards some other articles I’ve already written on the subject:
What Lessons Have You Learned?
During your time as a freelance designer, what have been the biggest lessons you have learned, or what are the most surprising lessons?