From acquiring accountants to marketing your business — this is your comprehensive start-up plan
You’re ready. You’re blasting hype music. You’re doing push-ups on the floor. You’ve decided to make the leap and freelance. Let’s talk about the necessary, not so fun part of the freelance game — business set-up: legal, financial, and infrastructure.
Let me make one point clear — you can skimp on a lot of things when you get started, but the legal and financial aspects of your business should not be one of them. Invest in this now, or you’ll cry kittens during tax season. Trust me.
But first, define what you want to do in your freelance business and whether there’s a market for it. Be brutally honest. You need to be doing something you can make a living off of. Ask yourself:
- Do people buy or hire freelancers for the type of work I’m offering? Do the research. Is there a demand for your work? What are people paying for it? Make sure you price yourself wisely — there are scores of online calculators that can help you figure out your rate. Determine if you want to be paid by the hour or by the project. I could write a whole piece on hourly vs. project, but for now, at this point in my career, I only do project rates.
- What’s the range they typically would pay for services (this can be a broad spectrum — for now, you want to get a sense of viability).
- Where am I on this spectrum of experience?
- Have I done what I’m selling before, and have I done it successfully? You may be laughing at this one, but I’ve seen freelancers sell services for which they have little to no experience. Your clients aren’t your training ground. This is their money, and they’re paying for someone who can get the job done professionally.
- What’s unique about me? What skill sets do I have (personality, expertise, insight) that make me stand out? What am I most proud of?
The answer to these questions will determine your value proposition, i.e., why people should hire you when compared to other options. Now, it’s easy to get imposter syndrome — especially if you’re starting. But remember, you may have skills others don’t — maybe you come with amazing, creative and fresh ideas. Perhaps you know social media better than the lot because you’ve built your brand. Maybe you can code like a MOFO because in your spare time at your nine-to-five, you created a ton of apps and websites for yourself, friends, and small-time clients. Just because you’re green doesn’t mean you don’t have value.
Don’t focus on everyone else. They’ll always be someone cooler, cuter, more experienced, etc. Focus on what makes you super special.
Identify Your Customer
Visualize your dream client. And no, your dream client isn’t just someone who pays you on time, although that is certainly dreamy. What kind of business are they in? How large is the company? What are the company’s values, and do they align with yours? How does your client value you? For example, I’ve shifted my model last year to use my 20+ years of experience to help small businesses, start-ups, and mid-sized companies. The majority of my clients are small to mid-sized companies, and they view me more as an integral partner than as a vendor. These businesses aim to create products and services that genuinely meet the needs of their customers. They operate from a place of honesty and integrity, which aligns with how I want to live my life.
Establish Your “Why”
Yes, we all want to make money, but that goal isn’t self-sustaining. After a while, you’ll realize money is a thing, but not the only thing, and then you’ll risk being resentful of the work you do. Do you have big dreams of leaving the world in better shape? Do you have a skill that would truly help and transform other people or make their lives easier? A sense of purpose can be a constant motivator.
Create a Business Plan
It’s easy to convince yourself that you don’t need a business plan, but creating a business plan with financial projections forces you to think through your business and details. People tend to rush into their new venture with a website and an email blast without making a plan for how they’ll build and grow their business. Do the exercise, if anything, to validate your idea and how you will earn income. Keep your plan a living, breathing thing that you revisit and adapt regularly. Check out these two tools to get you started.
Figure Out the Money
Most freelancing business can take a lot more time to get off the ground than you expect. Know where your living expenses for the first year will come from (e.g., savings, a job, spouse’s income, etc.). Make sure you’ve got a cash cushion for the months when business is slow. And trust me, everyone gets slow seasons. This is an excellent post about freelancing and getting started.
Name Your Business
You want a name that will stick in your target audience’s heads. And it shouldn’t already be taken by another company. Do Google searches and use a corporate name search tool to see if the name you have in mind is unique. This excellent post from the Small Business Association is a great way to get started. For those who live outside the U.S., do check with an attorney on this because even though you may live outside the U.S., you’re doing business within the U.S., and that still might impact your name.
Register Your Domain Name and Email
Get a matching domain to your business name. A Gmail email address or a website with free hosting and a name like mysite.wordpress.com makes it seem like (a) you are not running a real business or (b) you don’t plan to be around long. Invest the time and money to make your business look legit. You can use tools such as:
Figure Out Your Legal Structure: Sole Proprietorship, LLC or S-Corp
Setting up your business’s legal structure is critical for tax and liability implications. Talk over structure (corporation, LLC, sole proprietorship) with your attorney and accountant. We do have a section where we outline the definitions of LLCs and S-Corps, but again, it’s critical that you navigate your options with a licensed professional.
