Financial security is a must for any freelancer, but it often feels like you’re fighting an uphill battle. However, with the right strategy and tools, financial success is a sure thing.
Jumping into freelancing, leaving your 9-5 job and a so-called 'secure' career behind, demands courage. And, now that you have taken the leap of faith, you need to be ensured that something good will come out of it.
1. Plan. Plan. Plan.
When you begin as a freelancer, you might want to just jump right into every project you can, but remember, slow and steady wins the race. Proceeding in a hurry can have financial repercussions in the long run. For instance, you may end up wasting a lot of time and effort on a client that just was not worth it.
Create milestones for your business, looking at where you want to be at certain points in the future. Start with 1 month, then 6 months, then a year, then 5 years. However, do not waste time on writing a business plan. Have a look at Millo’s one page plan to save yourself hours of work. Spending too much time in the beginnings of your business on admin work takes time away from attracting new clients and working. Look at our fourth step for a similar point.
Do have a strong workflow for root-level requirements. This will make you organized and will convey professionalism to your clients. Talking about accepting payments, for example, you need to decide what method suits you. Perhaps PayPal is your style, or would credit card work better? Analyze the pros and cons of various methods before committing to one.
2. Know your own limits and your worth.
One mistake many freelancers make is never learning when to say “No”. The important practice of turning down unnecessary jobs will give you more time to work on the projects that matter and on clients that will help promote your work. It may feel like you need to take on every job that comes your way, but not turning down jobs that stretch you too thin will result in late nights and late projects.
When discussing terms of the project with clients, you need to be aware of how long projects take you to complete. Underestimating the project’s length will devalue your work and lead to many hours spent working overtime on a project without getting paid anything for it. Overestimating the project’s length may cause clients to bring their work to a different freelancer who is more accurately valuing their work. Send time finding that sweet spot to ensure good work at a fair price.
Additionally, do get paid what you deserve. Setting ridiculously low rates may make clients assume that the service you provide is sub-standard, while high rates may turn away good business. Set a rate and make sure people don’t mess with it, but be open to changing your prices as time goes on. As you improve, you should begin charging more for the work you do, while dry spells in work may require you to offer your work at a lower price.
3. Differentiate company and personal finances
As a freelancer, it's your job to decide how much you get paid and when. Although this brings flexibility, it may invite troubles as well. You may end up wasting funds here and there.
It is crucial to define boundaries and have a strong wall of separation between funds allocated for your personal use and those for the business needs. It would be a shame to run out of funds to continue to grow because you decided to take a family vacation!
On the flip side, this also makes sure that you don't invest all of your money into the business and save something for personal and family needs as well. In the unfortunate event of any legal issues or debts, this trick will be a real life saver.
4. Emphasize business growth over financial management
Being a one-person-army may seem tempting but demands unimaginable effort and dedication. You can't be checking the accounts all day long at the expense of ignoring clients and lead generation.
One of the biggest worries of a freelancer is keeping track of payments and making sure that the finances are in order. Creating an invoice, sending it to your client, and making sure that it gets settled on time is an arduous task.
You may turn to expense management or an invoicing platform that can actually let you do what you love doing rather than boring spreadsheets day-after-day. Consider subscribing to a platform that automatically bills your client as and when required. The platform will even track the payment as income, so you don't have a painful tax season.
A growing business ensures a regular flow of income. The more clients you have, the more financially stable you would tend to become.
There is no denying the fact that freelancing is not everyone's cup of tea. In addition to discipline, will power and skills, it demands smart decisions, keen business sense, and access to the right tools. Citing an ever-increasing number of sophisticated financial management tools available in the market, we at Clarrow, have come up with something that provides a holistic solution to business management as a freelancer. Be it expense management, invoicing or tax vaulting, Clarrow does it all.
Clarrow is not just a tool, we are a platform, a community of freelancers like you who have taken the leap of faith together. With a strong sense of togetherness, we continue to build solutions that lead your freelancing from busy-ness to business. Happy Freelancing!