Freelancers: Do You Need a Business Plan?
If you tell someone that you’re going into business for yourself, he may ask to see your business plan — unless you tell him that you’re planning to freelance. There’s a certain assumption that freelancing is so plain and simple that anyone can do it, with no business plan needed.
But is it really true that a freelancer shouldn’t bother with a business plan? There are thousands of freelancers, after all, who started taking on clients without even thinking about writing a business plan. Nobody seems to have suffered from that approach. However, there are a few steps along the way that are significantly easier when you have a business plan in hand.
Figuring Out Your Plan
In a lot of ways, the value in a business plan isn’t so much having it, but actually writing it. It gives you a chance to sit down and actually work through the numbers for freelancing. Not sure quite how to price your services? As you write even a basic business plan, you have to take a few minutes to figure out what your costs are. If you aren’t covering your costs, what’s the point of being in business?
Because many freelancers come from creative backgrounds, the act of writing a business plan can seem a little daunting. It’s easy to imagine some thousand page document that requires you to be able to predict exactly how many clients will find in the next year, as well as make all sorts of arcane operations decisions that don’t really seem to apply to freelance writers. It’s true that you may not need as in-depth a document as other types of businesses. But a freelancer can still benefit by figuring out the details of how he or she will operate and getting it down on paper:
- Description of the business: Sure, you’re planning to be a freelancer. Can you get more specific than that? Are there particular types of projects you want to work on? The more precise you can be, the easier planning later steps like marketing will be.
- Competition: Who else is out there? There are plenty of other freelancers, not only who you can compete with but who you can work with, learn from and more.
- Operating procedures: Even if you’re a one-person show, it’s worth thinking about how you’re going to operate your business. There are questions about everything from what type of business structure you plan to use to where you plan to work.
- Marketing: Every freelancer has to have a plan for getting your name out there. Without marketing, there won’t be any clients.
- Finances: You may only have a handful of expenses, but they can add up. Comparing those numbers to what you charge can give you an idea of where you are financially and where you want to go in the future.
Making Predictions
A business plan isn’t just a description of where you are now: it also shows where you want to be. Within your financial data, you might include a break-even analysis (determining how much work you need to do in order to cover all your expenses), but you’re probably also going to include some projections on what you expect to be able to make as well as the equipment and other assets you already have on hand. Those projections will require some work to meet, of course, but they can help you set goals and create a plan for how you’ll earn money.
You can also make a few useful predictions on questions like when you’ll need to replace your equipment. Considering that laptops don’t grow on trees, it may require advance planning to make sure that you’ll be able to cover that kind of cost when it comes around.
Partnerships, Loans and Other Purposes
A business plan comes in handy for more than just planning for yourself, of course. If you’re thinking that you may want to form a partnership with another freelancer or even expand your business, having a business plan can provide a blueprint for how you will move toward that goal. Such an expansion is not always simple and can even require more money than you currently have accessible. In such cases, you may be able qualify for a small business loan, as long as you have a business plan.
In such circumstances you may need a more formal business plan than you might otherwise put together. For my freelancing, my business plan is less than ten pages of text: for your own, day-to-day use, you can work with a business plan that isn’t much more complicated than bullet-points and a couple of spreadsheets. If you’re approaching another freelancer about a partnership or you’re looking into taking out a loan, you may want to add more details and make sure your business plan is closer to the format that the Small Business Administration (or your local equivalent) suggests.
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As the old saying goes, “If you fail to plan, you plan to fail.”
All businesses should have a plan if they actually want to be sustainable. It also largely determines your day to day decision making.
Good article, my only suggestion is that it could have been a little more insightful. It still provides some food for thought though nonetheless.
I completely agree that making a business plan is a must when you starting as a freelancer. I started working as a freelancer one year ago without writing a brief of what direction I wanted to go and what was my freelancing budget.
I made a couple of mistake and took bad decisions on some aspects and realized afterwards that I needed a business plan or at least a business brief to put everything straight and optimize my profit margin.
I’m in the process of writing one at the moment. It’s going to help me lay down on paper all the ideas that I had in the past years freelancing and drive me to the goals I want to accomplish with my freelance business.
For the starting freelancers I completely recommend doing this. Don’t make the same mistake as I did.
