Freelancing can offer a great work/life balance. But it’s important to treat your freelance writing business like business if you want it to grow and be financially successful. Adopting a business focus serves several key purposes.
First, you will be more likely to approach your writing work in a more professional fashion in terms of deadlines, understanding your client’s needs, etc. Taking this type of approach means that you are more likely to do some planning for the growth of your freelancing business and dedicate time to marketing to grow your client base.
Adapting the type of approach will also likely lead you to focus on managing the financial aspects of your business. This can mean more money in your pocket. Most importantly in my opinion, a business-oriented approach changes your mindset. This mindset will come across in how you interact with clients and prospects in a positive way.
Here are some thoughts and tips to consider.
Create a plan for your business
While this may sound like a daunting, overwhelming task, a business plan can be as simple as some bullet points on a single sheet of paper. The point is to give your business and the direction that you want to take your business some thought.
These thoughts should include the topical area(s) you want to focus your writing on, the types of writing services you can deliver, who might be interested in hiring you, and how much you should be charging for your services.
Freelance writers may become freelance writers by accident or opportunity. If you enjoy the work and want to make a career of it, it pays to do some planning. As your business grows you might need to make the planning process a bit more formal and involved, but doing some basic planning is a great first step.
The important part of the planning process is the thought process, not some formal end-result. The key here is that you think about your business, so you can take it in the direction that you want it to go. Writing is a lot more fun if you are writing about topics that interest you, for clients who appreciate you, and if you are being compensated fairly. For most freelancers, or for any business owner for that matter, this doesn’t just happen. It takes planning and focus.
Create a name for your business
While this might seem silly and frivolous to some, it does make you think of your business as a separate entity. Even if the name is “Jane Smith – Freelance Writer” this serves to separate your business from you as an individual.
Don’t underestimate the value of having your clients and prospects view you as a business person in addition to being a great writer.
Keep your business and personal finances separate
This is important for many reasons, not the least of which is taxes. It is important to keep business revenues and expenses separate from your personal finances to ensure that you are properly reporting your business profits for tax purposes. Under-reporting your income is, of course, a crime.
Along these lines its important to keep track of your revenues and expenses. At tax time, keeping track of expenses will allow you to supply a list (with verification like receipts) to your tax preparer so that your business can take all deductions that you are entitled to. Why leave money on the table?
Consider using a small business accounting package like QuickBooks to keep track of your revenues and expenses or hiring a bookkeeper if needed.
Beyond tax-compliance, keeping your business finances separate allows you access to critical information that you can use in managing your business.
Keeping track of your business finances can help you analyze which clients are providing the bulk of your revenue, which clients or types of work are the most profitable and can help you analyze where you are spending money on your business.
All of this and other types of financial information are important to know in managing your freelance writing business.
Separate business accounts
Keeping your finances separate also means you should have a separate business bank account into which you deposit payments received from your clients and from which you make disbursements to pay your business expenses.
If you do use a personal credit card for some payments, consider reimbursing yourself for these business expenses via an expense report. While this may seem tedious, it is a good way to ensure business and personal expenses do not get comingled.
Using a business entity
Establishing a separate entity like an LLC or an S-Corp via which you operate your writing business can offer a layer of protection from liability. This type of arrangement can also save you money at tax time.
One of the aspects of maintaining this “corporate veil” is not comingling the finances of your business entity with your personal finances. If this is an area of interest or concern for you, we suggest that you discuss the required level of segregation of your finances with an attorney or accountant knowledgeable in this area.
Many freelance writers start out as sole proprietors, and that’s fine for many. It is a good idea to review this aspect of your business periodically to see if moving to some sort of corporate entity makes sense for your business in terms of protection from liability and/or to save money tax-wise.
Everyone’s situation is a bit different, so there isn’t a one-size-fits-all answer for every freelancer. However, establishing a separate business entity for your business can help you grow in terms of providing a level of liability protection and perhaps an amount of tax savings that can be reinvested into your business or used for a purpose such as funding a business retirement plan.
Saving for retirement
Ideally, adopting a business-oriented focus will free-up money to fund a retirement plan for yourself. Being self-employed has many advantages, but also carries responsibilities like saving for your own retirement.
Whether you start with an IRA or move to a plan that allows larger contributions, such as a solo 401(k), a SEP-IRA or even a pension plan, focusing on business aspects of freelancing such as finance and marketing can help generate the funds to contribute to these types of plans, and to build a retirement nest egg for yourself. Freelance writers work hard and deserve a comfortable retirement.
Be sure to hire the help you need. This might include a qualified tax person, maybe a bookkeeper, a payroll service if applicable, and possibly an attorney to help you set up your business entity.
As with anything, look at the costs versus the benefits in making these decisions. You will also want to ensure that any professionals you work with understand how freelance businesses work.
Freelance writing is a passion for many. It can also be a profitable venture along with affording you with a great work/life balance. Taking the next step and treating your freelance business like a business isn’t as hard or daunting as it might sound. The benefits are enormous and can help you take your business and your lifestyle to the next levels.
Disclaimer: This article is meant as a guide for informational purposes only. It does not constitute a solicitation or provision of legal or financial advice, nor does it establish a client-attorney relationship. Please consult a professional in making any decisions for your business.