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anyone got any advice or practical info?
I am working full time for a company at the moment doing their website plus other design and marketing duties. I'm not entirely happy there so am looking around for a web design/developer job. I have approached a few suitable companies, and one has said that they might have freelance work available rather than a full time position. So I am wondering whether this might be a good option for me?
Are any of you guys freelancers? How did you start? I am a little nervous that I might find myself without work! Also how does it work with regard to paying tax etc? Is there anything else I should know?
Also, last but definitely not least, I need to know how much to charge. I know this is the ultimate question but what do other people here - particularly those in the UK - charge?
Any advice would be appreciated. Also, are there any online guides out there on this type of thing?
Even though you don't enjoy your current position it's to your advantage to sit down with them and make them one of your customers when you exit the company as a full-time employee.
If you leave they're gonna pay someone to do the work... why not pay you as a freelance? This would help you hit the ground running and as you pick up other clients you could eventually put another employee in there to do the work.
As for "what to charge". I'm a firm believer in agreeing to an hourly rate. This benefits both the developer and the customer; the developer gets screwed with scope creep every single time when you agree to a flat rate and the customer gets the benefit of only paying for your services while your actually working on their solution.
Don't say anything
try to do both (Kiss weekends goodbye :) )
First get a few freelance jobs done in order to test water
Another piece of advice...
Ancient Chinese Dentist say "get money while tooth hurtie".
That means: get a deposit.
Give the customer an estimate up front and get half of the money before work begins. Upon approval of initial design, etc., get another 25%. After completion, get the rest, plus any extra (or possibly refund some).
Firstly...I definitely agree with Henry0...test the waters before you jump in...moonlight a bit and see how it goes. Look into developing an LLC or at the very least a DBA
Keep good records... Account for everything, and keep your personal and business finances COMPLETELY seperate.
Write a business plan
Write a marketing plan
Join some networking associations
Build a strong portfolio
Make a list of expenses
Devise a budget
Decide what you would like to make per year and divide it up among the hours you are willing to work.
example: $40,000 per year = 40 hrs. per week x 52 weeks - 2 weeks vacation = 50 x 40 = 2000 billable hours per year/ $40,000 = $20.00/ hr. *Remember this is BEFORE any expenses.
Above all else...Manage Your Client's Expectations
Keep time for yourself, and don't stop enjoying what you do;)
I'd also recommend Seth Godin's "Bootstrapper's Bible"....very good read, and will have some additional insight.
>> 40 hrs. per week x 52 weeks - 2 weeks vacation
This might be the desired amount of work, but you cannot count on it becoming the realized amount of billable work.
Your prices need to be higher, because you will not likely be working 50 out of 52 weeks, especially not in your first year of operation.
2/3 of the year spent on billable work is good (imho). That's 8 months, so calculate your prices using that as a maximum. The remaining four months is not vacation time; it's also work, ie. getting customers for the next 8 months.
During these four months you will not be earning, in stead you will be using money. So, your prices simply need to be higher than you think they should be.
Related: Quick! what should i charge? [webmasterworld.com] (August '03)
>2/3 of the year spent on billable work is good (imho).
Very good points Claus. You have to account for non-billable work time to handle things like sales, accounting, paperwork, mistake fixing, and other non-billable philanthropy;).
I would be very happy with having 2/3's of MOST of my work days being billable work. You can see how an hourly rate of $80 - $100 really doesn't work out to as much as it seems like the first time you tell it to a client.
Thanks for all your replies, guys. There's definitely some food for thought here :)
There is absolutely no way I can fit freelancing in around my current position - I barely have the time and energy to feed and clothe myself at the moment ;) If the freelancing work isn't forthcoming at first, I think I will take a part-time job as well - this will hopefully ensure I can pay my rent!
I will definitely put it to my present employer that I could do some freelance work for them - I think it might actually benefit them more than the present situation.
|I will definitely put it to my present employer that I could do some freelance work for them - I think it might actually benefit them more than the present situation. |
Work out the numbers before you jump. Knowledge comes from information. Make knowledgeable decisions, it lowers your stress level.
Prior to mentioning anything to your current employer do the following:
- determine your current cost to your employer in both wages and benefits.
- determine how much of your current work time is other than what you want to do freelancing.
- determine benefits for your employer to hire you as a freelancer.
- do all the other "get ready to be a business" stuff in the earlier posts - especially the business plan.
- write up a presentation proposal for your employer.
- practice your presentation before a critical friend - and rewrite as required.
- jump in and eat the sharks!
