There’s an ever-growing number of people getting into some sort of freelancing these days. Yet, many of them never see any real success. While there could be a lot of reasons for this, one major factor is that many simply aren’t prepared for what they’re about to do! That’s why I’ve put together this Ultimate Guide. It will comprehensively cover how to prepare for freelancing from all different angles. I want to make sure that you will not only start but also grow your business successfully. Let’s dive right in!
What Does A Freelancer Need Before Getting Started?
Alright, we’ve got a lot of ground to cover. But before we do, I’d like to give you one important heads-up right at the beginning:
This list might appear a little discouraging due to its sheer length. Please don’t let that stop you from pursuing your dream of freeing yourself from the shackles of your day job. The journey of starting your own business has already started. Everything on this list is just another piece of the puzzle, leading to your first independent income! Keep that in mind and you’re well on your way.
I have broken down this article into the 11 main areas you should address in your preparation stage. Over the years, I’ve perfected this process while building my own businesses. It’s the exact same blueprint I’m using for every new project.
By the way, you can also download the Smart Freelancer Checklist & Worksheet for free and print it. That way, you can use it to prepare your own freelance business at home.
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#1 Be Clear About Your Motivation
Let’s start with the foundation. The one thing most people underestimate when starting their own freelance business is the harmful power of obstacles. Although they are an inevitable part in every business endeavor, they can absolutely knock us out if we’re not prepared.
But how do you prepare for an obstacle you don’t know in advance? Well, the short answer is: You can’t! The longer answer is this:
You’ll always figure out a way how to overcome any obstacle you’ll be facing. The issue is not so much how you can find the right solution, but how you can stay motivated to keep searching until you find it.
How can you prepare for hitting unknown roadblocks?
At this point, it’s important to have a very clear reason why you’ve taken this step into freelancing in the first place. Here are some possible reasons to ignite your inspiration:
- Be the boss over your time and make your own schedule.
- Make more money and be responsible for your income.
- Be paid based on performance, not time.
- Discover a new field and challenge yourself.
Of course, there are many more reasons to start a business. Think about it carefully and ask yourself what it is that drives you. Why do you want to start freelancing? There’s no right or wrong answer, but everyone’s motivation will be different. Yours will keep your boat on track when storms hit the water.
Some interesting stories to guide you
Check out this awesome and heart-warming article by Mickey Gast over at HorkeyHandBook! She’s presents six different freelancers along with their individual stories. This will help you a lot in understanding the big picture. Every story is different, and everybody is starting from their very unique place. So do you!
#2 Learn And Improve Necessary Skills
Freelancers are a lot of things at the same time. They are service providers, accountants, strategists, marketers, customer relations managers, autodidacts, living time bombs and a lot more.
To me, this is the beauty of building my own business. There’s not a single day repeating itself. Every morning brings a new set of tasks and challenges. However, you still have to deal with all these things. Thus, here are a few tips how you can prepare yourself for being a full-blown freelancer.
Build specific niche-related skills
I’m constantly buying courses and books to broaden my skills, learn new ones or improve existing ones. This is one of the ways how I make sure to always stay ahead of my competitors.
One page I love for constant learning is CreativeLive. It’s a subscription-based course platform where you can watch as many courses as you want for a monthly fee. In my opinion, this monthly fee should be an ongoing business expense, alongside your necessary business tools.
$39/mo or $149/yr
CreativeLive offers a vast pool of courses on topics like photography, video, software, graphic design, branding, fashion design, business, and a lot more. I’d highly recommend you check them out and make constant learning part of your routine.
With that being said, you can be sure that you’ll constantly find areas to improve upon once you are freelancing. Every single job and project brings unique requirements. And many of these requirements will only reveal themselves during an ongoing project. There’s just no way to prepare for all of it.
At the end of the day, you must know what skills you need to learn in order to do great work. Don’t try to be perfect, just able to perform. And then go perform!
