In our last Linkswitch, we had a look at a NY Times article on the “self-employed depression.” While it’s true that recent events have made making a living harder for many people who put themselves in the self-employed or freelance category, many freelancers are finding that business is as good as ever. A few days after, we published a piece by Martha Retallick on surviving the economic downturn. It’s clear that the state of the economy is an important issue for freelancers, as tiresome a topic it can get with the media milking it for all it’s worth.

So here’s what we want to know: how many of our readers are doing well despite it all, and how many of you are facing difficulties? Is the depressing and rather biased NY Times piece accurate or just another story written to sell? Cast your vote in the poll and then feel free to vent your economy frustrations in the comments.

There are a whole wide range of reasons why people take up freelancing. Some people are forced into it when they suddenly lose their job or need to make more money than they can otherwise to pay the bills. Others do it so they can take control over various areas of their lives, and there has to be at least one person who freelances purely because it’s only way they can use their skillset in their pajamas (the goal of this poll is to find that person). Let us know why you started freelancing in this week’s poll.

Last Poll: Where are you taking your business?

In the last poll we asked you where you planned to take your freelance business in the future. 1,500 of you have answered at the time of this writing (an awfully round number, don’t you think?). Let’s see what the most popular answers were:

• Expansionist thinking dominates with 33% of you intending to play with passive income and 32% intending to expand your freelance business into a firm, for a total of 65% of respondents who are not satisfied as small-scale service providers.
• A significant minority of 27% of respondents intend to continue their freelance businesses as they are — small-scale solo operations. That’s still four times the number of people who are using freelancing as a gateway to a Real Job, which came last at 7% of respondents (or 103 people).
• The Other option was used only 17 times, but the bulk of these responses simply listed a combination of two or more of the first three options.

When freelancers get together, they’ll almost inevitably get around to discussing where they plan to take their businesses in the future. As a party to many of these conversations, I’ve noticed that there are four prevailing goals for the future among our kind: those who enjoy freelancing for the solo and simple work life it provides them and want to keep it that way, those who want to transition to a passive income through selling products they can create with the skills they provide to others, those who want to take on employees and start a firm, and those using freelancing as a gateway to employment.

Most people I’ve talked to plan to stay in the first category — not surprisingly, as freelancing can be a great way to make a living. Those who want to take on employees and grow their enterprise take second place. Conversation, however, isn’t the most scientific way of gathering evidence and I’m curious to see where FreelanceSwitch readers hope to take their businesses in the months and years to come. For those who don’t fit into one of those four categories, I’ve left an “Other” option. Have at it and let us know!

When it comes to increasing our income, freelancers face a challenge. We’re used to trading our time for money — even if we charge a per project rate, rather than work for an hourly rate, we don’t get paid until we’ve put in a certain amount of time. But there are ways to make money without that direct connection between the number of hours we work and the amount we get paid. That sort of approach to making money is known as passive income — although passive income is a bit of a misnomer. It does take work to bring in money that way, although there is definitely potential to increase the ration of money to your time.

Continue Reading

If there’s one thing I’m bad at in this whole freelancing business it’s bookkeeping. I mean, I’m a writer — and frankly, one of the things that draws me to writing is that it’s not bookkeeping. If you’re a writer, a designer, or even a coder, chances are you were drawn by the possibility of putting words, images, and code together in creative ways, not by the prospect of meticulously recording financial transactions.

The bookkeeping and accounting a freelancer has to do boils down to three things:

1. Recording invoices and payments,
2. Recording expenses, and
3. Computing and paying your taxes.

For the past year-and-a-half, I’ve been using LessAccounting to handle the first two, and sort of “winging it” to handle the third. I like LessAccounting, and with a little creative data entry (e.g. holding off on entering payments in months when I get several payments and entering them during slower months; the free account limits the number of payments you can enter in any given month) I’ve managed to do pretty well for myself with a free account. But that’s changing – I’m developing more clients and more steady invoicing and payments to record, and at the same time my income is growing to the point where taxes are becoming a nightmare.

Continue Reading

What’s your attitude like? It’s a good idea to think about the answer, because your attitude is one of the keys to your success as a freelancer.

Take this example, for instance. If you were in the hiring seat, would you want to work with a freelancer who answered you like this?

