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The U.S. freelance workforce has grown to 56.7 million people, up 3.7 million since 2014, according to the fifth annual Freelancing in America study, commissioned by Upwork and Freelancers Union
When you consider some of the most popular reasons to start a freelance business, it’s no wonder that freelancers are everywhere.
Having a unique idea, designing a career that has the flexibility to grow with you, working toward financial independence, and investing in yourself — these are all important reasons to start freelancing.
But not every freelance business can be a success. In fact, only about two-thirds of freelancers with employees survive at least two years, and about half survive five years. So you may be in for a real challenge when you decide to take the plunge, ditch your day job, and become a business owner. The stage is often set in the beginning, so make sure you follow all the necessary steps when starting your freelance business.
Here are 10 steps that you need to start a freelance business. Take one step at a time, and you’ll be on your way to successful freelance business ownership.
Do Your Research
Most likely you have already identified a freelance business idea, so now it’s time to balance it with a little reality. Does your idea have the potential to succeed? You will need to run your business idea through a validation process before you go any further.
In order for a freelance business to be successful, it must solve a problem, fulfil a need or offer something the market wants.
There are many ways you can identify this need, including research, focus groups, and even trial and error. As you explore the market, some of the questions you should answer include:
Is there a need for your anticipated products/services?
Who needs it?
Are there other companies offering similar products/services now?
What is the competition like?
How will your business fit into the market?
Don’t forget to ask yourself some questions, too, about starting a freelance business before you take the plunge.
Make a Freelance Business Plan
You need a plan to make your freelance business idea a reality.
A business plan is a blueprint that will guide your freelance business from start-up through to establishment and growth.
A business plan is a must-have for all new freelance freelancers.
The good news is that there are different types of freelance business plans for different types of freelancers.
A simple one-page freelance business plan can give you clarity about what you hope to achieve and how you plan to do it.
In fact, you can even create a working business plan on the back of a napkin, and improve it over time. Some kind of plan in writing is always better than nothing.
Plan Your Freelance Finances
Starting a freelance business doesn’t need a lot of money.
But your freelance business will need some initial investment to cover ongoing expenses before you are turning a profit.
Put together a spreadsheet that estimates the one-time startup costs for your business:
- Licenses and permits
- Equipment
- Legal fees
- Insurance
- Branding
- Market research
- Inventory
- Trademarking
- Events
- Property leases
- Etc.
Also make a list what you expect you will need to keep your business running for at least 12 months:
- Rent
- Utilities
- Marketing and advertising
- Production
- Supplies
- Travel expenses
- Employee salaries
- Your own salary
- Etc
Those numbers combined is the initial investment you will need.
Now that you have a rough number in mind, there are many ways you can fund your freelance business, including:
- Financing
- Freelance business loans
- Freelance business grant
- Angel investors
- Crowdfunding
You can also attempt to get your business off the ground by bootstrapping, using as little capital as necessary to start your freelance business.
You may find that a combination of the paths listed above work best.
The goal here, though, is to work through the options and create a plan for setting up the capital you need to get your business off the ground.
Choose a Business Structure
Your freelance business can be a sole proprietorship, a partnership, a limited liability company (LLC) or a corporation.
The business entity you choose will impact many factors from your business name, to your liability, to how you file your taxes.
You may choose an initial business structure, and then reevaluate and change your structure as your business grows and needs change.
Depending on the complexity of your business, it may be worth investing in a consultation from an attorney or CPA to ensure you are making the right structure choice for your business.
Pick and Register Your Freelance Business Name
Your business name plays a role in almost every aspect of your business, so you want it to be a good one. Make sure you think through all the potential implications as you explore your options and choose your business name.
Once you have chosen a name for your business, you will need to check if it’s trademarked or currently in use. Then, you will need to register it.
A sole proprietor must register their business name with either their state or county clerk.
Corporations, LLCs, or limited partnerships register their business name when filing the formation paperwork.
Don’t forget to register your domain name once you have selected your business name.
Try these options if your ideal domain name is already taken.
Get Licenses and Permits
Paperwork is a part of the process when you start your own business.
There are a variety of licenses and permits that may apply to your situation, depending on the type of freelance business you are starting.
You will need to research what licenses and permits apply to your business during the start-up process.
Choose Your Accounting System
Freelance business run well when there are systems in place. One of the most important systems for a freelance business is an accounting system.
Your accounting system is necessary to create and manage your budget, send invoices, and file your taxes.
You can set up your accounting system yourself, or hire an accountant to take away some of the guesswork.
If you decide to get started on your own, make sure you consider these questions that are vital when choosing freelance accounting software.
Set Up Your Work Place
Setting up where you work is important for the operation of your business, whether you will have a home office, a shared or private office space, or a coworking space.
You will need to think about your location, equipment, and setup, and make sure your business location works for the type of freelance work you will be doing.
Get Your Team Ready
If your freelance business grows, you make be thinking about hiring employees, now is the time to start the process. Make sure you take the time to outline the positions you need to fill, and the job responsibilities that are part of each position.
If you are not hiring employees, but instead outsourcing work to other freelancers, now is the time to work with an attorney to get your independent contractor agreement in place and start your search.
If you are a true solopreneur hitting the freelance business road alone, you may not need employees or contractors, but you will still need your own support team.
This team contain a mentor, freelance coach, or even your family, and serves as your go-to resource for advice, motivation and reassurance when the freelance footpath gets bumpy.
Promote Your Freelance Business
Once your freelance business is up and running, you need to start attracting clients and customers.
You’ll want to start with the basics by writing a unique selling proposition (USP) and creating a marketing plan.
Then, explore as many freelance business marketing ideas as possible so you can decide how to promote your business most .
Once you have completed these business start-up activities, you will have all the most important bases covered. Keep in mind that success doesn’t happen overnight.
But use the plan you’ve created to work on your freelance business, and you will increase your chances of success.
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