Running Your Freelancing Business

Surprise! There’s much more to being a successful freelancer than being great at your craft.

In this section, we’ll equip you with the knowhow and tools you need to run a profitable and sustainable business. We’ll help you choose the right software, services, and tools for the job, and we’ll also show you how you can link these services together to automate parts of your business.

Additionally, we’ll help you make sure that you’re never strapped for cash by providing a few tips on keeping on top of your cash flow and business expenses.

Our views on running a business:

  • You should have a “data-driven” business. Find out how.
  • You should automate as much of your business as possible so you can focus on serving and billing your clients. Find out how.
  • You should create recurring revenue streams. Find out how.

Whether through 4+ years of in-depth articles, premium courses, the conferences and events I host, or my podcast, my #1 goal is to help you become a more successful freelancer.

Brennan Dunn

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The Freelancer’s Guide To Recurring Revenue

It’s pretty much inevitable that after the realization that “Oh my God, I’m making a ton of money” freelancing, just about every consultant I’ve met soon realizes, “But that money disappears when I stop working.”

This post is going to dive into how you, an idea-less freelance consultant, can build products of your own and develop recurring revenue streams that don’t necessarily require an ongoing commitment of your time.

How To Better Manage Your Freelancing Business

Greg writes:
“The thing that bothers me most about freelancing: the way the managing of the business is a time-suck from actual design and production.”

That phrase, “time-suck”, is PERFECT. I’ve often used time-sink to describe grunt work that I personally don’t bring value to, but time-suck… I like it!

This week I want to share with you some ways to reverse menial tasks that suck up your time, suck your business into stagnation, and in general — suck.

Cash Flow Tips For Freelancers

Like it or not, as a freelancer you shoulder the risks that come with running a business. And unlike a full-time job, there’s no guarantee of a Friday payday. Mastering cash flow — and ensuring that you can afford to pay your bills and feed your family — is critical to being a successful freelancer.

Getting Money ASAP

Because you aren’t guaranteed a steady paycheck, it’s up to you to make sure your clients play by the rules and treat you like the professional you are.

  • Make your payment terms as aggressive as possible. Just because your friends are all NET 30 doesn’t mean you need to be also. Enforce a 15 day payment policy.
  • Get serious about truant payments. If a client is late, stop work until that payment comes in the door. Don’t establish a culture of, “Oh, ok, that’s no problem.” Remember the wise words from the popular children’s tale: If you give a mouse a cookie…
  • Get paid first. Want to eliminate almost all of your cash flow nightmares? Make your clients pay you before you do any work. I often make the comparison of a gas tank: when there’s gas in the tank, I’m moving. I also make it clear that I’m a professional freelance web developer, not a bill collector. When I’m chasing around money, I’m not getting work done. And while I naturally trust the good nature of my clients, history proves that freelancers aren’t always paid on time.

Cash Flow Forecasting

The life of a freelancer, like any other business, requires budgeting. And unless a significant portion of your income is based on retainers or some other form of recurring revenue, your income will likely fluctuate. Cash flow forecasting is a way to weigh expected future income against known future expenses. Because you likely have quite a few fixed expenses — your house, cars, school tuition, and so on — aggressively saving when income is good will help you survive the inevitable slump.

Create A Cash Flow Statement

More immediately than forecasting, I want to know the state of my business right now. A cash flow statement helps me do this.

You can open up your spreadsheet tool of choice, and create two summed columns: Income this month, and expenses this month. It’s easy enough to think about a beefy deposit I’m about to get (especially when I’m trying to justify, oh, buying the latest MacBook!) but it’s too easy to convince your own mind that you’re about to get a lot of money.

Revenue is separate from profit, and your profitability goes down whenever you impulse buy the latest Apple computer or decide to take a week off. When you start realizing this, and you start seeing that your revenue is one thing, and your profit is something separate — something you entirely control — you’ll begin to see the world anew.

A glimpse into the future (a cash flow forecast) along with insight into the here and now (a cash flow statement) will give you everything you need to make the decisions that affect your ultimate profitability, which will directly influence how you fare when times are rough. And when armed with payment terms that favor you as a professional, you won’t be hearing “uh, the check’s in the mail.” Rather, you’ll be growing your business and your bottom line by continuing to do great work for your clients and by being smart about your profitability and cash flow.

