What is a Freelancing?
Freelancing is part of one being self-employed. Instead of being employed by a company, freelancers tend to work as self-employed, delivering their services on a contract or project basis. The next question on your mind right now would be:
Who is a freelancer?
A freelancer is a self-employed individual who offers services to a company (or multiple) without being a W-2 employee. Freelancers can take on as much work as possible from many businesses as they want. Eventually, their career and workload are in their own hands.
Since they are obviously contractors and not employees, freelancers must pay self-employment taxes every quarter. They also do not have access to benefits like company-sponsored retirement plans or health insurance coverage, unless they are a W-2 employer at another company.
Freelancers are most common in creative industries like web design, graphic design, and article writing. However, service-based industries offer a ton of opportunities for freelancers as well. Jobs like consulting, translation, marketing and social media management are often outsourced to contract workers.
How does freelancing work?
Setting up as a freelancer is a little bit like setting up your own business. While every country has its own laws and types of business structures available for freelancers, the key factors to consider remain the same regardless of where you live or work. So, are you really interested in freelancing?
Freelancers usually work on a per-project basis. For instance, they might take on a certain number of projects every month and charge either by the project or the amount of time taken to complete the project (i.e. an hourly or even daily rate).
Freelancers set their own hours and work on deadlines. For example, they might get four assignments from a client at the beginning of the month, with deadlines scattered throughout the month. Freelancers can work from any location at any hour, and they might even freelance for extra income on the side of a full-time job.
The freelance process typically goes as follows:
- The freelancer reaches out to clients/vice versa for possible contract work
- The freelancer tackles projects at agreed set price (per project, per hour, etc.)
- The client pays the freelancer for work (taxes are not taken out of paycheck; freelancers must pay quarterly taxes)
A career in freelancing offers flexibility and a chance to hone your skills for a price that you set. If a client refuses to compensate you for your worth, you can simply reject their offer and move on to the next client.
What are to be considered before becoming a freelancer
- Type of legal entity to work under. To start working as a freelancer (that is, officially), you’ll need to register your business with the local government. Keep in mind that the legal entity you choose (e.g. Sole Proprietorship, Limited Liability Company) will impact the amount of taxes you have to pay, your personal liability and the amount of paperwork required — not something that should be brushed aside carelessly!
- Paying taxes (invoicing, expenses, tax returns, etc.). Once you register your business, you’ll be legally required to file tax returns and pay taxes. Putting a robust invoicing and expense-tracking system in place from day one can prevent you from plunging into complete chaos at the end of the financial year.
- Choosing an insurance policy for freelancers. Even if you go freelance, you should be able to enjoy the same security and peace of mind that you get when working for a company. It’s worth thinking about paying for a special health, business or income insurance for freelancers to protect yourself from the unexpected.
- Opening a business account. In many cases, freelancers are not legally required to open a bank account, but most do it anyway. Being able to separate personal and business finances makes it significantly easier to claim expenses and work out the business profit at the end of the financial year.
- Building a client list. Building a client list prior to going freelance is a great way of getting enough work even during the quiet times of the year. Plus, as many freelancers will testify, there’s no better way of advertising your services than getting a client referral.
- Drafting your own freelance contract. A freelance contract is a legal document you and your client should sign before starting any work on a new project. What may seem like a boring formality at first, is actually your best way of protecting yourself against non-payment, liability and potential legal troubles. There are many freelance contract templates available online that you can download for free and adapt to your business.
Should I become a freelancer?
There are pros and cons to freelancing, just as with anything else in life; in my opinion, the pros outweigh the cons.
Here are some of my favorite things about being a freelancer:
1. Flexibility to decide how, when and where to work
One of the biggest perks of being your own boss is that you don’t have to ask anyone’s permission to work from home, start late or work while you travel. You decide your own business hours and you choose where to work from. If that means taking Wednesdays off to visit your grandma or working late into the night and sleeping until noon – so be it!
2. Choosing your own clients
Once your business is running smoothly, you’ll also have the freedom of choosing the clients you actually want to work with. And that’s a wonderful feeling! Whenever you feel like you don’t mesh with the client’s personality, don’t like someone’s attitude or payment terms, you can shift your energy to finding a new gig instead of fighting constant battles with the client.
3.Keeping all the profits
One of the best things about working as a freelancer is that you can see a direct link between working hard and your account balance. Since you keep all the after-tax profits, it is also up to you to decide how you want to allocate and spend the money.
What are the drawbacks of freelancing?
What do freelancers do when things don’t go as planned? That brings us to the challenges of running a freelance business. It’s important to be aware of some of the less favorable situations you could face if you decide to become a freelancer, so that you can prepare yourself and take the necessary steps to avoid anything dampening your freelance experience.
Even though there’s a lot to love about being a freelancer, there are some downsides, including:
1. You’re pretty much on your own
Whenever you run into issues with clients, receive a complaint or face a non-payment, there’s no legal or HR support to turn to – and resolving these issues on your own can be draining at times. The best way to reduce the impact of these issues is to sign a freelance contract before engaging with a new client or get freelancer insurance. Joining a freelancers’ union can also be a great way to access outside support and helpful resources.
2. It can be a lonely world
If you work from home all the time and have little interaction with the outside world, it can get lonely very quickly. People tend to have the hardest time when they’re facing business challenges and have to shoulder all the responsibility alone. To overcome these negative feelings, more and more freelancers are joining co-working spaces in their area, which are (typically) affordably priced, shared workspaces allowing freelancers to escape isolation, and separate their home life from work life. Networking groups are another way for freelancers to meet like-minded people from varying expertise levels, offering the opportunity to learn, share and create new business relationships.
3. Irregular payments
Unless you manage to secure recurring monthly revenue, locking in regular payments can be a challenge. Your monthly income will depend entirely on the amount of work you manage to do as well as on the goodwill of your clients!
Conclusion
Freelancing is a skill, like learning to play chess or paint. The more you practice it and polish your techniques, the better you get at it. If you’re considering going freelance and it seems a little scary, know that it’s normal. Rather than waiting for the right (or let’s be honest, perfect) time for making the leap, focus on doing your homework and sorting out the steps to a great start – build your client list early, take out insurance, open a business account and step into the world of freelancing. There’s no hiding from it – you’ll have to work hard to be great at it but once the breakthrough happens, the payoff will be oh-so-sweet!