7 Phases of Running A Freelance Business

Freelancing is a decent alternative if you’re a self-driven person who is a fast learner. Some people are well-organized, can use Google (or Stack Overflow, or other resources) quickly, read fast, and are not afraid of experimenting. With the right attitude through freelancing, you may improve your technical and business skills that you will need to start a freelance business.

The caveat is in finding the right process for handling activities. Growing your freelance business often revolves around marketing and sales, negotiations, project planning, documentation, delivery milestones, financial management, and even legal cases.

becoming a freelancer

If you’re not passionate about any of those (or struggle with most), it may turn into a bitter experience, not to mention that a good chunk of your time may go into marketing and prospecting instead of hands-on.

There are 7 phases of running a freelance business that you need to know in order to successfully grow and scale further. In this article, we are going to discuss the key areas to focus on during these critical phases.

7 Phases of Running a Freelance Business

1. Creating Your Business Plan

If I have to narrow them down to two essential requirements:

  • Strive for mind-blowing service quality
  • Prepare to run an entire business with all-encompassing activities

Most people get stuck on one of those and tend to develop it more zealously. That’s a mistake.

Essentially, becoming a freelancer is a form of starting a business. You sell your time and skills and build solutions. This is the service quality aspect.

What Running A Freelance Business Requires

Payment transactions require some tax management: enter accounting. This usually requires registering a business – and dealing with legal activities. Landing clients depends on sales and marketing. Juggling with several ongoing clients is contingent on your project management skills. And that’s running business and management operations.

Sure, you can start small at first. Build some projects for friends and acquaintances after hours or over the weekend. Sign up for any of the freelance networks out there and pitch for new projects every now and then.

This could be done as a hobby of a sort – as long as you deliver what you’ve promised within the time frame agreed upon.

A full-time freelance career would inevitably lead to hustling more and struggling to generate sustainable ongoing revenue at first. Excelling at all relevant activities is definitely not trivial. Be prepared to collaborate with others who can help out and have your lawyer or accountant on speed dial.

Failing is easier than making it work. That’s not to say that you shouldn’t try or it’s all causa perduta. But incomplete solutions result in dissatisfaction. Postponing deadlines builds pressure. Failing to manage your energy and revenue leads to burnouts. There are traps and challenges behind every corner.

Carefully write your business plan before you start and prepare a set of processes for the separate activities. Then combine them all in a flow chart, a mind map, add them in your calendar – whatever is easier for you.

The more “cheat sheets” and “how-to” guides you have, the easier would it be to follow a sane workflow and cover all areas accordingly. Create repeating tasks or recurring events for sales calls, project overviews, handling invoices. The staggering volume of activities can trigger a mental block and lead to missing important aspects of your work.

2. Finding Your First Clients

First off, we don’t tend to work locally. The local market is small and the problems we solve are beyond the low-level issues businesses around deal with.

This wasn’t the case in the early days, though.

I’d have to reach out to my network, announce my availability in forums and on social media, and spend time bidding on oDesk/Freelancer.

More importantly, I spent nearly a year bidding and studying freelancing before I went all in. I worked evenings and weekends, building my portfolio and rating.

The first memorable customer I have in mind was a local reference. An experienced Flash freelancer had a lead and saw my message. The client was smaller and the tech stack wasn’t something he was comfortable with, and that’s how we started.

I had a couple of similar leads in the interim. It was extremely challenging dealing with the scope creep most of all. Small businesses rarely understand the dynamics of digital and what goes into a project, and the number of assumptions was extreme.

I did not communicate that properly, meaning that “what goes in the contract is what you get”, which led to several months in additional fixes.

It went well after all, but I learned some valuable lessons after several tough contracts!

3. Working With Other Freelancers: Benefits vs Drawbacks

Weighing the benefits and drawbacks that come with working with other freelancers can guide you in your decision-making process. I have outlined some of the top pros and cons.

Benefits

  • You can scale your workload twice (after a certain period of training and onboarding)
  • Offload the most tedious activities
  • Focus on productive tasks instead of multitasking
  • Excel at what you do best instead of covering numerous areas
  • Limit distractions by offloading support or running outside errands

Drawbacks

  • Hard to find decent talent
  • Loyalty and retention are often a problem
  • Onboarding will cost you a lot. You need to work twice as hard handling training and getting the job done in the meantime.
  • Recurring costs are frightening
  • Management is increasing business complexity
  • Extra time in quality assurance

Once you start scaling your business, you start incurring monthly expenses. Incurring new expenses monthly is massively risky and challenging. Clients may delay paying for an invoice. That’s why an office is rarely a good investment early on.

Even co-working spaces may be too much, starting from a university’s library or coffee shops is a fine starting point during the bootstrap phase.

working with other freelancers

4. Surviving the Feast and Famine Cycle

Scaling your freelancing business depends on your workload.

