The Freelancing Guide: Managing your Finances

1. Introduction to class: Hey, everyone. Welcome to The Freelancing Guide: Managing Your Finances. In this part of the guide, I will walk you through the main points to consider when working on the financial side of your business. If anyone is new to my classes, my name is Faye Brown and I'm a designer and animator based in the UK. I went freelance about 6.5 years ago and I've learned a lot in that time. I've made mistakes which I've learned from and I've learned how to manage my clients, my personal projects, and my finances. I know a lot of you are in the same boat and similar positions. Some of you who've taken my previous Skillshare classes have got in touch and wanted me to talk a little bit more about this subject. So I really hope this class helps any of you out there who are working for yourselves. Depending on your culture or upbringing, talking about money can sometimes seem crude or a little bit too personal. Some people see success in how much money they make. Others see it as a necessary evil. I see it as neither of these things. I measure success in happiness, but I also know that money can play a part in that. I will look back on my accounts and think, "I've had a good year," and I feel positive about that. If I've had a quiet month, I'll look and see how I can improve on that. So this class isn't about how to achieve that magical six-figure salary, it's a practical class to help you as a freelancer or someone running your own business to keep on top of your accounts, deal with chasing invoices, and pricing your work. In this class, we will cover the main financial issues most people will face when freelancing and working for yourself. Some of these you might already be totally sorted on and some you might find are your sticking points. So take from this class what you need. We will start with where all freelancers have to start with, and that is finding work. To have a successful freelance career, you will need to bring in the money. Even if money isn't your driving force, most of us need it to live. So we will talk about some ways to get that ball rolling with finding work. Pricing is a massive subject, but I've tried to condense this down to the most important factors to take into account when pricing your work or your daily rate. Then we will look at quoting and invoicing and chasing money. I'll take you through my process of quoting to invoicing for a logo design project. You can apply these same principles to a variety of work. Then we will move on to keeping on board with your accounts. I will tell you how I manage my accounting and where I've gone wrong in the past. Downtime. We will talk about a few ways to cope financially with quiet times of the year where the work isn't flowing in. The project for this class is a series of simple steps to take at the end of each video. I really hope you enjoy this class and find it helpful. 2. My background: I just wanted to give you a little introduction into my background. I worked in London for about 10 years in motion graphics, working for a few different companies and I had a great time but eventually I started to get tired of one, the commute as we had recently moved out of the city and two, office politics. It definitely felt like I got to that stage in my career where going freelance was the natural next step. So in 2010, I took the step to leave my secure job and work for myself. At first, I still commute into London quite regularly and worked at various studios but then when we started a family, I realized that that wasn't really going to be possible with little children so now I mostly work from home for myself. Freelancing or working for yourself definitely has its pros and cons and this will become part of a series of classes where I will share with you my experiences and knowledge of freelancing. Personally, I think I'd find it hard to go back to work for someone else again now, I love freelancing but it's not always easy. When you decide to work for yourself no matter what business you're in, you'll find there is a time where you're taking on many different job roles. You'll be accountant, the project manager, the designer, the techie person, the photographer. A lot of us creative types don't particularly like dealing with the money side of our business but put simply, there is no business if you aren't making money. This is your livelihood so keeping on top of your money is so important. Remembering you have an invoiced for job four months down the line isn't ideal. Let's start this class and hopefully by the end of it, you'll feel more confident dealing with all the financial aspects of your business. 3. Finding Work: To be successful at freelancing or running your own business, you obviously need to find work, clients, and customers. Now,depending on your background, you might have a network of people that you've worked within the past to make contact with and get some good freelancing gigs. This is certainly how I started. Past clients and colleagues would hire me to freelance at their studios, I even went back to freelance at my previous place of work. I simply cannot emphasize enough the value of keeping in touch with people you meet throughout your working lives. Build those relationships, stay friends, and don't make enemies. I didn't intentionally go through life thinking, oh, I've got to be nice to this person in case I want to work with them again in the future. It just happened that a lot of people I met, I built genuine friendships and relationships with. But then you have the knock-on effect of them recommending new to others. So