Apply for an EIN
An Employer Identification Number (EIN) helps you separate yourself from your business. You’ll need it if you plan to incorporate your business or open a business bank account. DO NOT DO BUSINESS OUT OF YOUR PERSONAL CHECKING ACCOUNT. Plus, with it, you can avoid giving out your social security number (leaving yourself vulnerable to identity theft). EIN numbers are free; apply online. I recommend you speak with your accountant about setting up the financials for your business (i.e., business checking accounts, credit cards, financial bookkeeping for tax season).
Open a Business Bank Account
It’s all too easy to use your personal bank account to pay for business expenses, but it becomes a gnarl to untangle later — especially when dealing with the IRS. Don’t give yourself unnecessary stress.
Set Up Your Accounting System
Once you have your bank account set up, choose an accounting program. Few things will doom your business faster than books that are a mess. The two best investments in a business are a good lawyer and a good accountant. You can bootstrap a lot of your business to save money, but these investments are for the long-term and ensure you don’t have headaches down the road. I’m a big fan of Bench and Freshbooks. Check out Bench’s helpful articles on:
Determine If You Need to Apply for a Business License
You may need one depending on your industry and where you are located. Most licenses operate at the state or local level. The SBA has a great licensing and permit tool. Again, you probably won’t need it, but it doesn’t help to tick all the boxes.
Set Up Your Website
Get your website up and running as soon as possible because it’s your business card, point of contact, and it also establishes credibility. What you don’t need, however, is a fancy website — only a functional one. You can get templates from Template Monster or Squarespace that are professional and adequate for your business needs. Your website should outline your experience, expertise, services, and an easy way to contact you.
You don’t have to include case studies on your website (you may not be permitted to do so, contractually because clients get sensitive about their information out in public) or pricing. This can come via initial conversations where you go through a pre-qualification process.
Start Earning That Cash Money
Start generating revenue as soon as possible. At the early stages of a startup there is never enough money — resist the temptation to wait until things are perfect. Oh, and get your lawyer to create any customer contract forms necessary.
What You Can Tackle Later
While you don’t want to put off these tasks too long, they don’t need to be checked off your list before you launch your new business.
Refine your pitch
You need a good elevator pitch for many reasons: customers, grant applications, prospective new hires, bankers. If you can’t persuasively pitch your business, how can you expect key stakeholders to buy in?
Refine your services and your marketing and sales approach
As you go along, you will learn more about the marketplace. Use customer feedback to refine your product and service offerings, and your go-to-market approach. This is the time to think about your marketing, sales, and partnership plans, if applicable.
Find free advice
Your local SBA office, SCORE, and other small business resources can provide you with free information, access to business templates, and other tools. I’m also a fan of listening to podcasts like Being Boss, In the Trenches, What Works, and Creative Class for useful advice. Everyone always thinks they need a human mentor, but education and influence can come from everyone, and you may not be in a location where it’s easy to connect with like-minded freelancers. While I have a couple of informal mentors, I also lean on podcasts, websites, books, and courses from people whom I respect. They’re filling in the mentorship gaps.
File for trademarks and patents
The best thing to do is to consult an attorney early about the need for trademarks or copyrights. If you have a proprietary model or approach that you don’t want anyone else to copy, you can trademark it. Consult an attorney early on. Then you may be able to defer filing for a while, depending on the nature of your business. You may not need one, depending on the nature of your business, but better to be safe than sorry. Also, you might want to check to see if your business name has been filed as a DBA (Doing Business As) or a trademark. Isn’t it frustrating to think of a cool name to then discover someone in a small town trademarked it for their local shop?
Work your network
I have a philosophy that if I don’t like you, I can’t get on the phone or spend time with you. I want the time I spend with people to be gratifying. Have coffee with your peers. Schedule Skype/FaceTime dates to talk shop or buddy up with a peer for ongoing mutual support as accountability partners.
Ask your friends for specific introductions to people in their network, but don’t be vague. Don’t just say, “Can you hook me up with someone in your network?” Rather, say, “Do you know someone in nonprofits who works in social media marketing? I’d love to hook up with them for [X reason]. Could you make an intro?”
A key point: Never ask for or make blind introductions. Always ask each party if they want to be connected. It’s proper professional etiquette, and it ensures both parties are interested and not put in an awkward or compromising position.
Finally, Shout It From the Rafters
Tell everyone you know that you’re freelancing: your mom, your best friend, your dog, the barista at Starbucks — you get what I mean. Work can come from anywhere, but no one will offer you work unless you announce that you’re looking for it. I routinely send brief emails to my network outlining the kinds of projects I’m taking on and asking if they or someone they know is looking for a bomb-ass consultant. Email everyone in the free world: Do you need help? Do you know anyone who needs help?