Building Your Freelance Business: From First Steps to Getting Paid

1. Introduction: Hey, I'm Oliver. I'm the head of support over at AND Co from Fiverr, here in New York. AND Co is the back office software for freelancers that helps them from proposal to payment, and really we work on the backend side of things, so you can focus on your business. In this class, I want to answer every single question you have about running your logistics of your business. Your paying your taxes, to getting paid, to creating contracts, and really everything in between. We're also going to give you direct resources on websites that can help templates, things you can check out on AND Co, as well as partners in the freelance space that really have your back and specific industries. Now, I work at AND Co and I'm a huge fan obviously. So, some of the examples that we will be using will be directly related to AND Co, but you can do your own research and really see what's out there, and figure out the tools that are best for you and your business, and how you want to grow. This class is really for anyone that's thinking about starting their own business, has just started a business, or he has been running their own freelance business for a while. At the end of the day, this is for people that want to take ownership over their professional life, do things the way that they want to, and really be their own boss. So, as you're taking this class, feel free to take part in the discussion section of the video. We'd love to hear about issues you've come up with, ideas you had, tips for other freelancers based on your own experiences. I'm so excited you decided to join the class. Let's get started. 2. Getting Started: Freelancers have all different kinds of businesses. You have your traditional ones you think of like your digital marketers or designers, but it also covers a wide range of people, self-employed CPA, and really it's about anyone who is in business for themselves. With 40 percent of the US workforce going freelance by 2020, it means that there are a lot of people that need to know how to run their own business. So, the first question to ask yourself is, how do you know if you're supposed be categorized as a freelancer? So, the IRS actually classifies a freelancer as someone who is a sole proprietor or an independent contractor that conducts a trade or business. This also applies to you if you're a member of a partnership or a guild, and it can also include people that have their own business part time. So, you can still be considered a freelancer if you're doing this full time or part time as a side hustle. A lot of freelancers that now are full time did start this as a side hustle. So, no matter the kind of work you do or how frequently you do it, there's always going to be the logistical side of managing your business behind the scenes. The invoices, making sure you're getting paid, tracking expenses properly, and ensuring that you have everything taken care of so that you can really work on the creative side of your business. So, in this class we're really going to focus on project based freelancers. Freelancers that have a start and end date for their projects, deliverables, due dates, and billing terms for specific services that they're going to provide. So, once you've decided to start your own freelance business, the first thing you need to work on is establishing your business identity. What is a business identity? Well, there's three basic types of legal classifications. You have an S-Corp, an LLC or a sole proprietorship. What a lot of freelancers do when they first start out is they stick to being a sole proprietor. That pretty much means that you're representing yourself as a business. The reason why a lot of freelancers stick with this is because it's simple, it's pretty inexpensive to stay in that classification and you're allowed to really just focus on what you're creating and your output. Now, a lot of times as a freelance business grows, there are added complications and variables that come into play. That's when a lot of freelancers start to consider maybe reclassifying themselves as an S-Corp or an LLC. It's really about separating your personal liability from your professional liability and making sure that your assets are protected. So, one of the reasons that a lot of freelancers don't just jump right into classifying themselves as an S-Corp or an LLC is, frankly that it can be expensive and also add a couple of extra complications that someone who's just starting a business doesn't necessarily need to deal with at that time. When it comes to getting proper and expert advice on how to classify yourself and protect your personal identity and your business identity. We always recommend speaking to a CPA. They're the experts in tax law and running and managing a business properly. It's worth the money when you're ready to spend the time getting custom-tailored advice for them on what to do and what's right for you. So, as you're getting started there is going to be a ton of research that you need to put in. There is a lot of resources out there besides Enco and the full suite of resources that we have outside of our regular platform, a couple of other good resources that we like to recommend to our members are things like Elevate from Fiverr and also checking out the Freelancers Union here in New York. Both offer some pretty custom and tailored introductions to setting up different steps like establishing your business identity. But really like referencing some of the resources within the Freelancers Union can be super helpful. This is a group of people that are here to serve as an advocate, protect you and make sure that you're really protecting yourself. So, one of the earliest and first things you need to think about when you're establishing your business identity is, what you're going to be called? Generally, freelancers fall into two categories when it comes to picking a name. They either decide to stick with their real name and have that be the business identity or they pick a name that kind of embodies what they're doing. It's really up to you, there's no right or wrong way to do it, but you should really spend the time early on thinking about how you want to convey your brand and your reputation to the world. That can really be symbolized in the name that you choose for your company. 