It is a weird world. The above has been consistent in the following:
1- In high school. If you just meet some new kids for a first time and mumbble stupidly, they'll think you are retarded and it'll be hard to change that view.
2- If you fail to impress your potential date in the first date, you are pretty much over. I think as a guy I'm more tolerable with girls but I might not be accurate or maybe an exception.
3- It still applies in adulthood. I think that's why doctors care a lot about their medical offices. I mean if you check a doctor with a messy office, no secretary and not so expensive equipment.
It sucks: The first impression matters a lot. You are allowed to suck (within limits) afterward but the first impression is a must.
> Until you’re sure of your effective tax rate, set aside a minimum of 25% of every dollar you earn for the tax man. Put it away, don’t touch it.
Try to maximize your business expenses. Can you make your gym as a business expense? Your "personal" car? Your mobile phone bill? There are lots of things you can expense. Check with your accountant. Have a list and let him check what can be checked to the business account.
My advice will be: Don't touch the business money until next fiscal year. That might be hard if you don't have a full year reserve but you can do the math and "borrow" from your company.
It gets tricky when your profits get high and the effort of setting up and maintaining an S-Corp becomes more questionable. The 12.4% Social Security stops at $132,900 (2019) in income so if you want to max out a solo 401K (assuming a 25% employer contribution) you'll need to have $148,000 in W2 income ($19K from the employee and $37K from the employer to hit the 2019 limit of $56,000).
So at that point you've already paid all of the Social Security tax possible for the year and the S-Corp advantage is greatly minimized as you only continue to save on the 2.9% medicare tax. That's still something though as there is no cap on that tax.
S-Corp is significantly more work than a standard LLC. You'll have a separate corporate tax return and use the K1 for your personal taxes. You'll have to run payroll as you as an owner will now be a W2 employee and deal with workers comp, unemployment and all sorts of other fees and taxes depending on your state (for example here in WA they just started a paid family medical leave tax on gross wages up to $132,900). Some you'll be exempt from as an owner/employee and others you won't.
There is a lot more to the subject for sure, but those are a couple of highlights to dampen the mood of the idea of huge tax savings...
Making your wife/husband a shareholder is common too. In the UK you get a personal tax free allowance plus a certain amount of tax free dividend. If your spouse doesn't work (or pays a lower rate of tax than you) then you can make a big saving this way by paying some money to them instead of you. Maybe they can get a job as your bookkeeper? This can serve to pull you out of the top tax rate bands, or at least pay the higher rate on less of your income.
1- Push as much expenses as legally possible to the business. Lease (buy a car on a lease). Depending on the country, there might restrictions on how luxurious the personal/business car is. By leasing you deduct the interest. So there is literally no reason why you'd not do it.
2- Only "pay" yourself the minimum required. That is, how much is your personal rent, food and other. Pay yourself that. Don't pay yourself from dividends. Make yourself a salary. That can be helpful if you are getting a loan on the business and on your personal account.
3- Do not pay dividends if you made profit. Always re-invest or suck profits on some way or another. This will make your tax rate effectively 0 but you'll notice that the government has always ways to suck in taxes.
I'm not in the US, so YMMV.
I hit a deer at the front center of my car. Estimates varied from 1600 to 3300. Guess who I used, despite my intuitions? The low overhead, proprietor-led shop. The restoration was perfect.
> I’d estimate over half of freelancers disappear before delivering their projects. Good for you: Finish your projects and you’re already in the 51st percentile of freelancers.
This matches my gut as well and I've been somewhat shocked at how many clients compliment me on answering my email in a timely manner! Clients seem to understand almost any mistake you can make if you are upfront about it and work with them to solve the problem and don't disappear. Though, I definitely agree on being very very careful about code that charges money (or sends email for that manner).
1. You definitely don't need to form an LLC. I'm still a sole proprietor all this time and it's working out fine.
2. Personally, I'd hold back 35%+ of your income for taxes and expect to pay taxes every quarter.
3. 2 months of savings seems really low. People are wired different but I know a lot of people (myself included) who can't function with less than 6 months of runway when being self employed. It's not fun being in a position to take on low quality work because you absolutely need it.
4. Billing style really depends on the job you're doing. A lot of my work is billed hourly due to the nature of what I'm asked to do.
This is bad advice. It has worked out for you so far because, I'm willing to guess, you have not been put at risk for any sort of substantial liability.
Forming an LLC creates a separate legal entity which is itself responsible for its own debts and liabilities. It isn't expensive or difficult to form an LLC, and you don't need a lawyer to do it. For most US states, it's a short form and an online payment.
