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 will see 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 wherewithall to survive this period.
HOW DOES A
FREELANCER MAKE MONEY? You will only make money as a
freelancer if you charge more that 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 hadn'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).
About the Author 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