Whatever you decide and what ever you do: All the best!
Following what claus and stuntdubl said...
Don't underestimate the time you'll spend trying to land new clients, and outlining projects before you actually get started on them.
It takes up a lot of time. I tend to edit e-mails obsessively (bad habit of mine) so it takes even longer.
Sometimes it takes me two or three hours just estimating how long a project will take and writing up a quote.
I don't charge for any time I spend up to the point when the client says "yes, go ahead" so the clock runs often with non-billable hours.
Another thing, mentioned in an earlier thread about the subject: Applying for a credit card or loan is much easier while you have a steady job. So, create your (DBA?) business first and apply for your business credit card, before becoming a full-time freelancer.
Going against the advice of many of self-proclaimed "experts", I have to say you'll be better off to save up some money first and DON'T over-work yourself when you first get started. Save up enough money to pay your bills for at LEAST 6 months from the day you quit your job, plus make sure you have enough money to do some advertising otherwise it's going to be really hard to bring in new business. And I mean your REAL expenses not just your bills ... don't forget stuff like gas, food, etc.
Set your hours at 40 hours a week, take the weekends off, and do everything you would otherwise do if you were working for someone else. If you DON'T do that you'll stress yourself out and become a work-a-holic. Think about how you define "success" ... if it's having a bunch of money in the bank but having to work 24/7 to keep it that way, then follow everyone else's instructions to the letter. I've said this before ... work is what we do so we can enjoy the rest of the time. When work BECOMES the rest of the time, you have to stop and realize that you've got it all wrong.
In the United States approximately 90% of new businesses fail within the first two years. This number is so high for the exact reasons the previous posters mentioned - people jump in to the deep end and over-work themselves. I'll tell you from experience that it's REALLY hard to try and enjoy the money you make when you have to wonder if you're going to be able to make enough NEXT month. You don't know how much you can spend because you don't know if you're going to get it next month. That burns people out, and I've seen people who were EXPERTS in their field have to close up shop because they couldn't handle that.
You're going to have a lot to worry about when you start up a new business - getting and retaining customers, building a reputation, advertising, etc. Paying your own bills should NOT be on that list - I can't stress this enough, you have got to make sure your basics are covered not because you don't think you'll make enough money to cover them but so you don't have to THINK about it.
The other area where people screw themselves is taxes... If you don't put enough aside you're going to have to come up with it at tax time. There is also an entire subculture of people who think that everything that's deductible is "free"... like if you buy a company car, it doen't actually cost you anything because you can write it off. I don't know where this mentality came from, but for anyone who believes this is the way it is let me set you straight now - when you "write it off" it doesn't mean that the cost of the item comes OUT of the money you owe Uncle Sam, it means that you don't PAY TAXES on that amount of money. If you buy a $15,000 company car and your tax rate is (for simplicity's sake) 20% you don't save $15,000 in taxes when you "write off the car", you save $3,000. Dig it? :)
By the way, I don't know if you're one of the people didn't understand that until now or not but I'm sure that someone reading this post is and now they know how it works.
I can't tell you an exact percentage to put aside because it varies from state to state - there is always federal tax, but some states have state income taxes too. You're going to be taxed on what your business makes, and what you take home as an employee of your company. Talk to a CPA before you incorporate and they can tell you the best way to incorporate for what your short-term and long-term needs are, and can tell you how much of every transaction you should put aside so you don't come up short.
Consider making a marketting plan now. Who are you going to go after. What shingles, print ads, and cold calls you'll need to make.
Even if you are tight for time, do one to test the waters.
Talk to an accountant and draw up a business plan that includes taxes.
Forgot, plan your web-site and get it up!
Know what your fall back plan is.
Thanks again for all your advice :)
Gas? Credit cards? What are those? I lead a relatively simple life, well, as simple as it can be in this day and age. No car. No debt apart from student loan which I'm deemed to poor to pay back anyway.
I do have some savings in the bank, and I also plan to work part time, so I *should* be financially OK, if not rich. Yet. :)
I have to say I am still confused by the tax thing, I think I'd better go get some books from the library. I realise that I would need to set aside a portion of money from what I make to pay my taxes and national insurance at the end of the year.
What I don't really understand is what digitalv raised about tax deductable items. Obviously digitalv is in the US (or Canada?) and I am in the UK, so the details might be slightly different. Say for example I want to buy some equipment for my business use, does this mean I don't have to pay the VAT? Is that correct and would I claim it back at a later date? How does that work then - who pays the VAT? As I said, I don't think I understand this bit, so if anyone can advise... :)
As someone who has been freelance since 1976 ( worked for someone else till '78 part time but essentially went freelance in 76 and totally in '78 )....
