There are very few barriers to starting a freelance design or development business, which makes it easy to get launch quickly and without a major financial investment. Unfortunately, that also means that many freelancers get started without adequate planning or preparation, and it can lead to some significant mistakes.
New freelancers are bound to make some mistakes, but if you’re aware of some of the common pitfalls before you even get started, you can work to avoid mistakes that could prove to be very costly.
In this article, we’ll look at 11 mistakes that are often made by new freelance designers and developers. Avoiding these mistakes can help you to establish your business on a better foundation and set yourself up for success instead of failure.
1. Getting Started with Inadequate Savings
If you’re freelancing full-time or if you leave a full-time job to pursue your work as a freelancer, you should have an emergency fund saved up to help cover your bills and living expenses in case you’re not making enough money right away.
Most financial experts recommend having an emergency fund that includes enough money to cover all of your living expenses for at least 3-6 months. Of course, there are some details that can impact exactly how much you need (like if you’re supporting a family or just yourself), but this is something that you need to consider before relying on freelance work as your primary source of income.
Even if you start landing clients right away, you may not get paid immediately. Some projects can get delayed, so maybe you’ll get an initial upfront payment, but the final payment may be pushed back. Or you may also have issues with a client who just pays invoices very slowly. If that’s the case, you may need money to pay your own bills and expenses before you’re paid, and you’ll need to rely on savings.
An ideal scenario involves starting freelance work part-time while you also have income from a stable full-time job. That allows you to slowly build up your workload and client base before leaving the full-time job when the time is right. Even in this situation, you should still have an emergency fund to cover living expenses for a while in case your income is lower than anticipated.
2. Lack of Separation Between Personal and Business Finances
Another common mistake is to mix personal and business finances. In order to keep your financial records straight, you should keep them separate.
This means you should create a separate checking account for business purposes, and you may also want to sign up for a business credit card. Use the business credit card and business checking account to pay for all of your business expenses, and only your business expenses.
3. Lack of Planning for Taxes
One of the main reasons why you should keep your personal and business finances separate is because it makes tax preparation easier, and helps to avoid mistakes.
Unfortunately, many new freelancers give very little thought to taxes. Not only does this lead to financial records that are difficult to deal with during tax season, but it also leads to some surprises (and not the good kind) when it comes time to pay your taxes.
The income that you make from your freelance work will be taxed, but there is no employer to hold those taxes for you. That means that you’ll need to set aside a percentage of your income (depending on your tax bracket) to cover those taxes. You’ll probably also need to pay quarterly estimated taxes. I’d recommend speaking with a CPA or tax professional who can help you to make sure that you are doing everything you are supposed to do.
The money that you set aside for taxes will obviously impact your take-home pay, and you need to account for that when you’re determining your hourly rates.
4. Not Tracking Time
A lot of freelance web designers will use project-based pricing rather than charging clients an hourly rate. Of course, when you’re creating an estimate for a client you should have an ideal hourly rate in mind, estimate the number of hours required to complete the project, and multiply the number of hours by your hourly rate to determine how much you need to charge.
After you’ve landed the gig, you should track the time that you’re spending on the project even if you’re not billing the client based on an hourly rate. When the projected is completed, you should be able to look back and see how the end result compared with your estimate and calculate the hourly rate that you actually earned.
If you’re not tracking your time, it’s difficult or impossible to know how much you’re actually earning per hour of work, and it’s not really possible to know if you are pricing your projects correctly. If you do track your time, you’ll have much more useful data at your disposal and you can adjust your process for estimating projects if you are seeing a lot of discrepancies.
5. Not Using Contracts
You should always have a signed contract when you’re doing work for clients. Many new freelancers think that a contract isn’t important because they’re working on smaller jobs or because they feel like their business isn’t legit enough to use a contract.
Unfortunately, not having a signed contract can lead to a lot of different problems. The best way to protect yourself is to simply use a contract.
One of the most common objections to using a contract is not wanting to spend the money to have an attorney draft a contract. We decided to do something about this, so we created the Freelance Starter Kit, which includes several different contract templates that you can use with your own clients. The contract templates included are:
- Web design contract template
- Website maintenance contract template
- Logo design contract template
- SEO services contract template
- Social media marketing contract services template
- Graphic design services contract template
- Web design contract amendment template
With the help of the templates, you’ll simply enter the details and specifics related to your project and you’ll have a quality contract that can be signed by you and your client. Using contracts will not only help to protect you, but it will also make you look more professional and trustworthy to your clients and potential clients.
