Freelance bookkeeping business

A Guide to Starting and Running a Freelance Business and freelance business consultant job description
Dr.KiaraSimpson Profile Pic
Dr.KiaraSimpson,United States,Researcher
Published Date:05-07-2017
Your Website URL(Optional)
Comment
A Guide to Starting and Running a Freelance BusinessSpecial Considerations for Starting a Freelance Business When starting any type of business, there are myriad So if you’re the type of person that needs a steady things to consider . These are the special considerations stream of funds, are bad at budgeting, or have a family you should focus on when starting a freelancing business: depending on your income alone, freelancing may not be the best fit for you . However, if you’re good at • Personal traits and personality types and why they budgeting, have built up a nest egg, have solid leads or matter . even signed contracts for steady work, freelancing could • What types of business are good for freelancing? work for you just fine . • Freelancing full or part-time—Should you quit your Being a motivated self-starter is crucial for success in a day job? freelancing business . You will need to “knock on doors”— • Professional licensing, certificates, accreditation, and whether literally or online — to seek out and bid on jobs . training requirements Unlike many traditional businesses, you’ll need to really • Space for your business—home-based, rent or buy? get out there, even if your services are specialized and you already have contacts . • Equipping your business • Insuring yourself, your business and your business In addition, you need the ability to get along with people space and work under them . Now, you may be thinking, that’s • Retirement and time-off benefits exactly why I want to start a freelancing business—so that I don’t have a boss . As a freelancer, you are the boss in • Tax and liability considerations one sense: You decide what jobs to take and who to deal with . However, in practice, every client or customer is, in effect, your boss . When you’re doing freelance work for Are you ready to be a freelancer? someone, you must adapt to their style and needs . Your life circumstances may make starting a freelancing For example, some clients may want constant updates, business the perfect path for you . If you find yourself in staggered deadlines, and a specific method imple - the position of being laid off from an employer, reenter- mented for their project . Others may simply convey the ing the work force, or the needing to work more flexible end-result desired, give you a flexible due date, and give hours, freelancing can be a perfect choice . you free rein . You must be adaptable and give the clients Many of the traits that freelancers need to succeed are what they want . When you are an employee, you usually fairly obvious — self-starters, organized, motivated, get your work from a select few individuals or businesses, creative and flexible . You should ask yourself if you’re and most likely develop a rapport over time . Most free - able to avoid distractions and procrastination, and meet lancers deal directly with different clients and different deadlines without a boss standing over you . expectations . Being good at budgeting is a very important asset as In an ideal world, you would only work with the clients or well, because the nature of freelancing is such that often customers that best fit your style and needs . Most new you don’t have a steady stream of income coming in . freelancers are likely to be stuck with less than ideal work . Much of freelancing is done on a project- or as-needed Once you get your freelancing business up and running, basis, and work may only be available intermittently, it will be easier to be choosy with the work you take on . especially when you’re starting your business . Some work But at least until then, you will likely have to be a bit of a is seasonal, further making it likely that there will be times chameleon, to satisfy your freelancing clients . when little to no money is coming in . – 4 –design of a new home, it’s still work that has a beginning Choosing the right freelancing business and end . Whether you get paid by the hour or by the When starting a freelance business, the list of possi- project, it’s still freelancing if you decide what service or bilities is practically endless . Do you have a specialized item you are going to provide, you control how you will skill you have performed for an employer, such being a provide this service or item, what price you’re going to seamstress or tailor, paralegal, human resources profes- get paid, and how you’re going to get paid . sional, builder, or technical writer? If you don’t want to Tip: Beware of freelance, get-rich-quick scams or freelance be an employee and have always wanted to own your businesses that require you to make large purchases of own business, working as a freelancer in a field where you instructional materials or inventory to get started . Just have a proven track record might be an option . use common sense and investigate any potential work As when starting any new business, you should consider opportunities before you part with any money . Every whether there is a demand for freelancers in your chosen business opportunity, freelancing or not, requires careful expertise or whether the field is already crowded . Having investigation . already worked in the field, you should be able to find this out . Also, make sure to obtain the proper credentials and/or licensing requirements . Freelancing full or part-time — For example, say you have worked in a law firm under Should you quit your day job? the formal title of administrative assistant, but in reality Even in times of economic boom when jobs are plentiful, have standard legal forms or client intake sheets on you need to think carefully about the implications of a regular basis . If you would like to run a freelance leaving your full-time day job to pursue full-time freelanc- paralegal business, you should seriously consider taking ing . Unless you’re in a position of independent wealth, it a paralegal course so that you can combine your experi- can be risky . ence with the proper credentials . (Just be sure to check out the provider of the course to make sure it is properly One of the advantages of freelancing is that you get the credentialed .) chance to get your feet wet rather than just jumping in all the way . So starting your freelance business part-time Freelancers