Digitalv's advise is "THE WORD" ...!
I used to disagree with you virually every time I read your posts guy ..now ..I read them properly and its turned around ...
BTW where I live 90% of businesses fail in their first year due to the gov't taking away their bank accounts or assets to pay compulsory medical /retirement insurance before they make one centime ...
However hard you think it is to start up on your own wherever you are ..nowhere is as hard as France ..
The ambition of almost every kid here is to work for the government when they leave school ..and thats before they see what the laws are like for the "selfemployed"...
To get back on subject and to reitereate digitalv's point ..
If you are having to worry where the money is gonna come from to pay the phone bill etc when it comes ..this will show on your face ( if not you should take up acting as a career ) ...
Most prospective clients can smell this fear ..and will use that knowlege to beat you down on price or contract or find some otherway to screw you around ..and you will enjoy working for yourself even less than for someone else ..
Most all of us work for ourselves 'cos we want to ..not to get rich .
You (or your company) needs to be VAT registered in order to claim back VAT you pay. If you are VAT registered then you need to charge VAT on any services you supply.
If you're not VAT registered, you can't claim it back (but then you don't need to charge VAT either).
The issue of whether something is "tax deductible" is a different one. A company is taxed on the profits it makes. If you purchase a computer for £500, then your company will be making £500 less profit. Therefore, you'll be paying less tax (£100 less, if the tax on profits was 20%).
If you are serious about becoming freelance, I'd go and see an accountant. There are loads of tax issues associated with it, and a good accountant will save you more money than they cost. Should you create a limited company, or should you be a sole trader? Should you register for VAT (optional, as long as you sell less than 50-odd grand in a year).
Thanks pete_m, that makes it much clearer now!
"Set your hours at 40 hours a week, take the weekends off, and do everything you would otherwise do if you were working for someone else. "
I hear what you are saying digitalv and I agree, however I have found that when you are starting your business, it takes A LOT more then 40 hour weeks. I have been in business about 18 months now and can only now start working 40 hour weeks. The first year was really crazy, working all kinds of hours and making sure that the foundation of the business is set.
If you are starting as a freelancer and have hopes of building a successful business, do not count on working 40 hour weeks.
|I hear what you are saying digitalv and I agree, however I have found that when you are starting your business, it takes A LOT more then 40 hour weeks. I have been in business about 18 months now and can only now start working 40 hour weeks. The first year was really crazy, working all kinds of hours and making sure that the foundation of the business is set. |
If you are starting as a freelancer and have hopes of building a successful business, do not count on working 40 hour weeks.
There is no reason you should have to work more than 40 hours a week, even when you're just getting started. You just have to make a commitment NOT to. It's important to separate your business life from your personal life - and if you don't have a personal life, go watch T.V. or something just DON'T WORK :p
Make it clear to your customers what your hours are and set an "after hours" rate that you stick with. It's a deterrent for the customers who would call you at 2:00 AM to wait until the next morning, but it's also nice to pocket some extra cash when an emergency does pop up. Make sure you stick to your rates though. Never assume your customers are your friends - even if they ARE your friends. Their goal is the success of their own business, not yours. You are a pawn in their game of chess and they are a pawn in yours.
I don't recommend working from home, but I do realize that it's necessary for many people when they're starting and that's fine just make sure you separate it. If you must work from home, at the very least get a separate E-Mail client or PC for your business than your normal home machine. Also get a separate phone number - DO NOT EVER give your home number to a customer, and more importantly don't give them a cell phone number. Get a second line installed in your house and have a call forwarding feature enabled. If you have to leave, FORWARD the call to your cell phone - your customers only need one phone number and they don't need to know it's being forwarded.
Your customers will call and e-mail you after hours and if you start answering/replying outside of business hours they will expect it down the road. Turn off the business PC or close the business e-mail client, and either IGNORE or turn the ringer off on the business phone. They can leave a message. For emergencies what I did was create an account called firstname.lastname@example.org and had that address forward to my cell phone's email address. If there was ever a real "emergency" - and I outlined to every customer what qualified as an emergency and gave them a printed copy - they could e-mail that account and I would get notification wherever I was and could call them back.
But remember, after hours work = after hours rates. Even if it's just a phone call. Don't give away your time as a freebie, people will learn to expect it. It's better to be a hardass with a few customers who get it, than a softy with a ton of customers who DON'T get it and overwork you.