At least just open a Word document and take 2-3 hours to put all your business goals, expenses and profit predictions and how your going to achieve those goals. It’s totally worth it!
Good luck!
It’s very helpful to decide what kind of work you will do and what you won’t. This is important because 1) if you take work you don’t like you won’t be happy 2) the work you take is the work you’ll get both b/c that’s what in your portfolio AND (and this is key) you’ll get referrals from that work for the same kind of stuff.
It’s hard to say no to stuff, but by doing so you’re actually freeing yourself and guiding which way your business goes. If you HAVE to take work you don’t like b/c the money is just too good – then do it but don’t show it off too much.
I totally agree that creating a business plan will cause you take a good a hard look at the numbers and help you decide where you realistically need to set you rates.
Creating a business plan will also help you understand where you need to set your hourly rate. If you know much you have to earn each month verses how much you would like to earn each month, you can set target goal at how many hours you have to bill and how many hours you would like to bill.
Jenn
I once spent a whole day writing a business plan, printed it out and then never looked at it again. I went back to working full-time a bit afterwards.
I’m back to full-time freelancing and I don’t have a written business plan-which doesn’t mean I don’t plan out marketing and/or operations. But I decided there were better things to do with my time personally, so I skipped wasting all my time on plans, stationary etc etc that I wasted so much time on before, and business has been great. I’ve even been able to niche myself into a smaller market.
Everyday one job. Start and finish. That is IDEA!
A business plan is a great idea. A business plan can help you get “clear” about your niche market and what is involved in running your own business such as sales and marketing, financing, etc… When you see the “figures” on paper, you may forgo becoming a freelancer or change your niche market.
Thanks for posting such a helpful article on topic that receives very little coverage. I guess writing about business plans for freelance designers isn’t the most glamorous subject but this post definitely raises some valuable points worth noting.
I agree that writing a business plan is a must, now I just need to find the time to write one.
I don’t own a business yet but I could see the main reason for having a business plan is simply reminding yourself what you started the business for. The business plan gives you an idea of what you wanted to do, how you wanted to do it and all the other details behind it. It is a good reminder to keep you on the right track towards your ultimate goal and not get too carried away with just going with the flow. If you get lead astray and don’t follow what you laid out in the beginning things could get problematic.
Ok, this may sound really bad, but I want to clarify. Is the difference between a freelancer and a business owner that the former is a one-person operation?
Great pic Lydia! You are looking hot.
Great post!
I feel that it’s very importaint to make and write out a plan as a freelancer. Although it may not need to be as thought-out as a traditional business plan, it should include the topics mentioned in this post.
Good food for thought!
Dare I say it…the business plan is more for the biz owner (freelancer) than for anything else. Sure, many use their biz plan to get financing (banks, VCs, etc.). For me, as a freelancer, the biz plan helped ME get my head on straight, and focus my attention on what I enjoy doing most.
When I first started my biz in 1994, I listened to a seasoned business owner (computer tell a story at a networking event. He mentioned carefully crafting his biz plan, printing it out and putting it in a beautiful binder. Then he put it on a shelf in the back of a closet. Where it sat. Unopened. For years. Just prior to relating this story, the owner had discovered the binder and was shocked to see how much of his predictions for income, growth, and opportunity had come true despite NEVER having referred to his biz plan. LOL!
There is power in writing it down!
Many blessings,
Nancy
@AffirmingSpirit
previous post: The biz owner had a computer printer repair & sales shop.
Strangely enough, once upon a time I was a project manager for a company where ALL WE DID was write business plans for people. My thoughts??
First: ALWAYS write your own business plan, don’t hire someone to do it for you. You need to know what’s going on with your company, not some contractor.
Second: I now run my own web design company with my partner, and while I might just have a one-up from past experience writing b-plans, I can honestly say that I probably won’t ever write a business plan for myself.
That said, I WILL look at sales projections, break evens, cost-benefit analysis, an everything else that goes into getting a clear picture of your past/present/future earnings. Financials are the #1 most important part of a business plan. If you don’t have a grasp on them, you have nothing.
