By Brittany Foster on SkilledUp.com
As the modern business world changes, so do the roles that employees and professionals play in the workplace. Freelancing is a growing industry that many people are dipping their toes into, whether permanently, or as a means of extra income.
While freelancing may sound like an ideal form of employment, there are a few things that you should know before you jump in head first. It’s not as easy as it may seem, but if you take note of these 10 things, you should be off to a good start.
As a freelancer, you are responsible for your own taxes. Your clients will not hold back part of your pay to cover what you may owe at the end of the year, so it’s up to you to do that. It’s generally recommended that you hold back around 25-30% of your paycheck to go towards your taxes at the end of the year.
Keep your tax portion in a separate savings account and make sure not to use it for anything other than taxes, or you may end up with a bill at the end of the year and no way to pay it back.
You may charge your clients extra for taxes by including the invoice amount and then calculating the taxes.
2) Health Benefits
While most employers offer group benefits of some kind, freelancers are not entitled to them. It doesn’t matter if you work full-time hours as a consultant. If you are not an employee, you don’t have the option to pay into the benefits plan. This means that you cover your own medical expenses, such as prescriptions and dental appointments.
Because of this, you may want to look into setting up personal benefits for yourself through a third-party insurance provider. Explore your options and find something that works for you.
3) Expenses and Bills
When you spend your entire day at the office, you can lose sight of the fact that your employer pays for all of the office supplies, coffee, furniture, and utilities. When you work for yourself, all of them fall on you.
If you have a home office, don’t expect to bill your client for anything that you use to keep yourself comfortable while getting the job done. Things such as office chairs, desks, heat, power, and general supplies are now your responsibility.
However, if there is something specific that you require for your client, for example a certain computer program that is limited to their needs, you can discuss the expense with them.
You will be able to write off many of your freelance purchases as business expenses, but just remember that your client won’t reimburse you for anything that they don’t have to.
4) Holiday and Sick Time
Paid statutory holidays and sick time don’t really exist for freelancers. That’s why it’s important to budget carefully for days when your clients might not need you, or you may want to take a vacation. You can calculate and put away a part of each check to go towards days that you would like to take off, but your clients are not responsible for paying you to take time off.
You may talk to your client when creating a contract to agree on a higher fee or hourly rate on holidays should they need you. That way, if you do end up having work to do, you’ll get a little bonus for taking time out of your day off to help out a client.
As a freelancer, written and signed contracts are essential. You should include anything and everything to do with the details, limitations, and restrictions of the relationship between you and your client. This would include:
- Financial terms: payment/rate information, late penalties, expense responsibilities, etc.
- Project information: details about the projects and the consultant’s responsibilities, the goals and expectations of said project, how long the consultancy will last, deadlines, etc.
- Contact information for both parties, such as names, addresses, phone numbers, and so on.
- Confidentiality/Non-Competition/Non-Solicitation clauses: These are legally binding restrictions between you and a client that ensure that you don’t share confidential information related to the business, you don’t compete against their business, and you don’t end up encouraging employees to leave the company. You’ll need to know how long they will last for and details regarding how they will be enforced.
Make sure that your contract is clear and that your client understands and agrees with all of the inclusions. A proper contract could save you time, money, and stress down the road by laying out all of the terms early on.
Consultants and contractors all have to set their own fees and hourly rates at some point. This can be a difficult task as you have to balance client budgets as well as your own expenses. Ask too much and you may lose a client, ask too little and your bills could go unpaid.
There are two main ways to bill clients, and both can work quite well:
Hourly: Charging hourly means that your client pays for any time that you spend working on the project. That means writing emails, taking phone calls, and any other task that is related to the project.
Charging this way ensures that you, the contractor, get paid for every minute that you spend working for your client. It also makes it hard to give your client a quote, and you could end up going over their budget.
Per Project: Per project billing means that you charge your client by the project. You negotiate a fee early on, and it encompasses all aspects of your work for the customer. For long-term projects, retainers (a weekly/monthly sum that clients pay to contractors to retain their time, regardless of the amount of work actually completed) are also sometimes used.
Per project billing sets out a clear price for both you and the client early on, but if you’re not careful, you could end up putting more money into it than what you charged for.
Every freelancer should provide their clients with invoices at either the end of the project (if it’s a short, one time assignment), or at the end of each month (if it’s a long-term relationship).
Invoices should include the date, invoice number, contact information of each party, the tasks, and how much time was spent on each task. Include dates, totals, taxes (if applicable), and send them either via mail or email.
Keep copies of all of your invoices in paper or electronic format for your records. This way, when a client pays late, you can prove when you sent your invoice. Once a client does pay, mark down the invoice as paid, list the date and what payment method they used, and store it in your records.
Since you have to find business for yourself, you’ll need to decide whether you are experienced and learned enough in marketing to promote yourself, or if you need to enlist a professional. Early on, it’s ok to be careful with your money, but making full-time money without exploring different types of advertising is highly unlikely when you’re just starting out.
If promotion isn’t your area of expertise, try finding a freelance marketing professional who might be willing to trade some of your services for theirs.
9) Time Management
With no supervisor or manager to keep you on task, you’ll need to learn to plan your own work hours. In terms of flexibility, you will have some, like choosing your hours for instance, but you’ll still need the drive to focus on tasks without any prompting.
Try to pick the time of day that you feel the most focused and productive. If you like to sleep in a bit in the mornings, start you days a bit later so that you get the rest you need. If you are an early-riser and find yourself with a lot of energy in the mornings, work when you wake up and end your days early.
10) Stay Up-to-Date
Freelancers don’t have bosses who will pay for extra training or courses, so it’s up to you to keep yourself informed and up-to-date in your industry. You’ll also need to research your clients’ current ways of doing business so that you can be sure to understand their needs. If they’re behind, suggest upgrades. If they’re ahead of you, ask if they can allot some time to catch you up to speed.
If done right, freelancing can be an extremely rewarding and satisfying career, even though getting started can feel overwhelming. Take your time and build your business while supporting yourself through other means until you have enough ongoing business to make it your full-time profession. If you stick to it through the ups and downs, you can create a career that centers around your life and your interests, and what’s better than loving what you do?