What’s The Best Invoicing Software For Freelancers?

I get asked often what I recommend for invoicing clients. There are a lot of offerings. After all, you could do it the old fashioned way and use one of those invoice templates that Word and Pages offers (do people really use those?) But you’re probably using, or want to use, software that is built around the act of invoicing.

What do you need your invoicing software to do?

Are you a solo freelancer or a shop of 15? We all have different needs. Some of us, like designers who purchase stock photos and those who need to travel, need robust expense tracking. Or maybe you want integrated time tracking, and the ability to estimate new projects.

Before you choose a product, make a list of what you need your invoicing software to do. For example, my needs are pretty basic. I need a tool that has projects, and I need the ability to log time in these projects and generate invoices from unbilled time. Bonus points if it’s super easy to see who owes me what and when.

Desktop or Web Based?

Sometimes this is more a philosophical or aesthetic decision. I’m obviously biased towards web based software – Planscope can’t be downloaded. I personally don’t trust myself to keep my project information on my laptop. The chances of theft or hard drive failure, while thin, are still there. I trust that web application providers do daily backups and take care of warehousing my data. After all, that’s their job (and why I’m paying them.) And yes, we’re extremely paranoid and proactive about securing Planscope’s data.

I’m inclined towards web based software because they tend to run well in any desktop browser – meaning I can access it on my phone, iPad, laptop, or whatever connected computer is closeby. They’re also more likely to have some sort of collaborative abilities, a must if you’re not working solo.

List of some options for invoicing software:

  • Harvest This is the product my team and I use. Features include time logging and running timers, reports on time logs (by client, project, staff, and so on), generated and manual invoices, recurring invoices (great for retainer agreements or hosting invoices), and expense tracking.
  • Freckle Written by two friends of mine, Amy Hoy and Thomas Fuchs, Freckle is a beautiful and simple product meant to make the barrier of logging time as minimal as possible. It also boasts an emphasis on providing reflective analysis on your working habits: Are you spending too much time on unbillable time? Are you lagging on certain days? Features include dead simple time logging, quick reporting, a pulse view that visually shows your work output on a calendar, and invoicing.
  • Freshbooks Freshbooks is a full featured product that satisfies a lot of the needs most small businesses have. Two features set them apart: They integrate with a lot of payment gateways, which is super useful if you accept credit card or echeck payments. They also can snail mail invoices, if you have strange, enterprise-y clients who requires such things. In terms of features, they’re pretty similar to Harvest: Time logs, invoices (recurring and generated), reporting, and expense tracking.
  • FreeAgent A lot of our users across the pond use FreeAgent, which seems to be the most popular offering in the UK. Unique to most of the other time tracking and invoicing tools, they integrate with bank accounts and help you out come tax time. Other features include time logs, invoicing, drafting proposals, and expense management.
  • Billings The only non-web based product on the list, Billings is a Mac and iOS application. Years ago, when the invoicing landscape was much more barren than it is today, I used Billings – and it’s obvious that it’s come a long way since then. Features include time tracking directly from your operating system, generated and recurring invoices, reporting, and a native iPhone client.
  • LessAccounting Written by my super friends Allan Branch and Steve Bristol, LessAccounting has everything a small business needs for bookkeeping. I don’t believe they offer time tracking, but they do let you generate invoices (remember: bakeries, record shops, and other companies that don’t bill for time use it!) Besides invoicing, they integrate with hundreds of banks, let you create project proposals, track vehicle mileage, run reports and manage contacts.
  • Harpoon Harpoon includes all the features you’d expect from a powerful, online invoicing system. But Harpoon sets itself apart with some very practical financial planning and goal-setting features. You can set a financial goal for your business and then map out your expected and collected revenue on a yearly calendar as you work towards meeting your goals. Harpoon also provides an assortment of financial metrics you don’t find in most other invoicing apps, including letting you know when it’s safe to take a vacation. You also get a robust time-tracking system, expense tracking, project scheduling, and accounting reports.

Other time tracking tools (that don’t have invoicing)

  • Mite This is another European product, which has worked hard to design a very clean, very simple interface that stays out of the way. Features include time logs and running timers and reporting.
  • Tick Tick is a simple time tracking tool that places an emphasis on fitting the time you log within a project budget. Features include easily adding time, quickly seeing what budget is remaining on a project, and reporting.

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