Also, and this goes for the design community specifically, I would really focus my efforts on creating an effective marketing plan. You could be the best developer in the world, but you’re SOL if no one knows about it. I’m finding marketing to be the most challenging part of running a business, especially because I am more on the introverted side of the spectrum.
So. Business plans? Ehhhh. Financials and marketing plan? Yes!
Kendall, when I opened my business, I felt the same way about Marketing and (ugh!) Sales. I was literally paralyzed with fear. Then, I learned this:
Marketing = Education
I can educate people about my services, how I work with them, and the results they can expect (and success stories, too!). In fact, I enjoy *that* and I’m happy to do it in many different ways. Find the ways that you enjoy, and marketing can actually be something you look forward to doing! (really!)
Many blessings,
Nancy
Stop me if I am wrong but I don’t think the whole business plan is what a freelancer needs. He/she only needs a part of it in my opinion.
When I started freelancing part-time all I did was to calculate how much I want to earn per month, say $1000. Then I sat down to calculate the cost involved in achieving that target like software, electricity, my share etc. etc. and rest I invest back in freelancing like marketing. And I put in a place where I can see it everyday. Then at the end of the month I compare the estimated against actual and take necessary steps.
I did not feel the need to have profit projections for next year or so forth etc. I don’t need it until I go for a VC funding. I don’t have to think so much about competition except in case of my rate because I don’t have a product. Many times I am hired by my competitors!!
So, know your costs, know your area of work, have a vision and know how to achieve it.
I think many times a freelancer just suddenly realizes — “Hey – I’m running a business here.” It starts with taking on a client or two, no real intent on it becoming a full time gig. Then it ramps up a bit and you are busy, busy, busy.
You start operating on a triage basis. If it aint on fire — I am giving it no attention. A business plan is not something is simply not something that receives a lot of attention when there are clients barking at you.
No question though — taking a time out and crafting a business plan is worth every second.
Once you create a plan for your business, the next important step is believing it all can be so, and visualizing your plan falling into place.
It’s important to decide what you need/want to earn next year, AND it’s just as important to believe you’re worth what you plan on charging, and that your skills are up to par with the competition so that you’re worth top dollar!
Good post I think a plan is definitely important, it doesn’t have to be as detailed or outlined as a regular agency but to some point it should at least give you a good idea of what your goals are.
Great advice, it really is essential to have a business plan or you will keep runing into pitfall after pitfall. I found your ebook very helpful for freelancers.
Great article. When I started my business I wrote a really quick business plan. It wouldn’t win any awards, but like you said it forced me to think about things enough to be able to write them down.
We’re always wanting our clients to clarify, give specific information, hopefully even fill out a complete Project Brief for us – we should do the same for ourselves.
On a separate note I think Lydia has a good question in the comments – maybe even one I’d like to see FSW address.
I’ve been wanting to write a business plan for awhile now. Thanks for the tips.
Excellent piece! And very timely for me, as I am (re)developing my brand and find myself starting from scratch– with a plan this time.
Thanks!
RMH
No matter the size of you’re company – you need a business plan. Without it, you’re up “beep” creek without a paddle. Even if its a business plan on a napkin – anything helps!
Great article!!!
Really, have a business plan is vital. Run without a objective in the end is run in circles.
Nice post!
It is great to have a Business Plan ready for the freelancers who are considerably settled in this industry. Now they may want to grow there business or start a new start-up.
But the newcomers; they have to gain experience in getting clients or projects first. Because you need to know how much you are gonna make in a month so that you can know your guaranteed earnings. Then your monthly expenses like electricity bill, phone bill, internet connection bill, etc. This will give you a rough idea and then it will be easier to decide or make your business plan.
Thanks for writing this post.
I am in the process of putting together a simple plan for my business. I don’t think it needs to be a large or even medium plan but I think having a plan can put things in perspective. Having that quick plan is great now for the freelancer. Maybe later they may need something more as their business may change.
Either way, as someone said before, “if you fail to plan, you plan to fail”.
After reading some of the other comments,this has inspired me to go ahead and write my own business plan. Who else knows my business,or what I want to do better than myself.
Great post! I really appreciate reading this article. For more about business plan, check http://www.entrepreneurshipsecret.com/why-do-you-need-a-business-plan they also have good information about business plan.