So
You Want to Be a Freelancer
by
Elena Fawkner
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 willsee
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 wherewithal to survive this period.
HOW
DOES A FREELANCER MAKE MONEY?
You
will only make money as a freelancer if you charge more
than 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 had'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).
Elena
Fawkner is editor of A Home-Based Business Online ... practical
home business ideas, resources and strategies for the work-from-home
entrepreneur. http://www.ahbbo.com
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