Moving to freelance from a large organization: what do I need to know?
November 11, 2022 3:21 AM Subscribe
I'm exploring the idea of transitioning from a mid-senior role directing marketing and communications to freelancing as a writer/strategist. I've been working on establishing whether or not the market I know can support me, but wonder what I might be missing.
The exploratory work I've been doing so far is with industry contacts to see if they have unmet needs I can fill, for what I'd need to charge to maintain roughly the salary I make now -- this is underway. It looks positive. But I'm a bit worried about things like pension, insurance (I'm in Canada, but dental/vision is real nice), the provision of equipment, office space, how to handle billing and accounting, etc.
I've never worked for myself, and as I near 50 this feels like I'm kind of running out of window to make a life change like this. I also feel like there should be some sort of... ratio? Current salary times X to ensure you're factoring in all the expenses you need to run a small business kind of thing.
If you're a successful freelancer, what are the hidden costs that I should be thinking about? What do you wish you'd done when you started out that I should be keeping in mind?
The exploratory work I've been doing so far is with industry contacts to see if they have unmet needs I can fill, for what I'd need to charge to maintain roughly the salary I make now -- this is underway. It looks positive. But I'm a bit worried about things like pension, insurance (I'm in Canada, but dental/vision is real nice), the provision of equipment, office space, how to handle billing and accounting, etc.
I've never worked for myself, and as I near 50 this feels like I'm kind of running out of window to make a life change like this. I also feel like there should be some sort of... ratio? Current salary times X to ensure you're factoring in all the expenses you need to run a small business kind of thing.
If you're a successful freelancer, what are the hidden costs that I should be thinking about? What do you wish you'd done when you started out that I should be keeping in mind?
A rough rule of thumb I've seen a few times is to work out the hourly/daily rate you'd need to charge to make your full-time salary, then double it.
You need to charge more to allow for vacation time, sick days, days doing unchargeable admin, days when you don't have any work, days when work falls through at short notice, days that you spend improving your skills. And then overheads like equipment, travel, insurance, professional fees, pension contributions.
It should sound like a lot, to you. Just remember that you shouldn't compare it to the salary you were making, but the amount that your employer would charge another company for your skills.
posted by fabius at 5:40 AM on November 11, 2022 [4 favorites]
You need to charge more to allow for vacation time, sick days, days doing unchargeable admin, days when you don't have any work, days when work falls through at short notice, days that you spend improving your skills. And then overheads like equipment, travel, insurance, professional fees, pension contributions.
It should sound like a lot, to you. Just remember that you shouldn't compare it to the salary you were making, but the amount that your employer would charge another company for your skills.
posted by fabius at 5:40 AM on November 11, 2022 [4 favorites]
Fabius is exactly right in that you need to ensure you're covering ALL the costs - and that you should think about what a company would charge another company for your skills. And yes, double what you think your hourly/daily rate should be to cover your salary.
I've been freelancing full time for four years, and on the side for years before that. One thing to consider is to charge project rates rather than hourly rates. Especially if you work consistently for the same clients. Over time, you'll naturally work faster for repeat clients as you internalize their messaging and style -- and if you're being paid hourly, you'll effectively be earning LESS for each subsequent project.
Figure out what hourly rate you need to live, double it, and use that as your secret hourly rate to calculate project rates. I carefully track my time (using the Toggl app) so I know exactly how long it takes me to write a case study vs a web page vs a white paper. I keep all that in a spreadsheet so if a new project comes up, I can estimate how long it will take me, multiply that out by my secret hourly rate, then add another 20% to cover extras. Then adjust with subsequent projects if you find yourself spending more time on something.
The Writers' Co-op podcast is a wealth of resources for helping think about some of this, as well as helping you cultivate the right mindset to make the switch from in-house to freelance.
posted by writermcwriterson at 9:01 AM on November 11, 2022 [4 favorites]
I've been freelancing full time for four years, and on the side for years before that. One thing to consider is to charge project rates rather than hourly rates. Especially if you work consistently for the same clients. Over time, you'll naturally work faster for repeat clients as you internalize their messaging and style -- and if you're being paid hourly, you'll effectively be earning LESS for each subsequent project.
Figure out what hourly rate you need to live, double it, and use that as your secret hourly rate to calculate project rates. I carefully track my time (using the Toggl app) so I know exactly how long it takes me to write a case study vs a web page vs a white paper. I keep all that in a spreadsheet so if a new project comes up, I can estimate how long it will take me, multiply that out by my secret hourly rate, then add another 20% to cover extras. Then adjust with subsequent projects if you find yourself spending more time on something.
The Writers' Co-op podcast is a wealth of resources for helping think about some of this, as well as helping you cultivate the right mindset to make the switch from in-house to freelance.
posted by writermcwriterson at 9:01 AM on November 11, 2022 [4 favorites]
Coming back to this... it's also true that you can charge different clients differently, varying your standard rate.
A client who's a bit of a pain? Charge them 20% extra. A client who's short of cash but whose projects are always interesting? Charge them less if they balk at your standard rate? A job you don't really want to do? Tell them it will cost [vast amount that is the only amount you would do this work for]. It will either scare them off or you'll make plenty for your trouble.
I often can't predict who will look aghast at my rate, and who won't bat an eyelid.
posted by fabius at 6:56 AM on November 12, 2022 [1 favorite]
A client who's a bit of a pain? Charge them 20% extra. A client who's short of cash but whose projects are always interesting? Charge them less if they balk at your standard rate? A job you don't really want to do? Tell them it will cost [vast amount that is the only amount you would do this work for]. It will either scare them off or you'll make plenty for your trouble.
I often can't predict who will look aghast at my rate, and who won't bat an eyelid.
posted by fabius at 6:56 AM on November 12, 2022 [1 favorite]
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Then, figure your expenses, both your time and your overheads for doing the productized service. Your price to the customer is 3 times that. Then adjust as you do a few.
Also, read Profit First by Mike Michalowicz.
posted by banjonaut at 4:59 AM on November 11, 2022 [2 favorites]