I often receive questions about Freelancing. Some time ago João posted “How to work as a freelancer?” question on our forum and I thought if I write a post and make a video about my experience, maybe it will help you to start your own journey.
Phase 1 – Preparation
It helped me a lot to have right skills before I decided to move out from my daily job.
– English: First of all, in case you live in a small country, English is essential. Slovakia, that is the country where I am from, is quite small. All my clients have been from abroad and the communication language is English. English is one of the reasons why, before I did freelancing, we lived in the UK.
– Experience: To get a nice hourly rate, you may want to get experience in a field with high demand for professionals and you really may want to become good in that job. Before I started freelancing, I worked 2 years at University and 3 years in a smaller company doing all kind of designs + I had to do everything else (buying components, organizing production, designing packaging, writing manuals, …). Then I worked in a bigger company designing industrial computer boards. All this experience, not only gave me skills needed for Hardware design, but it helped me to organize all my work.
– Website: While you are still working in your daily job, you may want to start creating your own website and you really want to get some programming skills (or at least understand how you can modify and update your website by yourself). As a freelancer, you will need to do a lot of stuff which you have no idea how to do, so be prepare to learn. Also, before you start freelancing, you may want to try different software which you will be using when you will be freelancing e.g. software / application for time tracking or bookkeeping.
– Saving: You may want to have enough financial saving to live at least 1 year without any income, so you are not in continuous stress. This is one of the reasons why we moved back to Slovakia (it was much cheaper for me to live in Slovakia, than staying and freelancing from the UK).
– Reading books: You are moving to a completely new word – the business world. I recommend to read a lot of books. Some of them are good, some of them are not, but when I read them it helps me to come up with my own ideas and improvements. Initially you may want to read books about Internet marketing (what may be important on your website, how to write text, … e.g. Internet Marketing: How to Get a Website that Works for Your Business ), or some books about business (for example why some companies become successful and some not e.g. Good To Great, you can also try The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It). Other interesting books are about how to manage your time (in case you become really very busy and you have to handle a lot of different things or you start thinking about why you are doing all that: Getting Things Done: How to Achieve Stress-free Productivity or The 7 Habits of Highly Effective People)
Phase 2 – Freelancing
– Responsibility: This is one of the hard parts of freelancing. Some people / companies will want you to be responsible for the job you will be doing e.g. they will want you to guarantee, that everything you do will work perfectly at the first time and if not, you will fix it in your own expenses. Never agree on this condition. I always listed my previous work and I explained, that I will do my best to do their job, but everything must be sign off by their own people, they have to confirm, that they agree with what I have done and they have the full responsibility for checking the work which I am delivering.
– Payments: I usually invoiced my clients after I did the job (or part of the job). For example, I received first payment after the preliminary schematic was finished, second payment after the schematic and library checking and initial placement was finished and the third payment when board was working.
– Price: I knew how much our UK company was paying to our contractors (40 and 60 GBP / hour), so I started with 35 EUR / hour. It was relatively easy to get jobs up to 45 EUR/ hour, but when I tried to increase it more, for most companies and people it was too expensive. However, once you have a lot of clients, you can increase your price and currently we charge $99 USD / hour. My personal consultation hourly rate is $149 / hour which comparing to accountants or lawyers is still quite cheap. Do not take me wrong. The pricing is not about greediness. Once you have a lot of work, you need to ask yourself a question, what you should be doing and how much your clients need to pay you, so you stop for example doing marketing of your company (which can possibly brings to your company a lot of money in future and help to grow ) and start working on his / her own project. Number of hours which you can work every day is very limited and soon you will notice that you would need much more hours to get done everything you would like to do, so decide wisely.
– Written contract: With most of my clients we had no formal contract. The cooperation is about trust. Honestly, ask yourself a questions – Are you really going to sue your client from China for not paying you the agreed money? It’s unrealistic, time consuming and probably more costly then just forgetting about the money. However, you still should be careful. Be sure the amount they own you is not too high and you always receive your payment before you start working on the next phase. With some of my clients we had simple contract (usually they can send you a template which you can correct, or better, if you can, prepare your own contract with your own conditions). Very detailed contracts written by a company lawyer may be a red flag and think twice about taking that kind of job.
– Number of clients & jobs: To do things properly, I only could work on 1 big project at a time. I could have 1 big project and do some small stuff on another one, but that was the maximum. More than 2 jobs / clients at the same time can cause delays, a lot of stress and it can lower quality of your work.
– Holiday: Ideally I tried to fit family vacation in the space between two jobs, but with some clients you can agree on holiday in the middle of project (especially if the project runs during summer). Taking 1 week holiday should be just fine. However, keep in mind, when you don’t work, you don’t get paid.
– Sickness: Ideally, you don’t want to get sick when you are freelancing. Usually, your deadlines will be set the way, that you need to work every day (and sometimes even more). This is one of the biggest disadvantages when you are working as a freelancer – no one is going to pay your sick time and you can easily get behind the schedule. But, depends on you contract and client, most of them will understand if you are sick and they can move the deadline.
– First clients: When I left my UK job, my plan was to develop a time tracking software. I was not planning to do any freelancing. However, a friend of mine was running a company and they had some requests from their clients which they could not fulfil because they were short of resources. He ask me if I do not want to do it for them. I agreed. And that was how it all started. First I worked on their own projects, then he passed some of their clients directly to me and later I have got my own clients. Do not count on, that the company where you used to work will be sending you work. When I was leaving the UK company, I suggested, that I can help them, but the manager wanted me to work solely for their company which I didn’t want to agree with. So even I have got some small jobs from the UK company, I never worked on anything big for them (it was mostly about small work from the past projects).