General freelancer skills
This group covers all the abilities every freelancer needs to acquire. Here are the main skills that apply to all businesses:
- Marketing (the art of getting clients)
- Developing ideas and strategies
The way how I approach educating myself in these areas is by constantly listening to audio books or reading books. I also love taking online courses dedicated to specific topics like social media marketing or how to develop my brand.
Audio books are especially valuable since you can make use of your commute time or waiting time and learn about anything you want. I use Amazon’s service Audible for this. You can grab a free audio book just for creating a trial account, and you should do that right now!
I know this sounds like a lot. When you try to prepare yourself for freelancing, there’s a huge mountain of invisible tasks right in front of you. That’s exactly why I created this article. Although there is a lot to learn, you don’t need to master everything in the beginning.
Follow the steps in this article and you’ll be perfectly prepared for your own freelance business career. Everything else can be improved upon in the process!
#3 Obtain The Right Mindset For Freelancing
When I talk to people and they ask me about what I do, I usually give them a short overview. It wouldn’t make any sense to go into detail with every single business that I run, so I might say something like this:
I’m a freelancer and entrepreneur. I run several businesses. My focus consistently shifts from one to another, depending on what I want to expand and what else is important to me at that point in my life.
How do you picture the reaction? Seriously, try to imagine how you’d expect people to respond to my description.
The reality is that most people don’t understand what I’m saying. And how could they? From their perspective, it doesn’t make any sense. Why?
- They think I don’t have job security.
- What about all those benefits an employer would offer me?
- Why would someone want to work all the time?
- “Yeah, maybe he can try it. He will learn his lesson soon.”
Of course, all these assumptions are nothing but a world view these people have adopted. Objectively, a lot is wrong with these assumptions. An entrepreneur’s or freelancer’s mindset differs tremendously from an employee’s mindset.
The good thing is that you can adopt a new mindset at will (with a little time and practice, though). Thus, let’s talk about freelancer mindset so you’ll be properly prepared for your own freelance business, even if you’ve only known the employee perspective until now.
Freelancers don't pay too much attention on working hours
While there’s a strong craving among employees to reach the end of their work day or week, it’s a little different when you work on your own business.
There are many freelance jobs that rely on hourly rates (which are usually significantly higher than an employee’s rates). However, many freelancers (myself included) aim at working on a per-project-basis. That means that you and your client agree on an overall fee for the complete project. Then, you complete the project in whatever time you need and, when completed, you send your invoice.
That’s the power of getting paid based on performance. And it’s this one way of conducting business that allows me to make a whole year’s worth of income in just 30-40 days. It’s only possible because I get paid for completing a project, and not for the hours I put in.
Again, there are some freelance jobs that are better suited for one type of compensation while others are better suited for another. It depends on your occupation, and it also depends on how creative you become in designing your services.
Your work should make you money, not cost you money
Overall, this assumption is totally true. Most people confuse cost with investment, though! What they mean is this:
Business expenses? Why in the world would I want to work on something that costs me money?
Here’s a counter question for you, and I’d like you to really think about it:
You see, that’s the difference between investing in yourself (and your business) and just spending money without any potential return.
Earlier in this article, you’ve already heard about another way to invest in yourself: by learning new skills! That’s also an investment that will bring in countless new opportunities that you wouldn’t have if you didn’t invest in yourself.
What if you don't find another client and starve to death?
Well, that would be bad luck, wouldn’t it? No, seriously…
Sure, you have to think this way if you only know the employee side of things. If you’ve never made money without your employer handing it to you, then of course you know nothing about how to create your own income for yourself. How would you? You’ve never felt the need to do it.
However, I can assure you that finding clients is just another skill to learn. And once you’ve mastered that particular skill, nothing in the world can ever get you unemployed anymore. That’s because you know how to always find work, no matter your circumstances or the economy or whatever. In my opinion, that’s the ultimate financial relief!
