10 Things Every Freelance Business Has in Common
Although I’m a freelance web designer, I always try to teach others about freelancing in an industry-agnostic way. Whether you’re a designer, makeup artist, glassblower, or dog walker, all freelance businesses share fundamental similarities — and that’s what I try to write about in an effort to help as many people as possible.
Those professions might sound random, but my wife is a bridal makeup artist and esthetician who owns her own studio here in upstate NY. My brother is a glassblower at the Corning Museum of Glass and has an Etsy shop.
Fun fact: I designed and built both of their websites and logos! You can explore Rachel’s Edit and Outlaw Glass Co. here.
Their freelance businesses are drastically different from mine. My wife offers makeup and esthetics services and my brother sells physical hand-made products. Meanwhile, I craft digital experiences for my clients remotely.
Yet somehow I’ve been able to help them navigate a life of self-employment using my own experiences.
That got me thinking, “what exactly does every freelance business have in common?” As it turns out, I believe there are 10 structural pillars to every freelance business that I think are worth noting:
- Clients & Customers
- Marketing & Advertising
- Products & Services
- Proposals & Contracts
- Timelines
- Finances & Taxes
- Income & Payments
- Expenses
- Testimonials & Social Proof
- Communication & Expectations
If that seems obvious, I think you’ll be pleasantly surprised if you stick with me to the end of this article. Let’s unpack these in more detail.
Clients & Customers
The most essential part of every freelance business is its clients or customers. Without them, you don’t have a business, you have a hobby. When you first start freelancing, your top priority above all else needs to be getting clients.
At first, they don’t even need to pay you, they just need to hire you.
That said, freelancers often think they need to invest a lot of time and money “setting up their business” before they can get paying clients. More often than not, that isn’t necessary. It’s just an excuse we use to conceal our fears.
My first several web design clients were word-of-mouth referrals. I had no portfolio website, no logo, no legal business entity, no contracts, and no experience. In fact, I barely had the skills and often learned along the way.
Before my wife opened her own makeup studio, she assisted another bridal makeup artist to get experience, build her network, and boost her reputation. My brother sold his first glass art directly to people he knew before he opened an Etsy shop and later started fulfilling bulk wholesale orders.
Insight: If you provide services, your freelance business has “clients”. If you sell products, your freelance business has “customers”.
If you want to be a freelancer, the best thing you can do is just start. No excuses!
Marketing & Advertising
The best way to get new freelance clients is to attract them to your business. In other words, you need to make other people aware that your business exists. When you think of marketing and advertising, you probably think of billboards, online ads, TV commercials, and posters.
That might be true for large businesses, but what does it look like for freelancers?
Marketing yourself simply means telling people about you or your business. That can happen verbally during a conversation with a friend or when you leave business cards at a coffee shop. Other times marketing yourself means launching a portfolio website or putting a sign near the road inviting people into your shop.
No matter what type of freelance business you have, telling others about what you do is essential. While this can feel foreign and uncomfortable at first, putting yourself out there and building confidence will directly impact how successful you are. You never know who might be a potential client!
Products & Services
Have you ever thought about what makes a freelance business… a freelance business? Simply put, every business exists because they sell something that clients or customers want to buy. Broadly speaking, there are two main things businesses sell: products and services.
Web designers, developers, photographers, makeup artists, babysitters, and dog walkers offer services. Glassblowers, woodworkers, musicians, and bakers all offer products.
Some freelancers can use their skills to offer both. For example, graphic designers can use their skills to offer design services to a client or they can sell their design work as physical or digital products.
Best Seller!
However, many freelancers who offer services also think in terms of projects (which is most of what I discuss on this blog). As a web designer, my clients come to me with a project and I offer them web design and development services to help them complete that project.
The project has an associated cost, timeline, and scope of work, but ultimately, I’m still selling web design services. My wife, who sells bridal makeup and esthetics services operates her business based on appointments. My parents are real estate agents who operate on commission (they only make money when their client buys or sells a home).
In other words, a project is just one way you can structure the sale of a service.
Productized Services
What about a service that’s offered as a product? For example, a makeup application is clearly a service, but it’s sold as a product. A single appointment might take one hour and cost $85. It’s a consistent, repeatable service where the cost and timeline are known upfront and don’t change based on the customer.
This hybrid offering is called a productized service, which has a fixed price, fixed timeline, fixed scope of work, a clearly defined outcome, and clear benefits to the client.
No matter what type of freelance business you operate, every freelancer sells products, services, or a combination of both!
Proposals & Contracts
You might not realize it, but every freelance business utilizes some form of a proposal or contract. As a web designer, I send my clients a proposal and a contract.
The proposal outlines the scope of work, timeline, payment schedule, and project summary. The contract is the legally-binding terms and conditions (how we agree to proceed if things don’t go well).
