For those of us working in fields that reside within the digital realm, becoming a freelancer is very enticing. Especially for web developers and designers. The start-up expenses are negligible, and the path to transitioning away from a full-time job looks fairly natural.
Making the switch is the hardest part. People call it, “The Plunge“, or “Taking the Leap“, and other such phrases involving jumping off a cliff, that make it seem more terrifying than it really is. If you’re going to use those terms, think of like giving a yell and executing a really sweet cannonball. It causes a momentary stir, and you’re having a lot of fun. Or, like giving that first push on a sled, that starts you down a snowy hilltop. Geronimo!
The decision to quit my job and work for myself was not something that happened instantly. It was made over the course of a few months, during which I made some preparations. It was a calculated decision. I already had freelance jobs going on the side, but could not take on very much without sacrificing the ability to have down time. As I continued to weigh the pros and the cons, the pro side of the scale kept getting heavier. Eventually I got tired of discussing and thinking about it, and just had to make it happen. When you’re constantly asking yourself, “Why am I not doing it?”, it may be time.
Of course there still are challenges and downsides to a life of freelancing. If you’re also thinking about becoming a freelancer yourself, I bet they are lingering in the back of your mind right now. I don’t mean this article to be another feel-good quit your job puff piece (the dream always sounds great in theory), but a look at practical preparation tips to get ready for and begin the freelance life, based on my own experience.
Pros and Cons of Going Freelance
I’ve listed all the pros and cons that I could think of. These may vary depending on your circumstances and responsibilities. I think it’s important to give some serious thought to them, and whether you personally can handle the cons/concerns (in a later article, I will discuss these in-depth and how they can be handled or alleviated).
The Pros & Daydreams
- Set your own schedule. Good for night owls and taking off any time during the day.
- You decide what work and clients to take
- Mobility – Travel or just work from a coffee shop. All you need is an internet connection.
- Higher income potential & multiple income streams
- Variety of work – Expanding your creativity and knowledge
- Pride in all of your work (it’s just you) and ability to take extra time to learn new things
- A better work/life balance
- Spend more quality time with kids or significant others
- Ability to explore your own business ideas
- Good if you don’t like being told what to do
- Ideally less stress overall? Maybe?
- Flexibility and, FREEDOM!!!
The Cons & Concerns
- Irregular flow of work or lack of work – Monthly income changes from month to month
- Loneliness – Lack of social interaction
- Running a business and administrative time-sinks
- Lack of insurance / benefits
- Amount of direct communication with clients – If you enjoy this, it could go under “Pros”.
- You must be disciplined – or rather, you will be forced to be
- Will it really be less stress, or will it be more?
Personally, I was most concerned with #1, #2, and #8. After the first three months, they are not so bad after all. I have no lack of work and have had to turn some down. There is a lot of work available on the web right now. Losing the social interaction of the workplace can be alleviated by doing some work at a coffee shop, setting up at a coworking space, keeping in touch with friends via instant messenger during the day, and making sure to get out more on weekends and after work. Having a dedicated working space is also helpful to get into the right mindset.
Making Serious Preparations
First, I would suggest that if you’re at the very beginning of your professional career, you should get some experience working at or with a studio/agency. It’s important to know how a web design studio functions, how to manage your own workflow and communications, common pitfalls you may encounter, how to quote projects, and how to work with clients and designers. You may disagree, which is fine; this isn’t a requirement, and you may have the ability to learn all these things by the seat of your pants without ever having a cubicle (luckily I didn’t have one).
You’ll also make some valuable connections that you may continue to work with and get referrals from later. A lot of my work comes from word of mouth, or designers I know who need a developer. Sometimes I refer work to other developers when I am too busy, and vice versa. Networking at events and meetups can be another way to make helpful connections to fill that gap.
Line Up Work, and Put Irons in the Fire
Before you go quitting your job, make sure you have clients and some work lined up. Moonlight a little on some projects if you haven’t already, to get a feel for what it’s all about. Transitioning will be much easier if you have some guaranteed work ready to go. Realize that you’re going to need to spend a percentage of your time on administrative, workflow, and business setup tasks during the first couple weeks.
Start Thinking About Passive Income
Passive income is a revenue stream that happens without your intervention. This typically means creating something to sell: stock assets, themes, skins, a book, ad-space on a website, mobile apps, etc. In addition to cutting costs, even having a small amount of passive income every month is going to help pay the bills. And, as freelance work and payments can be irregular, it helps add some stability.
