The Business of Freelancing – You Are In Business To…
This is the second day of our series on The Business Of Freelancing. Every day this week we will have a new tip to help you make the most of your freelancing career.
If you missed yesterday’s post, check out Saving For Taxes. For more, check out ShaneandPeter.com.
You are in Business to…
First off, from a practical sense, you are in business to make money. The government expects you to and hopefully you do too. You may have got into business to make new friends, leave a legacy, control your own time, express your creativity or a multitude of other reasons, but the only thing that the IRS cares about is money. You have somewhere between 2 to 5 years to begin showing a net profit or the IRS gets grumpy and starts calling your business a hobby (and so might your spouse).
That Said, Money is not Enough
According to multiple studies, a staggering 80% of small businesses owners give up and go back to a job within 5 years of starting out. Why? When I asked one of my mentors, Tom, that question, he had an interesting response: most business owners get distracted by life and do not consistently focus on the things that would have made the greatest difference. It might be that those extra details are uncomfortable for some people; it might also be that they didn’t have a mentor, business group, or an amazing source like FreelanceSwitch to guide them through the many pitfalls of the first fragile years of a business; but in Tom’s opinion, they just didn’t have a big enough reason why they had to succeed. This may sound a touch preachy, but after enough mutli-millionaires and three billionaires all personally cited to me (I’m a nosy bugger) that having a powerful dream is the difference between success and failure, I started to listen.
Most people go to school, to get some form of a job, that provides a certain amount of money and time, from which they carve out whatever life they can. The problem is, that is entirely backwards. Truly successful people figure out the life they want to live. They figure out what they want to have, what they want to do and who they want to be. Then they go look for someone who has that lifestyle, ask them what they did and if it is legal, moral and ethical, they grab on their coattails and do it.
– Mark Victor Hansen, Co-Author of the Chicken Soup for the Soul Series [paraphrased]
So let me ask you, what do you want from your life? Can your business get you there? If the answer to the second question is a firm, resounding “YES!” you’ve got yourself the most important foundation for any business: the unstoppable determination to make it happen. Even though we all understand that your business has to make money, that is often not enough to drive us through the tough times. During the times when freelancing isn’t fun and things aren’t working out how you thought they would, knowing you are headed towards you dreams will ensure that you don’t call it quits get to the next stepping stone.
Homework: Make a list of the top 100 things you want to have, do and become in your life. Peter’s tip of the day: every time you think, “that would be cool” or “I need to remember about that” add it to your list. If you need help like I did, check out my personal list at the bottom of our post on the Figuring out the Why.
NB. This information should augment, not replace advice from an accountant or lawyer. This information is mostly relevant to US citizens. While we would like to include information for more localities, because FreelanceSwitch readers hail from all over the world this cannot be accomplished.
Stay tuned for tomorrow’s post, Creating A Business Plan: How Will You Make Money?
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During his live a freelancer needs to face many distractions and problems. But all dipends on itself, if he wants to succeed, he will succeed.
Having just read this then re-sized some artwork for an advert, which took me about 5mins, I was wondering how others approach billing for these “little” projects. Do I charge my client a minimum charge or a precentage of my hourly rate?
How does this apply to 5min amends and firing off another proof to the client?
@naderby
I think for those projects it makes much more sense to charge a project fee–they’re usually fairly easy to justify to clients (they prevent people having to worry about tracking time). Otherwise, charging 1/12th of your hourly fee means, unless you’re ridiculously expensive, that you’ll get all of fifty cents for your work. Remember that the project has a certain value to the client–and between that and your hourly rate lies a fair project charge.
@naderby – there is an awesome forum on FSw where people would be thrilled to answer that. Might get lost in a post on the why of business.
Regard the 5 minutes. I clock it. They usually end up in bunches by the time you need to bill. If not, I debate the financial return vs the good will and value of my time spent clocking. If the money weights in as more important I send them a bill.
Thanks, Shane. I appreciate the post a lot. I definitely hit discouragement sometimes, and it’s important to hear things like this. A monumental book in this regard that I recently read is Seth Godin’s The Dip. In a hundred or so short pages, outlines the way successful people stick it out when there’s no visible progress (and, quit when it’s right to quit!).
naderby: You should definitely have a minimum charge. Generally my minimum charge is equivalent to 1/2 hour of work.
My minimum charge is one hour of work. I just let my clients know that and recommend that they “save up” their minor updates and give them to me all at one time. This way I can focus on my larger projects without continual little distractions with updates.
Darren i actually do the same way as you