Freelancing can be an incredible adventure, and a great way to start your entrepreneurial journey. That doesn’t mean, however, that it’s glamorous or easy.
Particularly when getting started, there’s a lot of trial and error that can be expensive and disappointing, even opening freelancers to legal liability. Since we’ve already learned these lessons the hard way, we want to share the six most important things that freelancers need to know (and likely don’t) when they’re getting started.
You need to market yourself
If you want people to hire you, you need to treat what you’re doing as a business. That means your goods or services are exactly that (goods and services for sale) and you need to market both them and yourself.
Building up a strong website and your social media are good places to start. They make it possible for you to showcase work you’ve done, go over services you offer, and provide a clear way for users to get in touch. LinkedIn can be particularly beneficial for freelancers, with plenty of potential clients looking for freelancers on the platform.
Make sure to clarify what you do and how you can help potential clients. Think about branding your niche in a way that enhances your unique selling proposition. If you’re worried about the cost of building a website or running marketing campaigns, remember that advertising costs count as business expenses.
The best clients aren’t always on freelance platforms
Freelancing platforms like Upwork are often the first stop for many freelancers looking to get started. In many cases, however, these sites are entirely oversaturated with competition, making it hard to stand out. There are also high fees involved that can eat into your profit. Get creative with how you find new clients, because the best ones won’t always be on those freelance platforms.
You’ll often get the most momentum if you start looking for leads yourself. Reach out to your network to see if anyone needs any work, or knows anyone who does. You can also write up personalized pitches to send to business owners or decision makers on LinkedIn.
Continued education is important
When the clients start coming in and the invoices get paid, it’s easy to feel like your biggest priority is getting more work and doing it right now. While that will always be important, you never want to be complacent with what you have.
Continued education is perhaps more important for freelancers than for anyone else, because we have to work a little harder to stay competitive. Adding even one or two certifications or completing a single course once a year allows you to stay knowledgeable in a visible way you can show to clients. If you aren’t sure where to get started, a simple Google search in your chosen profession can give you plenty of options.
You lose traditional benefits
Freelancers, by nature, are not employees. This means that they don’t get benefits of being an employee, including health insurance, sick leave and that incredible matched 401k.
This is not the end of the world; freelancers who have successful businesses enjoy a more flexible lifestyle and even have the potential to earn more than their traditionally employed counterparts. The loss of benefits hurts, though, and you need to be aware of it upfront before you make fast decisions.
You need to pay quarterly taxes
After your first year as a freelancer, you need to pay quarterly taxes. Our taxes don’t come out of every paycheck, and the IRS requires that you submit estimated taxes four times a year. This happens in April, June, September and January.
The easiest thing to do is set aside about 30 percent of what you’ve earned (depending on how much you’re earning), and then pay what you owe based on the quarter you had. You don’t want to pay late or not pay at all because the IRS can and will come for interest fees.
Taxes can be difficult to calculate as a freelancer. Save yourself some time and a lot of money by hiring a CPA that has experience with startups and small businesses. They’re often able to show you deductions that you’d otherwise miss, so they often pay for themselves.
Filing a business license is relatively easy (and beneficial)
Many freelancers could benefit from filing a business license. Depending on what you do, your state may or may not require it, and the advantages of the license may vary from state to state.
In general, however, a business license can offer the following benefits:
- Protecting your personal assets by keeping your business assets legally separate
- Offer credibility to what you’re doing
- Make it slightly easier to get an EIN and a bank account (though you can obtain both without a business license)
LLCs are easy to file for and maintain, so they’re a popular choice for freelancers. Some freelancers opt for other corporation statuses, including an LLC filing as an S-corp to be able to declare business and personal income and save taxes.
Different corporation statuses may even affect the tax rate you pay. Before you file, get in touch with your accountant so you can see what would benefit you and your business most.
It can clearly be challenging, but worthwhile, to establish your own freelancing business. Many freelancers love the work they do, and would never leave it for traditional employment even when presented the option. As long as you’re fully prepared and know what’s required of you up front, you’ll be able to hit the ground running and experience fewer obstacles along the way.