How to prepare for freelancing: Discipline is a vital trait
Discipline is what you need to stick to your word. Your client’s projects will probably have deadlines most of the time. Of course, you’re expected to deliver on time. Sometimes, these deadlines might even feel impossible to make.
However, they usually aren’t. You just have to switch a few things around so you have more time to complete that particular project. And if you can’t make time, well, you can always work through the night, then sleep in the next morning.
For a sworn employee, this might sound like an unspeakable demand. But, when you work on your own business, it just feels different. You’re working on your life, not only in your job. And for that purpose, it’s fun to work the night through and pat yourself on the back for delivering just in time. Even more so when the deadline appeared impossible to make.
Over at TheBalanceCareers, there are some more insightful thoughts about discipline, and about persistance, which is the next item on our list.
Persistence determines your chances for success
Persistence is probably the most important aspect to consider when preparing your freelance business.
A time will come when you’ll think about quitting. It might happen because of a dissatisfied client or a failed project or simply a period where nothing seems to work out the way you want it.
Trust me, I’ve seen these times over and over again, and they are part of the game. You’ll be confronted with a much wider range of emotions than most others who are just fulfilling assignments without further responsibility.
Persistence will get you through these valleys, even if they feel daunting in that particular moment. There’s probably not a single (noteworthy) success story in the world without the protagonist exercising quite a bit of persistence at one point or another.
If there’s one way to ensure business success, on the other hand, it’s persistance! Simply persist until you’ve made it all work. As long as you don’t quit, you’re in the game!
Willingness to learn and reflect
A big part of being a successful freelancer is to constantly learn from the feedback you get from the world. Don’t think you prepare your freelance business once and then stick to the plan forever.
With every single experience you make in the process, you’ll refine your overall business skills and adjust your strategies. That’s how you’ll always be able to flexibly react on new opportunities and challenges.
#4 Prepare For Freelancing With The Right Expectations
Over at lifehacker.com, Alan Henry has put together a great resource of real-life experiences. In fact, preparing your freelance career should absolutely cover all the mental aspects and preparations as well. These are the ones that can make or break your freelance business in no time.
However, emotional and mental hurdles are not the only things for which you might have to adjust your expectations.
Starting a freelance business takes time
Another huge aspect is time – in particular the time it will take you to get everything going. Although it’s not too hard to set everything up and make a professional impression with your branding and marketing, clients will most likely not start knocking on your door from day 1.
I’m not saying this can’t happen at all. In fact, I wish you a start just like this. However, it’s more likely going to be a long-term process of gradually building your client base, your reputation and word of mouth.
Getting a client here and a gig there can happen rather quickly. Especially when you implement some of these ways to get clients as a freelancer, you should see rapid growth.
Building a solid base of returning customers, on the other hand, will take time. Yet, this is the key to your sustainable long-term business success.
The moment when you don’t need to chase new clients anymore because there are so many coming to you that you can’t even accept them all is the moment when everything will start to flow and turn into an upward spiral. Be ready for it! And just keep working until you get there.
#5 Prepare To Invest Some Money Upfront
When I’m browsing some of the business forums around the internet, there is this one question that appears over and over again:
“CAN YOU START A BUSINESS WITH NO MONEY?”
The simple answer is: yes, you can. You can go out there right now, offer your service to anyone who might need it and secure your first gig.
BUT, you’d limit yourself heavily because you couldn’t make use of any helpful business services or set yourself up for proper marketing. In short, you won’t be able to present yourself professionally without investing. Here is why:
Being perceived as a professional freelancer
Here are some of the essentials you’ll need in order for any client to take you seriously. Depending on your business, each one might be more or less important:
- Logo (unless you’re a designer, this will cost you a few dollars)
- Website (web hosting and a domain name cost money)
- Professional photos
- Image video (depending on your field, this could be a game changer)
- Business cards (printing them costs money)
- Tickets to networking events
- Any platform or software fees you might have to pay.
You could just ignore any of these, of course! Still, you’ll have a hard time competing with other freelancers who have positioned themselves professionally.