3. Contracts & Proposals: As you're getting ready to put your business out to the world, it's really important that you have all the necessary paperwork together so that you can really look as professional as possible, as well as protect yourself. Now with that being said, making sure you have a solid, legally binding contract and proposal is paramount. So, a proposal is super important as one of the first potential touch points for a prospective client. This is about you proposing the work you're going to do, the value you're going to add, and how long it's going to take. This is also where you're going to convey the worth. How you explain each step of the project, when you're going to complete it by, and what they're going to get for their money. There's really no right or wrong way to create a proposal, but it's always better to err on the side of having too much information and provide a prospective client with too many options versus too few. So, in my experience, I've seen freelancers really use proposals effectively in one of two ways. One is to get new clients and drum up new business, and the other is to provide clarity on a project that's already been pre-discussed, before you get to that contract stage. So, creating your own proposal is super easy. You could always create your own, you can find a bunch of free templates online and And Co actually has a custom proposal feature built right into the app. So, once your proposal has been agreed upon and approved, the next and most important thing is that you get a solid and legally binding contract to protect you and your work. Having a legally binding contract is absolutely critical. It's about protecting yourself, your financial security, and your livelihood. So, when you have a proposal that's approved and you're about to get working on a project with a client, make sure that you've got a legally binding and solid contract signed by both parties. Once you have that, you pretty much are ensured that you get the same protections as someone that is, well, under contract. Unfortunately, the reality is that at some point 70 percent of you as freelancers have reported getting stiffed on a payment that they're owed at some point. While it's absolutely terrible and should not be the case, it is the unfortunate reality. But, if you have a legally binding contract, you have that much more of a leg to stand up on. So, to make and ensure you've got an effective contract, there are a few key elements that must be included every single time. So, the first and most important part are your payment terms, essentially the deliverables. What services are you going to provide in exchange for what rate? You need to convey here what services you're going to provide in exchange for payment. Now, it's really important to establish and have very clear payment terms. This is going to convey what services you can provide, for what rate, and when you're going to be paid for it. Now, a lot of freelancers will leverage things like Net 30, 60, or 90, meaning that payments will start to come in 30, 60, 90 days after the project's been completed. It's totally up to you, and what makes sense for you and your client. But, it has to be clearly and explicitly explained what is going to be paid when. So what a lot of freelancers do to ensure the integrity of the project and that both parties are on the same page is, they'll do things like require a deposit to be paid upfront. They'll set milestones for when certain payments need to be made based off aspects of the project being completed. It's really important that you set the same expectations for your client as they set for you in terms of what you're going to deliver them. So, a next big and important feature in the contract is outlining your scope of work. It's really important to be as specific as possible, because this is where you're really confirming that you and your client are on the same page about what's going to be delivered and how you're going to be compensated for it. So this is also an opportunity for you to outline the extra work that's going to go into the specific aspects of your deliverables like, what kind of meeting prep will you need or calls will you need to make? Research what you need to do. All of this is about providing the extra detail so that you can really explain how you're going to get to the goal of delivering the services that you're planning to deliver to your client. One important thing to note in a proper contract is ownership rights. Now, this can really apply to and be different for individual freelancers and the kind of work that they do. For some freelancers, it'll be a bit more applicable and others it won't be. But really this is about clearly explaining what happens to the work that you create and how it can be used after the fact. So, for example, if you're taking part in a print campaign that's going to use your image and likeness, you would be outlining how long they can use it for, what sort of platforms they can be used on. That's just one of the examples, but this is where you really make sure that you protect the long term reputation of your brand, and also your identity. So, lastly, there are some key clauses that you should always include. The first one is a kill fee or a cancellation fee. Now, this is super important because sometimes projects