I also recommend getting an office as soon as you can afford it. Working from home sounds nice and all, but the reality is that it makes it really hard to separate your business life from your personal life and that's why you get people saying things like "it's impossible to only work 40 hours a week" :) It's not impossible if your work is NOWHERE NEAR you. I've done both, and I would much rather go to an office for 40 hours a week (or less if there is less work to do) and not even THINK about business when I get home.
Last but not least, don't forget what your TIME is worth. Time is most often overlooked by new business owners who only look at hard costs. If you are making a certain amount of money right now and you can make the same amount working for yourself when you get started, you're doing OK - but ONLY if you're doing it in the same or less amount of TIME. If you make $1,000 a week working 40 hours for someone else then you're earning about $25 an hour. But if you make that same $1,000 a week working 80 hours for yourself you're only making $12.50 an hour.
There are a lot of things to consider when starting a business, and one of them is if it's really something you want to do. The other reason I didn't mention before is that many people fail because they THINK they want to run their own company, but once they get into it they realize they don't like it and would rather work set hours and get a regular paycheck.
One other thing. Don't pretend you're a big company. It's easy to do this on the web and I guess that's why so many people do it. If you try to look like a big company people will EXPECT big company service. Honesty is the best policy. It's funny how people's perception changes. If you're honest about the fact that you're just one guy most business owners can relate to that and work with you. But if they get the impression you're a big company and then FIND OUT you're really just one guy, they won't want anything to do with you.
Also, if a client ever sneezes say "May the force be with you" instead of bless you. Because hey, you don't want to offend anyone's religion, Star Wars is cool, and it's just damn funny.
|Also, if a client ever sneezes say "May the force be with you" instead of bless you. Because hey, you don't want to offend anyone's religion, Star Wars is cool, and it's just damn funny. |
Wow! I'll use that :)
I agree with every word you said, digitalv - GREAT post. A lot of people fail in the business because they are burning themselves out.
But I do want to say that if you HAVE to work those 60-80 hours when you first start out, make it your goal to go back to working 40 hours. I worked 80 hour weeks to get new clients and am now at the point where my hours are 40 a week. That took 2 years, but make sure you give yourself lots of breaks (not working on weekends) and mini-vacations. Make sure you have time for family, friends, and yourself! Get OUTSIDE and do things - or at least try to! ;)
|Your customers will call and e-mail you after hours and if you start answering/replying outside of business hours they will expect it down the road. Turn off the business PC or close the business e-mail client, and either IGNORE or turn the ringer off on the business phone. They can leave a message. For emergencies what I did was create an account called email@example.com and had that address forward to my cell phone's email address. If there was ever a real "emergency" - and I outlined to every customer what qualified as an emergency and gave them a printed copy - they could e-mail that account and I would get notification wherever I was and could call them back. |
Thank you - LOVE this advice. I have 1 client who is only 1 hour behind and likes to IM me at 9:30 PM thinking I'm sitting there at the computer. My fault for telling him my personal screen name, but I need to tell him to use my business screen name. If you don't mind, digitalv, I would love to see your emergency list. I have the basic list of "I found a grammar change on my site and need to change it right away!" is not an emergency and can wait for the next day, but it's not that long. Do you mind posting it here or stickymail me? I would really appreciate it!
...your emergency list. I have the basic list of "I found a grammar change on my site and need to change it right away!" is not an emergency and can wait for the next day...
Well, I worked for one firm that was such a top-down dictatorship that when the President notified the webmaster of a typo on a webpage, it was done with a formal, typed memo on serious paper, hand delivered by the Senior Executive Assistant to the Executive Assistant of the President). Between time of delivery and time of said typo fix being posted, about 5 pairs of eyes were focused on her "time management" and "priority setting" abilities. Seriously -- no joke. I marveled at the post-event sighs of relief and actual back slapping that took place for a "job well done"... almost nothing got done for the rest of the day.
In some circles, to some people, a grammar change *is* an emergency!
Yes, you're right - the situation I was thinking of was a minor grammar change that was on their policies page - way at the bottom. No one ever reads this page! ;)
But some text changes can be considered an emergency. Sorry, should have been more detailed about it.
|But some text changes can be considered an emergency. |
Yeah, like 'price £0' ;)
|If you don't mind, digitalv, I would love to see your emergency list. |
I don't do webmaster work, the items on my list apply to network hardware so I don't think they would help you much. Honestly I can't think of anything that would constitute an emergency for a webmaster unless of course you were also the host and your server was down, which I don't recommend to any webmaster - find an established host with an affiliate or reseller program. Hosting *is* a 24 hour business and if you don't have the staff to manage it 24 hours, then outsource it to another company.
Anyway back to the webmaster thing ... make it a policy to have your client review all changes when you initially post them. That puts the responsibility on THEM to make sure everything is right before you're unreachable. If they happen to find something later, too bad - they missed their window - but you'll get to it first thing in the morning. As for pricing, just remember that this isn't the 80's where if a store put a price that was too low in their sale paper they had to sell it to you at that price. If the price is too low, if anyone buys the product and has already been charged you can void their transaction, explain to them that it was a typo on your site, and give them the option of buying again at the normal price. If they argue with you about it, ignore them.
Which reminds me, you should have some kind of "not responsible for typographical errors" in your contract with the client, and speficially include pricing errors. Have a lawyer write one up for you, or steal one from one of the larger design firms who already did. That way if the above situation happened they couldn't sue you and say you're responsible for the revenue lost because of the price being wrong. Having the client review every change before you post it would probably eliminate it ever being needed, but good to have anyway.
<SITE NOTE: I know it's easier to be a hard-ass and make rules like this when you already have enough customers that you can afford to lose one - but if you DON'T do this in the beginning and set firm ground rules if they become a LONG TERM customer they will feel slighted if your policy changes>
>>It's important to separate your business life from your personal life.
More true words were never spoken...
You have to run your business--DON'T LET YOUR BUSINESS RUN YOU!
And one OTHER "separationist" thing: do not EVER EVER mix business finances with personal and vice-versa. VERY BAD IDEA.
I almost cannot overemphasize this point. If you don't believe me, talk to your accountant and your attorney!
digitalv: you and I have our differences as to certain subjects. But YOU DA MAN on this one. I have copied your post verbatim to file, saved it, printed it banner size, and hung it over my workspace.
You are absolutely right in EVERY PARTICULAR. Thank you.
I would highly recommend filing for LLC or S-Corp status as soon as you start - don't go the freelancing route (from a tax perspective) if you're in the US. Here's why:
1. Way better write offs as a Corp/LLC.
2. Way less likely to be audited (in the US at least).
3. Avoid paying the self-employed tax.
4. Substantial legal liability limitation (protect your personal assets).
Also, depending upon the type of work you do, think about getting corporate liability insurance. You can get $1mil insurance for $350 per year.
|1. Way better write offs as a Corp/LLC. |
Not true usually. Maybe if you were a corporation you could have your annual corporate meeting in Hawaii and write part of it off. That's about it really. Also a corporation can write off more if it's employee insurance plan. Whether that would offset the added expense of a corporation depends on the size of the corp and number of employees.
Any business entity can write off their expenses.
3. Avoid paying the self-employed tax.
You have to pay the self employment tax (social security tax and medicare.) An LLC's income is passed through to you. You have to file a schedule C and form SE and pay the whole 15.3%.
If you are a corporation then you set up a payroll. The corp pays 1/2 of the social security and the employee pays the other 1/2.
Uncle Sam ALWAYS gets his piece of the pie as sad as that is.
You are correct though, you want to set up one for the liability protection. An LLC is taxed the same as a sole proprietor.
The main advantage of setting up a corporation over an LLC would be if you needed to keep significant monies in the company for some reason. Maybe to buy equipment in the future or something. In that case the "income" that stayed in the corporate bank account would be taxed at the lower corporate tax rate (up to the first $50k anyway.)
If you were any other sort of entity then all of the money would pass through to you and you would pay personal taxes (SS, withholding, state, etc.) on it at your 30-50% personal tax rate.
Actually, I was just repeating what my accountant told me. True, you must pay the employer taxes yourself as an LLC/S-Corp, but I was told that was different than the "self employed" tax.
I have also heard several times that self employed folks are the most targeted for audits, so even though you may claim a lot of the same deductions, you're far more likely to be audited if you do, so most accountants advise most freelancers not to take a lot of the write offs taken by LLCs/S-Corps.
As for keeping the money in the corporate entity for a lower tax rate, I don't think that works with S-Corps or LLCs, for the very reason you cited early ... flow through ... I thought that only worked for closed corporations (C-corp).
Well, whatever the case, perhaps the best advice in this case is to consider these vehicles and consult an accountant ... cuz I don't know about you but I'm just recollecting what i've read piece meal and been told by my accountant - I'm definitely not an expert.
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