Many freelancers dream about full-time freelancing, and it’s easy to see the appeal. There’s the creative freedom of choosing which projects you take on. And the financial freedom of setting (and raising) your own rates. But freelance designers face unique challenges when it comes to establishing and scaling successful careers.
On top of doing actual client work, there are operational and administrative needs that require ongoing attention. From marketing your services to onboarding new clients to managing simple accounting tasks like sending invoices, paying bills, and monitoring your cash flow.
Having said that, the “business” side of freelancing doesn’t have to be scary as long as you have some simple systems in place and a game plan for growth. Use this guide to establish strong practices and automate recurring processes so you can consistently grow your business and revenue over time.
Thanks to our friends at Hopscotch for sponsoring this blog post!
Pricing strategies and templates for creative professionals
Setting rates and designing fee structures can be challenging as a freelancer, especially if you’re just starting out in your career. Here are some of the most common questions and strategies for navigating each scenario.
1. Should I use hourly rates or project fees?
Many freelancers charge hourly rates, especially when they’re just starting out. To calculate your hourly rate, figure out how much you want to make in a given year. A reasonable annual income for a freelance professional web developer, for example, might be $130,000.
Next, determine your operational expenses. Remember–you need to think like a business. Do you need to buy a new laptop or software to do your work? Add this number to your total. In the web developer’s case, it might be $35,000. So the new total salary goal would be $130,000 + $35,000 = $165,000.
You also need to consider taxes and insurance costs. Working as a freelancer means you have different responsibilities than a full-time employee and you need to account for those expenses in your earnings. Finally, divide your target number by your billable hours for the year. For the web developer, this might look like $165,000/1,500, giving them an hourly rate of at least $110. Make sure to research your immediate market to determine a competitive hourly rate.
Alternatively, it might make more sense to evaluate projects holistically. Project-based pricing lets you set a flat fee based on the list of finalized deliverables. It doesn’t matter if you work for 2 hours or 19 hours to complete the work, you’re still going to receive the same amount of money.
If the scope of work is very clearly defined, it might be safe to estimate how many hours it will take you to complete and then use that number as a guideline for how much you charge overall. If the scope of work is loose, unclear, or seems like it might be subject to change over time, an hourly rate might be the best way to get paid fairly.
2. When is the right time to increase my rates?
The longer you work in your field, the more experience you gain. You also tend to become more of a specialist over time–and specialists make more money than generalists. If you invest in advanced training, develop new skills, or take on additional work your prices should go up to reflect the increased value of your services.
Let’s say after a year of freelancing you’ve gotten certified in Adobe and completed two campaigns for major brands that drove significant traffic and had an impact on generating revenue for the clients. Those new credentials and successful real world experiences might be strong indicators that you’re ready to raise your rates and communicate the increased value you bring to the table.
3. How can I successfully manage money convos with clients?
Let’s face it–conversations about money can be awkward. Whether it’s sharing your rates or following up about an unpaid invoice, knowing how to navigate tricky moments in your professional life will help you advocate for yourself and stay on good terms with clients.
Before you commit to any freelance gig, make sure to clearly share cost expectations and offer insights into your pricing philosophy. Remember, it’s probably best to base your pricing on the outcome you deliver rather than the time it takes you to execute.
An expert copywriter might be able to create copy for a website in 6 hours. Even at $200/hr, they would only be getting paid $1200. While that’s a decent price tag for less than a day’s work, it doesn’t accurately capture the ongoing impact of the work–a website can deliver big results like improving acquisition and drive revenue. Use this template to respond to questions about rates:
Want the full cheat sheet for freelancers? Download 6 editable email templates from Hopscotch here.
A quick guide to accounting basics
Think of your freelancing business just like any other professional entity that needs legitimate financial infrastructure–including setting up a separate business account and using professional payment and accounting tools to track your cash flow.
Do smart financial housekeeping
- Don’t mix business and personal spending. You’ll be able to more accurately maintain visibility on your earnings and expenses if you set up a designated bank account for your business. Many freelancers default to getting paid in their personal bank account. But creating a separate account makes it easier to track the money coming in and out of your freelancing business.
- Set up an emergency fund. When you’re a freelancer, payments don’t always run like clockwork. You can weather lean times with cash flow management tools, but another best practice is to set up an emergency fund. Build up the account until it contains enough money for at least 3 months of expenses. This way you won’t have to dip into savings if you have a slow month or panic if a big client pays late.
