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So You Want to Be a Freelancer ...

What's the difference between running your own home-based
business and freelancing? (tick, tick, tick ...) Give up? Me
too. If you want to work for yourself from home and have a
special talent or skill that you think others would be prepared
to pay for on an hourly or per-project basis, why not stop
thinking in terms of the traditional "home business" paradigm
and start thinking in terms of freelancing instead?

WHAT IS A FREELANCER?

Quite simply, a freelancer is an independent contractor who
earns his or her living by contracting for projects on a project
by project basis. A freelancer is not an employee of anyone
and so he or she must actively seek out work, negotiate the
terms and conditions of the project (the contract) and complete
the work to the satisfaction of the client. Once the project is
complete, the freelancer seeks out and enters into another
contract for another project.

Alternatively, the freelancer may have obligations under a
number of different contracts with different clients at the one
time.

Another variation involves the freelancer producing work and then
seeking buyers for that work. A freelance writer of magazine
articles, for example, would fall into this category.

WHO HIRES A FREELANCER?

Those who hire freelancers are as diverse as freelancers
themselves. In some cases, companies will hire freelancers
to complete a short-term project as an alternative to hiring
a new employee. This is often the case where the work in
question is spasmodic or ad hoc and the company cannot
justify hiring an employee for such work. Companies also
hire freelancers to help smooth out the peaks and troughs
of workload. Again, where there is a temporary oversupply
of work, the company will hire the freelancer on a short-term
basis to help cope with the backlog.

In other cases, companies hire freelancers for their special
expertise in a certain area. A company may want to create
a new website, for example. Hiring a freelance website
designer for such a project makes more sense than hiring
a website designer as an employee since once the website
is complete, the function will no longer be required.

Magazine and newspaper editors also hire freelancers or,
more precisely, buy rights to freelancers' work. A freelancer
in this type of situation may write a piece and submit it to
a number of different editors in the hope that his or her work
will be "picked up" by that editor and published, in return for
which the freelancer receives payment. By its nature, such
an approach is speculative since the freelancer can't be sure
that anyone will actually buy the work. Of course, once the
freelancer has been published, it is relatively easier to get the
editor to buy the freelancer's work in the future and, as the
freelancer's reputation grows, so too do the opportunities for
future business.

WHAT QUALIFICATIONS DOES A FREELANCER NEED?

To be financially successful, a freelancer obviously needs
marketable skills. A freelancer therefore needs the same
qualifications, skills and talents as someone who had been
hired as an employee to do the job would need. In other words,
if you are seeking work as a freelance website designer, you
must possess the same skills and qualifications that a full-time
employee website designer would possess.

IS A FREELANCER RUNNING A BUSINESS?

In short, yes. If you do not have an employer, if you have to
source your own work and negotiate your own terms, if you
have to chase payment, if you have to pay your own taxes
(i.e. no one is withholding them from your check), you are, in
essence, self-employed. Ergo, you are running your own
business.

There are a number of consequences you need to think about.
The first is taxation. You need to set aside from every payment
you receive an amount sufficient to cover your state and federal
taxes on the income you receive. Likewise, you need to keep
proper books and records so you can claim the deductions and
expenses you are entitled to as a self-employed person.

As a freelancer, like any independent contractor, you will also
be expected to provide your own equipment and supplies. If
you are a website designer, you need to have your own computer,
software and other tools of the trade. The party hiring you will
not provide this stuff for you. Similarly, if you are a freelance
editor, you will be expected to have all the reference materials
and style books, word processing programs and other sundry
items any editor would need to do the job.

From a legal point of view, you should also give some thought
to the legal entity of your business. Will you be a sole
proprietor or will you incorporate? If you incorporate, will you
choose S-corporation status? There are important tax
consequences of each of these alternatives so be sure to get
advice from your accountant before starting.

Think also about what licenses you may need as well as
insurance (health, life and liability depending on the nature
of the work).

WHERE DOES A FREELANCER FIND WORK?

OK, onto the nitty gritty. You've decided to start work as a
freelance website designer. You have the appropriate
qualifications, training, experience and equipment and you've
consulted your accountant to determine the most tax-effective
business structure and your lawyer to set up your new company
and advise you in relation to issues such as business licenses
and fictitious business names. You're ready to hang out your
shingle. Now what?

=> Approach Your Warm Market

Start with who you know. Where did you get your website
design experience? If it was with an employer, consider
whether that employer may not be a source of business for
you. That will obviously depend on the circumstances under
which you parted company but if you left on good terms and
didn't burn any bridges on your way out, by all means contact
your former employer and let him or her know that you are now
in business for yourself and ready, willing and able to take on
new projects. If possible, get a reference or testimonial too.
That will come in handy when it comes to touting for new
business from strangers.

Next, turn to your network of business associates you developed
while working for your former employer. Note, we're NOT talking
about clients of your former employer, rather your own network
of colleagues. Contact them and let them know about your
new venture and your availability for project work.

Be extremely cautious about approaching clients of your
former employer if your current business puts you in even
indirect competition with that employer. You may be constrained
from approaching former clients if you signed a non-compete
covenant in your employment contract, for example.

=> Create Brochure/Resume

Go to the time and expense at this stage to prepare some
sort of resume of your experience and services. Get this
professionally printed as a brochure and send it, together with
your business card, to your former employer and colleagues
as a follow-up to

your conversation. By giving them something
tangible about you, it is more likely that you will come to
mind when next they have a need for your services. If you've
already provided them with your brochure/resume, when the
time comes, the person concerned will think "hey, Joe's doing
this sort of thing now. Where's that information he sent? Oh,
here it is. I'll give him a call and see if it's something he
might be able to do for us."

