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New to Freelancing? Avoid These Mistakes

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Freelancing seems easy: you take a skill you already have down pretty well and offer to use that skill for any client who comes along. You get paid for the hours you work and, if you need to adapt your freelancing schedule to an employer or a family, you just take on the work that you can manage.

But right now, there are a lot of new freelancers out there, looking to fill gaps between jobs or even looking to permanently cut loose from the employment game. That means that if you’re just starting out, there’s less room for rookie mistakes than ever before. Even a little misstep can mean a client taking their business elsewhere.

Big Mistake: Thinking that You Just Need to Be Available

Despite the warm fuzzies that you might get from watching Field of Dreams, Hollywood is pretty much the only place where building anything is enough to get people to come to you. Deciding you’re going to freelance just isn’t enough. You have to invest time — and a little money — in letting people know you’re available for work.

You do need to build ways for clients to find you, like a professional website. But you also need to get your name in front of prospective clients, through networking, writing guest posts for blogs or any other method that will get you the access you need.

Big Mistake: Not Thinking Like a Business Owner

The moment you hang up your freelancing shingle, you are (legally speaking) a business owner. That means you’re required to have any local business licenses your state or city might require of you — and you can be facing fines if you don’t have them. You’ll hear plenty of freelancers say that they never get caught for operating without a business license, but the simple truth is that you should do things right and avoid potential problems.

That includes tax issues: as a freelancer, you’ll owe just as much money to the IRS as you did when you worked for an employer. The difference is that you won’t have your taxes automatically withheld from your pay check. You have to make sure that you set aside money to cover your tax bill.

I know one freelancer who failed to do so for an entire year and then, when he got his tax bill, he couldn’t pay it. He maxed out his credit cards, took loans and generally spiraled downwards in his financial situation until he had to sell his house. That’s the absolute worst case scenario, but it should serve as a good reminder that, no matter how you earn your money, the IRS wants its share.

Big Mistake: Not Acting Like a Professional

At the end of the day, the most important thing to remember is that you are a professional. It’s exceedingly rare that anyone will hire a freelancer for a project not associated with a business — the closest I can think of is maybe a website designer being asked to work on a personal blog or site — but most of the time, people hire you with the understanding that you’re going to help them earn more money.

That means that you have to be a professional: you have to be someone who a client can trust with their business and their money. Any other approach just isn’t going to get you much business. But if you can impress a client that you take your work seriously and that you’re incredibly responsible, you’re already ahead of the game.

Thursday Bram has been freelancing for more than eight years — the last four full-time. She’s the co-founder of EnhancedFreelance.com, a membership site for freelancers ready to up their game.

Brazen powers real-time, online events for leading organizations around the world. Our lifestyle and career blog, Brazen Life, offers fun and edgy ideas for ambitious professionals navigating the changing world of work.

  • Anonymous

    Great tips! The tax one is so key. Like you, I’ve known several freelancers who got in trouble because they didn’t take the time to figure out taxes and how much they should be putting aside to pay it each month.

  • http://www.benlocker.co.uk Ben

    Great post – thank you. I found that managing the finances became easier when I set up an official company with separate bank accounts – it was simpler to manage the money and I was able to focus on making the transition from single freelance writer to head of a small copywriting agency.

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  • http://www.weddinggownshop.com.au/ wedding dresses

    Totally right…..Being professional is necessary….

  • http://webappsguru.com Kevin

    Very interesting post! However it will be great if you can post something about how to manage freelancers as a business. Generally what happens is you end up selecting great talent as freelancer but not everyone meets their commitment – its really difficult to rely on freelancers as a small business after all thats why they chose to do freelancing over regular day jobs.

    It will be great if you can throw some insights on that topic.

  • http://www.StartMyConsultingBusiness.com Greg Miliates

    Freelancing/consulting is absolutely a business, so treat it that way and act like a business owner–even if that role feels weird at first (you’ll get used to it).

    Set yourself up as an LLC or s-corp, get a federal tax ID number (FEIN), talk to an accountant, and make sure you’re all legal. All that might sound overwhelming, but trust me, it’s not. Before I started my consulting business, it seemed overwhelming, but as I went through the steps, it was actually really straightforward. Make yourself a checklist of start-up tasks, and work through them–you’ll be done it fairly short order.

    As for the tax issue, I’ve seen that become a headache for other consultants who didn’t plan correctly. After discussing my situation with a CPA, I chose to form an s-corp, and have been very happy with the choice. With my s-corp, I’m the sole employee, and I pay myself a salary (and take distributions as well). As for health and retirement benefits, my s-corp pays 100% of my health insurance premiums (which is essentially like saying that I pay my health insurance with pre-tax dollars), and I have a SEP-IRA which provides equivalent retirement benefits as a 401(k), without the administrative costs and with unlimited investment choices. Paying myself a salary through the s-corp saves on income taxes, since any distributions from the corporation are taxed as regular income, and not subject to social security & FICA taxes.

    I’ve seen 2 things sidetrack and/or stymie aspiring freelancers/consultants:  fear and finding clients.  I talk about both those issues on my blog, and recently posted a couple of articles on ways to find clients (http://www.startmyconsultingbusiness.com/tired-of-scrambling-for-business-surprising-and-proven-ways-to-get-new-clients-part-1/). My blog also gives specific tips, tricks, techniques, and tools for starting and running a successful freelance/consulting–or any–business on the cheap.

    If you do something on your business each day, you’ll see how your efforts snowball. Not only will you have all your start-up tasks completed–meaning that you’re all legit–but you’ll notice that you start thinking more like a business owner instead of an employee. You’ll see opportunities and prioritize which ones you want to pursue. You’ll think of ways to get new clients and expand the work you do with existing clients.

    Having your own business is hard work, but in my experience, the income and rewards (flexibility, autonomy) are FAR greater than you get as an employee.

    You can check out an interview I recently did where I talk about how I made the switch from employee to consultant, and where I talk about some of my initial fears and doubts:
    http://www.startmyconsultingbusiness.com/how-i-made-the-switch-from-employee-to-consultant.

    Greg Miliates
    http://www.StartMyConsultingBusiness.com

  • Anonymous

    I agree with most of the post. Freelancing is absolutely a job that needs to be taken seriously with respect to commitment to your craft and setting up means to convey yourself as having commitment to your craft.

    I run a cad outsourcing company. We have actually outsourced some of our newsletter work in the past when we didn’t have the staff time available to do it onsite. The things that we looked for were adherent to schedules and legitimacy (ie. tax wise).

    Richard S.
    CAD-Sourcing- structural, architectural, mechanical, and civil drafting.

  • Anonymous

    I am fully agree with this post. Though Freelancing can be a good fun while working but you should do it seriously when you have projects in hand. I have been in the freelancing and believe that “Communication” is the key success. Hope other readers will be agree to me. Apart from this your skills always matters :)

    Keep up the good work :)

  • http://pulse.yahoo.com/_PENSIUBGAPKCAVYZOVKNVZQDFY Connect Vendors

    Well researched and written article. I feel that Freelancers are like Enterpreneur who are their own boss and have carved niche for themselves. However not being professional will bring bad name you will never really take off. And yes building credibility is essential as it helps you to come in eyes of clients and provides you with flurry of offers.

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