There are some important rules to follow to ensure that your LLC will be viewed by the courts as a separate entity from yourself in the event that some potential liability arises. Perhaps the most important rules is to separate the finances of the LLC from your own personal finances. It's easy to open a checking account for your LLC - someone at your bank can help you do it. When clients pay you, make sure the check is written to your LLC, not you. Pay yourself from the LLC account - don't use the LLC's debit card for personal purchases and expenses. The goal is to create a clear line of separation from yourself and the LLC so that if someone sues, liability stops at the LLC and does not extend to your personal assets.
I did this for a while, but it starts to hurt around tax season. There are advantages to being incorporated and then hiring yourself as an employee for a minimal wage. With the way you're doing it, you're paying employment taxes on your entire income. With an LLC, you can pass the majority of it through without paying that.
> 2. Personally, I'd hold back 35%+ of your income for taxes and expect to pay taxes every quarter.
That would be the responsible thing to do. I just end up paying yearly, paying the interest penalty, and using January+February+March for taxes. Probably should get my house in order at some point.
> 3. 2 months of savings seems really low.
Agreed.
> 4. Billing style really depends on the job you're doing. A lot of my work is billed hourly due to the nature of what I'm asked to do.
Yes, but I do pretty much everything I'm able to not bill hourly. Fixed Budget > Monthly Rate > Bi-Weekly Rate > Weekly Rate > Daily Rate > Hourly.
I'm not exactly sure what you mean by this, but LLCs are pass through entities for tax purposes. That means your tax treatment is the same for an LLC as it would be if you were a sole proprietor without an LLC.
The reason to create an LLC is to separate your personal assets from your business assets and to protect you from liability for your employees actions. If your LLC signs the contract, in most cases the client can only go after the business, not you personally.
However, almost all lenders require a personal guarantee and an LLC doesn't protect you from your own negligence. Only from the negligence of your employees.
So basically - LLCs are unnecessary if you are the only employee.
See: https://www.nolo.com/legal-encyclopedia/limited-liability-pr...
I did this for a while, but it starts to hurt around tax season. There are advantages
to being incorporated and then hiring yourself as an employee for a minimal wage. With
the way you're doing it, you're paying employment taxes on your entire income. With an
LLC, you can pass the majority of it through without paying that.
1. I'd be terrified to run as a sole proprietor for anything more than getting started. I work on medical software, and if someone dies during a procedure - even if it's not my software's fault - I don't want my personal assets to be liable.
2. I started at 35%, and moved back once I saw what I was actually paying. Depends on your state in life, state within the US, and charitable giving state-ments.
3. Yep, 2 months is low. Just enough to weather a storm, but more = better.
4. Funnily enough, I'm switching to hourly billing for much of my work. But I think many freelancers (particularly US-based) don't even realize "day rates" are a thing - we're fixed on hourly pay, for some reason.
https://info.legalzoom.com/owners-liable-llc-3298.html
> Members can also be held personally liable for court judgments against the LLC if the member has personally and directly injured someone or caused financial loss in the course of business, or has knowingly done something illegal or reckless.
> ...
> Courts usually require three elements to be present before they will allow the veil to be pierced and a member to be held liable for the financial losses of an LLC. First, the person bringing the lawsuit (the plaintiff) must show that the LLC was controlled and dominated so completely by the member in question that the LLC was a mere instrument of that person and indistinct from her. The plaintiff must then show that a breach of duty occurred -- for example, that the member committed fraud or failed to keep adequate records. The final element is that the control and the breach of duty must have caused injury or loss to the plaintiff.
Those aren't very high standards if a successful lawsuit is lobbed your way for software you have been contracted to right.
Edit: Not that using an LLC isn't a good idea, I just think the "legal shield" benefits are often overstated and misunderstood.
You should get really comfortable with “no”; Both saying “no” to bad fits, and hearing “no” from clients who can’t afford you."
Two quick thoughts:
1) "It always costs twice as much and takes twice as long" is a benchmark that has never failed me. 3x? Probably could have helped 25% of the time.
2) The key to freelancing or even being an agency is...avoid the time sucks, the bad clients. It's not finding grand slams or hat tricks. Sure those are good to have. But the killer is the bad ones, the really bad ones.
> It gets pretty dang lonely sometimes, particularly if you’re working remotely. I don’t care if you’re an introvert or extrovert, it’ll affect you either way.
