5 Tips for a Successful Freelancing Business

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Whether it’s a short-term fix or a long-term way to address your desire to work on your own, freelancing can offer great career and financial satisfaction.

Freelancing has come into growing favor as the economy keeps shifting more toward services, as corporations have sought to keep their own payrolls lean, and as up-and-coming small businesses have embraced outsourcing. More and more creative, professional and technical fields are now open to freelancing. Information technology makes freelancing more feasible than ever. And even the federal tax code has been giving freelancers more breaks lately.

If you do things right as a freelancer, you can enjoy many of the freedoms and rewards of being a solo entrepreneur without having to take the step of growing your company and creating jobs beyond your own position.

But there are challenges and risks aplenty in freelancing, some of which only become apparent once you’ve made the leap. Here are five tips for creating a successful freelancing business.

Maintain your focus

Freelancers say that the simplest way to maintain your focus is by reminding yourself that your financial and career fates are now solely in your hands; spouses and significant others can be helpful for such reminders as well. You’ll want to establish a solid book of business, enjoyable and reliable clients, and a significant backlog of work before turning off the afterburners for awhile and relishing your newly established independence.

“I know the work I’m doing now is important to me, and I’m the one in control and in charge and calling the shots – and for me, that’s what helps keep the focus and motivation going, so I can continue to do that,” says Thomas Ingrassia, a former higher-education administrator who became a freelance entertainment manager five years ago in Holden, Mass.

Expect to be lonely at first

Especially if you’re moving from an office, factory or store full of people into a home office, the shift in the nature of your daily exposure to other people can be jarring. Even if you’ve got family or roommates around you in your new setting, you’ll be conducting almost all of your business on the phone or online.

“It’s a shock, even if you’re expecting it,” says Ted Demopoulos, who has been freelancing as an IT consultant for 16 years in Durham, N.H. “You’re not working toward a common cause with others. You’ve got to realize that freelancing isn’t for everyone.”

Antidotes to this awareness include spending more time with people outside the work environment, networking with other freelancers who are experiencing the same isolation, and optimizing the advantages of working alone – think of all the time you’re not wasting around the water cooler.

Solve the cash-flow challenge

You’ll find out quickly that ensuring consistent cash flow is the biggest problem for most freelancers. You can’t rely on a regular paycheck to arrive like clockwork. Cash advances for assignments or projects are rare. Typically you’re working for days, weeks or months to produce an acceptable product, and only then does the client’s 30-, 60- or 90-day clock start ticking toward paying you.

There are ways to combat this vulnerability. You can ask some key or supportive clients for quick turnarounds on invoices, for example. Photographer Steve Kovich’s solution to this problem, when he began freelancing two decades ago, was to quickly work up a financial reserve so that the vagaries of short-term cash flow wouldn’t bother him or leave him working hand-to-mouth.

“I try to keep a six-month buffer,” says the 42-year-old, St. Petersburg, Fla.-based photographer, “and I put it in a CD account so at least it’s making a tiny bit of interest.”

Prioritize marketing

Many freelancers say the biggest surprise to them has been how much marketing is required to keep their enterprise afloat and advancing. Client lists continually shift, even for the best freelancers, because of changes at their clients and other factors out of their control. No matter how good your business is now, marketing and selling yourself to potential new clients should be an important part of your routine.

And make sure your marketing is smart and targeted, not scattershot. “I only go after companies that are within an hour of where I’m located, because in my business, having face time is important,” says Josh Feinberg, owner of Computer Consulting 101 in West Palm Beach, Fla.

Limit your exposure to major clients

We often say that your current customer is your best customer for a variety of reasons. However, a dilemma that eventually confronts most freelancers is how dependent to become on one or two large clients. When the relationship is humming and you’re fielding all the work you can from your biggest customer or two, the temptation can be amazingly great to make yourself essentially an outsourced arm of these cooperative clients.

But what happens when your key contact at the client unexpectedly leaves or is fired, or the customer’s business suddenly turns bad, or any manner of other ill fortune befalls your sugar daddy? Then, your dependence could quickly sink your freelancing business.

For this reason, many freelancers limit themselves to tying up no more than half, or maybe a slight majority, of their time and revenue potential with their largest client or two. “And what’s almost more important than that percentage,” says Demopoulos, “is that you have at least a few other big clients available to you. They don’t have to be ones that you’re necessarily doing a lot of work for right now, but maybe you have in the past or could in the future – if you need to turn to them because your biggest client disappears.”

Our Bottom Line

Freelancing is a growing trend – and it should be. The barriers are falling and the technologies available are greasing the skids for many a freelancing business entrepreneur. The key is recognizing that you don’t have to head into this form of entrepreneurship willy-nilly. Following these five guidelines can dramatically increase your chances of success in freelancing your skills.

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