1. Correct me if I'm wrong...
Correct me if I'm wrong: you entered the creative industry (writing, design, illustration, photography, etc.) because numbers weren't really your thing. Because you didn't want to be a bookkeeper or a tax accountant or an administrator. Because ideas excite you. Well, guess what? As a freelancer, numbers, books, tax and admin are the realities of your world.
Yes, your day job is the sexy stuff... but after hours, or at night, or over weekends, you're a part-time bean-counter - and the more organised you become (or pay others to be, on your behalf), the more professional your offering and the greater your ultimate success.
So let's look at some of the must-haves, for those of you who are starting out or those who've been doing this a while and would like to jack things up.
2. The business plan gargoyle
The beautiful part of a business plan is that it's never too late to write one. If you're a newbie, do it now. It's a valuable tool in defining:
- who your market is (How much do they earn? Where do they live?),
- how you'll sell yourself and your service,
- what exactly your service is (this is a biggie),
- where you'll be located (think about storage and competition),
- potential growth areas,
- your business structure,
- the overheads (resources, equipment, materials, etc.) you're in for,
- what your starting rates should be,
- what the competition's doing, and
- what your policies and procedures will be.
Next step? Consolidate the info you've gathered and sit down to write the bleeding thing. Keep it clear and concise. Present it logically, powerfully and enthusiastically. And divide it into three core areas: the personal profile, the business profile and the financial package (the latter especially if you're going to apply for finance).
3. Sole prop vs CC: my bias
First let me say that, as far as I know, the CC is on its way out. Be that as it may, if you're starting out, a sole prop is infinitely preferable.
It's easier (and less terrifying, for us right-brainers) to initiate and run; it's cheaper (no auditors, financial statements, company tax); and there are no formal procedures (beyond tax obligations, which I'll get to shortly). But you should know that sole proprietors don't have limited liability. In other words, your assets are indistinct from the business and they can be attached if the business goes bang.
In a close corporation or CC, you benefit from owning a legal identity that is distinct from its members and that allows its members limited liability, provided that sureties have been signed. My advice? Chat to an accountant or consultant who has an in-depth understanding of the freelance arena, and make an informed decision based on your abilities, potential liabilities, tax implications, etc.
4. Tackling the tax gremlin
Your tax obligation will depend on the form of business you select. But for the purposes of my (100% non-FICA compliant and non-expert, but 100% well-intended) advice, let's say you're a sole prop. You'll have to register as a provisional tax-payer who pays a combination of personal and professional income to the taxman twice a year, in February and in August. It's simple, really.
- Get a ‘freelance-friendly accountant' and ask for your allowable deductions (you'll also find a basic - again, non-expert - list on my blog: http://tiffanymarkmantraining.blogspot.com). Get into the habit of keeping slips for everything, even parking, and sort 'em once a month, or you'll drown.
- Put a sum (work on what you'd pay if you earned a salary) into your bond or a savings pocket each month, so that when your accountant calls and asks for your first provisional whack of cash, you don't want to cry.
- And remember: if you're paying what feels like a ton of tax, it's a sign that you're making money. Just divide it by the number of months in the year, and you'll feel better. Because of your income-earning-related expenses, you will land up paying less than a salaried person. Promise.
5. Befriending the BEE hobbit
Heard horror stories about pale one-person-shows who can't crack it in the contemporary corporate world, because tenders, pitches and briefs don't go to people without BEE scorecards? Guess what? It's your lucky day.
Empowerdex (or any financial officer) can help to certify you as an Exempted Micro Enterprise. As an EME with an annual turnover of R5 million or less (yeah, like freelancers could earn more than that), you can have your empowered status confirmed with a nifty ‘Level Four Contributor' certificate, for the sum of only R500-odd for a six-month certification and R1000-odd for a year's. Yee-ha!
6. The itchy Ts & Cs
I'm always surprised at how many freelancers successfully run their businesses without formal policies in place - until I hear sad tales about this client who took 80 hours of work and refused to pay for it, or that client who asked for changes and changes and changes, and then killed the job, without coughing up a cent.
But allow me my disclaimer, nonetheless:
If you have a body of regular clients you've built relationships with, and you'd feel ‘funny' subjecting them to a contract, a signed CE or even a half page of terms and conditions, don't read on. However, if you're new to the biz, tired of being cheated ('cos, yes, there are cheats out there) or keen on another, more hardcore way of approaching things, this is for you...
Based on Ts and Cs you've seen elsewhere (first consultation free, COD, 30 days, discounts for immediate payment, interest charges on late payment, 50% deposits, usage clauses, copyright clauses, etc.), decide on your terms and be firm about them. Be warned: a new client who is antsy about committing to a CE, or who quibbles endlessly over basic Ts and Cs, will be antsy when it comes to paying your bill. I've insisted on deposits for amounts as small as R500 - it's a matter of policy.
Tip: a reasonably good resource is Free Legal Docs.
|Remember, also, that it is possible to have different terms for different types of clients. When ad agencies out-source work to me, I only get paid by them once they've been paid by client - and agencies' terms can be 30 or 60 days. My international clients take forever to pay, which I anticipate. And my regulars need only commit in an email; no deposit or signed CE required. Discuss this with your clients in advance, so you're both clear on where you stand.|
7. The time-keeping jungle
As I've explained in previous articles, your quoting options could be per item, per hour or per job. But however you decide to do it, keep good records of the time you spend on each job. There's more to this than making a note of the hours you spend actually working, so break it down like this: Time spent on administration + time spent on research + time spent on creative. Do this for each and every job.
Under administration, you add the time spent on phone calls and emails, as well as the time spent setting up the project, timekeeping and invoicing. Under research, you estimate the time it'll take you to understand the project (client, industry, brief, deliverables) before you get going. Under creative, you estimate actual work time, and add a few extra hours in anticipation of revisions (I offer these for free).
When you take timekeeping seriously, you'll be in a much better position to estimate jobs accurately. There are several key benefits here:
- More accurate estimates for new jobs, whether you bill per hour or per job.
- Less chance of underestimating future jobs and losing money on time spent.
- Satisfied clients who'll appreciate that there's certainty in your estimates.
8. Knowing your value
A lady had a blocked pipe and called a plumber. He arrived, she pointed to the pipe, and he kicked it. The water started running immediately. He said, “That'll be R350”, to which she replied, “How can you charge me R350 for fixing this pipe? All you did was kick it!” And the plumber answered, “I'm not charging you R350 for kicking it; I'm charging you R350 for knowing where to kick it.” Moral of the story: know your value.
There remains a lot to say. So look out for future pieces on: negotiating usage, sourcing international clients, marketing and networking, freelance-supportive technology, contracts, VAT and more. And in the interim? Be a killer freelancer.