without special credentials or experience can allows you to keep the perks of your current job, such as have very successful businesses if they lfi l a niche that hasn’t health insurance benefits, until you’re ready to go at it been lfi led . One great example of this type of freelance full-time . work is running errands for people . This may sound simple, but with some people skills and very little equipment, this Let’s say your current full-time job is just fine and you type of business can be a successful freelancing one . The enjoy the security of a steady paycheck and benefits . point is that freelance businesses are a great t fi for many But maybe you need some extra income for a child’s types of work — some not readily apparent . college tuition, or your salary is not keeping pace with your expenses . Maybe you love what you do, but it Freelance businesses are typically those that can be done just doesn’t pay very well . This is a perfect situation for on a project or contract basis . Whether the project been a freelance business, because you can take on just the doing paralegal-like tasks such as preparing is picking up work you need to solve the problem . the items needed for a dinner party or an architectural – 5 –For example, consider a brand-new high school teacher For example, let’s say you want to leave your day job who loves his full-time job teaching science to ninth- and to turn your love of animals into a full-time freelance graders . However, he has student loans to pay off, not to pet walking service . You live in a big city with prospec - mention all his other living expenses . A great part-time tive clients that work long hours and are concentrated in freelancing business in this case would be tutoring . many of the large high rise buildings in your neighbor- This teacher’s school system requires all public school hood . It would be pretty impossible for you to start your children in various grades to take and pass a state-wide freelance business if you couldn’t walk any pets during science exam, and he would be able to tutor after school the day . So, you would have to either quit your day job or on weekends . or adjust your business plan . As one option, you could start a pet walking business for neighbors traveling out Sometimes starting a part-time freelance business is of town on weekends, so you wouldn’t have to give up borne out of a passion that isn’t being fulfilled by a day your regular job . job . In this case, a part-time freelancing business can fill that void . A classic example of this is a sax player who In some cases, you may not be able to work part-time works as an engineer full-time, but misses making music . at freelancing if work rules or a contract forbid you from He decides to start a part-time freelancing business working at any other job while you are an employee for playing saxophone at various dinner spots in his area . someone else . These types of prohibitions usually apply His prices are reasonable and he finds himself booked to doing the same type of work, but can apply to unrelated almost every Friday and Saturday night at various restau- fields as well . If you are employed as an accountant, resist rants . Besides the extra income, he feels much more the urge to start your freelance tax return business on personally fulfilled . company time (even if it’s your lunch or other break) . You risk breaking workplace rules or a contract, as well On the other hand, it is not always possible to start a as covenants not to compete . In addition, anything you freelance business part-time while continuing to work a produce during work hours technically belongs to your day job . Maybe your current job takes up too much of employer, and that could cause legal problems . And your time when coupled with the rest of your responsi- most importantly, your employer will not be very happy bilities . If you’re working in an accounting office and you with you . average ten-hour days, and then coach your daughter’s swim team three evenings a week, it’s going to be tough What ever option you choose, be sure to plan well . Make for you to start a freelancing business and give the proper a personal and work budget for the year, to make sure attention to these other duties . Also, if your potential you can afford to give it your best shot . Be prepared with freelance business has work that needs to be done at the savings and contingency plans . Because once you do same time as your full-time job, then it’s pretty certain a leave that day job, you won’t be able to go back to it . try-out period won’t be possible . And that could be a very good thing or a very bad thing . – 6 –mostly at clients’ homes or premises . In addition, many Obtaining professional licensing, freelancers are soloists without employees, particularly at accreditation and training first, so this makes a home-based business more likely . If running your business out of your home is an option, Freelancing businesses encompass so many different you will want to check out our discussion of Home-Based types of fields, and some are certain to require profes - Businesses . sional licensing, certificates or special training . Just because you are “only” freelancing, don’t make the The decision to move your business to a separate facility, mistake of thinking you don’t need the proper creden- whether leased or purchased, is a big one . This is a big tials, especially if required by law . upfront expense . And most new small businesses are not very profitable in the first year or so . So you will need to For example, some states require paralegals to be budget carefully for this expense . If you have the clients licensed if they are working on their own and not under and customers already lined up, then it might be a wise an attorney’s supervision . Or if you want to cut hair out move . Otherwise, you may want to start more slowly, and of your home, you may no be able to do so unless you freelancing certainly allows that . are properly licensed . More and more, state and local governments are requiring the licensing of certain activi- If you are considering whether to lease or buy space for ties . And most localities require a business license of running your business, the monthly rent or mortgage is some kind . And don’t forget zoning issues — if you work only one consideration . You also have location, location, out of your home there may be restrictions on what you location, as they say in the real estate business . Do you can do . need to be in a certain area to successfully conduct business, or will any old place do? Then there are Just like when you are starting any new business, check insurance, taxes, accessibility, maintenance, employees, with trade industry groups and associations to find out safety and security, and a host of other issues in play . what you need to do to be in compliance . Also, speak Judge the importance of each of these issues for your with local authorities and ask about their requirements . unique freelancing business when making a decision on If there are restrictions, you’ll want to know about them choosing an outside facility . before you decide to go full-time with your freelancing business idea and quit your day job . Equipping the Business. These needs will mostly be determined by the type of freelance work you’re doing . But generally speaking, a good rule of thumb for starting Locating and equipping your any business is not to go all out when equipping it so you don’t get into a financial bind . freelancing business Still, you should invest what it takes to present a profes- When starting a freelancing business, just like any other sional image . And you need to produce a quality product business, you have to determine your space, facility and or provide a quality service . As a freelancer, you want all equipment needs . Do you need to rent or buy space to current clients and potential customers to recognize you run your business, or perhaps can you run it out of your as serious business person, and not someone who’s just home? And what kinds of equipment will you need to dabbling in a hobby . invest in? Rent, Buy or Home? For many freelance businesses, a laptop computer and some desk space is more than enough at first . Meanwhile, others may do their work – 7 –If you’re a freelancer offering professional services (for Securing the right insurance for your example, an attorney), you should have malpractice freelancing business insurance . If your freelance business involves handling clients’ finances, or if you’re working in people’s homes, Insurance for a freelance business is not much different then you should be bonded to cover accusations of than for any other business . What you do and where you embezzlement or theft . Also, it’s very likely that many do it will shape your insurance needs . However, some clients would be uncomfortable with hiring a freelancer insurance needs are universal to all new small businesses . for this type of work who isn’t bonded . It speaks to your Even though cost is often a huge obstacle when starting credibility . If your freelance business sells a product a business, don’t skip buying insurance because money you created or invented, product liability insurance is is tight . Money will be even tighter if you have a claim to something you should seriously consider . One product pay and no insurance to cover it . with a problem could result in claims or even litigation against you . Where you plan to run your business has a great impact on the insurance you need as does the type of business If your personal vehicle is used for business purposes, or you are running . A large majority of freelance businesses if you have a business vehicle, be sure to obtain insurance are run out of the business owner’s home . If this is the that covers business or commercial use, as well as any case, please see our discussion of insurance for home- liability your business incurs for transporting clients or based businesses . At a minimum, you will need to get their possessions . You don’t want to run into problems a rider on your homeowner’s coverage in order to cover when you file an insurance claim for the valuable, large business activities . If you need to lease or buy space to outdoor marble statute repaired for a customer that run your freelance business, you must be sure that you later fell out of the back of your pick-up and smashed to obtain adequate insurance to cover your business, any pieces . If you don’t specifically have business coverage equipment or products, as well as liability for clients, for the vehicle, your claim will be denied . customers or suppliers, if applicable to your business . Good sources for insurance information are your trade, Business interruption insurance is also a necessity, partic- industry, or professional organizations and associations, ularly if you don’t have disability insurance and/or your as well as your current insurance agent . Information to fit income is the sole means of support for you and others . your insurance needs can also be found at the nonprofit website for freelancers wwwfr . eelancersunionor . g . – 8 –take more control over your time, as well as the type Finding employment benefits of work you want to do . But in this regard, freelancing for freelancers can be a double-edged sword . The same person who as an employee used every last hour of every vacation When you decide to start freelancing you may be day, stayed home when sick, and took advantage of any surprised at the different types of benefits you might leave the employer offered, may now find him- or herself have taken for granted in the past, particularly if you go working more than ever and never really taking time directly from being a full-time employee to owning a away from work . freelancing business . Don’t let this happen to you because it is not healthy . First and foremost on your list is likely to be health Part of the hard-working, self-starter personality that insurance . If you are a full-time freelancer, you likely will enabled you to strike out on your own may likely prevent not have health insurance through an employer . If you you from separating work from personal time . Since aren’t lucky enough to be covered through a spouse or your schedule as a freelancer is more flexible, make sure significant other, then you’ll have to get health insurance to include some planned time-off . Also, if you’re ill, let on your own . Contacting your insurance agent is a yourself “take off from work” unless it absolutely can’t good idea, but so is getting information from a trade or be avoided . industry association in your field . If the industry includes many freelancers, the association will have helpful infor- Again this can be tough to do, especially since your time mation and can assist in connecting you with insurers . off is not paid, as it was when you were an employee . The same is true for dental insurance, life insurance