I'm an introvert. I was lonely. It does affect you.
> But for maximum productivity, your routine should involve getting dressed, brushing your teeth, and treating it like a “real job”.
I had to do this. If I wasn't wearing street shoes, I wasn't "at work."
I could work very productively without these routines; the problem was that I could not switch off.
It was cool during school breaks to have my older kids at home. Cool during lunch. Not so cool when I had to break up disagreements.
It didn't get really bad for me until I'd been at home 5 or 6 years.
I'm also actually pretty introvert, and could lock myself up for days or weeks without seeing anyone - but that's on my terms. When it's not and there's no clear light at the end of the tunnel, that simply wouldn't work for me. The niche I found currently offers a nice balance - but I have to push myself for the social interactions that are required for the thing I do.
The main thing that sticks out is that the author mentions how referrals are the number one source of leads for basically every freelancer. The problem is that he only mentions it. Ok, that's great. How do I get referrals? The issue is that none of the other stuff matters if you don't know how to get referrals.
The author did a good job with the post, but I can't express how important it is to be a people person when freelancing. In order to get referrals you have to get projects. In order to get projects, you have to leave your house and meet other local business owners. That's very hard for freelancers to do and I think the post would be 100 times better if the author spent a little more time on that aspect of freelancing.
And so we come to one thing that rarely gets explicitly discussed in articles like this - the location. I don't blame authors for that, your environment is usually something you take for granted.
But if I were to go and talk to local business owners where I live (eastern Europe) they would invariably fall in the category of extremely-and-then-some-price-sensitive.
So most of the contracting around these parts is done under the umbrella of various agencies or Toptal. These have ongoing relationships with foreign clients and take advantage of the fact that local market prices for IT folk are nothing compared to western Europe and (especially) US. Not a bad deal, but not as good as fostering relationships with the clients yourself (and these clients are usually at least moderately price sensitive, as otherwise they would probably hire contractors at their location).
I'm sure there are plenty of people that freelance without middlemen where I live, it just seems a lot less prominent than in better developed economies. I know maybe one or two.
> And so we come to one thing that rarely gets explicitly discussed in articles like this - the location. I don't blame authors for that, your environment is usually something you take for granted.
Isn’t that what conferences are for? Or content marketing? Patio11 went from not consulting to charging $10,000 a week while living in the Japanese equivalent of Iowa by writing blog posts but IIRC the best channel for his particular consulting was Microconf followed at some distance by cold emailing.
If you live in Romania you can afford to attend a Western European conference once a quarter, right? You can definitely afford to blog.
If it's any consolation, I live in a tiny town in the US and have rarely met my clients in person. Many of them have no idea where I work from or that I occasionally wear pajama pants on video calls, because my webcam is from the waist up.
It was something that is never spoken about or really talked about at University, but so much of it is you just need to be in front of the right people and ask the right things.
For referrals, you have to leave your comfort zone and ask - "hey, you're a CTO at a mid sized Government agency and need my services...do you know anyone else I should be speaking with".
Like most things in sales, it's deceptively simple. It's a conversation. Probably over a beer or a coffee or lunch or something.
Contrary to popular perception, sales (especially B2B sales) is not at all about using the "magic words" or "tricking people" into buying. Sales is about effective qualification - that is asking the questions that give you confidence that you'd be able to complete the project you're speaking about, while also ensuring that the person you're speaking to is convinced that you'd be able to complete the project.
If you have a technical background, you have a massive advantage over someone with "sales skills" when it comes to selling whatever your technical expertise is. You can answer the hard questions! You know how people in that role think. This is a huge advantage.
Shameless plug: I ended up starting a company[0] to help freelancers/contractors with this. We are the sales and collections team for you. We focus on high-quality clients that can afford to pay for senior engineers. You pick jobs that appeal to you. We currently have way more openings for contract + remote jobs than we can fill and the clients are good (Vizio, Disney, Colliers). It's a great way to transition from full-time to consulting.
Most recent gig I had, the client cut hours and then rates... all due to the fact that the CEO didn't manage the project properly from the outset, and they were hemorrhaging cash. That fell squarely into the "not my problem" category, so I quit.
It's a tough business, and one I've not completely figured out yet.
Has that been your experience ?
The more serious types are indeed protective of their data, intellectual property, and processes. I have even seen paranoia around leveraging open source frameworks (Tensorflow, Pytorch) out of fear of their sponsor corporations coming for the client... not sure I see the logic on that one, but whatever.