The good news is: It’s actually not that expensive. You can easily come up with the money to at least cover the basics (such as a website and logo).
You could already get started for as little as $100-$500 and go a long way with it. Then, you could grow your business fund continuously by setting aside a portion of your earnings solely for business investments. This is how any business grows, by investing in new tools and services that open the doors for even more and higher-paying clients and customers.
How to come up with the initial investment
I’m assuming that you’re not in the desperate position of needing money tomorrow in order to survive. You’ll probably have some savings on the side, or at least some money coming in.
Here’s how I came up with the money for my first business when I was 17: I started putting 10% of every dollar I made to the side (even from my pocket money), solely for the purpose of starting my first business.
You can do this too! I think that coming up with a few hundred bucks won’t be too hard. You might have to initially exchange a few frozen cappuccinos for a future business life, but I’m confident you can pull this sacrifice off!
If you need help with it, I have created a simple course that will take you by the hand and help you save $1,000 for your business within 90 days. It’s priced at $39.
Strange that I’m charging for a course that’s supposed to save you money? No, because without it, you will probably end up without the money in 90 days anyway. And here’s the golden question again:
Would you invest $39 to end up with $1,000 after 90 days?
I certainly would…
If you want to kickstart your business budget and end up with $1,000 after 90 days, then check out the Freedom Fund Framework:
If you can come up with the budget yourself, that’s obviously even greater. I just know (from my own experience) that sometimes we need someone to take us by the hand and keep us accountable.
#6 Branding Foundations
Keep in mind that $1,000 will really help you prepare your freelance career. However, you don’t even need that much. You’ll be able to start your business after a few weeks with the first $100-$300, and then keep saving until you reach $1,000 while you’re already working on your freelance business!
You could use a portion of this money to get your basic branding in place. Branding is much more than just your visuals. But, when you prepare for freelancing, it’s sufficient to limit your focus to visual branding at first. These are the things I’d invest in first for my visual branding, from most to least important:
- Social Media graphics
- Business cards
- Business papers
Here are my recommendations to get you started. For inexpensive web hosting, check out the following two hosting providers. Use WordPress to build your website, as it has the most customization options. Additionally, it’s readily set up for blogging in case you want to add content marketing to your activities later on.
And for your logo and graphics, check out these two platforms:
#7 Create A Solid Offer
Pretty straight-forward, right? In order to freelance, you need to offer something. In reality, it’s not that straight-forward, though! Especially beginners often feel they have to cast a wide net to be able to catch at least some fish.
Most of the time this approach rather hurts your initial freelancing efforts, though. Thus, let’s take a quick look at what makes a solid offer. Once you’re a few miles down your freelance business road, you’ll notice that specializing is what makes you the most money.
How to create a solid offer for your prospective clients?
The key to business success in any field is that you learn to think from the perspective of your prospective clients or customers. Building a business is always about solving problems or fulfilling a demand.
When you’re preparing to become a freelance photographer, for example, then these are some of the “problems” you could solve:
- Couples desperately need someone to capture their most important day on photo so they can carry that memory with them for decades.
- Professionals need business photos, either for their own freelance websites or for internal company purposes.
- Passionate hobbyists (e.g. people who collect vintage cars) want to somehow express their passion in all sorts of way, like a photo shooting.
- Companies need as much media promo and coverage as they can get whenever they throw a special event (like a product launch, for example).
These are only a few ideas that I’ve just come up with on the spot. With these examples, I want to focus your attention towards what people need, and who these people are.
A specialized and consistent offer can do a lot for you...
Alright, we’ve just put ourselves in the position of our prospective clients. From here it’s easy to come up with a valuable offer that people actually WANT to pay for.
Check out this email I got lately from a cold contact. He’s chosen my event business for the given task because, in my communication (website & Co.), I’ve stated very clearly what I can do, and for whom. That’s the only reason why he wrote me this email!