if you have come from a background of working in a similar industry, the first step to find work is tell everyone in your network that you are freelancing and you are available for work gigs. There are various ways to do that, reaching out on social media and LinkedIn, e-mailing or phoning past contacts, meeting up for a coffee. There's no right or wrong way, just letting people know you're available for work is the first step. For those of you who don't have a history of previous work in your area, maybe you're a graduate or you've completely changed career paths, you'll have the harder job of finding work and proving your worth, or maybe you sell products and you'll have to find outlets to sell and market your goods. You'll all be coming at this from different angles and industries so I can't advise each of you personally how to find work. Firstly, you need to figure out who your target market is in terms of who you're wanting to work with or sell products to, and I'll post a link to another class of mine that could help you with that, and then ask some general pointers, follow some of these steps. Tell your friends and network, ask them to recommend you, get your name and work out there on social media, are there any groups you can join on Facebook that might help? For example, there's a lot of crafty groups. I'm in women in advertising group where a lot of people ask if anyone can recommend someone in a certain area to do some research there. Facebook, Instagram, and Twitter, ask friends to share your pages. Make sure people can find your work easily online, personal websites, Behance portfolio perhaps; and then contact past clients and colleagues and keep in touch with them regularly. For those of you who sell products or services, get your name out there and recognized, whether that's in your local community or online, try to get featured in some magazines, on blogs, e.t.c. So network, share, be open, and build relationships. Here's your first project step, and I really want you to play along with this. Introduce yourselves in the project gallery, tell us who you are and what you do, and for Step one, simply tell us one thing you will do this week to find new clients or customers. Why should you tell us? Working for yourself can be lonely and isolating. Now if you tell one person about your intentions, you are then accountable to that one person and that will make you more likely to achieve results as you want to go back and tell them how you've got on. So tell us all in your projects one thing you would do this week and then check-in and let us know how you got on. Be accountable. I'll be playing along too so just check out my sample projects in the project gallery. 4. Pricing: Pricing your work. I was a little tentative about talking about pricing either in my Facebook Skillshare group, which you can all join. I asked you guys what you'd like to see covered in the class and pricing strategies came out as a really popular topic. The reason this is a tricky area is in this class it's quite open to people from all sorts of businesses. One of you might be a jury maker, another one a designer or a photographer and how you price your time and talent is quite personal to you and your particular industry, and also the country you live in and the cost of living. But I'm going to try and give you some pointers to consider when quoting or pricing your work. So firstly, think about what's a reasonable daily or hourly rate for your work. With freelancing you might be working from home or you might have to travel to work in a studio or go to a certain location. If you're working away from home, you should try to factor in your travel costs into your rates, but you don't necessarily have to tell your clients this. If you say, "Hey, I'm going to charge X amount more because I'll be traveling for two hours." They might think, "Well, I'll just find someone closer." So just encompass that into your daily rate or the price that you're going to quote for the job. If you're freelancing at a studio, they will generally want to work with you on the basis of a daily rate. When it comes to setting your daily or hourly rate, bear in mind the following factors. Find out what the going rate is for your business. Often industry magazines post articles about average rates which might give you a good starting point or talking to friends in the industry of which country you live in will also have a factor as the cost of living differs around the world. So I can't tell you what you should be charging per hour, but a little research and comparing online can give you a good idea. You then need to factor in your experience. If you've been working in your industry with a good level of success and reputation, then you'll no doubt charge more than someone fresh out of college. Even if a recent graduate has a stunning portfolio, your experience in working to deadlines and managing clients and talking with them counts for a lot. So don't devalue yourself. If you work from home, you might find you are working on several jobs at once. So you might quote a fixed price rather than a daily rate. When it comes to me pricing a logo design job, I will thinking about how many hours I will most likely spend on it and price accordingly. I will also add some of my experience in this area. Now, in the quoting video, I will go into that in more depth. Pricing hourly is sometimes not ideal. Maybe you could spend two hours creating an awesome illustration or logo and someone else might take 10 hours to get to the same level. Now that logo will be extremely valuable to your client. So you might want to take into