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In this course, author and seasoned freelancer Tom Geller shows you how to prepare for a transition to freelancing. Begin by taking a look at your career goals, the systems that will support you, and proper ways to plan for success. Find out how to marshal your resources, refine your portfolio for presentation to clients, and estimate your costs to avoid any surprises on the financial front. Plus, discover how to create invoices, manage your books and taxes, expand your client base with marketing, and grow your business.
A bonus chapter covers common questions freelancers have when entering the field.
Even if you've decided to keep your job while freelancing, it would be wise to figure out how the start-up will affect your finances. Because no matter what, you're going to have some new expenses. I've created a spreadsheet to help you figure this out. It's in the exercise files. Use this cost-analysis worksheet to estimate your own costs as we go through the most common expenses. First are the large, infrequent costs such as equipment. That could include a new computer, software or a desk. Basically, anything you'd normally find in a workplace but don't own yet.
It also includes necessary certifications and one-time professional services. These comprise the bulk of your start-up costs. The second kind of expense is recurring costs, such as utilities, subscriptions and monthly insurance payments. Keep in mind that as a freelancer, your phone and Internet bills are likely to increase along with your home utilities, if that's where you'll be working. Third are occasional costs, such as those for conferences, training and professional consulting.
These can be substantial, but hard to predict. Finally, we have living costs, which are likely to change a bit when you start freelancing. In the United States for example, you'll probably have new expense of health insurance, which can run into hundreds of dollars per month. There's one other cost you can't ignore. Debt repayment. I'll talk more about that in a minute. If you want a nice breakdown of these costs in a slightly different form but much greater detail, I recommend Laura Spencer's article, "What it Really Costs to Be a Freelancer" at freelancefolder.com.
For all expenses, mentally balance the cost of the item against the benefits you expect to get out of it. Sometimes the benefit doesn't have a direct financial value. For example, spending an extra $100 on a comfortable chair won't necessarily make you more money, but your cost- benefit analysis will help you decide whether that comfort spread over the life of the chair is worth the $100. Take a look at the exercise file to calculate your own expenses. The point of this is to figure out how much money you'll need for that initial spending spree and then for each month for a while after that.
As I said before, I think it's good to have six months of expenses in reserve although more is always better. You'll start with your initial costs, then subtract the amount of money you have available to give the business. The amount left over is how much you'll have to raise to get started. For your ongoing finances, first figure out what your monthly cost will be, then subtract any continuing income that doesn't come from freelancing. For example, from royalties, investments or a partner who supports you.
That amount is what you'll need to either finance or earn from freelancing every month. Putting this all together, we get a formula that looks like this. Your start up costs plus six times your monthly deficit equals the amount of money you'll need to stay afloat until your income covers your expenses. Now that you have a target, you need to gather that amount of money together. I'll cover the various ways to do so next.
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