July 11th, 2010
When I asked folks to chime in with their burning freelancing questions last week I wasn’t expecting to get so many. Thank you — both for playing along, and for continuing to read this site despite my increasingly infrequent posts.
The column I wound up writing on the topic – Suddenly Self-Employed? Seven Ways to Boost Your Income – makes the following suggestions. Many of you will have heard some of them before. But hey, when it comes to making more moolah, a little reminder never hurts, right?
1. Follow the money. Sometimes a snoozy yet lucrative gig can be a lifesaver.
2. Don’t let any one client dominate your time. Over the course of the year, up to 25% per client is my recommended time limit.
3. Track your project time. If that $750 article takes you 75 hours to research, write, and revise, you’re either doing too much work or getting robbed.
4. Stop reducing your rates. The worst of the recession is hopefully behind us. Slashing your rates to get more work (or agreeing to a client’s slashed rates in order to hang on to them) is not a viable business model. You’ll just wind up working twice as many hours to pay your bills.
5. Institute project minimums. Why take piddly one-off assignments for $100 to $200 a pop when you can cultivate higher-paying projects and clients who give you steady business?
7. Hire a blasted intern already. As long as you provide some educational value (a bit of mentorship), you can get a budding freelancer to do your admin bidding for free or close to it for several hours a month. And even if you do pony up, say, $10 to $20/hour for a young, eager virtual assistant, if you’re charging clients, say, $60 to $80/hour and up, you still come out ahead. Once you get them trained, having your intern/assistant take four hours of admin work off yours hands each week frees you up to make four more hours of income, dig?
[To read Suddenly Self-Employed? Seven Ways to Boost Your Income in its entirety, see ABCNews.com.]
Meanwhile, I’d like to add a couple items to the above list:
1. Jean is right: hiring an intern or assistant is easy. All that’s required is an initial investment of time. Make a list of the work you need to pawn off on someone else, hit up your local college for creative students ISO internships (require them to commit for at least three to six months) or ask your network for the names of unemployed professionals who could use a little extra cash, wade through a handful of resumes and interviews, make your choice, and then delegate your little heart out.
To keep kosher with the IRS when you pay an intern or assistant, you would simply send your intern/assistant a 1099 in January for work they performed the previous year — that is, if you paid them at least $600 for the year. Otherwise, no 1099 is necessary. You can also claim the money you pay them as an expense of running your business. Talk to your tax preparer for details.
2. Subcontracting is your friend. From an income standpoint, freelancing comes with a big limitation. Suppose you only have 30 billable hours you’re able to work each week. That means the most you can hope to earn on a weekly basis is 30 times your best possible rate. However, if you take a project that involves more work than you alone can handle and farm some of it out to other freelancers, you stand to make more money because (a) you can nab bigger projects and possibly bigger clients, and (b) you can and should take a cut off the top of what you pay your subcontractors.
How much of a cut you take will depend on the project fee, the profit margin you need to make, and the market rate you need to pay to attract quality freelancers. (In other words, I can’t do the math for you, though I can tell you I’ve known freelancers and creative agencies to skim anywhere from 10 to 50% or more off the top. I suspect the appropriate sweet spot lies between 20 and 40%, but it will really depend on the project.)
A few key considerations for those who choose to hire subcontractors:
- Make sure your contract with your client allows you to subcontract. Otherwise, you risk violating the contract and losing the client.
- Prepare to invest some time in finding and overseeing your team of subcontractors.
- Give your subcontractors a contract in writing. If you can’t find a template for this in a book or online (try Nolo.com), talk to a lawyer.
- As with hiring an assistant, you will have to provide 1099s for your subcontractors. Definitely talk to your tax preparer if and when you decide to go this route.
- More freelancers on the job means more room for mistakes. If you don’t have business liability insurance, it may be time to look into it.
As for your other questions, I’ll answer them in the coming days. Thanks, everyone!