consideration the value you are providing a business. Also, you might want to add money on if the job has a tight deadline as opposed to one where you have a few months. Sometimes I get an inkling that a client might be a little bit tricky to please and I might add a little bit onto the quote also. Sometimes depending on the situation and your area of work, quoting purely on an hourly or daily rate is simply not the right approach. So let's talk a little about putting a price on your art. So let's say you're an artist or Illustrator. If you're being commissioned, you need to firstly take into account how long you think that piece of work world take. But then you might want to put a percentage on top of that. Now why is one painting worth $500 and another $10,000. Who's to say? But think about where you want to position yourself in your particular industry. If you're a photographer, you can probably easily compare yourself to others and figure out where you fit in. There are some wedding photographers who charged 10 times more than someone else, but quite often it's easy to see the difference. An art is subjective. There are people who wouldn't pay a £100 for a Picasso, let alone millions. So I can't tell you how much to charge for your art. But if you can figure out who you are aiming your work at, that will give you a good starting point. So again, if you need help figuring out your target market, then please do check out that other class of mine. Selling products physically and digitally. A lot of you might be selling products on maths, maybe in the form of printed poster artwork or home wares, soap, food, goods, jewelry or other items. Now when you come to price your work, you need to take into account your costs for materials or printing plus the time it takes you to produce. If you sell food items, you might need to consider the cost of the wasted food that you don't sell. Once you've worked all these things out, then you want to add a percentage on what you want to make as profit. Almost what are you going to be charging for your talent or your skill. Again, you'll need to do some research into this and compare similar products with your own. You might serve digital products in the form of printable art or maybe online classes or content. Now, I've debated with myself constantly about what the right price point is to sell something in my Etsy shop, MissPrintables for example. You hope to sell lots of each item, but in reality, some prove very popular and lucrative and others hardly sell a handful of times. So pricing can be tricky. Again, research similar products. When it comes to selling a service like an online class, you have to figure out the right platform for you. Are you in a position to heavily market a class and get traffic to your own site? Now, charging a premium for each of these classes? Or would you be better of using a site like Skillshare where you have the potential to reach a lot of students, but you don't get such a chunk of the money per sign up. When it comes to pricing, my main advice would be to do your research, look at people in a similar industry and what they charge. Value your art and talent. Don't undersell yourself. There's people that will design a logo for a tenth of what I do and there's people that charge a lot more than me. So figure out where you fit in. Finally, don't be afraid to experiment with your pricing if it's not working out. If you aren't getting work or sales, figure out why. Maybe it's because you aren't getting your name out there enough and you simply need to market yourself more. Maybe you are overcharging. If you find you quite for a lot of work, but then you lose out because someone came in a lot cheaper then take time to adapt your pricing. You will lose out on the odd job here in there do to someone being cheaper. That doesn't mean that you should immediately lower your pricing. But if it is continuously happening, then it might be something to rethink. I've started a Pinterest board dedicated to pricing your skills or products. So feel free to add to this. Here's the link in the notes and I'll also put it up on the discussion board. So project step number 2, I want you to do your research now and share it with us. You don't have to tell us how much you'll be charging but in the project gallery, share something really interesting you found out by completing this step about pricing. Maybe it's an aha moment for you that you found out whilst researching others in a similar industry that you work in. 5. Quoting: Quoting, this might not be relevant to everyone's businesses. Maybe you sell jewelry online and unless you are making personalized jewelry from scratch for clients you probably won't be quoting for a job. But for any of you working in graphic design, illustration, animation, web design and development, photography, quoting is the first step to a successful and smooth project. You're going to need to adapt what I'm going to go through in a minute to your own business. But in your quote be as specific as you can so the client knows what to expect and also doesn't start asking for amend after amend without you having a caveat to charge for your extra time. I want to go through my process of quoting for a logo design job, that I'm hoping you can adapt to your area of work or take some pointers from. I don't charge the same rate for each and every logo project I do, I quote per job depending on the size of the business and the nature of the project. But this is essentially what I will include in the fixed price. Initial ideas, I will provide 4-6 initial ideas based on a given initial brief or direction from