and But unless one of your goals for being a freelancer disability insurance that employees often obtain from included working all the time, take advantage of your their employer . new flexibility . As you start your business, you should include a plan for your retirement savings . While this can be tough when funds are tight, you must have the self-discipline to be Selecting an organizational form for proactive when it comes to retirement planning . And your freelancing business business owners have a number of available vehicles they can use to save for retirement . For example, if you had The vast majority of people starting freelance businesses automatic deductions made for a 401k by an employer, may assume that operating their business as a sole try to continue doing this in the new plan you set up . proprietorship is their best, or perhaps their only, option . Even if the amount you contribute has to be lower, This simply is not always true, on both counts . do your best to contribute what you can . Consult with your financial advisor and/or accountant and reassess As when starting any business, you should make an entity your situation regularly . You can also access informa - form choice based the needs of your particular business . tion regarding retirement benefits for freelancers at the Liability implications and taxes are two factors that play a nonprofit site wwwfr . eelancersunionor . g . large role in which form you choose to start your business . Time-off benefits are another story . Most employees The primary way to protect yourself from liability is to covet time off, and to many workers it can be more formally organize your business with state authorities . By important than monetary rewards . In fact, chances are choosing an organizational form — such as a corpora- excellent that you’re one of these people: One of the tion, a limited liability company (LLC), a formal partner- reasons you’ve likely started a freelancer business is to ship, or an S corporation — you are formally designat- – 9 –business is its own separate entity, separate from its Payroll taxes. When you start a freelancing business, you owners . That means the owners enjoy limited liability in are now among the ranks of the self-employed . In eyes operating the business, and can only be held liable for of others, you will likely fulfill the criteria for being treated the amount invested in the business . All personal assets as an independent contractor based on the Fair Labor are safely protected from the creditors of the business . Standards Act and the Internal Revenue Code . This carries with it some unusual tax burdens . You are certainly not required to do this before you start a freelancing business; you can do it later once the As both employer and employee, you are responsible for business is more established and looks to be on its way paying both sides of the payroll tax . For every dollar an to success . But as they say: You can’t put the genie back employee pays in FICA taxes, the employer has to pay in the bottle . If your business were to face a lawsuit while the same amount . So that means your FICA payments to operating as a sole proprietor or simple partnership the government will be twice what they were when you without limited liability protections, you can’t mitigate were just an employee . But at least the government lets the risk It’ . s too late . you deduct the employer part as an expense when filing your tax returns . As for income taxes, your entity choice will dictate the rules you must follow . Corporations and LLCs file their Of course, if you have employees, you will have addi- own returns, but corporations pay their own taxes, while tional payroll tax responsibilities like any business owner . LLCs’ profits are taxed on their owners’ personal tax Unless you use independent contractors yourself—then returns . Each has different legal requirements for staying they will have to file self-employment taxes as both in good standing under the law . Sole proprietorships and employer and employee . simple partnerships have no such formal requirements Income taxes. Your income tax obligations are deter- and the business’s profit and loss are determined on the mined by the type of organizational form in which you owners’ personal tax returns . operate your business . Sole proprietorships and simple The process of registering your business as an entity partnerships require no special tax filings . All income and with the state is not an expensive process, but its can expenses are accounted for on the owner’s Form 1040 . be valuable in the liability and tax savings it can provide . Some formal entity types — such as S corporations and limited liability companies (LLCs) — are considered pass- through entities, meaning that the business’s income passes through to the owners and is taxed on their Filing and paying taxes for your returns . Corporations, on the other hand, file their own freelancing business extensive tax returns and are subject to their own set of tax laws and tax brackets . Generally speaking, you will spend most of your tax compliance efforts on payroll and income taxes . Sales Quarterly filing. The federal government doesn’t want to taxes may be an issue if you are selling items at retail, wait until the end of the year to get your taxes owned, and excise taxes may affect some industries . But most of so it requires the quarterly filing of these taxes . These your time will be spent on payroll and incomes tax filing, estimated tax filings cannot be avoided, and if you try which must be done quarterly throughout the year . you will be hit with penalties and interest, even if you pay in full at year’s end . So you will need to stay on top of these quarterly deadlines . – 10 –Special Considerations for Running a Freelance Business You’ve gotten through the startup phase and your Networking and getting work freelance business is up and running . Like any small With the advent of digital technology and high-speed business owner, you will find many challenges and Internet, the opportunities for freelancing have grown rewards in running your own business . As a freelancer, tremendously . Just a few years ago, freelancers were though, running your business involves some special limited by contacts and the availability of work in their situations you will need to handle . general geographical area . Nothing could be further from the truth today . • Networking and getting work When looking for new