Should you take your freelancer business to the next level? Should you shoot for the stars? How do you even get started on that? It feels like a massive, scary risk, right? Here’s all the steps you need to take to make it happen, if that’s what you REALLY want.
Starting out as an independent freelancer, your goals were likely to bring in enough money to hold up your end of the mortgage and to enjoy the freedom of running your own business. Now, you’re finding it tough to keep up with demand and you’re considering remaking your freelance consultancy into a something bigger. Stop. Right now, you’re at a jumping off point from which there is no return. First, ask yourself if whether growing your business can be done, and if it should it be done.
Can you afford to grow your freelancer thing into a business?
The good news is that going from freelancer to small business, and staying a freelancer both have the same first step: putting your prices up.
This sounds risky but it will attract bigger clients who know that they have to pay for your quality work. If you do choose to grow to a bigger business, you’ll need these clients to pay for your contractors and also to reduce time spent haggling with cheapskates. Do this properly – don’t just add $20 and call it done. Consider how much you will need to pay a contractor to do work for you and make sure there’s at least 40% profit on top of that.
If you don’t grow into a mini-agency, then you’re making what you should be making in profit. If you do decide to grow, the hidden costs of a legit small business are pretty steep. You’ll find you’ve got a lot of unbillable hours you’re not used to having. You’ll find that you need to focus more on sales and admin, so you’ll do less of the day to day work yourself. Sadly, 40% is a conservative estimate on how much your prices need to increase. Once your prices are up, are you still in high demand? Do you still get enough work through to require a contactor to pick up the slack? If so, you are the next step along the way of growing your freelancer business into a “world-taking-over” mega brand.
OK, you have the capacity to grow your business – now what? If the idea of more unbillable hours, more admin and more time making sales hasn’t put you off, it’s time to decide what kind of business you want to grow. Digital businesses, like traditional ones, have their own specific models. Right now you’re a soloist. Soloists tend to have the least power in any working relationship and nobody has your back- it’s all on you.
Depending on your business activity, you’ll aim for one of three other business models to transition from freelance. For most freelancers, the next step is to become a specialist business. This might be a Social Media Consultancy or a Virtual Assistant Firm. Each model has its benefits and common mistakes to avoid. Read more here. This is where you need to think long and hard about what you need from your future business plans and then decide where to invest time and effort in growth.
OK, you have a model for your new business, now what?
DO NOT run out and place job ads on Seek. I repeat, don’t hire a single soul just yet. Employees are expensive. They are also a legal commitment that you need to understand before you sign them up. At this point, you’ll do far better with contractors – where you can pay only for the time you use.
At some point, you’ll need to switch to employment (the tax office will insist) but for now, you can work with your own network of reliable freelancers to build a team. If you’re a freelancer, being part of The Freelance Collective already gives you an edge., because you’ll here, you’ll find plenty of quality Australian talent at the ready to help grow your freelancer business.
What will you outsource to a new contractor? What do you hate doing the most? Is it the boring part of your job or is it a technical skill that you don’t have? Do you need to grow the services you can provide or keep providing one service but do more work? This is a big question for web design businesses. Do you get yourself a kickass PHP coder at $75 an hour or do you get yourself a VA who can upload content at $25 an hour? Or, do you get both and only use them on an ad-hoc basis? Every contractor you take on will need things from you. They’ll need training. They’ll need understanding. They’ll need your time. Keeping your contractor pool to a minimum keeps your hours down. As tempting as it is, sometimes, it’s quicker to do the boring admin stuff yourself than it is managing a VA.
Money, work, model, now what? The next step to setting up a small business is getting your systems in place. This is what most freelancers neglect (I am one of them), and it results in long painful hours of admin torture in the long run. Setting up a remote working environment like Basecamp or Trello allows everyone on the team to access client information and “get shiz done” without turning your inbox into Tokyo Metro Station every day. This job sucks. It’s hard and once you’ve done your systems, you’ll need to revise them again. It’s a painful job that is never quite done. However, if your web designer doesn’t know the logins and who to contact for specific graphics and content, you’ll be fielding questions and then forwarding them to the writers and graphic designers. Then they’ll have questions about size and length, which you’ll have to forward back and before you know it you’ll spend all day answering the same annoying questions all day. Systems fix this. Systems are there to ensure that when the day comes you hire a bookkeeper, your money is right. When it comes time to hire an assistant, your clients remain delighted. Love them or hate them, systems are important.
OK the elephant in the boardroom…
This is what nobody really talks about. You might see a thousand social media platitudes about reaching for the sky, but nobody is telling you that the sky is cold and lonely. Why are you doing this? Is it really what you want? I never even asked myself these questions – I just jumped on board with growth. So my freelance business where my biggest worry was getting copy to the client on time morphed into this busy disruptor agency, where I worry about paying 30 people, and what will happen if we lose a big client and I have to lay people off. It’s serious worry that keeps me up at night. I never write copy anymore. Once in a blue moon I might see a project that takes my fancy but for the most part, I do the big picture stuff. The strategy. The sales meetings. The consultations and client training. Not really my passion. My passion is performed by “by-the-hour” contractors while I do paperwork.
But I must be rich, right?
Rich beyond my wildest dreams? NOPE. Some months I roll around in my money drinking Dom from the bottle… others it’s a bag of goon and a can of beans. The bigger you grow, the harder it is to keep control of cash flow. Cash flow will become your biggest pain in the whole world. One or two non-payers or delayed payments and you’re panicking. The bigger the client, the bigger the job, the more you depend on the money!
The other thing nobody talks about is ‘what is success’? I still don’t know if I’m successful or not. My business is. It is busy. It’s bucking the stats for small business growth. It is, on paper, a great little agency. But I don’t know if I am successful or not. I don’t know what I wanted when I went from freelancer to business owner. I don’t think it was money, I can make excellent money in a day job. I thought it was control of my time, but then I work longer hours than any of my friends in day jobs. Maybe it was influence? I have a big team that I just love to death. I help them to grow their own reputations in their specific fields. That makes me happy, but it’s not a measure of my own success, or is it? I still have no bloody idea. If you can work this out before you make the decision to leap into business, you will have a better sense of accomplishment than I do! KPIs have never been my thing – I had to hire someone to work out KPIs for the business but how on earth do you KPI yourself?
Growing a freelancer business into something bigger is rewarding. It is stressful. It’s exciting. It’s depressing. It’s easy. It’s the most difficult thing you’ll ever do. Best of luck and I’ll see you procrastinating on Facebook at 3am while you should be doing cash flow analysis.