He then proceeds by stating the different things he wants me to take care of. Finally, he writes this:
I hope you understand now how crucial it is to create and communicate a consistent and solid offer. Only then is it possible that you attract people sending you inquiries like this out of the blue. I’ve done ZERO active marketing to get this email. I don’t even know how this client has found my business in the first place.
Here's how you can create your solid offer
Be aware that this offer is something that you’ll constantly refine over the years. You can only prepare for freelancing to a certain degree. Everything else will be adjusting, learning, getting feedback and implementing new ideas.
So, whenever I start a new business, I take a pen and paper. Then, I liberate myself from any distractions and answer the following questions in written form:
- What service do I offer?
- Who could need that service?
- Are there any additional services or aspects I could add to my service to bring even more value to my prospects or solve more of their problems at once?
- What are my prospective clients struggling with the most, regarding my service and related areas?
- What would be the best way to help them eliminate these struggles?
- Who else is facing these same obstacles?
Answering these questions will not only give you a much clearer picture of what value you bring to the table. It will also help you understand who would actually benefit from your service, and why.
Congratulations, you’ve just completed half of your client acquisition process by identifying who your best clients are. Isn’t it amazing when everything’s slowly coming together?
#8 Lay The Administrative Business Foundations
Now, let’s take a look at some of the things that make the accounting part of your freelance business a little easier. Especially in the beginning, all the different responsibilities might seem overwhelming. You need to file tax and income reports. You have to keep your invoices and expenses in order. And, since your business should be protected against unforeseen incidents, you might consider different types of professional insurance.
Your business bank account
Although it’s technically not necessary to have a dedicated business bank account, I would highly recommend it, for several reasons.
The main reason is that you can use this account solely for business purposes. Unless you are very savvy with your personal budgeting, mixing business and private bank accounts could cause a lot of trouble.
Another advantage is that you can regularly put your business funds (as mentioned in #5) into this account. As a result, you won’t be tempted to touch the money for your impulsive buying decisions but use it to constructively grow your business. You’ll also not run out of funds for your business, which is especially rewarding in times of sudden opportunity.
You can then pay yourself from this account every month (and you decide how much). Just make sure that there’s always a good buffer so you can make use of any special opportunity that reveals itself in front of you.
Prepare your basic contracts
This might not be too important for some niches. However, if you’re preparing for freelancing in a field with long-term projects or appointments that lie months in the future (like wedding photography), you might want to get some basic contracts ready.
I personally almost never use contracts because I maintain close relationships with my clients. Moreover, when somebody is really not able to pay, a contract won’t help you as there will still be no money, with or without a contract. However, I’d do a bad job recommending you to ignore this topic.
It would go far beyond the scope of this article to dive deep into contract creation for freelancers. Even more so because every freelance business brings unique characteristics, thus questions to cover in a contract. If you want to inform yourself further, use Google:
…and instead of “photography”, insert your own niche, of course!
Another noteworthy consideration is taking out any type of insurance for your business. There’s no hard-and-fast rule for this, so you need to decide for yourself if you want to reduce risk in specific areas.
Popular insurance types are:
- General Liability Insurance
- Professional liability insurance
- Commercial property insurance (your private insurance might not apply!)
You can find more info on these and more types of insurance for freelancers in this article about insurance policies for freelancers over at fundera.com.
Do freelancers need a business license?
One frequently asked question in online business communities is this:
Do you need a license to be a freelancer?
There’s no global answer to this. Licensing requirements vary, depending on the services you offer and the region in which you’re based.
To get a reliable answer, start by checking Small Business Administration’s table of licenses and permits and see whether your freelance business is part of the listed industries.
#9 Prepare Your Freelance Pricing Policy
Here’s another area that will evolve throughout your business journey. Your pricing policy depends a lot on your references, your negotiating experience and the type of customers you work with.