the client. They will then choose one ideally, but often there might be a bit of an amalgamation of two to develop. The development stage, I will typically then show them three options based on their feedback from their initial ideas. Then, they will choose one which I will move on to the final stage with minor tweaks, maybe color changes or scale between type and symbol, for example. I will then typically supply them with an EPS file and a JPEG. Occasionally, I will send along two versions of the logo or some other file formats. Then most importantly, I add this at the end of the quote. Any additional work at any stage, I will charge an hourly rate for extra options, more amends, etc. I've only actually charged extra a handful of times. But this covers me for any clients that maybe completely changed their mind at the final stage and you're back to square one for example, and this has happened. When quoting, be exact in what you are offering and cover yourself for any unforeseen circumstances, which could mean you'd have worked a lot of hours over the time you'd originally allowed. Projects step number 3, write out a quote for a typical project that you might work on. Write down what will be included in this price and what the amend process is. You don't have to share with us your price point, I just want you to write down as a template that you can then base any other quotes on. I can help suggest things that you might want to say or add, as anyone else can. Remember, this is called Skillshare for a reason. Remember to introduce yourselves and give us a background into what you do, so all of us can help suggest other things to each other. 6. Invoicing and chasing money: Invoicing and chasing money. When it comes to invoicing, I usually just invoice at the end of a completed job. Now, I have a lot of loyal clients I completely trust and I usually state to be paid within 14 or 30 days. But equally, I have made mistakes with this. Here's some tips when it comes to invoicing. Make sure you state or know your client's payment times upfront. One of the earliest mistakes I made was working on a five-week animation job that was worth a fair amount of money, and I was banking on that money to be paid quite soon after finishing the project. But then when I came to invoice, the company replied saying, their payment terms are to make payments within 90 days of receiving an invoice. A three months to wait for your money when you're relying on that to pay your bills is a longtime. Thankfully they agreed on that occasion to pay me a little bit sooner. If you are working on a big job like that, I would now always advise to find out the client's payments terms in advance or send them yours and make sure that they agree to them. Alternatively, on similar projects to this, I've got paid half the amount halfway through the project. Other companies have offered to pay a percentage upfront. I know that in other countries there will be different ways of doing general business like this. Chat to your friends in similar fields as you, and find out what the standard is for your country. Some people like to have a contract in place. I think this is much more standard in other industries and countries. For example, if you're a wedding photographer, you will definitely want to have some contract in place before the big day just agreeing with those terms with your bride and groom or the partners. I can't advise you on writing contracts with clients as is not something I generally do, but I will post up a link that might be able to help you there more. Since this experience is for me, any really big jobs, I won't wait to invoice until the very end. I'll either ask for some money upfront or to get paid halfway through half of the amount. That would be agreed before I start the job. Keep track on your money. It's hard. You don't want to put people off working with you by asking for money upfront or laying down your payment terms. But it's also very important if you know where you are with each job and then you can factor in what money is coming in and when. Keeping a record of when you invoice for each job and at the end of each month, check back through and make sure you're up to date with all those payments. Which brings us onto the subject of chasing invoices. You inevitably have to chase an invoice from time to time. Most people I've worked with, are usually quite apologetic. Firstly, just send a gentle reminder via email, most of the times, clients would pay me as soon as they receive it and apologize for being late. Others have written back saying they are really sorry, but they can't afford to pay me at the moment and then your left pretty stuck. Luckily for me, it's usually been on the smaller jobs. I managed to set up a little payment plan for one client who paid little over a few months. You might have to end up sending several letters ranging from a gentle reminder to a final demand payment and possibly legal proceedings. Luckily, I've never had to go that far, but I will post up some links to help with that if you ever do have to go down that route. Let's just go over some ways to hopefully avoid having to chase money. These will depend on your work and relationship with clients. Ask for 50 percent upfront or halfway through a big project. You need to judge how this will go down. If it's a new client, they might be put off by these terms, others will be more than happy. Don't hand over the final files until you've been paid. Again, this will come down to the client. If you've been commissioned to do an illustration for a magazine and they want it in two weeks, you probably won't be getting paid before you've handed that over. So you need to weigh up the risks. Being featured in that magazine might be really good exposure for you so you might be happy to take that chance. If you're a web designer, you could potentially not press live on a website until you've been paid, and then for photography, you could watermark your photos and only hand over the final clean images once you've been paid. If you're sending products in the post, I definitely wouldn't send anything until you have received the money. We are now going to move on to the next step that is closely related to this and that is, keeping on top of your accounts. 