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Thursday, June 7, 2012

Understanding the Business Aspect of Freelancing

Being a freelance designer is more than just fun and games. It’s not just playing around with Photoshop and other gadgets. You need to master the harder aspect of freelancing too: the business aspect of things. Once you know the ins and outs of the business of freelance, you’re sure to be a successful freelancer. Freelance is a business, first and foremost. You have to sell yourself to your clients to make a living.

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The Business Aspect of Freelancing

There are several business management errors a freelancer can make: finance mismanagement, no business plan, client mismanagement, etc., avoid these pitfalls, as they can be a very hard and expensive mistakes. You don’t need to be a business guru or hire a financial adviser. You will only need plain common sense and understanding of some basic business concepts. Here are the basic things you need to know about the business aspect of Freelancing.

Business Plan

A business requires lots of planning. So from the start, it’s important to have a solid business plan in place. The use of the business plan will provide you all the necessary strategies and information so that you can succeed in your endeavors, move forward stably and avoid any unexpected pitfalls and problems.

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Most freelance jobs are creative-based: photography, graphic design and creative writing. Thus the idea of actually writing a formal business plan can seem daunting. Don’t worry, you don’t need a very in-depth business plan with a freelance business. The business plan needs to define the most necessary parts:

  • Executive Summary – The whole summary of the business plan, on what it is in a nutshell.
  • Competitive Analysis – How can you define the freelance situation in your area? It pays to do your research on the competition, but remember that fellow freelancers create healthy competition, cooperation, learning, and more.
  • Business Overview and Description – What is your business about? What areas do you specialize in? What are your expertise? Are there any types of projects you want to work on? Be as concise and precise on what your freelance business is all about.
  • Operating Procedure – Freelance businesses are usually a one man show, which makes operating procedures easier. Just outline how you are going to operate your business, as well as when and where you plan to work.
  • Financial Review – Check your expenses and income coming in. This will give you an idea of how much you’re going to charge. You will also know your financial status and what direction you’re heading in the future.
  • Action Plan – What marketing techniques are you planning to employ? You need a detailed plan on how you’re going to get your name out there, to get more clients and projects.
Some people start ventures and businesses without a business plan, and that’s fine. However, remember that it is never too late for you to create a business plan.

Understanding the Basic Laws

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Copyright Laws

Copyright laws have become a bit more complicated with the dawn of the World Wide Web. It is now too easy to steal work online.

First things first, you must know which things you can copyright, and which ones you can’t. There are certain things that you can not copyright: ideas, concepts, methods,  procedures, slogans, discoveries and anything owned by the government cannot be copyrighted. Once you’ve owned a copyright, you now have exclusive right to give permission for the reproduction and distribution of copies. Anyone who wants to use your copyrighted property must get your consent first.

Copyright Infringement

Copyright infringement can be costly and can put your reputation at stake. The Digital Millennium Copyright Act protects copyrighted material. Through copyright protection systems, signal scramblers and encryption technology is now considered a criminal offense.

The simplest way to avoid a copyright is by obtaining the copyright owner’s permission before using it in any of your work. If you can’t get their permission, try to restate their idea in your own words. But don’t use large segments of someone’s article, as that is blatant copyright infringement.


Your reputation will be at stake if you are accused of copyright infringement and plagiarism. There are instances where writers and designers have been accused of plagiarism but have done so unintentionally. To avoid plagiarism, use plagiarism checker sites like Copyscape. All you need to do is copy-paste the article into the box and then it automatically searches the World Wide Web for any content that matches the article.


No one can escape the clutches of taxes. Thus, every freelancer must be prepared with the necessary paperwork and documents–income, expenses, and whatnot. Do you know that you can also get tax deductions for certain expenses: equipment, travel expenses, transportation expenses, etc.? Just be sure to keep track of all your receipts so you can write them off.

If you want to get a Social Security System number, you’ll need to pay the self employment tax. You may see the need to hire a tax professional to help you sort through your documents.

Your Workspace

You should choose a prime location that will maximize your productivity. Some freelancers choose to work at home. Working at home has plenty of perks. For one, you don’t have to spend on rent and other costs. However many freelance designers cannot work well at home, they find it too restraining, too boring or too comfortable.

You can opt to work at alternative working places such as cafes and parks. Some designers thrive in places with a lot of noise and interaction, but some don’t.

For more creative offices: 40 Creative Offices for Your Inspiration

Shared working spaces are now the latest trend in working, as they provide the necessary business essentials: wi-fi, fax machine, photocopiers, a conference room and some healthy human interaction.

If you do have the money, you can always rent office space to add professionalism to your business. You will have to wait for your business and client list to grow substantially.

