Freelancers are very popular with companies and agencies. But what specific steps do you need to take to become financially independent? In this article, I'll show you how you can become a successful freelancer.
What are freelancers?
Freelancers are freelance service providers whose employment relationship is based on freelance work and flexible income. In contrast to employees, freelancers are not bound by a company's instructions. Freelancers work independently of location and according to their own schedule on a contract basis. The employment relationship either relates to a specific project or extends over an indefinite period of time.
If the collaboration takes place over a longer period of time, the freelancer's areas of responsibility are often set out in a contract for work or service. In most cases, payment for the services provided is based on hourly or daily rates, the amount of which is defined by the freelancer. Depending on the industry, other remuneration options are also used. It is not uncommon for some clients to prefer to pay their freelancers a flat rate for a project.
Freelancer vs self-employed
Although freelancers are self-employed persons, they are distinguished from self-employed persons by their professional field. Self-employed persons carry out their work on their own responsibility without a permanent position and independently of an employer.
Freelancers form a subgroup of the self-employed whose field of activity relates to the exercise of liberal professions, which are also known as catalog professions. These include professional fields that require special skills, qualifications and expertise. Typical catalog professions are artistic, scientific, literary, teaching and educational activities.
Self-employed persons who are not self-employed are considered tradespeople under the German Trade Regulation Act and are obliged to register with the trade office and pay trade tax.
Furthermore, there are self-employed activities that fall through the cracks of the general definition and cannot be clearly assigned to the commercial or freelance sector. In this case, a call to the tax office will provide clarity. Regardless of the type of business start-up, the tax office is an unavoidable point of contact before starting up the activity.
Business registration yes or no?
You should seek good advice from a tax office in advance as to whether your activity should be classified as a freelancer or as a business. This is because an incorrect classification or correction by the tax office can cost you a lot of money in case of doubt, even retrospectively.
Freelancers are also considered self-employed. However, the term and the field of activity of freelancers is not clearly defined. The employment relationship relates to project-related services and is based on independent collaboration with companies and sole traders. Freelancers are characterized by the fact that they are not subject to social security contributions and usually work with several clients at the same time.
Instructions: Become a freelancer
There are a few things and formalities to consider to ensure a successful start to self-employment as a freelancer. The following instructions serve as a guide to avoid potential stumbling blocks, from planning to the first order processing.
1. define area of activity
At the beginning, you should decide in which area you would like to work as a freelancer. For this, we recommend a job that you are good at, that you enjoy and for which you already have extensive know-how. Many clients require appropriate qualifications.
2. market analysis
Once you have determined your desired job, you should check how high the current demand and sales potential is in the respective market. The higher the demand, the better the earning and contract opportunities in this area.
In the first step of the market analysis, it is important to get to know the target group and their problems. It is also necessary to analyze the competition. Offer and pricing structures play an important role here. In addition, customer reviews can be used to identify and avoid the mistakes and weaknesses of competing freelancers.
3. financial planning and calculation
Before the first customer orders can be processed, registration with the tax office for tax purposes is required. Different registration steps are necessary depending on whether the freelance activity is classified as freelance or commercial.
Tradespeople must also register with the trade office and then receive their tax number. The final step for commercial freelancers is to register with the Chamber of Industry and Commerce or Chamber of Crafts. Once these formalities have been completed, the hourly rate is calculated. As a freelancer, it is important to assess your own skills and market them in the form of a realistic price model.
Setting an hourly rate that is too low or too high is one of the most common mistakes made by beginners. The pricing of competing freelancers serves as a guide here. The next step is to create invoice templates and a work plan.
4. corporate image
After the previous steps, the next step is to create a professional online presence to make the services offered accessible to the relevant target group. A dedicated website or company profiles on social networks are ideal for this.
Marketing for your website
You should make sure to create an offer that stands out from the crowd of competitors and attracts the attention of potential customers through its uniqueness.
5. customer acquisition
Customer and order acquisition is the most important part of finding project partners and building lucrative customer relationships. See the e-book from Raidboxes Customer acquisition made easy. First and foremost, various freelancer platforms at home and abroad are an effective tool. These connect contractors and clients in various industries.
Alternatively, you can use networking platforms such as LinkedIn and Xing. Freelancer groups on social media, job boards or direct inquiries to companies are also suitable methods.
6. expand income streams
In order to be successful as an entrepreneur in the long term, it is important to build up multiple income streams. Especially in the freelancing sector, many activities are fixed for certain periods of time. Acquiring new client relationships is therefore an integral part of freelancing. If you base your business on several sources of income, you will not face a total financial loss if one income stream is lost.
Finance 101 for freelancers
To ensure the long-term existence of your own company, you should consider the various financial aspects of your business.
