Ten things I’ve learned (so far) about starting a freelance design business

14,297 designers received our email newsletter last week. Click here to sign up for free.

Over the past few months I’ve been working on getting starting a freelance design business. It’s definitely been a learning experience (in a good way, mostly), and I thought I’d share some tips that I’ve come across.

Determining Business Structure

There are many structures, but the most common for freelances are Sole Proprietor and LLC. I had a hard time deciding between the two.

A Sole Proprietorship is an unincorporated business that you own by yourself. Basically you’re personally responsible for all of the business’ financial obligations and the money your business earns is taxed as your money. If you get sued, they can go after your personal belongings (such as house, car, computer, etc.) if you don’t have the money to pay a large settlement.

Setting up as an LLC (Limited Liability can help protect your personal assets since you’re not personally liable for the company. In that case if you get sued, they can only take property and assets held by the business, so that’s nice. However, you have to file your taxes separately for your business, and from what I hear, that’s a hassle.

I, for one, figured the chances of legal action are slim (maybe short-sighted on my part, who knows?) and went with an SP. I do all my accounting and taxes myself and don’t plan on hiring anyone in the near future, so thought for starters this would be the way to go. I even consulted with GDB’s own Preston D. Lee, and he made the good point that it’s much easier to upgrade from an SP to a more complex structure than in the opposite direction, if you change your mind down the road.

Separating finances

I highly recommend setting up a separate checking account for your business, as it makes it much easier to track your business spending and income. I’ve set up a business budget, and that includes paying myself the same amount every month. This helps to keep money in the business for other expenses, and to have some cushion (hopefully) to still pay myself in a slow month.

Bookkeeping: I set up an account with Wave Accounting (which is free!). So far it has been super easy to use, and it generates financial reports and whatnot for tax time. Some “real” bookkeeping software (like QuickBooks or similar) can be very complex for a non-financially-savvy individual. I don’t recommend spending a ton of time learning accounting, but definitely make sure it’s being done correctly and you’ll save a ton of effort come tax time. If you can find an inexpensive accountant to do your taxes, or at least set up an easy bookkeeping system for you, it may be worth the money.

Specialization

Let’s say you’re a web designer, but someone approaches you to do a poster. Will you take on that project? Most of the time you might as well (if it’s a project you’re qualified for), since it’s always nice to have a bit of variety and round out your skills (and the money is always an incentive). However, if your print skills are shaky, you don’t want to risk hurting your reputation as stellar web designer by turning out a crappy poster. This person could be a potential web client and you want to look your best. Also, if you have a bunch of pressing assignments to get done and this random print job would be a distraction from your primary source of income, it’s ok to turn it down. Just be nice about it and explain that you’re too busy but would love to discuss future work.

Equipment and software

There always seem to be two sides to the equipment argument. I’ve run into this problem

You gotta have the best equipment available. There is a saying I learned at art school that goes something like, “You can make bad work with great tools, but you can’t make great work with bad tools.” I’ve found some truth in this, but nowadays for me it’s mostly about efficiency. If my computer takes FOREVER to rasterize an image or save a file, it can really increase my stress levels and keep me from working at the pace I’m comfortable with. It’s important to have the right equipment to do your job well and efficiently.

Get by with what you have. Sometimes you just don’t have the funds to get that new laptop, and while it’s annoying to have to look at your boring old 2005 MacBook, it still gets the job done just fine. As cool as CS5 is, it may not actually help you do your job better than CS3 ever did.

My feeling on this is to seriously evaluate your efficiency, your work habits, and ultimately your equipment needs. No need to buy a new Mac every year if you’re not noticing huge performance issues. And you may not even need to upgrade your software if you’re still able to exchange files with your clients with no headaches. If you have to start asking someone to convert CS5 files to CS2 for you every other day, it’s probably time to upgrade.

The Workweek

This is a tough one. You chose the freelance lifestyle because of the freedom, right? Well, there are a few things to consider here. For me, if I don’t have a set schedule of when I need to be working, then I find myself slacking off during the day and having to work long into the night to hit my deadlines.

Also, if you have to communicate with your clients a lot, make sure you’re available when they are. If this means dragging yourself out of bed before 3PM, it’s probably worth it (just try not to sound too hung over on the phone).

I find it hard to keep from getting distracted by things around the house as well. Focus on separating your work time from your non-work time, and both aspects of your life will be less stressful and better managed.

Rates

A question I hear a lot is, “How much would it cost for you to make a [insert random design product here]? Obviously that’s not much to go on, and I usually have to squeeze a lot more info out of the person before I can even start an estimate. One thing that helps is to have a set hourly rate. You don’t necessarily have to charge by the hour, but it’s a great starting point for determining a project fee or estimate. When starting a freelance design business, your desired rate may not always be agreed upon, but it’s a good benchmark for determining what you need to make in order to keep the business running.

Here’s a good rate calculator to help get started.

Marketing

This is something I’m still working on. First you have to know your competition, which is difficult in the ever-expanding world wide interweb marketplace. Chances are a lot of your early work will be from people you know or people they know in the area, so it can’t hurt to check out what other local shops offer and charge for similar services. I’m personally not one for cold calling, and the majority of my business has come from people that I have some sort of connection with. Every now and then if I come across a website that needs some help I’ll send an email in their direction and see if I can get involved. I’m sure there are many way more effective ways of finding clients, and if you’ve got any, do let me know.

Business Plan

This is very helpful even if you never plan on applying for a loan or entering a business plan competition. I got a template from the SCORE website http://www.score.org/, and came across many questions I had never even thought to consider. The planning guide really helped me think through how I’m going to market myself, who I’m going to approach for work, and how to run my business efficiently, so I’m spending less time on administrative tasks and more time doing actual design work. Of course, it takes a lot of time to really think through and write your business plan, but this is time very well spent.