Pricing considerations for new freelancers
When building your freelance career, you need to think a lot about strategy and not so much about what you think your service is actually worth. What do I mean by that? Let’s construct an example:
You’re a new freelance photographer, specializing in wedding photography. There are competitors all over the pricing table, some more premium-priced, others rather inexpensive. This rarely has to do with the objective level of their work, but rather with how they have positioned themselves over time.
But what do you do when starting out? Well, you don’t want to be the cheapest because this will project low quality and inexperience on your work. You also don’t want to be the most expensive since there are a few strategies involved when you want to succeed in being the most expensive offer and still have a full calendar (which is totally possible!).
Prepare for lower freelancing rates in the beginning
The reason for lower initial fees, is not because you are “new” and as such “required” to be cheaper than more experienced folks. There’s no law like this. However, it has to do with building experience, references, a portfolio and a name for yourself.
In the beginning, I’d suggest you price your service in the lower mid area, but then also accept to lower your rates even further if necessary. At the end of the day, you’ll still make money. And, what’s much more important, you’ll be actively building your assets and reputation.
There will come a time very soon when you’re going to adjust your pricing. Once you’ve completed a few wedding projects and know what’s important to your clients, you can start positioning yourself as a premium level photographer.
Don't derive your rates from your salary
There’s a great paragraph about this topic over here at Double Your Freelancing.
When you’re trying to calculate your rate and put on your employee hat, you’ll make some devastating mistakes. And the reason is simple:
Your employer pays you what’s left after he’s paid for all the side costs he needs to cover in order to hire and employ you (insurance deductions, taxes, etc.).
You, on the other hand, need to cover these expenses yourself now. You have to pay for advertising, necessary business tools, electricity and much more. All these things are covered by your employer at your regular job. That’s also why you end up with hourly rates of hardly $15-$20 for many jobs.
To get a better idea of what common rates are (if you’re offering services based on hourly rates), check Google again.
You’ll end up having a pretty clear idea of what industry standards and expectations are. This knowledge will come in handy when you talk to your first client. There’s hardly a worse experience than being asked about your price, and then feeling completely clueless on what to reply.
#10 Systems For Running And Growing Your Business
We’re getting closer to the end of this exhaustive list of business preparations. Make sure to download your free checklist and worksheet so you have a guide at home when you prepare your freelance business.
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Systems are important to run a sustainable business. That’s why it makes sense to be aware of them right from the start. You then can incorporate them into your preparation process and set everything up now for implementation at a later date.
Your client acquisition system
Systems don’t necessarily need to run automatically. In the beginning, it makes total sense to do as much as you can yourself. That’s the only way you’ll understand every single part of your business from your own experience.
Getting clients is what keeps your business alive. If there are no clients, then you can’t perform your service to anyone, and you won’t make any money. At least not from the immediate service you offer.
I’ve already mentioned this article on how to find your first clients as a freelancer. It’s a great resource, especially when you’re at the stage of preparing your freelance career. I won’t repeat all these strategies again here.
However, I will say that it’d be a good idea for you to create some kind of system for acquiring clients, using the strategies from the article I’ve mentioned above. Especially in the beginning, it’s very helpful to routinely repeat a task in the same way again and again. That’s the quickest way to perfect this aspect of your freelance business.
For example, your client acquisition system could consist of the following components:
- 30 minutes a day: participate in online communities where your prospective clients hang out.
- 15 minutes a day: research possible clients in your area (based on your findings from the “Solid Offer Questions”)
- 45 minutes a day: connect with these prospects and form relationships
90 minutes of client acquisition a day will inevitably lead to a vast pool of insights and experiences as well as growing revenue for your business.
Your network of professionals
In the beginning, this part will probably play a minor role. You might want to hire a tax accountant to deal with the fiscal side of your business. You’ll probably won’t need much more, though.
Later on your business journey, this network might also involve virtual assistants, legal advisers, graphic designers and more. It totally depends on what you need. Of course, you can get all these things done by other freelancers. You don’t need any employees to run your freelance business.
Still, it will be helpful to have a strong network of people you trust so you don’t have to explain everything a hundred times to new and ever-changing team members.