Artist Rate

Your artist rate is the single most important factor to decide when starting your freelance design business. Some freelancers prefer to charge hourly, while others charge on a per project basis.

I recommend you to charge your smaller projects and revisions by the hour; but charge your large projects on a per project basis.

Client Management

Finding Clients

Of course, to keep the income coming in you have to create a solid client base. The best freelance designers are great businessmen and salespeople. You are selling yourself after all, and projects help you put food on your plate.

To find your clients, you have to advertise your work. You’ll have to create a strong web site and portfolio so that your work will be shown to prospective clients. Behance is a good web site, but you will need an invite to create a portfolio. There are plenty of free portfolio web sites there to check out, such as Flickr and DeviantArt. If you want full freedom and customization for your portfolio, invest in your own professional web site.

Social networking tools like Facebook and Twitter are very powerful. Be sure to include all your contact information, web site, Twitter and links to your other social networking site. Upload photos and constantly update statuses, news and events to have a constant presence online. You don’t have to be very formal about things, but maintain professionalism. Always check grammar and typos before you click ‘Post’.

After completing a project, it helps to get testimonials, commendations and referrals. Online marketing is a strong tool, you can now promote yourself and spend a lot less than investing in the expensive tri-media vehicle of print, TV and radio. Social media is still booming, and best of all, it generates great buzz for free.

Traditional techniques are just as important in snagging clients. Networking is a powerful tool, so be sure to be well-connected with fellow artists, designers and freelancers. Be sure to have a business card with you wherever you go. Contact every design studio, animation studio or advertising agency in your area. They might need you for outsourcing. You can also go to local publishing houses, print shops, newspapers, magazines and book houses.

Personal networking may even be more powerful. The more people you know, your name would more likely come up. So network, attend as many events, introduce yourself. Patronize local services, and they will surely do the same for you.

Satisfying Clients

So you’ve started building up a solid client base. The next most important step is to keep them happy so they bring you more work.

A successful business knows how to satisfy their clients. You should be able to effectively meet their objectives and expectations. Of course, you can say that it’s impossible to please everyone. But by listening well you will know what your clients sincerely wants. Be modest, and don’t oversell their expectations. Be honest and open to communication. Give them any idea on any challenges and roadblocks you may encounter along the way.

Dealing with Agreements and Payments

To make an agreement formal, you must draw up a contract. This legally binding document is necessary for drawing out the parameters of the business relationship, deadline, payment, number of revisions, just to name a few things that should be covered. A contract is important for defining the project and scope, as well as for protecting the rights of both the freelancer and the client.

Get everything on paper to protect yourself especially during the time of collection of payments. Have a payment deadline and lay out when you expect to be paid: up front, upon completion of the project, or during a set time period. Most designers need a deposit of around 50% before starting a project.

As your business and client base grows, you can then write proposals or bid for larger projects. This is known as RFP (request for proposal) or RFQ (request for quotation).

Financial Statement

There are plenty of financial terms that every entrepreneur has to be familiar with. One is balance sheet, which lists the business’ assets, liabilities and equity.

Assets include investments that put money into your pocket. These includes cash, buildings, fixtures, land, capital, equipment, patents, trademarks, copyrights, etc. Liabilities are accounts payable, credit issued by banks, loans and mortgages. Equity means investments in your business plus the fiscal profits. Through your balance sheet, you can determine how ‘financially healthy’ your business status is.

Just as important is knowing the cash flow of your business, so then you will know your liquidity. By defining your current financial state you can then establish goals to challenge yourself and increase sales and profit over time. Set deadlines for your goals monthly, quarterly or yearly. You can be as aggressive with your goals as you can, and review them everyday to give yourself motivation.

Freelance Discipline

Freelancers need to be disciplined. Methodology must be professional and projects must be delivered on time. If you are planning a meeting with your client, be sure to arrive there at least 15 minutes before. Be prepared with your portfolio and appear presentable (but, please, still be yourself).

It always pays to be prepared, so be sure to insure your business. You need to protect yourself in case of unexpected emergencies. Basic insurance to get include: health insurance, business insurance, gain loss insurance, accident insurance and life insurance.

Every freelance designer must have a good back up strategy. Have plenty of external hard drives for back ups, as well as an online back up such as DropBox and the Cloud. This is to ensure that all your documents are safe.

Being a freelance designer is no excuse for you to be lazy. Just because you are in control of your time, or you don’t have a boss, doesn’t mean you can be idle. In fact, being your boss and handling your own business is harder than any day job you can think of. You should be your own strict boss, follow your own guidelines and be serious about your discipline.


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