Expenditure management
In order to be able to assess the profitability of the work in relation to the income generated, precise expense management is essential. Special accounting tools and Excel sheets are a time-saving solution for keeping track of all business and private expenses. Recurring expenses such as food, rental costs, internet and telephone charges and insurance premiums play a particularly important role.
Budgeting
In most cases, the monthly income of freelancers is subject to considerable fluctuations. This makes budgeting more difficult in contrast to a paycheck in an employee relationship.
The first step in creating a clear financial structure is to separate personal and business funds. An effective and frequently used budgeting method works according to the 50/30/20 rule.
Here, 50 percent is spent on basic expenses, 30 percent on personal needs and 20 percent on savings. Freelancers can apply for a business account in advance and structure different financial flows with sub-accounts.
Don't forget to take precautions
In any case, you should also seek advice on how much you should set aside and factor in, especially for retirement provision. Many freelancers neglect this at the beginning of their career, which is difficult to catch up on later.
Build up reserves
In order to survive times of crisis or to protect yourself against months of low income, it is essential to build up a financial cushion. Reserves secure your livelihood as a freelancer and are useful for unforeseen expenses, tax claims or as additional retirement provision. A well thought-out savings plan with a specific target amount and a defined period of time is required to build up reserves efficiently.
Tax administration
Tax deductions can be used to increase the profit margin of freelance work without the need for additional work. The most common business expenses that freelancers can deduct from their taxes include advertising costs, office rent, accounting services, web hosting and mobile and internet costs.
Different regulations apply depending on the sector and activity. In any case, I recommend that you seek advice from an expert tax firm. This can save you considerable sums of money each year. You may also be able to make use of the small business regulation and be exempt from VAT.
Freelancers and customer acquisition
Generating new customers is the foundation of your financial success. Below I present five effective methods that are suitable for freelancers.
Recommendations
Recommendations are the most efficient way for freelancers to acquire new customers. They underline your quality as a service provider and are based on a high level of customer satisfaction. If you do consistently good work as a freelancer and implement the customer's wishes exactly, you have a good chance of receiving a recommendation.
Implementing a rating function on your own website is also a helpful tool for obtaining customer feedback. After a successful job, you can also ask your clients to leave a review.
LinkedIn is a social network that specializes in jobs and careers. On this platform, freelancers have the opportunity to create a profile and build up a network of professionals and potential clients.
Customer acquisition is primarily achieved by generating added value in the form of LinkedIn posts. In this way, you position yourself as an expert authority and can market your services to new customers in a serious manner. See the article on LinkedIn marketing.
Facebook groups
With a professionally created Facebook profile and by joining relevant freelancer groups, you can quickly establish new customer relationships. Address the questions and problems of your target group, actively offer your help and create added value through specialist posts.
In principle, membership in general groups such as "Rising Tide Society" or "Project Freedom to Freelance" makes sense. This should always be done in combination with membership in industry-specific groups. The Facebook group "Freelancer Projects" is suitable for building long-term and profitable business relationships.
Platforms for remote jobs
Remote job platforms are an excellent way to make direct contact with clients. In contrast to cold calling, numerous new customers who need a service are already available here. Freelancers can apply for advertised jobs and quickly enter into lucrative collaborations. Established remote job platforms include Indeed, remote-job.net and weworkremotely.com.
Further resources for freelancers
Starting out as a freelancer is associated with many challenges at the beginning. The Internet has a number of useful resources for aspiring freelancers that make it easier to work and acquire orders.
Books and audio books
Successful freelancers constantly educate themselves and refresh their knowledge with up-to-date know-how. Certain books are considered must-reads in self-employment and are perfect for aspiring freelancers. These include the book "The 4-Hour Work Week" by Timothy Ferriss or "Freelancing Business: More Time and Money as a Freelancer" by Tim Chimoy.
If you don't have the time or inclination to read a book, you can switch to audiobook apps and listen to a book on your smartphone or tablet from anywhere. See my article 10 audiobook apps put to the test.
Conferences
Conferences offer freelancers an excellent opportunity to network and connect with potential clients. By attending industry-specific conferences, freelancers can learn about the latest trends, technologies and challenges in their field.
This knowledge not only helps you stay up to date with the latest trends, but also positions you as an expert in your field. In addition, conferences allow you to meet potential customers in person and build relationships that can lead to long-term partnerships. For these reasons, conferences are an important part of the marketing strategy.
Platforms for freelancers
Platforms specifically geared towards freelancers are a promising way to get jobs. For example, freelancer.com, Guru, PeoplePerHour and Outsourcely are established websites with good earning potential. The platforms are suitable for both beginners and experienced freelancers and connect clients and contractors on an international level.
For me personally, freelancing is a future-oriented working model that allows me to start my own business with little capital and low risk. Being a freelancer offers me numerous advantages and allows me to work from any location at any time.
Your questions about freelancers
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