How to Become a Freelancer in 8 Steps
- Understand the trade-offs and responsibilities of freelancing.
- Choose your specialization.
- Write a business plan.
- Create professional contact information and supplements.
- Understand your value and determine your rates.
- Source freelance work by tapping into various networks.
- Select a business entity and prepare for tax season.
- Finance your freelancing business.
If it seems like everyone around you is freelancing, it’s not just you: the freelance economy is becoming a major force in American work, with some estimates putting the number of Americans freelancing at close to 57 million. If you’re considering making the jump to working for yourself, there’s a lot to know about how to become a freelancer.
Freelance work can be a lot of things, depending on whom you talk to—it can be a one-off job here and there, or full-blown self-employment in which you’re balancing a lot of assignments or clients and essentially running your own business. What you’ll need to understand about how to become a freelancer and how to make freelancing sustainable, will depend on how fully you’re committing to freelance work.
Regardless of where you fall on the spectrum, there are things all people who are looking into freelance work and how to become a freelancer should understand. We’ll talk about things including freelance business structure, taxes, finding work, and even financing your freelance operation (because, yes, you’ll need some cash).
Remember as you go through all of this that the transition to freelance work can be challenging. But it can also be very rewarding—there’s a reason, after all, that freelancing has skyrocketed in the past half-decade.
What Is a Freelancer?
Freelance work is a form of self-employment in which you, the freelancer, propel the ship. Most freelancers also do work for multiple clients at once, sometimes with a combination of ongoing assignments as well as one-off jobs. Importantly, as a freelancer, you’re not an employee working for a larger company; although you might take a contract to do work for a larger company, you’re still your own employer at the end of the day.
Freelance vs. Full-Time Work
In a full-time role, you’re working for an employer; as a freelancer, you take the place of the employer. In other words, you’re working for yourself. In that sense, you’d be taking care of what a normal company would such as paying taxes and business expenses. But, because you’re not on a salary designated by a company, you also get to keep all of the profits you make.
Unlike having the network and infrastructure of a full-time position, as a freelancer, you’ll need to build out and maintain your business on your own. That extends to small things such as answering all emails that come in, all the way through larger tasks such as finding and paying for health care and performing accounting that may regularly fall outside the purview of a full-time role.
Freelance vs. Contract Work
As a freelancer, some clients will ask you to sign contracts, especially for ongoing work. This is often what’s referred to as “contract work.” These jobs are different than one-off jobs for which you get paid by the assignment; rather, with contract-work arrangements, you’ll generally have a set fee structure and payment structure dictated by the terms of the contract arranged with the client. Arrangements like this generally only apply to recurring jobs.
It’s important to know that, as a contractor, even if you’re working onsite at a company, or working for them multiple hours a week, you’re not considered an employee of their company, and therefore not eligible for any of the benefits that employees get.
From your perspective, freelance work and contract work are the same in that you’re still a freelancer who is performing the work. But, technically, some companies are not legally allowed to hire freelancers due to their internal rules—they can only hire “contractors” instead, which is what may create this distinction between freelancer and contractor as you find yourself getting work.
Freelance vs. Gig Work
What you likely think about as “gig” work—driving a rideshare, hanging someone’s photos, etc.—is generally technically freelance work in that you’re making money independently. But, for instance, if the gig is facilitated by an app or platform, you’re usually paying a cut of your earnings to that platform. Additionally, gig workers don’t generally run their own businesses like freelancers do.
How to Become a Freelancer: 8 Steps
Now that you’re comfortable with the definition of a freelancer, and the nuances therein, let’s talk a little more in-depth about how to become a freelancer.
1. Understand the trade-offs and responsibilities of freelancing.
Why, exactly, would you want to become a freelancer? Although there are lots of reasons why many gravitate toward freelance, here are some of the most common reasons. Similarly, there are some downsides you want to consider as well.
- Flexibility in both location and hours
- Constantly changing client and assignment list
- Being your own boss
- Selecting the clients with whom you work
- Independent work
- Focusing on the parts of your specialty you like
- No 9-to-5 structure
- No constant paycheck
- Generating your own leads
- Full responsibility for interactions with clients
- Below-market pay for new workers
- Balancing multiple clients
- No access to benefit plans for employees
It’s an intense trade-off! But, luckily, most people who have freelanced for a long time find that the job gets easier as they get further into freelance life. Challenges such as organization and balancing multiple jobs will become easier with experience—and as you gain more tenure in your industry, you can charge higher rates. With that in mind, you’ll probably need to be mindful of the rates you charge when you’re first starting out and learning
2. Choose your specialization.
One thing that you’ll need to decide as you transition into freelancing is what, exactly, you’ll offer your clients. Nearly anything can be provided as a freelance service, but here are some examples of common specializations for freelancers:
- Creative (writer, designer, editor)
- Financial (accountant, bookkeeper)
- Consulting (strategist, consultant)
- Marketing (social media specialist, brand developer)
- Technology (QA, web developer, cybersecurity specialist)
- Coaching (professional, personal)
3. Write a business plan.
To begin, you’ll want to have your own version of a business plan that any entrepreneur starting a business would (after all, freelancing now is your business). To develop your plan of action, ask yourself the following questions about your freelance business:
- What services will you offer?
- How will you advertise them?
- Where will you find work?
- Do you need a business license to get started?
- How much money do you need to make each month?
- Is your work recurring and ongoing with a single client, or are you taking on more ad-hoc assignments?
The answers to these questions will help you figure out what steps to take next, and how to form your business plan. If you’re not sure of the answers, you may want to wait before going forward and do a bit more research.