7. Keeping track of your accounts: You don't have to be the accountant of your business. You can employ someone to do your accounts, but you are responsible for keeping on top of your accounts. Your accountant won't know if you spent money on a train fare to work on a project that you need to then put down as expenses, unless you have a record of that and you pass it on. They won't know how many projects you've completed this month and what you've charged for each, unless you tell them. So it's a really important part of successfully working for yourself. In my first year of freelance and I thought, that's okay. I've got all my receipts in one envelope and a record of all my invoices. So I'll just figure it all out at the end of the year when I have to fill out my tax return. It was a major headache, trying to collate all of this stuff together in one day to pass onto my accountant was quite a hard work. So now I dedicate one day each month, usually at the end to fill in my Excel sheet with incoming money and outcoming money. I also use that time to check for any overdue invoices. Doesn't take long at all for me and maybe an hour or two. But it's so much easier than letting it all mount up. It's also useful as it gives me a good idea of what my tax bill is going to be at the end of the year so I don't get a nasty surprise. I'm going to show you a typical page in my Excel document just taken from a given month. Just to protect some of my clients privacy, I've blurred out the names and the values. I have an invoice named column. I have a days spent column which is mainly from my record, so I can see how long I spent on something. I have an invoice sent and an invoice paid column. I also have a notes columns for additional things I need to remember about that project. Maybe some things that I need to carry forward into the following month. A lot of people would set up a separate expenses document, but I don't generally have that many expenses. So I just keep it all together here. Now, Adobe CC, I pay for on a monthly basis along with etsy fees and some other expenses I will have a along way. I then have another page which keeps account of my monthly profits. Excel is pretty easy to use for this simple account management. If your business requires you to buy a lot of items that would go down as expenses, there are now phone apps where you can take a shot of your receipts and it will help you manage them. Now my biggest piece of advice when it comes to doing your accounts is to do them regularly. Either every week or every month, depending on the amount of incoming and outgoing money that you have. Don't let them mount up. It would just be one of those things that plays on your mind. Doing a little often is less daunting than a big mess of accounts at the end of the year. Now this is simple, obvious advice, but I've been guilty myself not following it, so just try and do it. Projects step number 4, have you got any top tips for doing your accounts? Maybe it's apps that you use on your phone or programs that you use at home. So why not share them in your projects and share them with the other students. 8. Downtime: Downtime. Depending on your industry or business, you will probably find you have busy periods of the year and quiet times. If you're a wedding photographer, summer might be busier than winter, if you sell products that lead up to Christmas, might be really busy for you. For me, I find January and August are my quiet times. January, people are coming back from the Christmas break and settling back into work, August, a lot of people are on their summer vacations, so work tends to slow down a little. Downtimes are okay if you manage them and account for them. If you know one month is looking quiet, you can plan your life around it. Maybe you take vacation at the same time. Maybe take two weeks off to do up a room in your house, or maybe use that time to work on personal projects and passive income streams. Now I will talk more about that in depth in another class, ways to fill your downtime, but as this class is focusing on the money side, I just want you to be mindful of it. Now, allow for downtimes and budget for quiet periods. Equally, don't worry about the odd month being quiet. It's quite normal with freelancing. So try to enjoy it and do something productive in that time. The final project step, step number 5, is just state down your plans of how you might use your downtime. 9. Final message: I hope you found this advice useful for your business. Please do upload your projects and workflow in the project gallery. I try to comment on every single project and really encourage you to share your steps there. Also, please pop over and joined the Facebook group. We have weekly discussions on various topics and it's just a nice way for me to get to know you guys more and what classes you might like to see in the future. So please let me know how you found this class and hope it will help you on your freelancing journey. Bye.