7 Strategies to Make Your Freelancing Business Profitable
One of the biggest differences between traditional work and freelancing is that with freelancing, income isn’t guaranteed. Without the right planning and attention to finances, freelancers can easily fall short of profitability. Without a guaranteed steady income, almost everything in life, from saving to vacationing, becomes more difficult. Ensuring a steady flow of income is a top priority for freelancers, but it doesn’t have to be a gamble.
There are some surefire strategies to help you maintain a profitable freelancing business. Through our years of work with successful freelancers, CreativesAtWork has learned some of the best strategies for building a profitable freelancing business. Now we’re sharing these tips with you to help you make the most from your freelancing business.
1. Set SMART Goals
Goal setting is imperative to knowing where you’re headed and how you can achieve success. SMART goals are five things: specific, measurable, actionable, realistic, and timed. Writing goals in this way helps you break things down into really actionable steps when building your business. Specific goals have certain amounts or quantities of something, maybe time or money. Measurable are those that can easily be identified as achieved or not. Actionable goals are things that you can take steps to achieve, and timed goals include a date that you want to achieve this goal by.
An example of a SMART goal would be something like, ‘I will earn $10,000 monthly by the end of 2022.’ However, It would be best to break this goal down into something more realistic and actionable in the beginning of your freelancing career. You may want to set smaller goals that will build to this bigger goal, such as ‘I have four paying clients at all times’ or ‘I get a $1,000 project by next month.’ Reviewing your goals often and seeing if you’re achieving them will help you understand if your business is really operating how you want it to.
2. Charge the Correct Rate
Freelancers have the privilege of deciding how much they want to get paid for their work, but figuring out how much to charge clients can be challenging. There are different ways of calculating your rates, such as an hourly rate, a market rate, or value-based pricing. Charging by the hour can be challenging because you will end up making less money for being more efficient. Charging the market rate means aligning yourself with what others are charging, which can box you into a particular rate.
CreativesAtWork has found that value-based pricing is the most successful pricing scheme for freelancers over the long run. Charging clients by value means assessing how much revenue will be generated by your contribution to their business and then charging a piece of that. For example, if you create an eCommerce website that is projected to sell $200,000 worth of merchandise a year, you deserve a chunk of that. What percentage you charge should be based on how much of the completed project you contributed to.
3. Make a Financial Plan
Having a financial plan for your income is imperative in ensuring your business is profitable in the long run. The income that you earn as a freelancer is not just your paycheck--it’s your business’s profit. You are your business’s CFO, and it’s in your hands to make sure that your income is funneled into the correct places to ensure you stay profitable.
One of our experts advises that when you get paid, you always pay yourself first. Make sure the first portion, whether it be 10 or 20%, of your paycheck, goes towards savings. As a freelancer, having savings is imperative, as the windfalls of your income need to make up for the shortfalls. The rest of your income should be allocated as your salary and company reserves. These company reserves can fall into categories, such as rainy day funds, business expansion or investment, education/upgrading skills, dreams, future, and giving. Once you have your plan in place, make it easy to stick to by setting up automatic transfers into separate savings accounts.
4. Find Clients Who Will Pay and Keep Them
Some clients are willing to pay top dollar for quality work--there are others that barely pay $10 for a good article. Don’t waste your time chasing work and clients that are not willing to pay you fairly for your time. If a potential client wants to negotiate rates that are lower than what you need to make a living--don’t sweat it and move on. Use your time to instead find quality clients that are willing to invest in their businesses by paying you what you’re worth.
Once you’ve found these types of clients, whether it’s through networking or an online platform, it’s imperative that you keep them around. Finding clients takes time--time that isn’t paid. If you can avoid needing to find and negotiate with new clients, you can maximise your work time, and therefore your income. Build good relationships with your clients by keeping in touch regularly, updating them on industry news, being an asset to their team, and always turning in your work on time.
5. Invest in Yourself
Part of your financial plan should be self-investment. As you’re a business, you have to spend money to make money. This could be in soft-skills, like upleveling your writing savviness by taking a writing class each year, or in hardware, like buying a new camera if you’re a photographer. It could also mean investing in marketing so you can find higher paying clients.
Investing into yourself and your business will help keep you competitive and cutting edge. Whatever you choose to invest in, make sure you can see that the investment will pay off in the end by making you more money. Keep track of the effectiveness of your investments by looking at shifts in your income before and after investments.
6. Find Ways to Make Passive Income
Generating passive income is a great way to help keep your freelancing business profitable. Passive income comes from something that you only need to invest minimal or no time into, while you continue to make profit. To make passive income, you must find what you can create with your skills that is copyable and sellable.
For a photographer, that might mean uploading stock photos on sites like pexels, where you can get paid by people who use your photos. For a copywriter, it might mean making article guidebooks that people can download for a fee. For a director, it might mean writing an eBook about creating short films. All these methods require an initial investment of time, but they can be capitalized on continuously.
7. Review Your Income and Expenses Regularly
Your bottom line is the ultimate measure of whether your business is profitable or not. Each month, you should review your finances and make sure that you are making more money than your expenses. If you find that your expenses outweigh your income, avoid trying to reduce your expenses.
Instead, try to find how you can become more profitable. Are you missing one of the above steps? Do you need to adjust your rates? Can you generate more passive income? How can you make an investment that will yield a big return? Increasing profitability instead of reducing expenses will help keep your business sustainable for the life that you want.
If you follow the above steps, you can not only find work as a freelancer but be profitable. Need more help making sure your freelancing business is a well-oiled machine? Check out CAW’s guide to creating a successful freelancing business! Follow us on https://www.youtube.com/creativesatwork/ for more bite sized video content!
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