BUSINESS | SUCCESS
Millions of people every year decide to take the plunge into the world of self employment, either by way of voluntarily resigning from their current jobs, or because they were laid off/fired/downsized out. Either way, the idea of carving your own path and in turn sticking it to the man can seem like a attractive alternative to the grind of the 9 to 5.
While it’s true that working for yourself can be all of those things (and more), there are some realities that no one tells you about when you’re contemplating doing your own thing. Here are some things you have to not only sort out but have a solid grasp of if you’re going to operate a successful freelance business.
Ahhhh, the freelance life. It’s exactly like this (kind of).
Well how are you? The number one reason freelancers fail is because of an inability to secure enough work to sustain themselves.
The first thing you’re going to have to figure out is how you’re going to market yourself. After all, people can’t hire you if they don’t know about you. It isn’t easy, so here are a few ideas. Maybe you have a little bit of a profile already as a function of pre-existing relationships and employers. Leverage those relationships to get the word out that you’re on your own now and available for hire. Attend networking events where you might be able to make contact with influential individuals who can point you in the right direction – or hire you outright. Everybody knows a guy who knows a guy. Another idea is to attend meetups and workshops for adjacent industries in similar arenas. For example, if you’re a web designer, find groups for development and coding. People are always looking to expand their social and professional circles, and by being a little out of place, you’ll likely be the most interesting person there.
When starting out, the biggest mistake we typically see is freelancers setting their rates too high or too low. Setting freelance rates is different that your hourly rate at a full time job. It’s common to think in terms of ‘I made $40k annually at my last job, so my freelance rate should be $20/hr’. This couldn’t be more wrong.
You have to know – not think but know that you’re going to have at least one non-billable hour for every billable hour you can secure. Lori Grenier of Shark Tank and QVC fame is known for having said:
“Entrepreneurs: The only people who work 80 hour weeks to avoid working 40 hour weeks.” – Lori Grenier
So if you want to make 40 grand a year, you’re going to need to work 80 hours a week if your rate is $20/hr. That’s reality.
The flip side is people who see other freelancers in the marketplace with market-value rates and immediately set their own prices accordingly. Depending on market, the going rate for premium freelance work can be as high as $150-$200 per billable hour or even more. And while it’s something to strive for, more than likely you’re not going to be able to charge anything near the top of the scale when you’re first starting out.
No matter your skill set, when you’re first starting out you have to prove yourself. Without a track record of success or a portfolio of clients singing your praises, it’s challenging for a company to hire you at a premium rate when there are other, more established options. The freelancers who can charge the top rates are those who’ve taken risk out of the equation.
But actually, it’s more like this.
When a company hires someone, no matter what the circumstances there’s an element of risk. They are risking time, money and sometimes their reputation. With a demonstrable track record of success, that risk is reduced or eliminated and as such the higher rate is justifiable. When you’re just starting out, anyone who hires you is taking a chance on you. People typically want the lowest possible amount of risk. So in order to be the less risky option, you need to work at a lower rate for at least a while.
So when you’re starting out, it’s best to start somewhere in the middle. Our advice is to figure out the median rates for your market, and then price yourself slightly under (10-15%) to start, with the intention of raising them gradually as your profile and track record of success increases.
There are a lot of challenges with any business, and a freelance operation is no exception. If anything, being a freelancer is more difficult because you don’t have the support elements to help you with accounting, sales, accounts receivable, accounts payable, project management, execution, etc. Freelancers get stretched in all sorts of different directions and they have to handle everything. A few things to know going in:
Lastly, for as rewarding as a freelance business can be, remember that it is a business and needs to be treated as such. It’s not something that you’re going to try while you’re between full time gigs. It’s not glamorous, especially at first. It’s a grind. And while you might make a lot of money right away, chances are you won’t. Most freelancers quit when a full time opportunity comes along for them to make roughly the same money for a lot less headaches.