When you’re starting a new business, it’s natural to get ahead of yourself. It’s easier said than done, but slow down and take it one step at a time. Start with a solid foundation, known as a strategic business plan, that will enable you to build a freelance life you love. The key components of a business plan for freelancers are:
- Goals and objectives
- Financial forecasts
Goals and Objectives
Often overlooked, goals and objectives are the most important aspects of any business plan. Without a specific outline, you’ll significantly decrease your chances of getting to wherever you want to go. As Seneca famously said, “If one does not know to which port one is sailing, no wind is favorable.”
Goals are what you want to accomplish, and objectives are how you’ll accomplish them. But, before you focus on the “what” and the “how,” it’s imperative to determine the “why.” Why do you want to freelance? To have more freedom and flexibility? To take more control over your time and income? To build something of your own? Once you know your “why,” you can decipher your “whats” and “hows.”
Whether we like it or not, sales is a part of the job — not just any part, but a major part. Without sales, a business doesn’t exist.
First, acknowledge what you’re selling: your services. Once you know the services you want to sell, how are you going to sell them? The key to sales is to understand your ideal client. What types of businesses do you want to work with?
You also need to understand the people within these businesses who will decide whether to hire you. Is it the owner, an executive, a manager or someone else? An owner and a manager of a business (assuming they’re two different people) will have different perspectives. They hire freelancers for different reasons, which means your messaging must fit within the unique perspectives of your ideal clients. This brings us to the marketing piece of the puzzle.
Marketing is a process, and to market yourself well, you need to stand out. It’s all about making potential clients not only want, but need your skills. Present yourself as a valuable asset, and develop your relationships with clients to build trust. After that, your clients will be more likely to hire you at the price you want to charge. Notice how I used the word “process” — this takes time.
Many new freelancers rely on word-of-mouth as a marketing “strategy,” but eventually realize this isn’t the best route, since it’s not scalable or controllable. In reality, marketing must be able to achieve scale, and you need to be in control of the message you want to send to your ideal clients. To create the perfect marketing message (or series of messages) for your ideal clients, you must understand them at their core, including their:
- Demographics: age range, gender, job title, industry, education level, nationality and language.
- Geographics: where they work and live (if relevant), and the business-related websites and social media platforms they frequent.
- Psychographics: beliefs and attitudes; interests and passions; hopes and aspirations; problems, challenges and concerns; and motivations related to their job title and industry.
- Behaviors: the types of content they consume (like written, audio, video), and if they prefer to engage with it on a desktop or mobile device.
You can use these insights and observations to create and publish content that links their values and interests to your services. For new freelancers, I’d recommend starting with LinkedIn and email marketing.
Within financial forecasting, there are two primary categories: revenues and expenses. Revenue is the total amount of money you generate, while expenses are the amount of money spent to run your business. Don’t confuse revenue with profit — that’ll be the total revenue minus your expenses.
The best way to forecast your revenue is to reverse-engineer it by determining your total monthly expenses (both business-related and personal) and the amount of money you want to save each month. For non-recurring expenses, figure out their annual cost, and divide by 12 to get the monthly amount. For example: If I travel three times per year and each trip costs me $2,000, that’s a total of $6,000 per year — or $500 per month.
Once you have your monthly total, divide it by 70 percent of the total number of hours you want to work each month to get your hourly rate, since most freelancers don’t get paid for every single hour worked (like the time it takes to go to and from meetings). If I want to work 160 hours each month (which is considered full-time work) and I have $5,000 of total monthly expenses, my hourly rate would be about $45. Whether or not you decide to charge your clients per hour is irrelevant, but you’ll want to establish an internal hourly rate to determine your project or retainer fees.
In terms of expenses, there are fixed expenses and variable expenses. Fixed expenses are costs that don’t change, regardless of how much you use a product or service. A car payment would be a fixed cost because, whether you use the car for four hours each day or four hours each week, the cost of payment is static. On the other hand, variable expenses change according to how much you use a product or service. Gasoline is a variable cost, since it changes depending on how much you drive.
There’s some math involved, but once you’ve nailed down the essential pieces, you’re well on your way to a solid foundation. When you’re creating your strategic business plan, make sure you plan for both fixed and variable expenses today — and in the future.