don't necessarily go as planned, there could be ton of different reasons for why a project might start, and then stop. Now, having a cancellation or a kill fee established and agreed upon beforehand really can make sure that both parties understand the risks of essentially abandoning a project. Sometimes it might make sense, but having that cancellation fee established beforehand really gives you the freelancer leverage to feel confident that the work and the time and the effort you're going to put into starting to work on deliverables for someone is going to be respected and treated fairly. So, depending on the kind of work that you do, having revisions be requested back and forth between the client and the freelancer as the project's ongoing, it can be sometimes kind of an arduous task in the sense that as a web designer, you put a bunch of work into outlining what a website is going to look like. You send it over to your client, they're not super jazzed about it. They had a different vision. They ask for you to revise it. Well, sometimes that can be a huge pain, if you've already put a number of hours into it and you have a very specific vision of what it's supposed to look like. That's why it can be super helpful to establish how many revisions can be requested. If for any reason it goes outside of that scope, what sort of fee or extra penalty will you be able to accept as a freelancer for this extra work that you're essentially being added to do. So, billable expenses is one of those realities of creating a project and delivering results to a client. Depending on the work you're doing and the kind of project it is, there can definitely be some expected and also unexpected billable and business expenses that you as a freelancer incur as you're making it all happen. Now depending on the agreement that you have and what you can anticipate before you start the project, it's really important to outline what expenses you would be charging and adding to your fee, so that there aren't any surprises on the client side. This can be everything from having the mileage that you spent to go travel to a specific site to do a photo shoot, or the art supplies that you needed to make your new piece of work happen. This could be digital services or hosting that you need as a web developer to make sure that the client's website stays up. Billable expenses and expenses that you incur when creating a project, supernormal, happens all the time, but if you can anticipate what those might be and how much it might cost beforehand, it'd be a great opportunity for you to include it in that scope of work early on. That way, there's no surprises later on and really you can get the work done that you need to with all the supplies and materials that you need. Sometimes it can be a concern for new freelancers about potentially dispute occurring at some point in the project or afterwards. Now, not to worry at all because this rarely ever happens, but at the end of the day, ensuring that you have a proper proposal outlining your scope of work, and a legally binding contract established and approved by both parties, it won't be an issue. Frankly, there won't be any surprise in that respect. Now, one of the cool things that the Freelancers Union here in New York offers as a resource, if in the rare chance that something does happen and you do need some help to protect yourself, and your work, and the reputation of your brand, you can actually download the Freelancer Union app and they can help source a lawyer that can help with legal and business disputes in your area. Also, if you ever need help as an And Co member, you can always reach out to the support team and the chief operator, and we can do some research for you and put together a list of the top rated lawyers in your area. So, having a solid and inclusive contract that's legally binding and approved by both parties is super important before you begin any work and take on any project. Now, there's a ton of free resources out there. There's contract builders all over the Internet. If you're into it, And Co also has a really sweet contract builder called the standard freelance contract, that we actually co-created with the Freelancers Union here in New York. So, to wrap up, there's a few things I'd love for you remember when you're really trying to create a legally binding and solid contract for yourself and your business. So, the first important part is establishing those communication methods upfront. The next is that, if the scope changes at all, you need to recalculate your fee and update that paperwork, and definitely, remember to include that cancellation fee and late payment fee. Another really important thing is really kind of building a team of experts that are around you and support you. This includes having a CPA that you trust, a lawyer that you trust, and any other kind of experts that you can really go to and feel comfortable getting advice from. Next up, we're going to talk about how to price your work and making sure that you get paid every time on time. 4. Pricing Your Work & Getting Paid: How do you price your work? The best way to figure out how to properly price your work at any given stage of the growth of your business is to really do some research. Now, the good news is that there are a ton of resources out there that provide some very simple and straight up facts about what people are paid for specific roles and services. Glassdoor is a great one, salary.com is another great one, and then also checking out freelance forums, whether it's like digital marketing forums, or Facebook groups or general communities and forums that are out there, they can help guide you on how to price yourself competitively. What we do find in my experience is that freelancers that are just starting out can tend to underprice a little bit, they'd rather get