I’m just getting started with this myself and am hoping to make it a larger percent of my income. The nice thing is that, for the most part, you can set it and forget it, check back later, and suddenly there are sales and some money. I’d recommend checking out using sites like the Envato Marketplace (ThemeForest, CodeCanyon, etc) for selling stock assets.
Go Lean: Figure out Your Finances, Cut Costs, and Have Backup Savings
One of the first things I started doing was to look for ways to cut my monthly expenses. Some cuts I had thought about before, but hadn’t got to yet. With a salary, it’s a little easier to let some luxuries and monthly fees carry on. One that I did not have a problem with cancelling was TV service. For me, just keeping the internet and using Netflix was great. I have to watch a lot less commercials.
If you’re having trouble identifying your monthly expenses, take a look at Mint.com. It’s a free money management web app that is useful for getting an overview of your accounts, and reviewing purchases and deposits by category. You’ll probably have to go through and re-categorize a handful of them to get an accurate picture. Figuring out exactly what your monthly expenses are (on paper works too) is going to determine how much work you need to do and what hourly rate to charge.
If you have zero savings, and are going paycheck to paycheck, I think it’s better to hold on to that job for a little while. At least until you can stabilize your situation. Cut costs, and save some money. Have a few months salary on hand. In my mind, I figured I could start off making a few hundred dollars less every month. I imagined the almost-worst-case scenario, and how many months I could sustain myself until money ran out. The more savings you can pull together, the less you will have to worry about the switch to freelance. You may not even have to dip into it at all. This is also important because you may not get paid for a few weeks, and that big project you were banking on may get delayed. Payments, in general, will be irregular.
Start Using an Invoicing and Time Tracking Tool
Using an invoicing and time tracking tool is going to make your life so much simpler. You’re going to need to track time if you’re doing hourly work. And you’re going to need a way to send bills and receive payments. I’m happily using Harvest, which is a little cheaper than FreshBooks for a single user. FreshBooks is a bit more robust, and has some features like recurring expenses that I had to send in feature requests to Harvest for. Both are excellent options. This helps me in a few ways:
- Tracking time efficiently and all in one place – I also use it to time all non-billable tasks like project management, for review later. Seeing how long a project actually took is important for future quotes.
- Punching the clock – Hitting the start timer button makes me feel like I’m on the clock and is extra incentive to not get distracted. If I do, I have to subtract time and then become aware of how much more work I need to do. The total time for the week and the day keeps myself accountable.
- Basic Client Management – Keeps track of client information, including addresses, names, and emails/phones.
- Sending a Nicely Designed Invoice with Little Effort – Click a button to send an email with a nicely designed PDF. You can quickly see outstanding invoices, or record payment that you might receive by check. If payment is past due, you can send another reminder without feeling like you need to have to write a carefully worded email (unless it’s REALLY past due). One less thing you need to handle.
- Online Payment – Using Harvest, I am able to receive payments from Paypal accounts that are linked to a US bank account at only a few cents per transaction (not a percentage!). This is without signing up for a special PayPal account with monthly fees. You can also use other payment gateways.
- Recording Expenses – Since my finances are fairly simple as this point, I’m using Harvest as a central hub for everything money related. Expenses recorded include any software or scripts I need to purchase, hosting and domain names, as well as monthly fees for things like Creative Cloud. You can also scan in receipts via the mobile app.
In addition to Harvest’s 30-day trial, it does offer a limited free plan (limits projects and clients), which was a little hidden on their site when I signed up. I was happy that I could continue using it after the first 30 days, when I still only had one or two clients. You do need to manually switch to this plan.
Figure Out Your Hourly Rate – What’s Your Minimum to Pay the Bills?
If you’re just starting out, deciding on an hourly rate can be difficult. A lot of first-time freelancer start off charging too little, and under quoting their time (plan for the unknowns when they are typical, as well as updates to a final product). Don’t undervalue your work, and the fact that not everyone can do what you do. You’re a professional right? If you’ve got experience under your belt and are good at your craft, charge what your work is worth.
This doesn’t mean that you should charge hourly for every project. Most larger projects end up being signed for a flat rate. But coming up with the final quote for them will be easier when you can multiply estimated hours by your base rate.
Realize that some agencies are charging $100 to $150 an hour, and even some high-end freelancers. Charging $25 to $35 an hour is probably too cheap, unless you’re desperate for work, or have very little experience. You may be surprised at how raising your rates can increase the quality of work you receive, which also allows you to put in more care. It doesn’t mean you’ll sign less clients, in fact, it may mean that you’ll sign more (see story about the wedding photographer).