work, start with the people you • Competing with a former or current employer worked for (or still do) . If you are on good terms, they • Charging for your work are still your best bet for referrals because they not only know your work, but they also know you . • Dealing with work distractions In addition, now freelancers can go on websites like www . • Setting boundaries for work vs . personal time . mingspring . com, www . elance . com or www . ifreelance . com, and post their services as a provider or bid on work that • Building your savings and other contingency plans they would like to do as a freelancer . But whoever you • Freelancers should keep up on new developments, choose to work with, do your homework because there credentials, licensing and continuing education are risks in doing business blindly . You need to scrutinize any site or potential client just as you would any business or person you’re going to work with . Your particular line of work may also have a trade or industry association that would be a good source of contacts . You can check out chamber of commerce groups that usually have events you can attend . Also, you can join lead clubs that get your name out there . Just like running any small business, running a freelance business requires pretty aggressive networking, particu- larly in the most competitive fields . – 11 –ally, they know you love dogs and they don’t have to hunt Competing with a former or down someone to fill this need because you make it easy current employer for them . This type of example can be applied to any number of situations . The people who know you best are When freelancing, you may end up competing with a great potential customers, no matter your field of work . current or former employer . This can lead to a host of unusual situations . In some situations, the demand is What if you’re still employed but working part-time as a so plentiful and varied that there’s enough work for freelancer? First, you need to make sure there are no rules everyone . Where this isn’t the case, you may want to against it . It’s better if you are freelancing in a field that consider viewing the situation as a mutually beneficial is different from your employer, to avoid conflicts . Also, relationship, instead of a competition . don’t let your freelance work affect the work product for your employer . If you can keep all this separate, you’ll be For example, if you were employed as an event planner better off for it . for a large company, you might want to form an alliance with your former employer where you take on affairs If you’re running a freelance business in the same field that the company deems too small for its organiza- that you’re employed, there are some potential traps to tion . Freelancing for your old company is a huge source avoid . First of all, you must be sure you aren’t violating a of work for many former employees, and this is one of non-compete agreement . You also should not be doing the strongest reasons that you don’t want to leave your your freelance work on your employer’s time — not only employer on bad terms . Yes, you might take work away is this unethical, but technically anything you produce or from your former employer because you can charge less create on company time could be deemed the employ- or a prospective customer likes you personally, but you’ll er’s work product and not belonging to you . want to tread carefully here because you’re in this for the long haul . Things get even more complicated if you use inside knowledge to underbid or sneak your way into freelance Even if your freelancing business has nothing to with work . If part of your job includes bidding on projects, you the work you were doing for your employer, network- should not use that information to your advantage as a ing and getting work from your former company is still a freelancer . Not only could these actions get you fired great source if the lines of communication are open . For for cause (translation, no unemployment compensation example, let’s say you worked for the aforementioned and no severance), but your name and reputation will be company as an event planner, but intensely disliked the sullied, making it tough to run your freelance business . long and crazy hours . So you decide to take your love of Instead, take the approach of bidding on work only after dogs and start your own freelance dog daycare/sitting your employer passes on it . Or think about an arrange - business . You know that your former colleagues at the ment where you terminate the employer/employee company work long, crazy hours since you worked there relationship and instead work for your former employer too . Many of them feel terrible about leaving their dogs as a freelancer . alone so much . What better source of business than your former colleagues and/or bosses? They know you person- – 12 –can have their rates frozen for some period of time if they Charging for your work sign up for projects now . Also, referring a friend will get How and what you are paid for your freelance work is based the friend a discount of some sort too . This allows you to largely on the e fi ld you are in and business custom . If you keep pace with the economy as well as the competitive have experience in your chosen e fi ld, you likely have an going rate for your type of freelance work, while increasing idea of what the going rate is . If you’re new to your free- goodwill with your client base . lancing e fi ld, you should investigate the market and obtain Be sure to stay abreast of emerging trends, so you can information as to what others are charging for the type of stay on top of your pricing issues . Always do competi- freelance work you are doing . tive research to see what others are doing . Also, you will In some instances, geography will inu fl ence what you are probably n fi d that as you gain more and more experience paid, especially if you can only do the work locally . In other freelancing in your e fi ld, that experience will enable you to cases, location or geography isn’t an issue, so it doesn’t work smarter rather than longer and you can charge more affect pricing . If you live in a relatively low-cost area of the for that experience . country and don’t have a lot of overhead, you may be able After you g fi ure out what to charge, how do you get paid? to charge less than someone working out of their home in Depending on your industry, it may be customary to be paid California with a jumbo