But what about a carpenter who sells furniture? What about a makeup artist who sells bridal makeup services? What about an electrician or landscaper?
You might not think these freelancers use proposals or contracts, but they do — it just looks a bit different for their businesses.
A verbal agreement is still a type of contract. A price tag is still a type of proposal.
If I ask a carpenter to build me a custom dining room table, there will likely be a verbal or written agreement that outlines the timeline, cost, materials, design, dimensions, etc.
My wife doesn’t ask every new client to sign a contract before getting a facial, but she does require bridal parties to sign a contract that outlines the cost, timeline, payment schedule, travel fees, and more.
My brother doesn’t require every customer to sign a contract before buying his glass artwork, but he does use proposals and contracts when selling bulk orders to larger retail customers. He also signed a digital contract with Etsy allowing him to sell his products on their platform.
Insight: Every time you click “I agree to the Terms & Conditions” on a website, you sign a digital contract with that company.
Electricians and landscapers will still provide an estimate or quote before starting work. These are all types of proposals and contracts that ultimately set expectations for both parties and outline the details of the product being sold or the service being rendered.
If you want to download the exact proposal and contract templates I use, you can find them here.
Timelines
It’s no secret that everything takes time. As a freelance web designer, my projects can last weeks, months, or even years. In contrast, my wife offers esthetics services that last about an hour. Her on-site bridal makeup services can last an entire afternoon.
My brother, who sells glass artwork, spends most of his time creating products and considerably less time selling them.
For freelancers who sell services, their time is usually spent interacting directly with the client. For freelancers who sell products, their time is mostly spent creating the product.
Where many freelancers get tripped up is charging for their time. How can some web designers charge $30 per hour and others charge $30,000 per website? Should you charge hourly, daily, weekly, or monthly? Should you charge a fixed price?
If you’re interested in learning more about pricing and charging what you’re worth, check out this article:
Finances & Taxes
Two things are certain for every freelancer: you need to manage your finances and you need to pay taxes. As a freelancer, sole proprietor, or small business owner, it’s imperative that you develop an understanding of your finances if you want to be successful.
In other words, if you want to enjoy all the benefits of owning your own business, you need to know how to actually run the business.
For those who aren’t financially inclined or interested in the business side of freelancing, this can take a tremendous amount of discipline at first, but it does get easier over time.
The degree to which freelancers understand finances may vary, but everyone needs to have a basic understanding of 4 things: income, expenses, profit, and taxes.
The formula is simple: income ($) – expenses ($) – taxes (%) = profit/loss ($).
Breaking It Down
If you make $25,000 as a freelancer, no taxes are withheld, and the $25k is your total income (before taxes and expenses). Then, we need to subtract expenses, which are any dollars you spend to operate your business. Expenses lower your taxable income!
Finally, we need to subtract taxes, which are a percentage of your taxable income and vary based on your income bracket.
You’ll be left with either a profit (positive dollars) or a loss (negative dollars).
Google Spreadsheets can be an incredibly powerful, effective, and convenient tool for tracking your income and expenses. I created 6 spreadsheets to help track my own finances and I made them available as templates for you to download too!
Taxes can also be extremely deceptive for freelancers. When you’re employed at a company, tax dollars come out of your paycheck automatically so you never have to think about them. But when you’re a freelancer, you keep every dollar you earn until tax season, which can easily result in a large and unexpected tax bill. For more details about how taxes work as a freelancer, read this article.
In the simplest terms, the goal for any freelancer or small business owner is to always earn more than you spend.
Income & Payments
While earning lots of money may not be the purpose of every freelance business, it is a requirement for every freelance business. For many freelancers, the purpose of a freelance business is to do what they love and have more freedom.
But if you’re not making money, then you can’t have your own business doing what you love anyway, right?
The very existence of your freelance business relies on income and payments. Yet, getting paid is arguably the most challenging task for freelancers. The second most challenging task is pricing your products and services, which is the prerequisite for getting paid.
After freelancing for nearly 15 years at the time of this writing, I can tell you there is really no right or wrong answer here. The way you price your services and the strategies you use to collect payments will evolve over time. Some experts tout value-based pricing and shame hourly rates. Others tell you to derive an hourly rate based on your previous salary.
Who should you trust?
I’ve found success using a variety of different pricing strategies. Setting clear expectations upfront for when and how you’ll get paid is key to actually getting your payments. I’ve written about this in much more detail in this article and in my best-selling book Kickstart Your Freelancing Career:
Here’s a chapter list in case you’re interested in learning more:
- Chapter 1: Is Freelancing Right for You?
