Are you a freelancer “stuck” in a full-time day job? Or an out of work professional considering a move into freelancing? If so, you’re not alone.
Thousands of aspiring freelancers are in the same spot and with the Internet such a huge marketplace for everyone these days, there is, in particular, an ever-increasing army of people across the professions of IT, SEO, Marketing and Writing who want to make the leap to freelancing full-time.
For many though, becoming a freelancer is a double-edged sword as on the one hand they need time to promote their services and to work on client projects, but on the other they need an income to support themselves and their families. Which means they need that day job.
So how are you supposed to break this cycle and enter in to the world of freelancing, fulltime? Here are some of the core basics that everyone considering freelancing should think about.
Become a venture capitalist!
The biggest challenge most of us face when trying to make this type of transition, is how to combat the loss of income. If you currently have a job, quitting it to start a freelance business would mean going several months without a paycheck. And even if some freelance work came in, it is unlikely in the early days that it would be enough to cover the living expenses for most of us.
So we need a way to replace that income safely. And until your freelance business can do that on its own, you need some sort of funding. You need start-up capital that can help you cover your living expenses during the leaner months and allow you to sleep well at night.
Essentially, you need venture capital. Don’t worry, though – you’re not going to approach venture capitalists about investing in your business. Instead, you’re going to raise that capital yourself. And you’re going to do that by working your freelance business part-time – in addition to a current job or a stop-over job if you’re currently out work, and saving all your net profits.
Once you have enough capital stashed away to comfortably “fund” your business for a defined period of time, you’ll be in a position to begin freelancing full-time.
This is the best, safest and most reliable way to make the transition. It’s not theory or wishful thinking! Now on to the specifics of the plan…
Set and track key milestones
In order for a transition plan to work, you’re going to need to set some key goals and milestones. These are critical, as they’ll guide your day-to-day decisions and help you determine how you’re tracking and what adjustments you may need to make as you move forward.
Start Date – The first thing you need to do is spend some time thinking about when you want to be fully self-employed – the actual date you want to go solo. This is important, because most of your other milestones and day-to-day activities will flow from this one milestone.
You want this date to be somewhat aggressive, but not so much so that it’s completely unrealistic and will set you up for failure. At the same time, it should get you excited and motivated. So choose a date that’s somewhere between thrilling and realistic.
Savings Reserve – Next, you have to determine how much start-up capital you’re going to need to make up for any income shortfalls during your first year. This is your safety net, and it will become the reserve account you draw from when you hit those lean months or when you have unexpected expenses.
How much you put away is obviously up to you. It should be based on your current resources, other sources of income (e.g., your spouse’s job), your financial obligations and how much makes you feel comfortable. The greater your financial obligations, the higher the number. The more your family depends on your income, the more you’ll need.
Many financial experts recommend that families keep savings of at least six months’ living expenses. If you’re the sole breadwinner and this is going to be your full-time business, then eight to 12 months’ worth of living expenses may not be a bad idea.
That may sound like an impossible goal for you right now. But don’t get discouraged. Find a level you’re comfortable with. And remember: most of this amount will be funded by your part-time freelance earnings.
Your first project. This is the date by which you want to land your first paid project (if you haven’t landed one already). This is important because that first paid project is the best thing you can get for your self-confidence.
What’s a realistic time frame for landing a first project? That obviously depends on the intensity of your promotional efforts, your ability to leverage current contacts into clients, your profession, your chosen market niche (if any) and other important factors.
Here again (and with all these milestones), pick targets that will stretch you a bit and get you excited. Don’t be too conservative, but don’t be completely unrealistic, either.
Initial monthly income. This is the monthly income you want to start consistently earning as you work your business part-time (assuming that’s what you do during transition). You want to set a date by which that part-time income will be somewhat steady and predictable. When you reach this milestone, you’ll know that you probably have a viable business.
Trigger monthly income. This is the income that, when you start consistently earning it, it will “tell” you that you’re ready to make the leap. This is probably one of the most important and helpful milestones to set.
Before going solo, if you were earning say $7,000 a month in a day job, but had little spare time to work on your freelance business (like most of us in this situation), your part-time income potential would be capped.
But then the question becomes, “OK, if all I can manage to earn is, say, $2,000 a month from my part-time freelance business…how will I know that this would turn into a much bigger number if I were freelancing full-time?”
In other words, if your goal is to earn $7,000 a month as a full-time freelancer, what part-time income figure would turn into that number if I could work my freelance business full-time?
There’s no straightforward answer. It really depends on your profession and how much time you can afford to put into your part-time business. Try and set a “trigger” point – in other words, when you consistently start bringing in X amount everyone month, you can be confident that the equivalent full-time effort would give you you’re target monthly income, in the above case, $7,000 or more a month.
Number of clients. Specifically, you should determine the number of clients you want to have and the dates by which you want to have them. This is not as important as the income milestones discussed, but it’s still a good indicator of readiness.
For example, you may set an early stage goal such as winning two clients who you work with regularly and a longer-term goal of four to five clients before transitioning over to full-time freelancing.
What if you don’t reach every milestone?
Use your savings goal as your guide. If you’ve met or surpassed your savings goal but your trigger monthly income is not as steady as you’d like it to be, that may be OK. Ask yourself: “If I could do this on a full-time basis and therefore have more time to take on more projects and promote my business, how much more could I earn? Would that be a good starting point, even if it’s not my long-term income goal?”
Tracking it all
Now that you’ve set your goals and identified all your key milestones, it’s time to map it all out. That means putting it in writing and in a visual format you can easily track.
Putting your milestones in an easily to read chart or table will help you see where you are now and what your journey will look like. It’s a good thing to print out and review every couple of weeks to make sure you’re on track. Plus, when you first run through this exercise, seeing your targets visually may also help you determine whether your goals are realistic or too conservative.
Safest and smartest
Freelancing full-time is not an easy path to tread, but is one that can lead to much greater levels of success than working a ‘day job!’. There are lots of pitfalls and risks though, so taking a similar approach as outlined above will give you a safer and smarter path to turning your dream in to reality.