their foot in the door so that they can really get a few clients and jobs under their belt so that they can start to charge higher rates. It's super important that you don't undervalue yourself at any time. One great step in addition to doing research about other competitive salaries and rates is to figure out your annual income, and what that target is going to be. If you can work backwards, figure out how much you want to and expect to make in the year including business expenses, other expenses like potential taxes or software that you're going to need. You can work backwards, figure out how many hours you plan on working per month, per week, per day, and really figure out what that target price is for a specific block of time. Once you have that figured out, you can start to project based off the actual amount of work that you're getting, where you're going to fall in between, what kind of rates you expect to make and want to make. So, one thing that you want to think about as you're growing your freelance businesses, how you want to increase and raise your rates over time. As you get more experience, jobs under your belt, it's totally natural that you continue to grow. Now, that should be commensurate with your experience and the kind of relationships you've already pre-established with clients. Now, it's super common for freelancers to send out emails to their clients saying,"It's been a year since we've started working together, next year I'll be raising my rates on par with my experience." It's a totally normal thing to do, and while it can seem a little bit scary, it's not a greedy thing to do. This is how you're supposed to be respected and taken seriously as a professional. So, now we've discussed a little bit about how to set your rates and make sure that you're providing competitive services, we're going to switch a little bit, talk about the other side of things, making sure that you can get paid in a professional, quick, easy, and responsible way. The most professional and common way that people get paid and expect to be paid is by sending an invoice. Invoicing is super important and it's one of those tools that every freelancer needs in their arsenal. Having a proper invoice not only makes you look professional, provides a written record and history of what is being asked and required, but invoicing is basically how you keep things honest and organized. Now, a lot of freelancers think that when it's time to actually get paid, that the onus is on their client to send them an invoice and then essentially get paid. But the truth is the onus is on the freelancer. You need to be responsible for sending out invoices in a timely manner that clearly explains what expectations you have on when you expect to get paid and for how much. Now when it comes to invoicing, I know it can seem super daunting, if you're not like a trained accountant, what do you do, and what are you supposed to put on it? But the truth is invoices are super easy and while that might sound a little bit confusing and confounding, they only need to have and spell out a few basic key elements. That is who you're invoicing, what your invoicing for, how much, and when you expect to get paid. Now, you can also go into details about how you want your client to pay you, whether there's any billable expenses that have been added to this, and also your payment terms. So, nowadays there are a ton of different ways that you can capture payments for the work that you're doing from your client. You can request a cheque, cash, credit card payment, or direct bank transfer. Some of these are very easy and simple to request of your client. Some of these do require that you leverage a third party like PayPal, Stripe or WePay to handle the capturing and security side of getting your credit card payments. With that of course, does come a small processing fee that these companies charge for the privilege of getting paid by a credit card. It's normally pretty small, it's never usually more than 2.9 percent with 30 cents depending on where you are, but some freelancers also prefer just to do ACA to direct deposit. With a lot of these merchant services, they charge a much smaller fee. So Stripe for example, they only charge 0.8 percent of the total payment with a five dollar max. So, another pretty easy and automated way that some freelancers choose to get paid from their clients is by setting up recurring payments or subscriptions as we call it at Anchor. Now the idea here is that, instead of sending a one-off invoice that you're asking your client to pay one time, what you do is you set up payment terms with your client or you're going to charge the same amount at a set frequency, send it off to your client to approve it, they enter their credit card once, and then you basically set it and forget it. Now, what we find at Anchor, for example is that some freelancers do prefer to have that written evidence of an invoice, others really prefer to have, they're hosting charges for example for a client's website, just be automatically charged every month or every couple of weeks. Really depends on what works for you and the kind of service that you plan on charging your client for, but they're both great options to look into and at the end of the day they do make life a little bit more easy and a little bit more automated. So, in this globalized world it's pretty common nowadays for freelancers to have clients that aren't necessarily like in their city or state. A lot of freelancers will pick up clients and jobs that are out of the country or even the same continent. So, what they do is they do have to adjust a little bit so that they can charge their clients in their respective currencies. Now, there's a lot of software out there including these merchant services like Stripe and PayPal that can adjust and accommodate those. Now at the