Getting started as a freelancer? Whether you're freelancing nights and weekends or as your full-time gig, use this short list to fast track your business set up. We promise it’ll save you the headache in the long run.
1. Create your portfolio
As a freelancer, you’re selling your expertise. It helps to have a website or portfolio you can share. You can go as elaborate or as a basic as you want. You might feel like your portfolio isn't good enough. You may even feel a little embarrassed about it, but it's better to start your portfolio and have a first draft of it done. As any full-time freelancer will tell you, your portfolio will never feel perfect or "done".
Remember, any good portfolio contains a list of your services, of your clients, and your contact information.
2. Tell your network
The sustainability of your business depends on finding work. Once you feel like your portfolio website is good enough to share with others, let your network know that you’re freelancing. All it takes is a quick email or social post. Trust us, your community will want to support you.
3. Set your rate
There are many (free) rate calculators out there that we recommend using. A quick google will give you the basics. For those who want to DIY, the basic algebra is below. Tweak as you need.
Estimate your total annual expenses
(ex. this can include insurance, office space, tax, software, hardware, etc.)
Multiply your annual expenses by desired profit margin
(ex. desired profit margin is 25%, so multiply by 1.25)
Divide by the number of days per year you estimate working
(There are generally around 240 workable days in the year)
Divide by the number of billable hours per day you estimate working.
(billable hours can include project and client management. Non-billable time includes invoicing, bookkeeping, tax management, and general admin.
This will give you your estimated hourly rate.
To consider:
- Rates fluctuate by market, so it’s a good idea to gut check your hourly with fellow freelancers and potential clients.
(Ex. the market in Chicago for a brand or marketing strategy director is roughly $120/hr In New York or San Francisco, that rate is closer to $160–$180 / hr) - Don’t be afraid to start high. You’ve got expertise that others need.
4. Spend the time scoping
For many, this is one of the hardest skills a freelancer has to learn (or remember). Scoping has repercussions on your financial stability, so don’t rush through it.
To consider:
- Don’t forget to scope in administrative time. As a freelancer you are now responsible for project management, client management, the back office finances, timesheet tracking (if required), expense tracking (if required), email responses, and everything else in addition to actually doing the work. Set yourself up for success by accurately budgeting in this time.
- Assume your project will be delayed. Protect yourself and your budget by making sure your scope properly accounts for unexpected delays. Your client doesn’t get to hold your time for free.
- Different projects may require different types of scopes. If the deliverable is uncertain, consider implementing an hourly scope as you and the client work together towards the end goal. If the project is clear cut, consider a project based fee.
5. Establish your preferred payment terms
With 60% of the independent workforce experiencing delayed or unpaid invoices, having a strong contract to protect you from delinquent clients is imperative.
To consider:
- Require an upfront deposit to begin work. Aim for anywhere between 25% — 50% of the overall fee.
- If there are multiple deliverables, ask for payment to be made on a percent completion basis. As an example, if you complete one of three deliverables in the first phase, you invoice for 33% of the total project fee (less the upfront deposit if you received one)
- Lock your terms to a clear scope to avoid scope creep, and don’t be afraid to refer back to it.
- Push for payment within net 15 to net 30 days of receipt of invoice.
- Write in late fees and hold your clients accountable to those.
- Make sure you, not the client, own the deliverables so you can use them as collateral should you need. This may require a special clause in the contract to stipulate that you own the intellectual property.
- Know your rights — in certain states there are laws that help protect freelancers from clients who don’t pay. Feel free to make mention of those laws and your willingness to enforce them if needed.
6. Invoice promptly
In order to get paid, you have to send your invoice. Do this promptly — you can make it part of your weekly routine, draft invoices or schedule them to send when projects are set to close. The sooner you invoice, the sooner you can get paid.
7. Set up health insurance
One of the biggest concerns for freelancers is getting insurance. The good news? Insurance is available and comes in all shapes and sizes. For those freelancers who currently have insurance, you are most likely eligible to enroll in new insurance during open enrollment. However, special circumstances (like losing your health insurance unexpectedly), can make you eligible to enroll off-cycle in a new plan or your partner’s plan (if that’s an option).
Check with your state’s marketplace, or automated guides like Healthsherpa to understand your options and eligibility.
8. Create a new business banking account
This is a quick solve for easy accounting. By setting up a separate checking and savings account for your business, you have one place to track your income and expenses, as well as set cash aside for tax and time off.
To consider:
- If you’re a sole proprietor, you cannot open a business account because you do not have an EIN. Fear not. Just open a new personal savings and checking and label it as your business account. We use — “Business Checking”, “Business Saving”.
- Don’t forget to ask for a debit or credit card associated with your business checking account.
9. Get incorporated
For most, the idea of incorporation is enough to overwhelm. Here, we translate the legalese so you can make the decision that suits you best.
Option 1: Sole proprietorship
This is the simplest option to get started with because there are no formal steps required. In fact, a sole proprietorship means there is no distinction between the business and you, the owner. Instead of an EIN (tax id), you use your social security number.
- Best for: someone contracting on the side, in transition to a W2, or uncertain how long they want to freelance
- Key benefit: quickest way to get started (because you literally don’t have to do anything).
- Key drawback: no distinction between you and the business, which means that you can be liable for your business’s debts.
Option 2: LLC
This is the most common option for freelancers. While it has the same tax implications as a sole proprietorship, it is a proper corporate entity, which protects you personally from business liability and risk.
- Best for: someone who needs protection from business liability, but prefers to be taxed as an individual — most likely a dedicated full-time freelancer.
- Key benefit: Protects you from business liability and easier to set up than a corporation
- Key drawback: not eligible for corporate tax benefits
Option 3: C- or S-Corporation
This is a less common choice for a freelancer because incorporation and the administration of managing the corporation is more labor intensive.
Best for: a career freelancer who can support the administrative costs of managing a c/s-corporation and can take advantage of tax benefits.
Key benefit: taxed on your corporate salary, not on dividends that the company can pay out
Key drawback: requires an investment of time and money to incorporate, obtain a registered agent, pay annual fees and taxes. Note: these costs can be deducted as a cost of doing business.
Whether you pick one or all of these items to knock off the to-do list, freelance on your own terms sooner than you think. Have questions about the above? Create an account to speak with one of our advocates.
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