If there is a silver lining to periods of economic uncertainty, it is the freedom it offers entrepreneurs. It’s not a coincidence that two of the best years for starting businesses occurred at the peak of the Great Recession. As people look for new ways to add income to their households, they often turn to their talents. Sometimes, those side hustles will emerge as a more viable career path than their full-time jobs.
But starting and managing a freelance business isn’t an easy task. Being a business owner means having to wear several different hats from the creative director to CFO. To start, let’s break down how to start a freelance business into more manageable chunks. You’ll learn everything from establishing your brand to getting your business finances in order.
Establishing Your Brand
First off, you need to decide what type of work your freelance business will be doing. Are you skilled at writing? Have a robust background in digital marketing or graphic design? You need to nail down what exactly your company does and what services you will offer clients.
But successfully running a freelance business is more than just a personal marketing strategy, it’s also about marketing your brand. Your brand goes beyond the name of your company and logo. Think about your professional style, what sort of clients you want to work with, and your company goals. Understanding these early on will save you some headaches down the road and help you develop your niche.
Build a Network of Clients
The name of the game in the freelancing world is finding clients. After all, no clients mean no work, and no work means no income.
There are several ways of approaching client acquisition. Which methods you decide to use will depend on your industry and the scope of your existing network.
- Tap into your current contacts. If you are already working in the field or have a network that does, reach out to them. Let them know about your new business and ask them to put out feelers for any potential jobs or clients.
- Find jobs on online marketplaces. According to Website Planet, 73% of freelancers find work on online marketplaces. For those starting in graphic design, copywriting, and editing, the right online job board can be an excellent way to get experience and build contacts.
- Reach out to potential clients. Do you have a list of businesses that could benefit from your work? You never know what can happen if you reach out to ask for the opportunity to pitch your business and services.
- Market yourself on social media and networking sites. In some areas of freelancing, the clients will come to you. The key is to generate interest in your company on social media platforms, networking sites, and search engines.
It may be hard to land clients, especially at first. The jobs you take may be frustrating or unrelated to your long term interests. As time goes on and your company builds a solid reputation, many find it easier to find and land clients through referrals and word of mouth.
Get Your Finances in Order
Starting a business is more than just a creative endeavor. You’ll also need to have a solid understanding of the finance and legal aspects of business ownership.
Separate Business from Personal
The first step in organizing your business is to separate your business finances from your personal finances. The easiest way to do this is to create a new bank account for your business expenses. It provides credibility with customers and creditors that your business is legit.
Commingling funds also raises a red flag with the IRS. Having separate accounts with clear trails of revenue and expenses will be necessary if you ever get audited. Separating your accounts will make it much easier to do the next thing on our finance checklist: keeping track of income and expenses.
Keep Track of Everything
It can be easy to lose track of receipts and get lazy about documenting your income. Still, as a business owner, this record-keeping is crucial. Good record keeping will make your life a lot easier when it comes to tax season, managing your business accounts, and keeping your finances in good health.
Register Your Business
Unless you’re doing business as yourself using your legal name, you should register your business. Doing so can give your business personal liability protection, legal benefits, and some tax benefits.
Your business structure and location will determine how you will need to register. The United States Small Business Administration has a ton of helpful info on creating a distinct legal entity and obtaining a federal tax ID.
We could write a whole separate article on taxes for freelancers. After all, not much involving the Internal Revenue Service is straight forward or easy to understand. The critical thing to realize is that doing your taxes as a business or independent contractor won’t work the same as filing as a traditional employee.
- IRS Publication 334 — Tax Guide for Small Business offers some useful information on filing and paying business taxes. It also includes helpful advice on accounting periods and methods, business income, business credits, and self-employment tax.
- Publication 535 — Business Expenses is also an excellent guide to read. It walks through the ins and outs of deducting business expenses.
Because loan approval depends on your stream of income, some may find it hard to qualify for a business or personal loan with non-traditional forms of income. However, there are still ways to show financial institutions that you can pay off what you owe. It also helps if you work with a modern financial institution that understands the unique situations you will face.
Finding a Community
Creating your own business and working for yourself doesn’t mean starting this journey alone, even if you are the only employee. It’s important to find a community of freelancers and business owners, either online or in real life, that you can turn to for advice and wisdom.
Starting and running a freelance business is no easy task. The road ahead contains many obstacles and hurdles. There will be good days, and there will be bad days, but having a career that you are passionate about will be worth it in the end.