mortgage and a very high cost of either at the end of a project or by the hour . So you’ll have to living . You also may decide that you have something extra follow traditional practices . Some work involves expenses worth paying for and that entitles you to charge more than paid by the customer, and depending on the custom in the regular going rate . For example, you may be an attorney your e fi ld, these costs may be covered upfront, in stages, or with a ten-year background with the IRS who provides tax at the end of the project when the work is completed . consulting services . Your freelance business is focused on clients with complex tax issues, and you feel they will pay If there are no customary practices, you are in the unique extra for the experience you bring to the table . position of simply dictating or negotiating the terms with your clients or customers . This e fl xibility will allow you deal When setting a price, do your best not to charge too much with situations on a case-by-cased basis . Although, it is so you end up with no work, but don’t sell yourself short probably a good idea to have some standard practices to and charge too little just to get the client’s business . If follow . You don’t want to gain a reputation for irregularity in you charge too little, then rather than the client feeling it’s your pricing and billing . a bargain, he or she may be reminded of the old adage “You get what you pay for . ” It may leave the impression To protect all parties, contracts should be signed for all work that your work is not high quality . Den fi itely not the impres - agreements . While informalities may be more prevalent, sion you want your freelance business to convey Also, you you don’t want to get into the situation where a client or may resent not being paid what you’re worth, and you may customer feels they can negotiate payment with you or, not give it your best effort . Being successful as a freelancer worse yet, not pay you because there has been a miscom- requires knowing what you’re worth . And while you can be munication or you’re not taken as seriously . Freelancing is e fl xible, don’t be a sucker either . Remember, a freelance your business and a contract that spells out the terms of business is still a business . your arrangement may seem formal, but can be a useful tool formalizing the transaction as well as due dates and What you charge clients or customers for your work can costs, etc . Make sure that any contract you draft doesn’t also turn into a marketing opportunity . Let’s say you have put you at a disadvantage . You may want to work with a a planned price increase coming up . You can send out professional advisor in your industry or an attorney to get notices that rates are going up, but that existing customers the language right . – 13 –One of the biggest issues freelancers face is trouble collect- Billing and collection also can affect your cash o fl w, so you’ll ing payment for their work . It appears that when money want to manage these accounts carefully . Keep a watch out is tight, freelancers, particularly those with more liberal for trends that may affect your future cash o fl w . If your clients arrangements with customers or clients, are the last to get have always been quick to pay and lately many of them are paid, if they get paid at all . If you have a valid contract, you slower to pay, this may be a sign of trouble in the economy . can at least threaten to take things to the next level — legal For example, if you are a pet sitter that has had steady action — if you don’t receive payment . Now, it may not be business for a couple of years from clients frequently economically feasible for you to take legal action, but at traveling for business, you may be affected quite adversely least with a contract you have the option . Penalties for late if your clients’ businesses cut back on travel for economic payments are also good incentives for clients or customers reasons . They will no longer need your services nearly as to make timely payments . often . But if you didn’t anticipate this, and you just bought a You can avoid a lump-sum payment problem by requiring new car with expensive monthly payments, you could be in payments in increments, so that if payment is late or not n fi ancial trouble without back-up funds . made, you can stop the work . This would mitigate your So plan for the ups and downs of cash o fl w associated with damages as well as provide an incentive to the client or freelancing and try to avoid putting yourself in situations customer to make payment so the work can be completed . that can suddenly overwhelm you and your business . In the end, let experience be your guide . If you’re running your business with little to no real problems in this area, you’re probably doing something right . If instead you feel like you’re you have to badger or harangue clients and Dealing with distractions and customers to pay you on time or at all, it’s time to reexamine establishing boundaries who you’re accepting work from, how much you charge, the method you use to set up work and collect payment, or any As a freelancer, you may find that you can work at home, combination of the three . in the park with your laptop, or in the evening or on weekends . This flexibility is probably one of things that attracted you to freelancing in the first place . But this flexibility may cause friends, family, and neighbors to not Savings for the slow times take your work seriously . One situation common to the freelancing business is While freelancing has become much more of the norm uneven cash o fl w . While this can obviously be a problem over the years, you’re still going to have to deal with with any small business, particularly a seasonal one, free- people who don’t understand your work flows . They lancers often engage in long-term projects . This type of may try to get you to skip working when they are not work often includes an advance payment for a project working—after all, you can make your own hours . What due months later . If a couple projects stack up and you you have to explain is that while they’re working you have don’t carefully spread out the money, you may face cash been off, and vice-versa . If the explanations don’t seem o fl w gaps that could make it difc fi ult to later complete the sink in, you will have to adjust your work life to avoid projects you must deliver . these distractions as best as possible . This should get the message across