- Choose a payment process that works for your business. Personal payment platforms like Venmo and Cashapp don’t offer many benefits for businesses. And many business platforms like Paypal charge transaction fees. Hopscotch is built for business payments, making it super easy to pay and get paid instantly without any fees. When it’s time to send an invoice, you can manage the entire process in a few clicks and keep track of everything in one clear, streamlined ledger.
Develop a few cash flow hacks
Poor cash flow is the #1 reason small businesses fail–and freelancers are often in the same boat. If you have bills coming due before you get paid, you might have to take on debt to cover the cost of business expenses like paying your subcontractors or even living expenses like rent, groceries, or car payments. This is bad for business as it creates undue tension and interferes with your ability to focus on growth.
Plan for how taxes impact you
Salaried designers have tax money taken out of their paychecks automatically, but freelancer designers have to calculate and deduct the money they owe for taxes throughout the year. Be sure to track all your sources of income and keep a record of employment documentation forms. Set aside money from each of your paychecks to cover taxes at the end of the year. A portion of your paycheck can be automatically added to a specific account designated for this purpose.
The foolproof invoicing process for freelancers
Now that you have an understanding of how much you should be getting paid as a freelancer and an overview of the way money moves through freelancing businesses, let’s talk about the really important things: how you get paid. Financial mechanics shouldn’t be an afterthought in any freelancing career–after all, if you want to maximize your revenue potential and keep scaling your business you need to develop operational systems that reflect those priorities.
Here what to look for when you’re setting up an invoicing process:
Error reduction. Mistakes cause delays, create friction, and undermine the professionalism of your business. Develop an invoicing strategy that minimizes the chance of human error (automations are your friend!) and helps improve the overall accuracy of your business accounting efforts.
Easy workflows. Time is a precious resource for freelancers. Look for an invoicing process that’s easy to manage, ideally with an all-in-one dashboard so you can see your incoming and outgoing transactions in a single ledger. View and track payments, send invoices, automate reminders, and more – all from one place.
Fast payouts. Businesses don’t want to wait days or weeks to receive funds from a completed transaction. Quick turnaround on payments is even more critical for freelancers and creates better cash flow to cover expenses or reinvest in your business (market your services, get certified in a new skill, etc.)
Minimal fees. Choose an invoicing process that minimizes your fees so you can keep more of the money you earn. Sounds simple, but it’s more difficult than you’d think and can have a big impact on your take-home pay.
Must-have automations to get paid as a freelancer
Automations are a huge advantage when it comes to moving money more efficiently through your business. The more operational processes you can set to automatically recur without requiring manual oversight or input from you, the more time/energy you free up to focus on revenue-generating activity and building a truly sustainable freelancing career.
Step 1–Figure out what to automate
If you can make something happen with fewer errors, less manual oversight, and relatively little setup then it’s a great candidate for automations. Create a list of every process that falls under this umbrella, such as:
– Templatize your invoicing – Automate bill payments – Streamline client onboarding – Standardize your workflows – Productize your services
Step 2–Set recurring processes to autopilot
Once you have the list of processes that make sense to automate, find the best platforms and/or products to help you get set up.
Step 3–Reinvest in your freelancing business
With all the time and money you save, you can reinvest valuable resources into your freelancing career and keep scaling, either by expanding your book of business or developing a new skill that will enhance the way you market your services.
What comes next? Growth mindsets for freelance designers
Freelancing without a clear financial strategy is like starting a journey with no roadmap. You’re more likely to get sidetracked, derailed, or totally lost on the way to key financial milestones. Once you have a few basic systems in place, you can actually track your progress and make adjustments as you scale. Keep fine-tuning your freelancing career to figure out what works for your personal style and brand. After all, you’re the boss!
Looking for an all-in-one invoicing and bill pay partner with built-in cash flow management tools? Start your free Hopscotch trial today.
Hopscotch is the all-in-one invoicing and bill pay platform for small businesses. With Hopscotch, you can pay and get paid in real time with zero fees, customize your client’s payment experience to match your brand, and integrate to accounting software like Quickbooks. Join thousands of businesses paying & getting paid by bank transfers and credit cards on Hopscotch!
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