=> Approach Your Cold Market

Once you've approached your so-called "warm market", it's
time to start on the cold. Start by gathering up a list of
businesses in your local area or industry that you think would
have use of your services. Prepare a letter of introduction and
send it, together with your business card, to your list of
prospects. Your letter of introduction should make if very
clear why you are writing. Identify yourself and the specific
skills that may appeal to the reader and why.

Follow up in a week with a telephone call to make sure the
materials arrived safely. If the other person is approachable,
try and strike up a conversation about what you could do for the
business. Otherwise, thank the person for their time, ask them
to keep you in mind for future work and calendar to contact them
again in 30 days' time.

Continue to work your market like this. Remember, persistence
pays off. Don't be discouraged if you receive little warmth or
interest in response to your approaches to your cold market.
It takes time and persistence. Just don't take it personally.
A good way to approach it is to tackle a fixed number per day.
Start out by making a list of, say, 300 businesses you want
to approach. Develop your list from the Yellow Pages, local library
and the web to start with. Calendar to approach 10 businesses
a day for the next 30 days. That means ten calls a day, followed
by 10 letters of introduction (together with a copy of your
brochure/resume and business card) and a follow up phone
call a week later.

Where there is interest, you may be able to schedule a
meeting. Where there is no interest, schedule for a further
follow up call in 30 days. If there is still no interest, schedule for a
further call in 90 days. Or maybe you would prefer to do something
else to stay in contact. A good way is to publish a newsletter for
your clients and colleagues. Make it relevant to the recipient and
it's a good way of keeping your name in front of your prospects. A
quarterly newsletter is probably frequent enough. Send it, with
another of your business cards, to your list and, over time, you will
see that it will start paying off in the form of business.

=> Samples

Another idea to think about is to produce a set of samples
of your work; a portfolio if you will. Make 8.5 x 11 copies
of your work and keep them in an artist's portfolio for
presentations when you're able to arrange face to face
meetings with potential clients.

=> Advertising and Promotion

Next comes advertising. If you're a website designer,
possibly your best advertisement is your own website. But
don't stop there. Advertise in the publications your target
market reads.

Another good way to generate business is to join associations and
groups affiliated with your industry. Chambers of Commerce
are a good place to make handy contacts.

You will probably find that in the early stages of your freelance
career you spend more time marketing yourself and your
services than you spend actually working. There's a financial
cost to that, of course. How do you finance your marketing if
you don't have any money coming in? For this reason, the
early days will be lean and mean. Make sure you have the
financial wherewithall to survive this period.

HOW DOES A FREELANCER MAKE MONEY?

You will only make money as a freelancer if you charge more
that it costs you to do the work in terms of your time, expenses
and materials. Factor in a profit component to every job you quote
for and make sure that that profit component is in ADDITION to
an allowance for your time. For more on pricing your services,
see "Pricing Yourself To Get and Stay In Business", at
http://www.ahbbo.com/pricing.html .

Some freelancers charge by the hour and others by the project.
In reality, you will probably use a combination of both methods
depending on the nature of the job and the client.

You can get an idea of current market rates by surveying your
competitors. Don't be obvious about it though; competitors are,
naturally enough, reluctant to divulge information about their
businesses to their competitors. So you'll probably need to
employ a bit of subterfuge here by posing as a potential
customer, for example. In fact, it's in your legal interests
that your competition doesn't give you pricing information if it
knows you're a competitor. Such conduct can be construed
as price fixing which can land both of you in extremely hot
water. So, keep it safe and use circuitous methods of
obtaining pricing information from competitors.

PROTECTING YOURSELF

A question often asked by freelancers is "do I need a contract?".
Well, to start with, once you've negotiated a deal with a new
client you have a contract. The question is whether it's oral or
in writing. An oral contact is just as enforceable as a written one
but the problem becomes one of proof. How do you prove the
terms of your contract if all you have is one person's word against
another's? For this reason, a written contract is always a good
idea. It needn't be anything too elaborate. In fact, even an
exchange of letters will do. Just be sure to include the basic
terms:

=> Describe the job

What must you do to perform the contract? Be as specific as
possible here and try not to be open-ended. "Create a website
for client" is too vague. What would you do if the client came back
after you'd finished and said, "but there's no shopping cart, there's
no feedback form?" and you hadn't quoted your time for these
things in striking the price? Better to say, "Create website
at client's direction consisting of (a) home page; (b) products and
services page; (c) order page; (d) shopping cart and (e) feedback
form". By requiring the client to be very specific about what it is
they want from their website, how they want it to look etc. you
can go a long way to avoiding misunderstandings caused by
vagueness.

=> Set the price

State in unequivocal terms the price you are to receive for the
job. This can be either a project cost such as $5,000 or an
hourly rate such as "$150 hour or part thereof; minimum of
ten (10) hours" or whatever.

=> State time for performance

Performance means not only when you will complete your part
of the bargain (i.e. delivering the completed website to the client)
but when the client must complete his or hers (i.e. by paying you).

About the Author

Elena Fawkner is editor of A Home-Based Business Online ....
practical home business ideas, resources and strategies for the
work-from-home entrepreneur.
http://www.ahbbo.com

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