soon enough . In addition, you may face the opposite problem at times— too little business coming in . Because of the ebb and o fl w nature of freelance work, you will need to have savings or back-up funds to bridge the gap, until the cash starts o fl wing again . – 14 –Even worse than dealing with distractions from those Keeping up on credentials, licensing that don’t take your work seriously is dealing with people and continuing education who feel that because you’re freelancing your work is somehow less valuable or “free” . For example, the type Running a freelance business keeps you very busy . But of friend who would have never walked into your employ- despite the demands on your time, it is important that you er’s workplace during busy tax season and asked you to keep up with new developments, credentials, licensing take care of her college daughter’s “simple” tax return, and continuing education in your particular field . but thinks nothing of asking you to do the same during For example, you may need to take a certain amount tax season now that you have a freelance tax return of credits to keep your CPA license up to date . Or you business . Don’t get caught in this trap . If your friend’s wife maybe you need to check that the dogs you walk together is the president of a large company whose business you have received a new vaccine for a recent outbreak in are pursuing, you may want to consider it . But be sure your area . Or maybe the latest fashions demand that you to explain what you normally charge, even it’s a simple should start designing more strapless wedding dresses . tax return and that you are doing it as a favor . If there’s Effectively running your business requires keeping up nothing in it for you, explain to your friend that you can’t with all the latest trends and all the legal requirements . spare a minute because a tax return business is seasonal . This is your livelihood and you need to complete the work Obviously, legally required compliance measures should of paying clients . Real friends will understand and may even come first (licenses and the like), but particularly in some be a bit embarrassed that they asked . fields, like fashion for example, trends can be just as important . You want to show that, as a freelancer, you Moreover, as the owner of a freelanced business, when are on the cutting edge . Freelancing or industry associa - you are working you are usually never off the clock . At tions, seminars and trade shows can help to keep you any time during your “free time,” you may have to drop up to date . This can be an advantage for your business everything and take on some work for your business . against your bigger corporate competitors . Large Even if it’s just some calls or emails, you need to be ready companies have a harder time changing directions . So to interrupt what you are doing to take care of business . use your nimbleness for change to your advantage . On the other hand, you can go like that 24/7 for 365 days In many cases, continuing education in your field can a year . When it’s time to take a vacation, be on vacation be accomplished online . But when time and finances if at all possible and avoid tending to business . You need allow, you may want to consider attending conferences to refresh and replenish if you are going to be effective and classes in person . These types of gatherings can be when you are back on the job . If you worked on projects vital for networking purposes, socializing and interacting around the clock in the winter because you enjoy having with other business people in your specific field, whether most of the summer off, you are entitled to do just that . freelancers or not . Being serious about maintaining your Don’t shortchange yourself in the very important parts of qualifications sends a message to others who may end your life because you are a freelancer and are supposed up recommending you for work . There’s also the added to be flexible . bonus of avoiding isolation, if your freelance work doesn’t call for much interaction with peers . – 15 –Special Considerations for Growing a Freelance Business All small business share common duties, necessary to But whatever your scenario, there comes a point where growing the business . But freelancing businesses have you will want to consider going full-time with your free- some unique situations you may have to address . You will lancing operation . If your business is home-based, this need to consider these options: may or may not require moving out of your house . If you need more space, or will be bringing on a number of • Going full-time with your freelancing business — is it employees, operating your business out of your home time to quit your day job or move out of the house? may not be feasible . You will have to deal with all the various issues every small business owner must handle • Do you need employees or subcontractors? when finding, equipping and running a separate facility . • Does your growing freelance business need to And it is a big step . On the other hand, if you are just form as a new type of entity, to handle the new going to be doing the same thing you’ve always done, challenges? just doing more of it full-time, you may not need to move out . When that point comes, only your head and your heart Going full-time with your will know for sure . It is not the same point for everyone . freelancing business Just be realistic . Let’s say you’ve been running your freelance business for two years . Despite giving it your Up to this point, you may have tested the waters by best shot, it doesn’t seem to be growing . So don’t assume starting and running your freelancing business on a that by going full-time everything will improve . Now, you part-time basis . Maybe you were unsure of your big don’t have to abandon your dream . Keep refining your idea’s successful startup . Or maybe you’ve been the business operations part-time and keep working toward sole means of support for yourself and others, and you that full-time goal . wanted to keep your full-time position and build up a financial reserve before you took such a big step . Or On the other hand, many people start and run perhaps you have anticipated a life change — an elderly freelance businesses never intending them to be full- parent coming to live with you or a spouse retiring . One time . Maybe you like your full-time job, or only want to means you may need to work from home more, and the work part-time . Whatever