6. Not Defending Against Scope Creep
One of the main reasons that you should be using a contract is to prevent scope creep. Scope creep is when the details of a project keep growing, and as the service provider, you are expected to do more work without extra compensation.
As an example, you could have a verbal agreement with a client to create a 5-page website, but throughout the course of the project, the client may have added some additional requests, including more pages. Without a contract, it’s sometimes hard to draw the line and the scope of the project keeps growing.
A contract should include the exact details and scope of the project, and with that in writing, you can hold firm if a client asks you to increase the amount of work involved in the project.
In addition to using a contract, effective communication can also help to prevent or avoid scope creep. Before beginning a project, you should communicate with the client so that you’re both on board with the exact details and scope of the project.
It’s very normal for the scope of a project to increase at some point during the course of the project. However, you should be able to charge additional fees for work that falls outside the scope of the original agreement.
7. Underestimating Time Needed to Complete a Job
In order to have long-term success as a freelancer, you’ll need to develop the ability to estimate the amount of time needed to complete a project. Obviously, the amount of time and working hours that you’ll need for a project should impact the price that you charge, but it will also impact the deadlines and schedule that you discuss with clients.
Notice, in the previous paragraph I said that you’ll need to “develop the ability.” That means that you’ll probably make some mistakes along the way.
It’s extremely common for new freelancers to underestimate just how much time and effort will go into a project. That’s part of why you need to be calculating your time, so you can learn how long projects are actually taking you.
Almost every freelancer is going to underestimate how much time a project will take, and in turn, how much money he or she should charge for the project.
When you’re first getting started, I’d recommend that you plan for something unexpected when you’re estimating timelines and give yourself some built-in cushion.
8. Taking Any Client Rather Than the Right Clients
Most new freelancers are so anxious to start landing clients that they’ll work with anyone who is willing to pay them. But the truth is, not all clients will be right for you.
When you’re speaking with potential clients before starting a project, you don’t want to only focus on selling your services. You should also try to get to know them and learn as much as possible about their project and be sure that it’s a good fit.
If you come across a potential client or project that you think may not be idea for you, you can estimate the price to be higher to the point that it would be worth your time and effort to take the project (this is one of the reasons why I don’t recommend listing prices publicly on your site, because it takes away your flexibility and forces you to charge everyone the same amount).
Another option is to bluntly but politely tell a potential client that their project would not be a good fit for you at this time, and if possible, refer the client to someone else that you think might be a better fit.
9. Not Specializing
There are so many freelance designers and developers out there that it can be difficult to stand out. One way to help yourself stand out is to specialize. Specializing allows you to tailor your services to a particular type of client. You could specialize in a particular type of service (WordPress customization, church websites, ecommerce development, blog design, etc.) or specialize your services to meet the needs of a particular industry.
Specializing doesn’t mean that you can’t offer other services. You could still offer more generalized services outside your area of specialization, but by specializing you can try to attract a particular type of project.
10. Lack of a Portfolio
Your portfolio website will be one of the most effective tools you have for attracting and landing new clients. New freelancers often underestimate the need for a portfolio website and assume that they can get started without one. Especially when it comes to design and development services, potential clients will want to see some work samples before signing a contract.
One of the challenges that new freelancers face is getting work to include in the portfolio. If you’re just getting started, you won’t have client projects that you can showcase. However, you could use some personal projects or create some items simply for the sake of having something in your portfolio.
It may require some time, but creating some items to showcase and setting up a portfolio site will help you to look more professional and will make it easier for you to start landing clients.
11. Not Looking to Maximize the Value of Each Client
Once you start doing some freelance work, you’ll quickly realize that it takes time to land clients and each client that you land is very valuable. The less time you need to spend looking for clients, the more time you can spend doing the actual work that generates revenue for your business.
For this reason, you should look to maximize the value of each client, and there are a few different ways you can do this.
First, you could offer additional services that your clients might need. For example, instead of offering only web design services, maybe you also offer other services like logo design and search engine optimization. Your clients may be interested in hiring you for multiple services, which increases the amount you make from each client.
Second, you can offer on-going services that would turn a one-time project into a recurring source of revenue. For example, instead of completing a web design project for a client and being done with it, you could offer a maintenance package that involves a certain number of hours of work per month for a flat price. The more recurring work you have from your clients, the less time you’ll need to spend looking for clients.
Freelancing can be a great way to make money, and it’s an appealing option because it can be so quick and easy to get started. But if you’re considering freelancing, be sure that you avoid these common mistakes to get your business off to a good start.