As a contractor, freelancer, or otherwise self-employed, income-bearing activities are at the top of your to-do list. However, you must also pay attention to other issues. Contractors must keep an eye on legal matters, financial responsibilities, and other administrative tasks to keep their businesses afloat.
How can you prioritize these duties to avoid problems? Here are four things you need to consider before accepting contract work:
Finding the Right Type of Work
You may already have the background or skills necessary for a certain kind of freelance work. But what do you do if you don’t?
First, you must be sure to provide a product or service that people will pay to use. That will take some research. You can investigate some of the top jobs for self-employed people that have taken off recently.
For example, since the pandemic, there has been a greater need for remote workers such as virtual assistants. This particular job is very flexible. Services you can offer range from data entry and accounting to marketing and website support.
Another popular field for contract work is freelance writing, which can pay very well once you have experience under your belt. There are several ways you can get started in this field, including publishing a blog or submitting articles to online publications. Freelance writers should be skilled in editing, grammar, and a popular writing format style such as AP.
If your skills align properly, it’s time to address legal issues.
Legal Issues and Insurance
Working as a freelancer does not necessarily require you to get any business designation or insurance. However, as your business grows, you may want to take steps to protect yourself from potential disasters.
Here are some of the legal issues that may impact freelance work:
- Before starting, make sure you do not have any contracts with your current or former full-time employer that place restrictions on you. If you signed a non-compete or non-disclosure agreement, you may not be able to share prior work or details from your job with clients.
- You can work as a sole proprietor. However, for additional protection, becoming an LLC is safer. This designation protects your personal bank account and other assets in the event of a lawsuit.
- You may also want to consider purchasing additional insurance to protect your business, such as professional liability insurance.
- Finally, you should have formal contracts between you and any clients or vendors. These can be simple but should lay out expectations, costs, timelines, and legal issues such as copyright or delinquent accounts.
The next hurdle to conquer is business money management.
Managing Your Business Finances and Taxes
As you transition into freelance work, you must properly manage money matters. Prepare for your business finances and tax accounting beforehand. Some steps you should take include:
- Creating a separate bank account for your freelance income to help with accounting and potential legal issues.
- A business budget. It’s wise to set up a regular monthly budget for business expenses. This will help you prioritize the must-have costs versus optional investments, such as high-end accounting software.
- Find a system to create and track invoices, hourly work, and expenses. Also make sure you have a secure, robust system to accept client payments. Paypal is one simple, affordable option but may not work for your needs. You don’t have to reinvent the wheel in tracking income and spending; a simple spreadsheet will do.
Whether you are a freelancer, business owner, or dabbling in an income-earning hobby, you’ll need to pay taxes but different rules apply. For example, if you are participating in a hobby without an intention to earn money, your deductions are different than if you are doing this work for profit. If you lose more than you earn, additional rules apply for deductions as well.
If you’re confused about taxes, you may want to speak to an accountant. Once your finances and taxes are in order, it’s time to find customers!
Attracting and Retaining Clients
How can you start attracting clients? There are lots of tried and true ways.
Networking: A great idea for starters is to join a networking group or your local chamber of commerce. There may be free or low-cost local groups that are a better fit. Check out Meetup.org or search on Google to see if there are any local ones.
Social Media: Facebook, LinkedIn, Instagram, and TikTok are popular platforms for marketing. The best idea is to join one and build your presence there before adding multiple platforms.
Start by connecting with friends and family already using these social media tools. Then, join groups and get connected. The key to social media is to build relationships first, rather than just promoting your business.
Blogging: If you start a blog, it can do double duty to bring in income. First, it can act as your writing resume. However, you can also add affiliate links to earn income from the products you recommend. You may even be able to build partnerships with brands and eventually write posts on your blog for income.
When you blog, it’s critical to do some work so that search engines can find you. You may also want to start an email service and share your posts on social media.
Paid Advertising: This is another option. You can pay to advertise on social media or in the local press. This may be the most costly, so it should be last in your marketing plan.
Before signing up clients, you should meet with them virtually or face-to-face first. Not every prospect will be a good fit for you, nor you for them. A video meeting allows you to meet with clients anywhere in the country.
Preparing for this meeting is similar to prepping for a job interview via video. You are likely to encounter some common interview questions and can prepare answers for them before your interviews. The questions will likely differ in detail, but interviewers will still want to know your expertise, dedication, and experience. Keep the meeting short and to the point, and be prepared to answer any questions about your work, schedule, or pricing.
Contract work is a great way to make extra money or even leap into business. But before starting, protect yourself by making wise choices for your work, finances, and clients. Being aware of these issues ahead of time will help you to thrive as a freelancer.