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What You Need to Know Before Going Freelance
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Close to 17 million Americans are self-employed or identify as being a freelancer. For the moment, we are going to consider the terms interchangeable and define freelance work as working independently without affiliation with or authorized by an organization. Freelancers set their own work hours, decide which clients to take, and determine what they charge for work. For these reasons alone, moving from work as a salaried employee to freelance is the someday-dream of many professionals in a variety of fields. It can allow you to build a creative portfolio, take on projects and learn skills not available in your current job, or work part-time to allow for extensive travel or other family lifestyle needs. Here’s what you should know before taking the plunge.
Don’t quit your 9–5 job before you start freelancing. Pursue clients and do freelance work on weekends and evenings (as long as you don’t have a non-compete clause in your current job contract). This allows you to test the market for your services or product, build a client base, see what it will be like to work long hours (because you can count on long days and long weeks being self-employed!), and most importantly, you can continue to save while you build your business.
Do not underestimate the importance of having a substantial cushion of savings before you turn in your two-weeks’ notice. It will take time to grow your client list, build repeat business relationships, and move the balance of time spent in favor of billable hours rather than networking and promoting yourself. Make sure you have the financial resources for the small and undependable paychecks that are hallmarks of early freelance work. It’s not uncommon for it to take up to three years before you start seeing a dependable, sufficient paycheck. Consider scaling back on lifestyle expenses to build your savings and live well within your means while you make this transition.
Be prepared to become an expert at time management. To be a successful freelancer, learning how to balance your roles as self-marketer, project manager, customer support, accountant, etc. is critical. Wisely managing your time will also mean working more than 40 hours a week—sometimes for several weeks in a row—so that you’re prepared for slow seasons. Not pursuing leads or working during the evenings, early mornings, or weekends might mean a smaller paycheck. Make hay while the sun shines!
While you’re managing time, you should also become a pro at managing money. You will need to determine how much money you will spend each month on business bills; how much money you need to net (i.e. the money you take home minus your expenses) to pay your personal bills; and then how many projects a month you need to take on to meet these expenses. Be sure to take into account unpaid or delayed invoices, lack of work, business asset repairs or replacements (like needing a new computer), and family emergencies. Considering all of this will also help you determine how much to charge for your work.
Deciding what your services or products are worth can be one of the hardest parts of being self-employed. You’ll need to decide if you’ll charge per hour, per project, per feature, or some other way. Part of this answer will come from what you already know: how many projects you need to do per month, quarter, or year in order to pay your bills. From there, do research, see what others are charging for their work. Even when you decide on the price tag of your time and talents, you may still need to lower the price if work is scarce.
Finally, outline the set of circumstances under which you will need or want to return to a 9–5 job: the amount of money you have in your checking or savings accounts or maybe the total hours you’re working and away from your family. Knowing this will not only help motivate you and give you clear goals, it will also help alleviate unnecessary doubt when the work gets tough and the hours long. This knowledge will help you avoid going into debt by pursuing freelance work when the smartest move is to return to a salaried position.
After thorough consideration and plenty of research, be confident in your choice to pursue the life and rewards of freelancing!
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