same time, it's very important that you price your work accordingly, and take into account possible currency fluctuations with exchange rates, but it's a pretty common thing to have multiple clients in different countries with different currencies. So, one thing we do need to talk about is making sure you get paid and what happens in the situation of late payment or non-payment. It's an unfortunate reality, but the truth is as a freelancer running your own business, you are responsible for making sure you're paid on time and in the right amount. Now, what can happen sometimes is that client pays a bit late, they need to be reminded, or you do need to track down the payment. Now, we do see this in my experience every once in a while. It's super unfortunate, but the good news is that there are a ton of resources and support out there to make sure that that doesn't happen and that if it does, you're protected. One of the things you can require upon the approval of a contract is that a deposit is paid immediately. Now, it depends what kind of work you're doing and how comfortable you feel starting work with a certain amount of money already on the table. Some freelancers want to charge a very small percentage or a dollar amount upfront, others want half now, half when it's done, it totally depends on you and your experience with clients and the kind of work that you're doing. At the end of the day, you should never feel hesitant or embarrassed to ask for deposit. Deposits are very normal and another thing that you can do is you can require that a fee will be added for late payment. If you've got a set schedule with your client to achieve certain milestones and deliverables that come with payments on the other side from them, you can basically require that there will be a specific dollar amount or a percentage added if your client's late to pay. Look, nowadays, there is no excuse for a client to not pay you on time and the amount that you've agreed upon. It's 2018, so you can really take advantage of some of the technological advances and resources online to make sure that you're both protected. At the end of the day, you're providing a service, you're not working for free. In very rare cases that a client is a little bit hard to track down or they're a bit late on a payment, as a freelancer who runs their own business, the burden is on you to immediately reach out and ask for an ETA. Now in most cases, this is easily solved with a nice and friendly email to your clients just reminding them that it's past the due date or that the due date for an invoice is approaching. Now, if you're really having trouble tracking down a payment, you can always send a demand letter. A demand letter is one of those pretty powerful tools that serves as a very friendly, but formal reminder that your client owes you money. Now, one of the cool things about Anchor is we actually have a feature within the app that allows you to easily get that demand letter printed and sent on your behalf. Now, if repeated attempts to get that payment and track down your client aren't really that successful, there are organizations like the Freelancers Union who can help get in touch with lawyers and other professionals that can help with labor disputes. Now, obviously, that costs money and that's definitely a last resort. It is always within your right to reach out to an attorney and see what your options are. If you ever need help and you're an Anchor member, you can always ask your chief operator, would be happy to put together a list of the top rated lawyers in your area. Next up we're going to talk about how you keep track of your expenses and what you can write off. 5. Expenses and Write Offs: So, a business expense is loosely categorized as any sort of expense that you incur to keep your business running and operating healthily. So, as you're growing and running your business, there's always going to be costs and expenses that you incur to keep things going, and also, to keep growing and evolving. Now, the good news is that there are a lot of things and expenses you can write off, and then also, certain expenses that you can have your client reimburse you for. So, for example, if you need to buy, purchase or rent stock music for a video you're working on, that is technically and traditionally something that you can bill your client for. Another example would be mileage, tracking the transportation cost to go to and from a meeting with a client where you're going over a brief or the progress of the project. Now, other things such as your dues and subscription or software like Photoshop that you use to keep your business going everyday, that wouldn't technically or traditionally be something that you could ask your client to pay for, but there are certain considerations that the IRS makes that allows you to write off certain parts of it. If you write something off, what that does is it doesn't necessarily give you a refund or reimbursement the same way a billable expense to your client would, it allows you to basically take and deduct a small amount of the total taxes you'll pay to the government for the year or for the quarter. So, basically, the idea is that you can use some of these write offs to lower the amount of income tax you're expected to pay at the end of the year, which can really like put you in a lower tax bracket and somewhat reward you for the money that you're investing into growing your own business. Good news is the IRS makes it really easy to know what categories you can and can't expense, and you can always find them online. Also, at Anchor, we actually built in the IRS expense categories within the income tracking. So, when you're categorizing your expenses, you always know what's allowed and what's not. So, the good news is that nowadays, technology can pretty much help you keep expense tracking