Freelancers: Why you need to think of yourself as a business owner
This article is an excerpt from the book Finance for Freelancers, a guide to controlling your cash in the gig economy that has been written by Australian freelancers, for Australian freelancers.
If you have ever opened a book by a business coach you have a huge chance of seeing the word ‘mindset’ between the pages.
For anyone who has the goal of earning a kick-ass income as a freelancer and not just bringing in a bit of pocket money here and there, staying in the rut of thinking like an employee will mean you are only compensated for the hours you put in. What’s more, you will probably undersell yourself.
The payoff of running your own show and putting up with the stress of dealing with multiple clients should be that you’re getting more dough than you would with an everyday, run-of-the-mill job.
To start giving yourself pay raises, you also need to start thinking about how you can go past billable hours and the standard ‘time for money’ trade.
This doesn’t have to happen straight away but once you have well and truly found your feet with the technical side of running your freelancing business, it doesn’t hurt to explore how you can work towards sharing the load across some other people’s shoulders.
Even if you don’t want to progress to growing a team, thinking like a business owner will see you looking for ways to maximise revenue and minimise the faffing that costs you time and money. The biz-owner mindset will also force you to think strategically; for example, making sure you don’t end up in a situation where 80% of your income is coming from 20% of your clients.
So go ahead, say “I own my own business”. Because you do. And having a business owner mindset will help you be prepared to weather the many storms that freelance life throws across the horizon.
What to do if you feel you have hit an income ceiling
Whether you are a piano teacher or a personal stylist, you will eventually hit a ceiling with what you can earn on your own.
Most freelancers start out nervous to charge good money then harden up and increase their rates when they realise how much is going out in expenses (and how much drama clients have the power to create). Then they reach a point where they are busy enough that they are turning business away. A price rise usually helps sort that out.
After a couple more years of experience and another few rounds of price hikes, it becomes difficult to justify going higher (congrats on being at the top of this particular game).
From there, you have a couple of choices:
- Chill and be happy with your success… well done you.
- Find other ways to generate revenue that don’t rely on time for money; e.g., by hosting workshops, creating some kind of paid membership solution for your clients or creating an app your clients can purchase (although all these come with running costs).
- Scale up, become the Queen/King instead of a worker bee and stop doing all the work yourself.
Scaling up doesn’t mean hitting Facebook size and having thousands of employees. It may mean having a few contractors on hand who you can delegate work to when times are busy. You may decide to outsource to people based overseas or to recruit some more hands locally.
This is a big leap and it won’t happen without a lot of groundwork. But the tradeoffs can be positive and you will start to recognise opportunities and think differently about the way you generate income.
The value in doing this is that you now have the potential to grow a business that will operate and generate income on the days you’re not around. There is also the opportunity to sell your business and retire a gazillionaire (or at least comfortably).
Of course, scaling up is a risk that you have to take in a calculated way. It comes with a lot of learning and setbacks but it can be very fulfilling, especially if you take pride in knowing you have created opportunities for other people.
This article is an excerpt from the book Finance for Freelancers.