“I guess I could work on this project. It’s a a tough job, but I might be able to work something out. The worst that can happen is that we have to take another look at it after I try. Does that sound okay?”

I wouldn’t. That person sounds uncertain, unsure and under-skilled.

What about this freelancer? Say you’re just talking shop over coffee. What would your impression be?

Continue Reading

People become freelancers for all sorts of reasons. Very few do it to get into business – that’s just a side effect. To be successful freelancers, we need to be savvy business people.

Understanding business takes work – some light reading, some heavy ploughing though your government’s forms and requirements, maybe some serious study, and keeping up with business news and events. Material for small businesses and entrepreneurs will be especially helpful.

Here is a reading list for you to pick and choose from: 40 Places Where Freelancers Can Learn More About Business. This list is a starting point. Please add to it in the comments.

Continue Reading

In order to build a successful freelance business, you must do three things, and do them well. If you don’t, no amount of promotion will save your business from oblivion. Here are the Three Elements of Business Success:

1. Doing Business.

Provide the goods and services that people pay you for. Part of this process is providing customer service so good that people will want to do business with you again, and send referrals.

2. Getting Business.

This is where your marketing and selling activities fit in.

3. Running the Business.

Tasks that don’t directly make you money but must be done fall into this category. We’re talking about things like administrative tasks such as long-term planning, accounting and bookkeeping, handling legal matters, and office and business management. Employee hiring, training, and supervision are included in office and business management.

The following story illustrates what can happen when there’s an excessive focus on getting business at the expense of doing it and running it.

Continue Reading

Up until September, 2008 I was a full-time freelance writer. I had built myself a little business that kept my family comfortable, and I have to admit, my writer friends who enjoyed hacking away at their fantasy novels after work were a little jealous. I was happy because my lifelong goal, ever since I could clasp a pencil between a few fingers, was to make my living from writing.

The problem in this story was unrestricted growth. Maybe you think I sound like a bit of an ass looking at growth as a problem when many people are losing their jobs and closing up their shops, but don’t make that mistake. Unrestricted growth can be a problem, and saying it can’t be is a bit like the obese person telling the anorexic that they don’t have any real problems.

I was killing myself with work, and still taking on new clients because I didn’t want to let any of that growth “go to waste.” Nobody wanted to be around me at the time because I could barely hold a conversation after spending long, hard days doing nothing but writing and editing.

When it became clear that I couldn’t take on any more work whatsoever and I wasn’t comfortable with raising my prices anymore than I already had, I did what anybody in my situation would do.

I took a job.

Continue Reading

After doing my taxes this year, I’m firmly of the opinion that every freelancer needs a debit or credit card just for business expenses. A separate checking account for your freelancing business — and the debit card that comes with it — is ideal, but for freelancers who aren’t ready to do that, having a credit card that is used exclusively for office supplies, business lunches and all those other expenses you can write off on your taxes can pay off.

Continue Reading

When I’m shopping for something, discounts can play a big role in what I wind up purchasing. Whether I’m looking for a host for my website or a graphic designer to put that website together, I’m more likely to choose an option that offers me a discounted price. I’m not the only one who makes purchasing decisions that way, either: depending on your clientele, you’re likely to pick up at least a few new clients with a discount.

Discounts and sales offer motivation for potential customers to buy now: if they want to take advantage of the deal, it’s necessary to act immediately. You can also use discounts to motivate your customers to do all sorts of things, like pay early or try out new services that you’re offering. The right discount can help bring in more money from new projects, if you take a long-term view.

Continue Reading

Permit me to start this article with a confession: It took me more than a decade to make friends with accounting.

Not that accounting didn’t try to become my friend. It kept coming around my freelance business saying that I needed to deal with it. After all, I did need to know how much profit or loss I was generating so that I file a tax return.

So, I hired a bookkeeper to generate quarterly financial reports. Then, when tax time rolled around, she generated a year-end report for me and my tax accountant.

When it came to accounting avoidance, this system was superb.  But there was a problem. The bookkeeper’s reports were seldom correct. I had to go through them, line by line, to see which income and expense items had been incorrectly logged or omitted. Little did I know, but my accounting education had begun.

Continue Reading