– Format of work: Take the whole project or partial jobs? Whole and large projects are awesome. You have guaranteed income for months. However, you are also stacked for months. This means, if you get a better offer, you can not take it. And that is not the only disadvantage of the whole project – another one is responsibility. It’s you who is responsible for all the work and it’s very easy to blame you if something is not working the way as your client wanted (this is especially hard if you are doing research or development – there is always high risk of something not working as expected). If something has to be fixed, it will be you. If someone has any question about the project, it will be you who will be answering. The big projects never end – even the project is officially finished, you still will be receiving emails about it (and no one may pay you for answering them). On the other side, partial jobs are shorter (usually weeks of work), but they are much easier and less stressful to do. However, you need to be sure you will have continuous flow of the new work.
– Time tracking and reporting: This is very important for your clients. Not many freelancers or contractors are clear about tracking their time. So, if you do it properly, your clients will love it. I used my own time tracking system, so I can not really recommend anything existing – you may want to try couple of them and pick the one which you find most comfortable to work with. What you want from the system is to have possibility to describe what you are doing, putting number of hours to that and generating reports for easy invoicing. Here you can find example of output from our time tracking system: Hours & Cost Summary
– Marketing: If you would like to reach to new clients, you will need to do marketing. I like writing blog and recording youtube videos. You will need to be persistent. It may take months, to see some results. Initially, no one is going to find your blog and only a few people will find your videos. The posts and videos need to be useful, otherwise people are not going to read / watch it. It sounds easy to do, but it’s hard. I usually try to share my experience or something what I found interesting (or people may find interesting). Good articles and videos take hours or days to prepare.
– Discipline: Be aware of how much you work. It may be very hard to force yourself to work certain number of hours each week – especially if you like resting 🙂 Also, on the other side, it’s impossible to work 80 hours a week for several months – you would collapse. What I did, I decided on my own working hours Monday – Friday from 8:00 – 17:00 and that was the time when I worked. Often I work in the evenings or weekends, but you must be careful about that.
– Office: This is MUST HAVE. You need to have your own place to work. Initially your own table is ok. But it’s impossible to work if you share your table with other members of your family. You need to focus and don’t want to be disturbed. You may think it’s impossible to have your own office, but you need to figure out something. For example, when I started freelancing I split our living room – it was very simple to do and it helped a lot. I made a video about it: How to build home office for 560€ in 3days.
– Difficult Clients & Projects: If you do not feel happy about the deal, do not take it. When you start working on a project and you find very hard to talk to the client, cancel the project as soon as possible. Early signs of difficult clients are delays in communications, changing specification, project is not ready to take over, stubborn people, … Some clients may be very difficult to deal with. What I found most difficult is, that some of them can keep writing you emails 5 years after you finish a project for them and asking questions about it. If you have more clients like this, you may end up by answering emails and you are not getting paid for it. So, be careful and make it clear how you work.
Phase 3 – Your own company
It took me 2 years to realize, that Freelancing is not an ideal business model. Some people love it, but here are three things which I found important:
– As a freelancer, you never work for yourself, you are always working for your clients. This means, it doesn’t really mater for how long you have been freelancing, you are not building and growing your own company, you are building your clients companies. When your project is done, you are starting from ZERO, again. Of course, you may be working for same clients (so, you do not have to look for a new one every time), but this is even worse than to be an employee. The truth is, they may pay you well, they will give you work (when they have it), but for what cost: you are not sure if you will have project next week, you have no holiday, you are working through nights and weekends and you are responsible for your work. If something goes wrong, you may not get paid. If you go to hospital or you break you hand and you can not work, you are not going to be paid.
– If you don’t work, you are not earning any money. It may sound strange. Of course you are not earning money when you are not working, or, wait, really? What you want to achieve is, that when you check your account before you go to bed and when you check your bank account after you wake up, you will have more money. As a Freelancer, this is extremely hard to achieve. Ideally, you would like have something what you can sell multiple times.
– You only sell your work once. Don’t forget. You only have certain number of hours which you can work e.g. 60 hours a week. And you only have certain highest hourly rate which people will be willing to pay for your work e.g. 60USD / hour. So your super maximum which you can earn is 60 (rate) * 60 (hours a week) * 52 (weeks a year) = 187 200 USD (yes, that is true, by doing freelancing, you are not going to be a millionaire, not this year, nor the next year, ….). Still, the 187 200 USD may sound AWESOME! 🙂 However, most of the freelancers I know earn between 50 000 – 100 000 a year – before taxation. And that is a lot of work, responsibility and stress. And you are still building someone’s else company … and then you speak to your neighbour and you find out, he earns same money by buying rice from China and selling it to local shops … doing almost nothing. Then you realize again, that maybe it could be better to stay in a daily job where you could earn similar money for less responsibility or you realize that you need something what you develop once and sell many times … or as your neighbour you become a retailer 🙂
Freelancing helped me to come up with ideas for my own company and it introduced me to the “business” world. Freelancing may not be for everyone and it may not be the final destination for you. There are people who like it, because they feel like they work for themselves and they are their own bosses. They like to stay small and they do not want to grow. However, if you would like to become a freelancer because you do not like your boss, you may want to think about it twice. Being a freelancer is hard!