- Chapter 2: How to Make Freelancing Your Primary Income
- Chapter 3: Identifying and Attracting Your Ideal Clients
- Chapter 4: Properly Setting Your Rate
- Chapter 5: Writing a Winning Proposal
- Chapter 6: Managing Projects, Clients, and Expectations
- Chapter 7: Collecting Payments, Testimonials, and Referrals
Remember, every freelance business doesn’t just have income, they each require income. The best thing you can do is start with what you know, learn from every experience, and build confidence in setting your prices and asking for payments.
Expenses
Every freelance business has operating expenses. Some are obvious, others not so much. As a general rule of thumb, ANY money you spend to operate your business can likely be considered a business expense.
Note: I am not an accountant or tax professional and you should always consult a CPA to find out what is and is not considered a business expense.
The types of expenses you have will vary greatly depending on the industry you’re in, but the list is quite extensive. Here are some of the business expenses you can claim that lower your taxable income:
- Payroll (employees and freelance help)
- Bank Fees & Interest
- Rent, Utilities, and Insurance
- Company Car
- Equipment or Equipment Rental
- Hardware, Software & Subscriptions
- Furniture & Supplies
- Commissions & Fees
- Meals & Travel
- Marketing & Advertising
- Office Equipment
- Legal Fees
- Maintenance & Repair
If you operate a small business out of your home, you may be able to deduct partial expenses such as:
- Home Office Space (as long as this is your main place of business)
- Mortgage Interest
- Security System
- Property Taxes
- Maintenance, Repairs or Upkeep
- Business Phone Line
- Insurance
For more examples, check out this great article on Freshbooks. All of these expenses lower your taxable income. That means if you earn $50,000 as a freelancer, but you spend $10,000 on your business, your taxable income for that year would be $40,000.
In other words, you’d be taxed on $40k instead of $50k. This can potentially lower your income tax bracket as well, which can decrease your tax burden even further.
Lastly, it’s extremely important that you track all of your expenses throughout the year. Again, Google Spreadsheets are an amazing tool for this if you’re not ready to pay a monthly fee for software like Quickbooks. It takes discipline, but it’s well worth the money you’ll save.
More importantly, you’ll know exactly how much you’re spending throughout the year, which isn’t always obvious if you aren’t actively monitoring your spending. After a few years, you won’t have to monitor things as closely and you can likely automate the tracking process with online software as your business grows.
Testimonials & Social Proof
How do you know if a business is trustworthy? Most of us probably read reviews and shop from brands we trust. In fact, reviews (also known as testimonials or “social proof”) can heavily influence your decision to do business with someone. However, most freelancers aren’t well known and don’t work with repeat clients or customers.
Many freelancers aren’t good at collecting high-quality testimonials from their clients either.
Think about this from a potential client’s perspective. If they’ve never worked with you before and you have little or no testimonials for them to read, how are they supposed to trust you?
This might not be a huge deal if you’re selling physical products, but if you’re charging $10,000 for custom web design services, this becomes a really difficult decision.
Consider another scenario: what if you wanted to hire a freelance web designer to design a website for your business and they said it would cost $10,000? What would you need in order to trust them with your money? Testimonials? Referrals? A portfolio website? Several conversations and meetings? All of the above?
You probably would hesitate to sign a contract with a freelancer you’ve never worked with before to complete a high-risk, high-value project that could impact how others perceive your business.
Ok, so we’ve established that testimonials, referrals, and social proof are an essential part of every freelance business. But how do you get glowing, detailed testimonials from your clients and customers? Check out this amazing article from Ryan Waggoner.
Communication & Expectations
Communication is by far the most challenging and critical aspect of every freelance business. It’s the backbone that ties everything else together. I truly believe that you actually can’t become a successful freelancer or small business owner unless you’re a good communicator.
Communication is already difficult for many people, but communicating about business is often completely foreign and feels uncomfortable and unnatural.
There is no shortcut to getting better at communication. It takes time and practice, but here are two tips for developing your communication skills:
- After every conversation, reflect on what went well, what didn’t, and how you can improve next time.
- Before every conversation, take notes, anticipate questions, and proactively prepare answers to those questions.
This will dramatically improve your confidence, which plays a major role in communication. Too much confidence can be a repellant. Too little confidence can make clients hesitate or invite them to take advantage of you. You’ll have to find the right balance of confidence over time.
When you become a better communicator, you can set appropriate expectations with your clients or customers. This is much more relevant when you’re providing services to clients than when you’re selling products to customers.
However, setting learning how to set appropriate upfront expectations with the people you work with (or anyone you know for that matter) is an incredibly effective skill that will prevent misunderstandings and lead to better outcomes for everyone.
Ok, I know this was a long article and I appreciate you reading this far. I hope I was able to offer a few new insights and inspiring perspectives on what I believe are the 10 pillars of every freelance business.
If there’s one more thing I’d want you to take away from this article, it’s that you’re not alone. Everyone shares similar struggles and every business is fundamentally similar!
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