The Freelancer’s Starter Kit: Pt. I

The Essentials

This month marks exactly two years since I launched my full-time freelance career and since then, I’ve learned a lot about the world of freelancing. I’ve learned how to cultivate creativity, what types of clients I partner well with, and what daily habits help me do my best work. But perhaps more importantly, I’ve also learned a few golden lessons—a short but powerful list of must-knows that are true for freelancers no matter what skills you’re offering or what industry you serve. Together, this little list forms what I call the Freelancer’s Starter Kit.  

1.     Set a Financial Goal

Many of the freelancers I consult set their financial goals backwards. They start with the number they feel comfortable charging by the hour, and then hope they get enough billable hours to cover costs for the year. But that approach is risky and makes it hard to really know how you’re doing financially at any point. Typically, this way of figuring leaves out essential items like health insurance and retirement planning which means that for every hour of work, these freelancers take a hit. A more accurate way to look at your financial goals is to start with the big picture.   

It felt scary at first to hold myself to a financial goal, but I needed an income and I needed a measuring stick to know if my business was succeeding or failing. So I took a few minutes to figure out how much money I needed to make to earn a comfortable living—I added add up my bills and spending, insurance costs, and how much I wanted to put aside for savings and retirement. As a reference, I looked at my income from my previous corporate job which was in the same industry. Once I had a number, I broke it down into a quarterly goal and an hourly wage.

Of course, as many freelancers know, not all projects pay by the hour. Some are flat rate. And if you’re like me, it’s easy to pour way more hours into those projects than they actually pay. In these cases, my hourly rate gives me a ballpark number of hours that I can plan to give to these projects. It goes without saying that I work until the task is completed at the level of quality that I’ve promised. But generally speaking, it’s smart to keep to the number of hours covered by the flat rate. Thinking about flat rate projects in terms of your hourly rate makes it clear up front if a project is worth really worth your time and effort.   

2.     Estimated Taxes

Speaking of financial goals, it’s a must to sit down and figure out estimated taxes. This piece of advice came to me very early on from Stephanie Smith. I knew there was “something about taxes” that I needed to learn but Stephanie gave me the boost I needed to master it. Estimated taxes are required for anyone who receives an income that does not withhold taxes—meaning us freelancers. For everyone else, this tax is taken out of their paycheck. If you don’t pay income tax throughout the year, you’ll get hit with a big fat tax bill at the end of the year, with penalties, and that’s no fun. But the good news is estimated taxes aren’t too hard to learn—there is a lot of information online along with video tutorials and the tax forms themselves are self-explanatory. You can submit tax payments online or mail a check if you prefer to stay old school. Don’t put it off: schedule a day to learn about estimated taxes and organize all the paperwork you’ll need for the year. Your future self will thank you.

This article offers links to some helpful tools or go straight to the source.

3.     Get Organized with a Project Pipeline

Disorganization always leads to a loss of business, which always leads to a loss of income. There are a lot of details to running a one-person business—projects, clients, deadlines, invoice tracking, following up on pitches, recording expenses, managing the previously mentioned taxes,… An easy-to-use organizational tool is key to getting and staying in business. Luckily, there are a lot of options out there—from trusty excel spreadsheets and Google sheets, to a host of software tools. The key is to find—or create—a tool that fits within your budget, many of the better software tools come at a price, and that you’ll actually use every day. Whether you like project management or not, you’ll be spending a decent amount of time doing it. Better to find one that’s at least efficient to use, if not enjoyable. 

 In the same vein, you will need to set up an invoicing system. Some project management tools include the option to create, send, track invoices, and receive payments. If you have a small business and the knack for creating aesthetic and professional documents, then you might choose to handle this manually. I’ve added small print to my invoices throughout the years and I encourage any freelancer starting out to decide early on how soon you’ll follow up on outstanding invoices, how you will apply late fees, and how you’ll communicate this information to your client.

Here’s a current list of the best project management software tools.

These three must-knows will help you start your freelance business on the right foot. But there’s more to the Freelancer’s Starter Kit. Check in soon to learn a simple strategy for growing a sustainable, profitable business.

And if you have a tip or piece of advice you would add to the Freelancers’ Starter Kit, share it in the comments below. I’d love to learn with you and add it to the list.   

Photo Credit: Jens Kreuter on Unsplash