Get started on a freelancing career the right way: by being aware of the stumbling blocks.
Posted by : Elizabeth Millard
The recent dips and swerves in the economy have left many IT types
looking for solid ground in their careers. And as some have found, it
can be easier to just create terra firma than keep searching for it.
That means the freelance life has become more attractive than ever.
Although there may still be a few naïve souls who believe freelancing is
all about naps, working in slippers, and ducking out for daily matinees,
most people who investigate working solo realize how much work it can
be, and how difficult time management can get. But yes: You really can
work in slippers. Before you decide on fuzzy vs. suede, however, there
are some planning issues to tackle. When embarking on a freelance
consulting and support path, the more strategy that can be done, the
better, and that usually means working out financial challenges,
marketing tactics, and logistic concerns. Here's a look at the five most
common stumbling blocks, and how to avoid them.
Finding the money
It seems simplistic, but it's something that some
new freelancers forget: Have enough money in the bank to get started.
Even if you have a robust client roster and you're owed thousands of
dollars, be careful not to start freelancing until you have a
comfortable cushion in the bank that isn't needed for bills, rent, or
mortgage. How much is needed depends on your expenses, but the general
rule of thumb is to have enough to float you through two months of no
income. That means figuring out exactly how much you need for bills,
groceries, gas--the whole shebang of living--and translate that into two
months' worth of savings. If you've been downsized and saving isn't an
option, at least figure out where you could get the money if you had to.
Ask friends and family about possible loan opportunities, think about
taking the bus more often, or renting out that spare bedroom. The focus
here is on anticipating crisis. Hopefully, that time will never come,
but it's better to be prepared in advance.
Paying the tax man
Ah, taxes. As a freelance professional, there
will certainly be times when you'll look back at those carefree college
days of EZ forms and sigh with nostalgia. But then again, you were
probably delivering pizza then, and looking for beer money between the
couch cushions. As much as you've advanced careerwise, you've also
entered a realm where taxes can be more than just confusing. They can be
downright intimidating. The best thing to do is to get a solid CPA or
other preparer (see "Utilizing professional help" below), but in the
meantime, gain at least general familiarity with how the process works.
Unlike when you were a regular wage earner who could pay taxes on April
15, you must now do quarterly estimated taxes. These fall due in April,
June, September, and January. True to the name, they should reflect what
a freelancer estimates as a quarterly tax hit. To avoid paying too much
or too little for these taxes, it's vital to employ good bookkeeping
techniques, and do quarterly reports. Wayne Davies, author of the e-book
"The Tax Reduction Toolkit," notes that a freelancer should know the
bottom line every month. He says, "From a tax standpoint, once you know
your profit for a given quarter, you can then calculate the resulting
tax liability on that quarter's profit." This results in an accurate
quarterly payment rather than just guessing. It's also possible to
simply skip the quarterly taxes and pay annually, but beware: The IRS
will hit you with a penalty for such laziness.
Getting and retaining some customers
You've shelled out cash for
software, business cards, maybe even a logo for your car door. Now, it's
time to sit back and ... what, exactly? The answer is that you can't
really sit back, not ever, if you want your business to be as successful
as possible. The key to happy freelancing is getting clients, and plenty
of them. As with finding a job, this involves networking and putting
your name in front of other people. If you're doing freelance tech
support, it could mean littering the city with bulletin board postings.
Freelance programming could involve calling local businesses and
inquiring about their software needs. Often, it's beneficial to put
together an informational packet about you and what you offer,
highlighting what sets you apart from similar service providers. Once
you've got that done and you've sent it to relevant prospective clients,
don't get comfortable. Freelancing involves relentless new customer
development, so a portion of your time should be set aside specifically
for creating new marketing tactics and researching different markets to
explore. Once you have a client roster, it's important to maintain those
relationships. This, like many other aspects of freelancing, depends
heavily on recordkeeping. Who's due for a hardware refresh on firewalls?
Who needs software integration? Didn't that guy on the CRM project talk
about wanting to migrate to Linux by the end of the year? Keep notes,
even if you think you'll remember later. Then, set reminders in your
calendar for periodic note checks, to refresh that trusty memory.
Clients will appreciate your follow-through and competence, and that
means more jobs for you.
Utilizing professional help
Sometimes when freelancing is going
well, with the taxes paid and the client roster growing, you can feel
pretty bulletproof. Everything is under control, and that's a powerful,
and often rare, kind of feeling. But even when things are going
swimmingly, and especially when they're not, you can benefit from the
sage advice of other professionals. Specifically, get an accountant who
knows a good tax preparer, or can do tax prep as well as financial
planning. Tapping into that financial knowledge doesn't have to be a
monthly line on your budget; a quarterly check-up can be all it takes to
go from fretful to blissful. Basically, professionals make it their job
to know about your business. For you, finances or taxes or strategy are
merely one component, and a couple of questionable line items or wrong
deductions can slip into your books when you're busy. A second opinion
is often a valuable, and easy, way to double-check your work and make
sure you're poised to reach future goals. Freelancing isn't easy; that's
why not everyone does it, despite the allure of wearing slippers all
day. But it doesn't have to be daunting either. With good records,
frequent bookkeeping, and a load of persistence, you'll be a stellar
freelance in no time.
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