Your invoicing and payment system
As far as I’m concerned, this is one of the fun parts. I love sending out invoices or having payments deposited into my bank account. That being said, writing invoices (correctly) and monitoring all these payments can sometimes become a little daunting. If nothing else, it’s certainly a huge time killer.
As always, having the right systems in place is key. Invoicing and accounting are necessary to run a successful business (because you need to get your money). I like to automate it as much as possible, though, so I can focus my time on other important tasks like talking to new clients.
FreshBooks is an online service dedicated to solving exactly this problem. It’s a full-blown invoicing software that takes care of invoices, monitoring payments, expense tracking and much more. Their price pays itself with the time the service frees you. They even have a free trial where you can test the software and see what it can do for you. I highly recommend you do that and add FreshBooks to your monthly business expenses.
Time management system
You don’t need anything sophisticated in the beginning. However, you need to be absolutely aware of how you spend your time. The more hours you put into growth activities, the more your business will grow.
On the other hand, the more time you waste browsing social media, the more pressure you’ll put on yourself to make as much as possible from the minutes or hours you’ve left.
When I’ve started my first freelance business, I’ve assigned certain time frames to certain tasks. Here’s an example:
- 8:00 AM – 9:30 AM ………. Client acquisition
- 9:45 AM – 12:00 Noon ………. Work on client projects
- 12:30 PM – 3:00 PM ………. Learn about XYZ
- 3:15 PM – 4:00 PM ………. Grow social media presence
- 4:00 PM – bedtime ………. Variable: Meet with friends, clients, read, work on ideas, work on website, etc. (Whatever I felt like doing. Don’t forget the fun of being in business!)
A general time management system will help you a lot, especially in the beginning. You can always flexibly re-arrange your plan to make time for lunch appointments or presentations. But, as a general guideline, this will save you a lot of energy and improve your productivity drastically.
A healthy support system
Don’t forget that you’re not alone in the game. There are many others just like you. That means that there are also a lot of people facing similar obstacles and fears.
I have found that it’s incredibly important to form an alliance with other people who are sitting in the same boat with you. Only when someone has experienced the struggles and also the victories herself, then there can be a full understanding of what’s going on in your mind.
As much as you’d like it to be that way, your friends and family won’t be able to fully grasp what you do and why you’re doing it unless they have adopted some sort of freelance or entrepreneurial mindset themselves. Otherwise, they’ll only be able to talk to you from the perspective of an employee. They won’t be able to understand your passion or the illogical decisions you make to gain more in the long run.
#11 Prepare Your Finances For Freelancing
When you get a regular paycheck, you are used to your household expenses. You can tell instinctively how much you can spend until your salary is used up.
When you prepare for freelancing, it’s vitally important that you get a clear picture of your financial situation. What do you need every month? Most people I talk to don’t even know that, because somehow there is always enough.
Do you think Apple (the tech giant) doesn’t exactly know what they need every month? They probably have a clear budget down to the cent. You need to be aware of your personal expenses as well so you understand fully what your situation is.
Start by calculating the bare minimum
Emily Nickerson has published an article over at The Muse, explaining how to prepare your budget for freelancing. She recommends to first calculate the bare minimum of what you need, and I recommend the very same thing.
Being aware of your personal spending habits isn’t only going to help your business, but your personal life, too. If you don’t know where your money goes, I’d recommend sitting down with a pen and paper and listing all your fixed monthly expenses.
For variable expenses, I’d start with some estimated numbers and then track these expenses over a few weeks or months to replace the initial estimates with the real findings.
Also, don’t forget to include your essential business expenses into the bare minimum.
Allocate your future budget
Money isn’t coming in regularly as a freelancer. Depending on your specific niche, you might have strong months and weak months. You can’t expect the same amount of money every month. Rebecca Lake has written an article for SmartAsset where she emphasizes the importance of having a budget as a freelancer.
Personally, I like to think in whole years. My event business, for example, drives 90% of its revenue between May and October. It’s still more than enough to live from this business alone. However, I cannot spend 100% of what I make every month since I won’t have anything left to cover the remaining months then.
My solution to this is the following. I dedicate my revenue percentage-wise to different types of expenses. You don’t need to do the same. Feel free to take the following demonstration as guidance, though:
How I budget my income
- 10% of my earnings go to my education account. With this money I pay for seminars, books, courses and everything related to education and learning new skills.
- 10% go to my Freedom Fund. The money in there is for investments and new businesses that will result in higher returns. That’s also the fund that I use to immediately come up with the initial money when I want to start a new business.
- 5% go to a charity account. I’m giving away all of the money in there. Not all of it goes to charity. I’m also paying for birthday presents or other treats I want to surprise my family and friends or strangers with.
- 5% goes to my clothing account (yes I have such a thing). I’ve found that buying clothes is where money can vanish in a black hole if I don’t pay attention. That’s why I’ve limited myself to only spend as much money on clothes as I have in this account. If there’s not enough money in there, I don’t buy the shoes.
- $500 every month go to my “extended emergency fund” (which is also used for annual payments like insurance, taxes big investments like a new car, etc.)
- Everything left at the end of the month is also put into the extended emergency fund. That way, when I have a $12,000 month, I won’t spend it just because it’s there. I’ll stay consistent with my lifestyle and put a huge buffer into my account that will sustain me in the months where income is less than the minimum amount I need.
Prepare For Freelancing - The Next Steps
We’ve reached the end of this list of things you need to consider when you prepare for freelancing. Assuming you have gone through all of these steps, you’ll probably face the question what to do next. Here’s your answer:
Focus on creating your portfolio
The most important proof of the quality and look of your work is assembled in your portfolio. Thus, you should constantly be updating your portfolio with your best work so that you always make the best possible impression on new clients.
Your portfolio will naturally grow with every new project you work on. However, in the beginning, there’s nothing wrong with creating a portfolio from imaginary projects. This way, you can still show prospective clients how your family photos look like. Simply ask a family in your social circle to do a shooting with you for free so you can build your portfolio.
You get the idea! Think about what your clients need to see (not what you as a professional would like to see!), and then create some sample work.
Find your first customer(s)
Once you have everything in place, there is only one thing left: getting customers and earn money with your new freelance business. Make sure to bookmark this article as well as the article about finding your first client, and reference it again and again until you see results.
You will see results, if you stick to it! There’s no way around it. Just don’t kill your own motivation with unrealistic expectations. It’s possible to find 5 clients in your first 2 weeks in business. However, it could also take you 2-3 months to get the first one, or even longer. Everybody has different circumstances. Keep going and you’ll get there!
Build a collection of references and reviews
This is the final step on the road to your healthy full-time income as a freelancer. Now, it’s only repeating the last steps over and over again, and maybe add another revenue stream sometime down the road. That’s a whole different topic, though.
References and reviews create trust. Once you are in a position where you can show 1, 5, 10, 20 reviews of happy customers, getting the next one becomes a much easier task. Not only do your new prospective clients see that others are happy with your work. They also see that other people are paying your price (which is especially helpful when you position yourself at the upper end of the price range).
How To Prepare For Freelancing - Final Words
There’s only so much you can prepare. At one point, you need to make the jump and receive feedback from the world. And that’s exactly what I encourage you to do! You’ve probably made your decision to start freelancing already. Why else would you take the time and work through all this in-depth content?
Lastly, here’s a recap of the things you should do now. First, download the Smart Freelancer Checklist and Worksheet, if you haven’t already!
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And then follow these steps:
- Let me know in the comments if you have any further questions about your own freelance business or if you would add something to this list.
- Bookmark this article and review it every once in a while.
- Summon the courage and make a decision to finally become a freelancer yourself. There’s nothing to lose, and you don’t have to put everything you have at risk. Just start at your own pace, and then go from there.
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