Your portfolio

When you approach a client about working for them, they’ll most likely want to see your previous work. Whether it’s a book or a website (you should probably have a website by now—if you don’t, let me know and I’ll make you an awesome one), your actual portfolio is the first piece your potential client will see. Make sure it really represents who you are as a designer. That’s something I’ve struggled with. How do I brand myself? This may be something to consider while you’re working on your business plan. What sets you apart from your competition, how does your work reflect that? Try to make that clear.

Something to avoid while creating your portfolio is overdoing it. While you want it to be an attractive piece on its own, make sure your work is the center of attention. It’s a fine line to tread, but you don’t want your portfolio to distract your potential clients from the finer aspects of your other work.

Organization

How are you supposed to stay on task with out a boss breathing down your neck all day? The most beneficial strategy I’ve found is creating a MANAGEABLE to-do list. Break your big projects down into mini projects and assign due dates/times for them. It’s really hard to get cracking on that daunting “Build Website” task, so try adding smaller chunks of the project to your list instead. Maybe “Create Wireframes” would be one, and “Sketch out three possible layouts” would be another, and “Pick font families” a third. Set aside time to complete each task (leaving some room before your deadline for anything else you missed, of course). It’s always nice to have that satisfying feeling of accomplishment as you achieve your minor goals along the way.

Your turn to talk

Well, enough of my yappin’. What have you learned (maybe the hard way) about getting into freelancing? I know there are a lot of problems I haven’t had to face yet, or maybe you don’t agree with some of my suggestions or strategies. Let’s discuss!

Like what you've read?

Subscribe to our M,W,F newsletter packed with awesome content just like this. We'll also throw in a free ebook just for signing up. Enter your email below. Download will begin immediately.

About Dan Sweet

Comments

  1. Hi Dan,

    Great read. Just started freelancing full time myself and agree with all of your points!

    I live in the UK and registered my business as a Sole Trader (the UK equivalent to a Sole Proprietorship, I believe. Seems like the same rules apply too). I have something called Professional Indemnity Insurance which costs me £10 a month (about $16). That protects me against being sued for up to £250,000 (almost $400,000). Maybe worth seeing if you have a similar service in the US.

    Another thing that I’ve learnt recently is to write out a list of why you want/wanted to become a freelancer. Sometimes you get a dodgy job you can’t decide whether you should take or not. Go back to your list of why you wanted to become freelance, and quite often, that helps you decide!

    I’ve been writing a monthly round up of how my business is going. It’s on my blog if you’re interested.

    • @Ian Lunn,
      Some excellent insights, Ian. Thanks for sharing. And thanks for bringing in some pointers about freelancers from the UK. Much appreciated.

    • @Ian Lunn,

      Excellent idea, keeping a list of why you want(ed) to be a freelancer. Right now, as I’m starting out, my main arguments for taking or refusing a questionable job are A.) Will it be a good addition to my portfolio? and B.) Will it keep me from doing the work that I want/need to be doing according to my business plan?

      Thanks for the tip on the Indemnity Insurance. I’ll definitely look into that.
      Are there any designers in the States that use this? Can you recommend a starting point?

  2. Great advice! We have experienced the same with these ten categories. Very insightful! Always great to continue to learn from each other! Thank you.

  3. Dan,
    This has been an excellent article. Thank you for sharing your insight. I especially thought your tips on a business plan and on separating finances were great! This is a definitely useful article for any freelance designer – experienced or new.

    Thanks for contributing!

    • @Preston D Lee,

      Thanks! I enjoyed going through the thought process of writing the article, and it’s nice to get some feedback and new ideas. I’m here to learn, too!

  4. These are some very helpful tips on the practical side of running a design business. As far as marketing goes, sending out postcards to prospective clients can really help grow your business, and mailing them every couple of months will help keep you on people’s minds. Since postcard printing is relatively inexpensive, this is doable for most small businesses.

  5. Thanks for sharing the info about WAVE. Just signed up. I’d never heard of them before you posted it. After taking a look, they are exactly what I am looking for and fit my needs to a T.
    Thanks!

    • @Shanae,
      Yeah, I happened to stumble on it myself as well and was glad I did. I had tried a couple of the “normal” tools like QuickBooks, but just didn’t have the time to sit down and learn double-entry bookkeeping.

      I have had some issues with Wave being unable to track one of my personal accounts, but their customer service has been very helpful. The problem still hasn’t been resolved but it appears they are trying.

  6. Dan,
    Thanks for sharing your insights, i have a fairly new startup and have been facing the exact same issues day in and out. Your tips will surely help sort my life / business out.

    Thanks again.

    Neha Singh
    More on Design

Trackbacks

  1. […] This post was mentioned on Twitter by Russell Webb, PonsCreative and PonsCreative, Carlos Estrada. Carlos Estrada said: Ten things I’ve learned (so far) about starting a freelance design business: Over the past few months I’ve been … http://bit.ly/ic6lCp […]

  2. […] Ten things I’ve learned (so far) about starting a freelance design business – the final recommended article in this “bunch”. A must read for any self-employed professional. Related Posts:Top 10 blog articles: October 25-31 , 2010Top 10 blog articles: September 27 – October 3, 2010Top 10 blog articles: November 15-21, 2010Top 10 blog articles: November 22-28, 2010Top 10 blog articles: November 8-14, 2010 blog, interesting […]

  3. […] Starting a freelance design business […]

Join the conversation

*