totally automated. There's a ton of resources out there, apps, software that really just allows you to connect your bank account, and you just set it, and forget it. So, while there are a ton of tools out there that will automatically classify and categorize your expenses for you, if you do want to go the old school route and have a spreadsheet that outlines every single expense for you to enter yourself manually, there is a bit of information that you need to always have it to ensure that it can be written off properly and accepted by the IRS. Now, really, there's four key things that you must have tracked for every one of those expenses if you're going that old school route. That is the date of purchase, the amount of the purchase, the proof of purchase, and the purpose of the purchase. So, defining what it means to have proof of purchase, what we recommend is to have a photo or the physical copy of your receipt for that purchase. Now, as mentioned, there's a bunch of apps where you can simply just snap a photo of the receipt, attach it to an expense, and you're good to go. But it is really important to keep records of every single purchase that you make. So, it's really critical that you are on top of tracking your business expenses 24/7. If you're not, if you let things slide or you're a little bit lazy about it, you're essentially leaving money and investments in your business off the table. Well, it's absolutely critical to always be on top of tracking your business expenses. In my experience, I found that once freelancers really kind of get into a rhythm of tracking their businesses, projecting their projects, the scope, and the work that go into it, it really becomes kind of a second nature. It doesn't become more confusing. As you grow your business and get more comfortable with tracking expenses, it just becomes easier and easier, less of a hassle, and obviously, you can always leverage tools that can automate it for you. So, one small tip is when you're starting a new business or you have your own freelance business to actually open a business bank account. It's not as complicated as it sounds, and it actually makes it really easy for you just to make sure that all your professional and business expenses are separate from your personal. Next up, we're going to go over how you handle your taxes. 6. Doing Your Taxes: Now that you are running your own business, you are responsible for paying your own taxes. Whereas, if you worked a typical office job, that would automatically be deducted from your paycheck and you'd be good to go. Now typically, freelancers pay their taxes quarterly, while it is not required if you pay them annually there is a fee that is added on top of it which is essentially giving away free money. So what freelancers do when they get ready for their quarterly tax payments is, they set that money aside and when it comes time, the tax day comes up, they just send it off and they move right along. So there are a bunch of tools out there that can help freelancers estimate and calculate their upcoming quarterly tax payments, Anco has one, but there is also a ton of resources out there that really can help you be prepared. So when it comes to paying and filing your taxes, there is state and federal. When it comes to paying your federal quarterly taxes, there is a simple form called the 1040-ES. You could easily download it, fill it out and file it. When it comes to paying your state quarterly taxes, it is different depending on where you live. So you just need to do a little bit of research or consult a CPA on what forms you need to fill out in order to file them properly. So when you are actually getting ready to file your taxes, you can either do it yourself, you can outsource it to a CPA or you can use a company like Vizor which will handle everything for you. So there is kind of a minimum amount that you need to hit in terms of income in order to have to pay taxes and it is your responsibility to know what that threshold is. So as you are starting out freelance business, filing and figuring out the whole tax thing can be a little bit daunting, but the truth is, ton of resources out there and really as you grow your business and just become more experienced in general, it will become a little bit more routine, a little less scary and a bit easier to get done. 7. Final Thoughts: So, while we have gone over some of the big and obvious aspects of running your freelance business and making sure that you're on top of everything, there are of course things and specific issues that you'll come across as you grow your business. The truth is that there are a ton of resources and support groups out there. If you do have any questions, or comments, or tips for other people that are just starting out, please feel free to add them in the discussion section below. Also, if you happen to have any other questions, consult things like your local freelance union or you can join Anco for free and we'd be happy to help get you all set up. Well, hey, I hope this class really helped make things a little bit clear, helped make you feel a bit more confident in starting or continuing to grow your own freelance business and really make you feel confident that you can do this. At the end of the day, there is no reason why you're not getting yourself out there and growing your own business for yourself. So, with this class, we have added a bunch of the resources and specific links to things that, I've gone over and that we've talked about so far. So, you can really do your own research and learn a bit more at your own pace, in your own time. Feel free to check out all the links over here and we'd love to see how everything goes for you. Thank you so much for taking this class. We cannot wait to see where you go from here. Good luck with everything. 8. Explore More Classes on Skillshare: