More freedom means more responsibility. As a freelancer, you're entirely free to make your own decisions. But there are also a number of stress factors you could do without, from badly planned customer acquisition to poor hourly rates and many more. This article gives you tips on how to avoid typical freelancer mistakes.
I've been working as a freelance journalist, publicist, and content specialist for companies since 2012. I write articles, create videos, give advice on content, run my own web projects, and publish e-books and online courses. In other words, I rarely get bored.
In fact, life can become pretty stressful at times. This simply comes with the territory and a lot of the stress factors are unavoidable. But some of the problems we experience as freelancers are homemade. Here are some typical mistakes that I believe make freelancer life far more stressful than it needs to be:
Hourly rates too low
It's a recurring theme: you underestimate your market value. You also quickly miscalculate how much money you really need in the end. This is especially true if you have previously worked as a salaried employee.
The biggest mistake is to assume your working week will be 40 hours. Sure, you may well be working 40 hours a week, perhaps even more. But you can't assume that you'll also be paid for working 40 hours a week. This is where the big difference between being a salaried employee and a freelancer lies.
And why can't you assume a 40-hour working week? Because there are quite a few tasks that you, as a freelancer, need to take care of that an employee in a company doesn't:
- You need to look for and agree on each contract with your customers.
- You have to take care of things like finances and taxes (see below).
- If you have computer issues, you can't just call an internal IT department.
- The money doesn't just keep rolling in if you get sick, go on vacation or take off bank holidays.
On top of all of this, your expenses as a freelancer also tend to be higher. You need to buy your own work equipment, for example, and you may need an office. You pay full rates for your health insurance and may need additional insurances.
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If you sit down and do some detailed calculations, you'll soon realize you have to charge at least 60 euros per hour to arrive at a typical average salary in the service sector. Or you can get an idea with these two rules of thumb:
- Take what you consider a good gross salary and multiply it by 1.5.
- You need to reach this amount in half of your available working time to include both your unpaid time and all the disadvantages you, as a freelancer, have compared to employees.
An example: Let's say 4,000 euro per month would be a good gross salary for you. This corresponds roughly to the typical average salary for service providers mentioned above. So your freelancer target is 4,000 x 1.5 = 6,000 euro per month. As a rule, we assume 21 working days per month. 21 days x 4 hours = 84 hours. 6,000 euros target divided by 84 hours of monthly working time = an hourly rate of 71.43 euros.
This hourly rate is just a rough guide, it will seem like a lot to some people and even unrealistic to others. This rate could change if, for example, you have a long-term project where might be able to charge more than 20 hours per week. Generally speaking, freelancers often work with slightly lower daily and weekly rates.
As an employee, keeping an overview of your finances is much simpler. After all, you receive your salary, usually every month, and all the fees and taxes have already been deducted.
The situation is much more complex for freelancers. Your income isn't regular, sometimes payments can be late or invoices can end up not being paid at all. At the same time, some expenses, e.g. taxes, are not paid until later. As mentioned above, certain expenses are specific to freelancers and include work equipment, insurances, and much more.
It's essential to keep track of whether your finances are going in the right direction. In the old days, one look at your bank account would have been enough. But now that can be misleading: you always have to keep an eye on what income and, above all, what expenses are due in the next few months. You're certainly not going to get this information from a quick glance at your current bank account balance. Simple accounting software or, at a push, a spreadsheet, can help you keep track of your finances.
It's important to always keep a reserve for "surprises" because they come more regularly than you'd like. Ideally, you should have enough reserves to cover you for three to six months during dry spells. Or perhaps to escape the rat race you've fallen into. Your income can also fall or disappear altogether due to illness or other responsibilities.
Those who pay taxes in advance are somewhat less at risk here. With quarterly prepayments, however, you might forget to make the payment. It's good practice to set aside at least 20% of all income as soon as you receive it. Either mentally or physically. Put away 30% if you want to play it extra safe. Depending on your situation and other sources of income, it can make sense to set aside even more. A tax specialist can help you calculate the most appropriate amount. Ultimately, it's always better to have too much rather than not enough money to hand.
Looking for customers and contracts over and over again is part and parcel of being a freelancer. If you only start the process when a previous job is coming to end, it can already be too late. Finding the right tenders, winning and agreeing on the contract, delivering the work, and getting paid at the end: All this can take many weeks or even months. You should always keep that in mind and be looking around for new contracts even when things are going well. It's also important to invest in your own marketing (see below).
When freelancer life gets tough, it's normal to be relieved when you find one big customer and feel like you can rely on them. The danger is this contract can be canceled and you're left in a sticky situation. If you've not taken care of other potential customers, it can take a long time to get out of this rut.
As nice as long-term contracts are: You also have to consider that you are largely "out of the picture" for this period. You have little or no time for acquisition, for your self-presentation or for further training. You should not underestimate these indirect costs of a lucrative large order. You should also be aware of the threat of bogus self-employment if you live off a single large customer.
As a freelancer, you tend to take a contract because you need the money urgently or you like the sound of the job. Doing so ignores another important point: You must also get along with the customer. The relationship can otherwise lead to frustration or perhaps even to an aborted project and disputes.
You need to clarify the following points with new customers:
- What exactly is included in your offer
- What additional services you provide and what they cost
- When payments for which parts of the contract are due etc.
Over time, you'll develop a template to hopefully clear up common questions and problems in advance. For large projects with extensive services, this may also include invoicing a portion of the final total at the start and defining further billable milestones.
Depending on the field of employment, it may be possible to offer packages with clearly defined services. Your advantage: You don't have to discuss the details of the job with each customer individually. Productized services is the buzzword for creating products from individual services.
You could argue that people who present themselves as specialists reduce their potential target group. However, they also increase their chances of being considered for a project in the first place. Moreover, potential hourly rates can be far higher. Make sure people can quickly recognize where your particular strengths lie and how you acquired them.
My tip: If you have several areas of specialism, distribute them over separate, appropriately optimized websites and profiles.
This includes viewing the promotion of your own cause as an important and ongoing task. Show your strengths and emphasize exactly those topics and tasks that you like and are particularly good at. As someone once said to me, "If you sell mostly buns, but you like cupcakes better and bring in more, you need to put your best cupcakes in the window."
Ask satisfied customers to write a two or three-sentence recommendation for you. You can then display this on your website as "social proof".
One of the biggest challenges for many freelancers is to work productively and independently. As an employee, you're often told exactly what to do and when to do it. As a freelancer, you're responsible for organizing this yourself.
Everyone works differently. Some people need a clear structure. For example, I set myself difficult or lengthy tasks in the morning. I might work on a particular project for two hours before I do anything else on my computer. Emails just have to wait during this time and, needless to say, so do Twitter & Co.
Note: As a freelancer, you usually work from home. This is a challenge for many. We have summarized the best tips for this in the article Remote working: Advantages & Disadvantages.
At the same time, you have to learn to accept (and plan for) the fact that you're not going to be able to work productively for eight hours a day. This is just how it will be on most days. You need to plan your working hours and your day accordingly.
I could easily write another post about productivity techniques. There are countless guides on the subject. Personally, I couldn't live without my to-do app Todoist. I keep everything in it. However, I don't follow any particular system, such as Getting Things Done (GTD), because that's too much overhead for me. Others, however, swear by it.
As a freelancer, it's important that you do your work properly and deliver on time. Even small orders need to be given your full attention because you never know what might come out of it.
There's one more idea I think is important to understand: freelancers should see their work as a business and treat it as such. It may not feel like entrepreneurship, especially in the beginning. Perhaps you've become a freelancer out of necessity. But the more professionally you approach your contracts, the greater the chances are that it will work out for you in the long run.
Images: Headway, Jordan Whitfield, Danielle MacInnes