Whenever I don't have much success in a venture, I try to look inward to see what I'm doing wrong. I suspect that there is a fair amount I have to learn about getting good gigs and being successful in the freelance game. Unfortunately, it's one of those "have to learn the hard way" type of things.
Will try the shoes trick.
I disagree with this. Some clients just don't have any idea where to get something done other than a "site" they heard about or found on the internet.
But these clients usually are fairly technically clueless and require a lot of hand holding and/or have unrealistic expectations. Come to think of it I sort of have to agree with the authors basic point... not a great signal (although for different reasons).
I hire a lot on Upwork, and have found excellent talent, with extensive experience, for my projects.
I've learned how to qualify candidates with a minimal process that has weeded out the "waste of time" people that I sunk a bit of time into when I first went there.
So count me as someone who's posting there that counts on expertise, and has been very happy with what I've found. That said, my clients would probably not know how to use Upwork effectively. Hence, me.
If they're posting there because they don't know where to hire someone to do contract work for them then you may well be able to work with them - particularly if you're personable and willing to spend some time handholding and making them comfortable. For that matter, if they've done something on one of those places and been burned by poor quality, poor understanding, language issues, whatever then it may make them more likely to work with you if you don't have the same problems.
It's a question of making sure there are realistic expectations on both sides. If a client is going to need concierge service beyond the raw design and coding and you're able to provide (and get paid for) that then you may be in a good position.
> "If a client gives you a design to implement, make your implementation pixel-perfect. It’s crazy how sloppy some developers are; the client put together that PSD for a reason."
Shamefully have to admit this was me when I started -- my mind says "the tool does the thing!" and the client says "it looks nothing like my design". Can't be afraid to charge for CSS.
Even when the various mockups are in conflict with each other? Dealing with internally inconsistent state?
Building full web applications off of a PSD file is often a bad start. Things like menu/toggle state, hovering, accessibility, etc - these are - in about 95% of my experiences - ignored or broken in "designer-led" design stuff.
Yes, they had an idea that was translated to graphic state, but when things don't comport with reality (no, browsers can't actually represent everything you just in your PSD, or no, we can't make 9 point fonts usable in pulldowns with the same font your designer used, and no, we can't use that exact font because it's $1500, etc).... you have to use your judgement - and you can do it collaboratively with the client(s), but do not spend hours/days/weeks trying to chase down pixel-perfection based on PSDs that were likely based off $30 templates themselves. When chrome does an autoupdate and things are 3 pixels off... what do you do then?
> It’s crazy how sloppy some developers are
It's also crazy how un-aware of what browsers actually are and how they work some designers are.
I would also give my customer feedback on whether the UI helps them achieve their goals. Sometimes people zero in on a visual design that has poor usability, and all you're doing is taking them further down a bad road.
This is so true.
I wish it expanded more on this. Some questions:
- when you're remote, do you print the contract, sign it, scan it, send it, and have the client do the same? or do you send 2 physical copies via DHL or something? or do you just rely on a "looks good!" reply to an email detailing the terms?
- what's the typical practice in the freelance market on using contracts? I mean, when you're working remote from a country different from your client's, I imagine it's pretty difficult to write good enforceable contracts since they involve 2 very different jurisdictions. Do people typically bother trying to make good quality contracts, or are they used on the assumption that both parties will act in good-faith?
- when you're just starting out and can't really afford the services of a lawyer that can write international contracts, how do write such things on your own? some tips?
- are there standard clauses in these contracts that people expect or are they really diverse?
It would have also been cool if this talked a bit about how the interactions typically are between a freelancer and a client. I mean, I imagine there's a general protocol, right? I imagine the freelancer should guide the interactions, but what are clients' expectations? For example, what's typically used for communication? skype? plain email? Are there some etiquette rules specific to freelancing?
My take on international contracts: Working internationally, it's pretty much all based on trust. Once you get to the point where you have a large enough contract, sure, hire lawyers then. But how is someone going to pursue, for example, a Romanian developer for $10,000? It's just not worth it.
So, if you're unsure of the client and you have no way of enforcing a contract, you could "ramp up" your agreement: Get 50% up front, do a small project or 2, break larger projects into smaller chunks paid incrementally, etc.
I've never dealt with a large client flaking, so this is all speculation from me. I hope it helps.
Not necessarily. My team has recently inherited a system developed by an outside contractor that has absolutely nothing to do with our stack, and taking over its operation ended up taking much more time than if we had developed the functionality from scratch.
I am freelancing for some time now and the hardest part is to score and retain clients.