4. Create professional contact information and supplements.
Next, you’ll want to make sure you have many of the same essentials in place as any other business owner would. These include:
- A website where people can see what you offer and examples of your past work (and, going forward, client partnerships)
- A professional email address
- Business cards, if you think you’ll be interacting with leads in person
- Templates for a statement of work or proposal, which some clients may request
This is a chance to impress clients with your professionalism and preparedness, without having to sink a lot of money into costs. For example, if you know the industry you’re choosing to work in has several specialized fields, you can organize your portfolio with dedicated pages for each of those specializations, showing potential clients both your breadth of knowledge about the field and giving them concrete examples of past work you’ve done.
5. Understand your value and determine your rates.
Finally, an important piece of being a freelancer is determining your rates. Ask any freelancer—this is generally the hardest part of working for yourself! How, exactly, do you value your time? How do you make sure you’re not going to alienate a potential client with a price, but also not sell yourself short? There’s no easy answer, but you should still work to figure out a range of what you’d charge for services. Remember, you can always change this later.
You might feel confident with the prices you have in mind, or you might want to consult potential clients or other similar freelancers on how they’d price your services. This will help you come up with a “menu,” so to speak, of services and their corresponding prices.
Freelancing network events and trade groups can be especially helpful when it comes to setting prices, as can finding a mentor in your field—but don’t forget to factor in your bottom line. Assess your monthly, quarterly, or yearly income goals compared to the services you’re offering and the clients you’re targeting. If clients are telling you that your rate is too high, it might be that you’re overestimating your skills, but it could just as well be that you need to target a different set of clientele.
You may also run into situations in which you’re not setting a rate at all because your client has strict budgetary guidelines for assignments. That’s normal—but it’s up to you to figure out if what they’re offering to pay for an assignment is worth the time that you’re spending on it (and, subsequently, not spending on another assignment).
6. Source freelance work by tapping into existing networks and creating new ones.
There’s no magic way to find freelance clients—that’s one of the biggest challenges of being a freelancer. However, to begin, consider trying these approaches:
- Put out a call on your social networks letting people know you’re now freelance and which services you’re offering.
- Join trade groups and associations related to the work you do, and general freelance unions, which can help you connect with clients and find support.
- Reach out to former colleagues to inquire about leads both within their organization and outside.
- Join platforms for freelance workers, such as Upwork, Toptal, and more.
Finding clients can be difficult and it may be tempting to settle for whoever reaches out first, but you should always be critical of what they’re asking for, who they are, and what they’re offering for your work. When you’re just starting out, a client may not pay as much as you’d like, but if they’re an impressive addition to your portfolio, can provide further work contacts, or align with your brand well, it might be worth it to take a pay cut.
7. Select a business entity and prepare for tax season.
Talking about business finances and taxes isn’t the most thrilling thing, we know. Yet freelancers make common financial mistakes often, so setting a strong foundation with your money is hugely important as you learn how to become a freelancer—especially since no one is responsible for your cash but you.
Business Structure: Sole Proprietors vs. LLCs
When you begin, you will likely start off as a sole proprietor. This is the simplest setup, wherein you can start working immediately, no paperwork required. Many freelancers find that operating as a sole proprietorship is enough. The biggest drawback of a sole proprietorship is that if something happens to your freelance business and you get into legal trouble, you’re personally responsible for any damages.
If that sounds a little taxing, you may want to consider setting up an LLC as a freelancer. It requires quite a bit more paperwork and potentially some hoop-jumping depending on your state. But if your freelance business is growing, this can be a very smart move, since you’ll get personal protections separate from your business.
Paying Taxes as a Freelancer
Most tax setups for freelancers are what’s called a “pass-through entity” which essentially just means that you’re paying taxes on your business income as personal income. With this setup, you can gain certain deductions, too, that can help you manage how much taxable income you have.
Regardless of your business entity setup, you will want to consider something called “harvesting,” which means that you take a percentage of your earnings and stash them away (preferably in a business bank account) so you don’t get caught flat-footed when tax time comes. The percentage you want to harvest will depend on the freelance tax rate by state. You also may need to pay what’s called “estimated taxes,” which is a quarterly payment due from freelancers for your self-employment taxes.
If this sounds complicated, it can be. You may want to check in with a tax professional for a little help. Your taxes will become more complex as a freelancer since you’ll generally be receiving 1099s vs. W2 forms.
8. Finance your freelancing business.
One of the benefits of beginning as a freelancer is that, generally, it’s a non-capital-intensive endeavor; unlike, say, opening a coffee shop, you’re not putting down money for real estate, large equipment, major marketing campaigns, etc. But you may still find that you have some expenses such as website development, business cards, a computer and software, etc. You may also find that you have to front business expenses for clients for which they’ll reimburse you later. In that case, you’ll want a good financial tool that’s a fit for your business.
Business Credit Cards for Freelancing
Generally, a great way to finance your operations as freelancer is with a business credit card for freelancers. With these cards, you can purchase your supplies and make any other purchases you need, which is especially helpful during a cash drought or if you aren’t liquid enough to pay in cash. A business credit card doesn’t require that you spend on it a ton—but it’s a great tool to have in case you do have business spending to do. It’s also a smart way to keep your business and personal finances separate—something that will definitely come in handy once it’s time to pay taxes.
The Bottom Line
It’s true that becoming a freelancer can be a big leap outside of your comfort zone. That’s especially true if you’ve been relying on the structure and benefits of a full-time position. But many people choose freelance because of its flexibility, enabling them to do the work that they want, when they want, and where they want. For some, that’s priceless.
As you navigate how to become a freelancer, one thing you’ll likely learn is that it’s a constantly evolving process. But, even if it’s hard at first, you’ll likely get better at it. Don’t forget to rely on your networks—both personal and professional—to help you gain insights, prop you up in down moments, and celebrate your successes, too.