the case, this doesn’t mean other could mean you are ready for more flexible hours your business is any less successful than the one that to accommodate your spouse’s traveling desires . These grows to full-time . In fact, the opposite is true . As long are all valid reasons for starting part-time . as your business is giving you what you want, then it’s as successful as it can be . – 16 –members of her needlepoint club who could use some Hiring employees and subcontractors extra money for the holidays and hires three of them for your freelancing business as subcontractors to cut out the stockings, stitch them together and needlepoint the basic signature border Most freelance businesses are started and run by one design . When Merry receives the stockings from her person . As they grow, many of these businesses stay subcontractors, she inspects them for quality and then solo businesses . But some freelancers may find that adds the custom work for each stocking as ordered . they simply can’t handle the added workload alone . Or Merry is able to fill all the orders she receives and has maybe you have a seasonal business and your busy times started thinking about hiring even more subcontractors are really busy . You don’t want to run the risk of turning for next year . away work . In this situation, employees or subcontractors are an option . You, too, may find that some steps in the work process can be subcontracted without jeopardizing the quality or If you go this route, you’ll want to make sure that you individuality of your work or product . As a matter of fact, have good quality control in place . Make sure that your freeing yourself from some of the more routine or repeti- workers are not damaging the fine reputation you’ve tive tasks of your work can make it possible for you to worked so hard to build . If you establish the right rules produce an even better service or product for your clients and processes, you’ll minimize your risks . or customers . Subcontractors often are a better fit for For example, Merry is running a freelance heirloom most freelance business owners . Independent contrac - Christmas stocking business . She creates custom tors don’t require all the paperwork, procedures and Christmas stockings from scratch — cutting out the tax filings that must be followed when hiring traditional pattern from fabric, creating the border, adding her employees . Many freelancers choose to be in business signature folk materials and then finally using her consid - for themselves, not for employees . And subcontractors erable needlepoint skills to customize the look per are independent contractors, who are often flexible free - customer request . She started out small a couple of years lancers themselves So subcontractors are likely to share ago, but when a local paper did a piece on her work, your similar tendencies . including her impressive artistic background, people For other freelance business owners, hiring traditional clipped the article, went to her website and forwarded employees may make sense . The business might be information about her and her stockings to friends and growing so rapidly that it is time for a larger facility with relatives around the country . more workers and more equipment . To keep quality By October, she already has double the amount of orders control, you might want to contain your operations all in as last year, and people can place orders until November one place, to keep a close eye on all the various moving 20 for Christmas delivery . Merry is already overwhelmed, parts in the business . You can still choose to use indepen - but doesn’t want to disappoint anyone or tarnish her dent contractors, but if you are exhibiting control over business reputation . Also the income would help with the workers’ output, you may not legally be allowed to her family’s tight financial situation, since her husband’s do so . You may be required to hire traditional employees . construction work has been very slow . Merry decides to Of course, you may just need to accept less work . Some subcontract the time-consuming parts of her work that freelancers feel that growing the business beyond their don’t require her individual touch . She contacts some personal output is not what they want out of a freelance – 17 –business . Maybe you worked as an employee until Reviewing the entity choice for your age 50, and now only want to run a freelance business freelancing business part-time and be semi-retired . Again, this is an individ- ual decision shaped by many factors, including finances, As you grow your business, you should take a second the type of work involved, family commitments and time look at the organizational form in which you operate of life . your business . When growing your business, you may find that you need Many freelancers may start off as sole proprietorships . assistance in areas outside of your expertise . Sometimes But as your business grows and changes, your protec- bartering with another freelancer can be the solution . For tion needs for the business changes as well . For tax and example, once Merry was featured in a national needle- liability reasons, as well as for ownership and succes- point publication, the inadequacy of her website became sion reasons, you might need to change your entity to quite apparent . She needed a website that could really a limited liability company or corporation . Each of the showcase her product to market it to those who couldn’t different types of entities has advantages and disadvan- see it in person . Merry met Wally from Wally’s Website tages, and you’ll want to consider how they affect your Designs at several Chamber of Commerce meetings, growing freelance business and your goals for it . It is not learning his wife and mother were big fans of both difficult to transition from one entity type to another . You needlepoint and Christmas decorations . Merry contacted just need to file the right paperwork with state authori - Wally . In exchange for custom Christmas stockings for his ties . And you might need to notify the IRS about the mother and wife, Wally created a new website for Merry change in your tax status . that truly made her product and its uniqueness sparkle . You can do this yourself, through the services of a lawyer or accountant, or by using a third-party serviced that specializes in these business filings . You always want to protect yourself and the freelance business you worked so hard to build – 18 –