If you are still going through the feast and famine cycle all the time, consider one of the following two strategies:

  1. Switch to some form of a recurring revenue model (or at least a longer-term contract to keep you safe for a bit)
  2. Save enough cash for both you and your future hire as you don’t want to end up delaying a paycheck

There are different ways to actually accomplish this. Some examples:

  • Build a network of freelancers first to ensure you can scale the workload.
  • Poach some of the freelancers for a half-time or a full-time role once you know they can deliver and know the projects (plus you’ve tested the working relationship).
  • If they can’t/aren’t interested, look for a hire that could offload some of the freelance work and bring it home.
  • If you don’t have freelancers around, look for an experienced hire who can deliver and asks for less than what you charge. Otherwise, you will never make as much from clients as they ask for (wage-wise).
  • If you can’t find someone (or afford them), hire a junior. Start with tedious and recurring tasks. It will be tough, you’ll work twice as much, but this can scale if they are a good learner and eager enough to stick around and learn the ropes.

5. Establishing Your Pricing

There are generally two categories of freelance development activities:

  • Affordable
  • ROI-driven

Freelancers often try to mix between both models and often fall back into the first category instead. Unless you demonstrate professional capacity which could contribute to the business, you’ll likely be compared by price instead of value.

I’ve discussed the value-based pricing in detail at Grow Your Business With Your Customers – WP Elevation and in various answers here on Quora. The gist of it is providing actionable business insights and a strategy that would support the business needs of your customers.

Clients are often not fully aware of the requirements of their project. They have a problem in mind and suppose that a certain tool or work will solve it. However, there are different ways to approach the problem – some being more effective than others.

Value-Based Pricing Approach

With value-based pricing in mind, figure out what the project is worth to your client. Every project aims for one of two things (or both at a time):

  • Increasing revenue (through additional sales or higher conversion rates), or
  • Automating processes (saving time that could be invested in something else).

New business applications fall into the first category. Same goes for marketing websites and eCommerce platforms which could sell more than they do now – with the right techniques retaining customers longer and providing the exact information prospects are looking for.

The second type are usually CRM systems, ERPs, hiring tools, marketing automation platforms and anything else that would save people from manually clicking, browsing around, sifting through spreadsheets or browsing Google every time they need to perform a simple operation.

For value-based pricing, as long as you can ask for the expected revenue upfront or estimate the impact on your work, you can invest more into providing a better solution which would have a better impact on the business processes.

Cost-Based Pricing Approach

If you want to stick to simple projects and compete by price instead:

  • Make sure you automate as much of your work as possible.
  • Focus on a specific market and build reusable components which could easily be adapted and integrated into new software.
  • Prepare contract and proposal templates, sign up for some stock photo websites and do anything you can in order to save time per project and compile all requirements early on with the least amount of friction.
  • Sign some partnerships or reseller deals for hosting accounts, plugin shops, etc. These would pay for some of the components you provide as a part of your complete solution.

The cost-based approach is generally riskier since most of those activities can be automated in a way. This is why there are so many site builders and 3rd party hosted tools available for most problems. ROI-driven deals require expertise which is harder to replace by a robot.

Both strategies can be decoupled into an actionable plan. The rest depends on hustling and attracting prospects in order to create an ongoing sales funnel for your consulting business.

6. Growing Your Freelance Business: Organic vs Fueled Growth

Should you aim for organic growth or fueled growth in a business?

A healthy mix of both would be the best compromise.

What Does “Organic Growth” Mean?

It’s the general sales/marketing mix excluding expensive ad campaigns, rapid funding cycles, insane growth. This also includes occasional press releases or other campaigns aiming to spark extra interest.

Add in some references, testimonials, help from existing connections in your network.

Small businesses can benefit from slower growth when it comes to scaling the company.

Rapid growth is stressful. You’ll hire quickly. Making some compromises and filling in gaps just because you really need to. Cut some corners here and there and skip important onboarding cycles.

Otherwise, your culture may be affected big time.

But fueled growth can help when contained properly.

Slower growth can also damage your business with unpredictable revenue and failing to make payroll on time. Pulling some tricks from under your sleeve can speed things up without affecting your sanity.

Some angel investing or collecting cash from friends and family for strategic campaigns can pay off.

Figuring out a successful lead generation channel and doubling down, too.

Making your way to a TV appearance or a session at a key conference for your industry.

If you play it safe but smart, you’ll find the right pacing to push your company forward.

7. Upkeeping Your Freelance Business’ Processes

Running a business

Yes, several times a week (on a good week), I feel like I am out of my depth in terms of the skills required to run a business.

Running a business requires hundreds of instant decisions every day. You rarely get the opportunity to plan too far ahead of time.

I’m not as worried about solving every individual small case. I try to be as cautious as possible not to take a serious of decisions that would have consequences in the future. Poor investments, hiring against our culture fit, announcing a partnership without considering nuanced cultural implications.

Building a moral compass in the form of business and culture code often serves as the last line of validation for quick assessments every day.

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Your thoughts?