There are extra costs involved when you’re self-employed that need to be factored into your pricing. There is the overhead; the operating cost of doing business (office, utilities, software, scripts, stock assets, etc). Then there is the time stuck doing project management, writing up contracts, handling emails, and having conference calls, which may not be factored into the cost of the project. This could be 10 to 15% of your time on average; use time tracking to get an accurate gauge on this.
Get Your Documents in Order
Get an EIN from the IRS
You’re basically a sole-proprietor now, whether or not you register a business or not. You are going to want to sign up for an EIN:
An Employer Identification Number (EIN) is also known as a Federal Tax Identification Number, and is used to identify a business entity. Generally, businesses need an EIN.
Some independent contractor forms may ask for this Tax ID number. I was thinking this would be difficult, but it’s probably the easiest government-related thing I have ever done. It literally takes you five minutes, and you’ll get an email with your number.
Tip for Digitally Signing Contracts
At some point you’re going to need to digitally sign some contracts and agreements. I do this using a scanned image of my signature that I have ready to use, and the free PDF viewer/editor Foxit. In Foxit, you can use the Typewriter tool:
- Comments -> Typewriter Tools -> Typewriter
- Edit -> Add Image
- Under Advanced, select Proportional.
Get a folder structure set up, and schedule backups
The basic folder I use to organize my web development work is the following:
-clientname --web ---content ---psd --www --archive
Create Templates for your Own Contracts
If you’re working with another agency that gives you work, they will likely have an independent contractor agreement that you need to sign. When you are dealing with a client directly, you’re going to want to have a default contract template or two. I’d have at least:
- A general hourly work contract for edits and small projects. Get some form of payment up front for new clients.
- A template for larger projects and builds. Include upfront fee percentage (25%? 50%), and a kill-fee (to prevent you from doing a ton of work and not getting payed for it). Itemize all work to be completed, so it is clear what your deliverables are. You can point to the contract if new items start being requested.
Here are some of the best links to sample contracts and related articles that I’ve found, to get you started: , , , , , 
It’s also worth searching the free legal documents at docracy.com.
Making the Decision, and How to Quit your Job
Now that all the preparations are made, there’s still an elephant in the room: actually quitting. What’s the right way to go about it? It’s exciting in your head, and also a little daunting when you realize there may be tactics involve in actually doing it in a professional manner.
The responsible standard is to put in two weeks notice. Especially if you’ve been at your job for a good amount of time. You want to keep good references in tact, in case you decide to later give up on freelance go look for another full-time position (or an irresistible offer appears). It’s about the right amount of time to finish up projects, create any leaving documentation about what you do, hand off work, and clean out your computer and desk. Your boss may ask you to stay longer, so be willing to stand your ground. I ended up agreeing to three weeks instead of two, since I had been there five years, but in retrospect I don’t think it was necessary.
How I did it: I scheduled a quick meeting with my boss during the day, and let him know that “I’ve decided to quit and become a full-time freelancer.” I let him know honestly that this is something that I have been wanting to do for a while, and that I was putting in my two weeks.
Keep it professional and realize it’s not personal, it’s business. This is the decision you’ve made. I appreciated the time that I was there and everything I had learned. I do not think this initial conversation is the time to be negative and get into an argument about any of the gripes that you might have. Going on the attack, out of emotion, is not going to end well, and could get awkward if you’re still working there for two weeks. It’s also a good idea to send a formal resignation to your boss via email after this, for the record. Your boss may want to reference it later, and it’s good to have in writing in case any questions arise; so include what day you will be leaving.
You may be asked to do an exit interview. I’d say the same as above applies, but how you approach this is up to you. Realize that you’re going to be asked some questions, like what you liked least about the job and the company. It may be worth taking a glance over some sample exit interview questions. There are a few things that I regret not saying; I did not think of them at the time because I was on the spot.
Send a company-wide email to your co-workers: This is an opportunity to show gratitude to those you’ve worked with, and to say your goodbyes. Heck, it wasn’t all bad right? The news may spread disjointedly, and it is a good way to let everyone know directly. Personally, I decided to send this after my resignation meeting, but you may want to send this (or a separate message) on your last day. Include how you can be contacted outside of work: email, instant messaging, phone, etc. Your friends there are valuable connections, and you may work together in the future (or just hang out as friends).
Alternatively, you could quit like Joey (just kidding):
Have you made the freelance jump? Any thoughts or additional suggestions based on your experience? See anywhere where I am off the mark? I’m interested to hear from you in the comments below.