Take the Leap: First Steps in Freelancing

Freelance or Small Business?

Freelancing -- it sounds so good! No more office politics! Bye-bye, boss! You're out there on your own, the wind in your hair, no expenses, and clients aplenty. Every job is a new job, with a great hourly rate. Variety is the spice of life!

Then there's owning the small business. You're in charge! You can make good money as your business grows, and you reap the rewards of leveraging. Having one person generate $80 an hour is good -- especially when you pay your employees $40 an hour. Having five people generating $80 an hour each is even better. That's a $200-an-hour profit ... and you don't even have to be in the office!

But which is the option for you?

Both freelancing and running a business have established reputations for being unstable forms of employment. Conventional wisdom suggests that in your own business, the rug can be pulled out from under you at the drop of a hat. Actually, I'm of the opinion that working for yourself is the most stable of all forms of employment.

I'd even argue that the freelancer with a couple of regular clients has more secure employment than the majority of desk jockeys in businesses across the world. With a salaried job, you're at the mercy of the company. What happens when the board discovers there's not enough money in the coffers to give the management team a million-dollar bonus each? It's no problem! They just cut 500 jobs and pay the bonuses from the money they've "saved."

A friend of mine recently made the move into his own business from the corporate world. He looks upon this business as being far more stable than having a job. Why? Well, he sees that if one of his clients fires him, he has lost just a small amount of business, and, as he's very busy, it really doesn't matter. If he'd been fired from his previous life as the corporate money-man, it would've meant an end to his entire income.

Life as your own boss is unpredictable, it's true. That's the best and worst aspect of it. There's total authority to make decisions, but no one else to take the blame if everything goes down the toilet.

In a sense, especially as a freelancer, your time's your own. It's true that you can take vacations when you want, nod off when you want, and start work when you want. Life wasn't meant to be easy, though -- it can be a struggle to survive as a freelancer, and you can rest assured you'll find yourself working some long, hard hours. Sometimes those vacations are determined by the work you have to do unexpectedly, and it can be difficult to plan ahead. But as you work these hours and postpone those vacations, you'll come to recognize that the skills you're using are salable. Now that's the exciting bit.

It's not all merrily working and counting the money when you're running a small business, either. With a small business, you certainly have greater potential to grow and generate more income, but the organizational effort is substantial. Who will do your accounting? Don't forget to allow for taxes. Which staff members will take holidays, and when? Then there's sick leave, insurance, office-space rent ... you get the idea. Suddenly that $40-an-hour profit for each employee is dwindling down to not so much.

Whichever option you choose -- freelancer or small business -- you'll be inspired by the variety and amazed at your versatility, and thrilled when someone actually pays you. I actually had my photo taken with the first-ever check I received from a client, and yes, I can still remember its amount and whom it was from! Be aware that, although it will be hard work, the rewards -- not only in monetary terms -- can be great.

Stepping Out on your Own

As a marketing consultant for a few years, I looked at a huge range of businesses -- from the inside. It was a wonderful education.

I've heard many people say the Internet is too hard and too competitive an environment to give you any chance of success. I've also heard many people make exactly that same argument about any other industry. And I've heard many people talk about "now" not being the right time to build a successful business.

However, I've seen businesspeople succeed in recessions. I've seen businesspeople succeed with Internet businesses. I've seen businesspeople succeed in all sorts of other very competitive industries. The reason for this is simple: these people would succeed anywhere, with any venture. They put systems in place, they react to market changes faster, they sell better, and they manage more effectively; they do everything better than their competition.

You can succeed in any place, at any time. Run your business the right way, and you can't possibly fail.

Getting Started

So, where do you start with your business? Most people would answer "start at the beginning," but I'd like to offer you my own philosophy. You should start at the end.

As you step out on your own, your very first thought should be your exit strategy: you should know how and when you're going to exit your business. If your goal is to build the business for the next 30 years, and hand it over to your children, plan accordingly. If your exit strategy to build the business up and sell it in five years, when you're grossing $1 million annually, you'll need a different plan.

Plan your business very carefully -- don't just cruise along, hoping for the best.

Identifying your Goal

When you define your exit strategy, you'll have just provided yourself with a goal.

Let's say your goal is to build up your web development business over five years to $1 million in gross sales. Great! To achieve that outcome, estimate the value of sales you'll need to make each year. Your sales figures might need to look something like this:

To reach those targets, you'll need to sell an average of $20,833 worth of work per month throughout the first year. That's slightly over $4,500 per week. For a talented web designer, that might mean attracting just one new client per week.

That's easy to do -- we'll be running through the best ways to attract new clients a little later in Chapter 5, Pitch, Quote, and Win your First Client.

Planning to Achieve

You must plan to achieve! Your success depends on it! Let's take a look at the two most critical factors you'll need to consider.

Sales

Now that you have your goal, you'll need to look at how you can generate this one new client each week. Maybe you'll use PR; maybe you'll network at your local business club; maybe you'll send direct mail; maybe you'll take out an advertisement in your local newspaper. That's the start of a good marketing plan.

Then you could factor in ongoing work (content management, web site maintenance, and marketing) from all these clients -- another $1,000 per month.

Expenses and Eventualities

Next, take a look at what you'll need in order to take on one new client a week: a telephone, business literature such as letterhead and business cards, a reliable computer, a table and chair, maybe some support staff.

Note all these requirements down, and spread the costs over 12 months. Spreading them evenly is fine, or you can spread them according to the way you think the costs might be incurred. Repeat the same exercise to forecast the way you think your income might be generated.

Now, consider as many eventualities as you can, short of Earth-threatening meteors and species-jumping avian influenza. What if your computer is stolen? That would be ... annoying. Insurance, don't forget insurance. Don't forget to organise backup of all of your files offsite, whether you use an online service or simply burn to a CD and take it home. What if you need staff quickly? Have someone in mind to come in at a day's notice. What if you're sick for a week? Have someone to whom you can outsource the work. Keep thinking. What other eventualities do you need to cover? Listen to other people, and the problems they've experienced, to help you predict the unpredictable.

Keep developing solutions for all these scenarios, and soon you'll have a top-quality plan of attack: a weapon the vast majority of businesses don't have.

Forming the Right Mindset

When you're just starting out in your first business, you need to have a no-frills mindset.

Your first business isn't the right time to buy the new color photocopier, the latest and greatest fax, or plush red office furniture. No new car, no new cell phone, no huge office space with city views. Don't spend money on things that don't help generate money. Buying this kit was a wise investment; signing a three-year lease on a 200-square-meter office when you're just starting out, is not.

You need to focus on survival -- and that means running the business with as much frugality as possible.

Saving on Equipment

Maybe, just maybe, you can't keep running down to your local post office to use the fax machine, or borrow your brother-in-law's, and you actually have to buy your own. If you're rushing out to buy that new fax with 100-number memory, the ability to call at selected times, and all the rest of the latest and greatest functionality, stop! Take two steps back and slap yourself. You're wasting money!

You'll have to work hard in the early stages of your business to bring cash in the door -- don't throw it straight out the window on stuff you don't need. It might be exciting setting up your new business, but do not let it go to your head. You do not need a new fax. You do not need a new photocopier. You do not need a new anything.

Visit the local auctions, scour the newspaper ads, and visit secondhand shops. Ask friends if they have an old fax machine they don't use anymore. I guarantee that with just a little sniffing around, you'll find a perfectly good and inexpensive fax machine.

You may think this kind of austerity simply doesn't matter in the long run, and that a clicking, flashing, and beeping fax machine will impress clients. Understand that the fax machine really isn't the point. It's your outlook and attitude that is the crucial element. Save a few hundred here, another hundred there, a couple of dollars over there ... and before you know it, you'll have the mentality of a businessperson intent on keeping expenditure tight and cashflow positive.

In the end, that can be the difference between success and failure.

Don't worry -- I've fallen into the trap of buying expensive gadgets for the business I didn't really need. It was only after a few years, when I'd gained some confidence in what I was doing, that I relaxed about needing to keep up with everyone else and stopped buying stuff I didn't really need.

Saving on Office Space

Now, just where will that secondhand but perfectly functional fax machine go? Into your large and beautifully appointed office? Or into your back bedroom?

Don't let your ego get in the way of your business's survival. It's very hard to start, establish, and grow a business. You'll need everything in your favor, and having to produce thousands of dollars each month for office rental is not a positive. When I first started out, I ran my business from my back bedroom. It's a fine place to start.

I did most of my business on the phone, via email, or by visiting my clients' offices, so the fact that I toiled away in the bedroom never mattered much. With modern technology, your virtual office can be set up simply and easily. You'll have a Net connection and fax on one line. Your telephone calls can be answered by your "secretary" -- acquaint yourself with the power of answering services. Your clients need never know.

I was initially reluctant to let clients know I worked from home. My perception was that if you worked from home, you were small fry. I thought my clients would feel that if I couldn't afford an office, I would be too small to worry about; I thought it would damage my credibility. In hindsight, I think I may have been partly right.

Many clients will want to know that you have real offices, with staff and computers and faxes and an important-looking boardroom. Indeed, the types of clients I was trying to attract wanted the reassurance a bigger outfit would supposedly provide them, so I avoided telling these customers that my web development and marketing firm comprised simply me working from my bedroom. I found as time went on that very few clients asked me where my offices were, and when they did I answered truthfully, with the name of my suburb.

But I will say this: the moment I moved into my office, my business really surged ahead. I spoke with some clients after I took the plunge, and the general consensus among them was that once I had offices and staff, they could see I was serious about the business and not just testing the waters.

The other aspect is that larger firms (and they're the ones with the bigger budgets for web development) felt far more comfortable in dealing with a business with offices, staff, and a higher profile. Having said all that, I don't advocate signing a five-year office lease -- I suggest you start off slowly. When I finally moved into an office, I had a regular income and a fairly well-established client base from which to grow.

Now that I have the offices with the boardroom, break room, a reception area, multiple phone lines, a fax line, high-speed Internet connection, and plenty of staff, I spend a fair amount of my time working from home on a laptop!

Innovating and Making Do

My offices do not contain a single stick of new furniture. All of the six desks came with the office, as did the furnishings for the reception area. Our two bookcases and the boardroom table came from the local secondhand store, at a cost of $350. The break-room fridge cost $50 at a garage sale. The office chairs were all secondhand, and cost $180 in total. The boardroom chairs are my old dining-room chairs.

Remember that success is whatever you want it to be.

The more expenses you have, the more income you need to generate. This reduces your chances of surviving in the tough world of business, and that's obviously not what we want. That's one of the reasons most businesses fail -- and you're not going to fail.