Approximately 57 million Americans were freelancing in 2019, and if trends continue, more than half of Americans be will freelancing in the future, according to a study conducted by Upwork, a large freelancing platform provider.??
Some of these workers are full-time freelancers; others are still holding down a 9-5 job, but doing side hustles in their free time. The proliferation of such part-time and freelance work has people talking about a new kind of labor market: The Gig Economy.
If you are interested in joining the gig economy and earning money outside the context of a full-time job, you'll have to understand the many advantages and disadvantages of this type of income generation. Taxes will be different for you; you may need some basic accounting skills; and you'll need to rearrange your lifestyle to accommodate working in this manner.
What Is Freelancing??
A freelancer is a self-employed person who offers services to clients. These services often, though not necessarily, are offered to businesses through the proliferation of sharing economy platforms like TaskRabbit, Mechanical Turk, or Upwork. However, individuals can offer their services directly to clients, without third-party resources that often take a cut of the pay.
Nearly every type of service needed by a business can be provided by a freelancer. Some of the most common freelance opportunities include:
- Graphic Design
- Project Management
- Social Media Manager
- Virtual Assistant
- Web Design/Development
- Writing /Editing
Some freelancers focus in general areas while others focus in specific industries, such as real estate assistants, or in niche skills such as pay-per-click (PPC) copywriters.
Freelance income varies depending on the skills offered, your experience, and the market you're targeting. In general, freelancers earn anywhere from $10 to $75 per hour. Skills that require more education or experience, such as accounting or website coding, generally pay more than skills that don't require as much.
The Advantages of Freelancing?
Freelancing can be a fast and affordable way to get started working as your own boss, often from the comfort of home. There are numerous advantages to freelance work.
Set Your Own Hours
Freelancing is flexible. You can often work full- or part-time on projects of your choice, at the hours that are convenient for you.
Time is money, as the saying goes. The time you save by not commuting is time that can be used to make money.
Work Where You Want
If you'd like to be location independent in your career, freelancing is a great portable option for those who would like to work from wherever they want. If you enjoy traveling, you could work and travel at the same time.
Be an Independent Contractor
Although clients can (and usually will) set specifications for the work they want to be done, a freelancer is still an independent contractor, not an employee. You'd be free to control how the work is completed. However, if your clients don't like the final product, you might find yourself out of a gig.
Get Paid What You're Worth
Freelancing allows you to set your own price for your services, which is often higher than what you'd make as an employee doing the same work. Make sure you?charge enough?to cover your overhead and to compensate you fairly for the time it will take you to do the work.?
It's Affordable to Start
If you have the ability to provide a certain service, you most likely also already have the equipment or software you need to deliver it. You shouldn't face steep startup costs unless you are very new to the process and need equipment, training, and experience.
There's a High Demand
Although the freelance marketplace is competitive, the need for quality, reliable freelancers is growing. Many businesses don't have employees these days and rely upon a team of freelancers instead.?Currently, this trend is growing as freelancers cost less to businesses than employees do, even if they pay a higher rate—because they don't have payroll fees or benefits.
You Can Pick and Choose Your Clients
You'll probably want to take on any client who will hire you when you're starting out, but you also have the option to not take on difficult clients, especially as you grow. You can even tell clients you no longer wish to work for them.
You Might Pay Less in Taxes
The IRS treats employees and independent contractors quite differently. Thanks to recent tax law changes, employees can no longer deduct unreimbursed work-related expenses—but independent contractors can. You can deduct business expenses from your earnings on IRS Schedule C to reduce your taxable income.
Taxes can be difficult to understand, and you might not want to worry about them as much as making a living. Many freelancers hire accountants or tax professionals to help them.
Increase Work/Life Balance
When you can pick and choose what you do and when you do it, as well as what you're paid and who you work with, you feel more balanced and happy in your life.
The Disadvantages of Freelancing
Freelancing isn't perfect for everyone, and not everyone is suited to it. Here are a few of the downsides of working for yourself.
Your Clients Have Schedules, Too
Yes, you can set your own hours for the most part, but if a client can only see you at dawn on Tuesday, you'll need to be up with the roosters.?You likely will need to work within deadlines as well.
Depending upon the services you provide, you may only be able to work in the late afternoon and evenings, or you may have clients in different time zones that work different hours also. You'll need to be very good at managing your time.
The Work Isn't Always Consistent
This is particularly the case if you're offering one-and-done services, like creating a certain product. You turn the finished product over to your client, and that's the end of it—you have to find a new client who wants your product so you can create another one and be paid for it.
At first, you may need to do a lot of self-marketing and promoting to find clients. You may end up with a hundred "no thank you's" before you get a "yes."
More seasoned freelancers can avoid this issue by finding clients with a substantial volume of consistent work, and deliver results so that they become regular vendors or service providers. A freelance writer, for instance, might have a client that requires an article twice a week on an ongoing basis.
You May Not Be Successful Overnight
Acquiring enough clients to support yourself and your family through freelancing can take a while, and many freelancers experience an ebb and flow in their work. You'll have to plan for lean times and be ready to work hard to deliver work on time when work is plentiful. Breaking in with lower costs might be necessary, but find clients willing to pay for quality as quickly as possible.
Managing Multiple Clients and Projects Can Be a Challenge
Although some people like the variety of working on several projects at once, others might find it difficult to keep track of deadlines. You have to pace yourself to produce and deliver quality work on time.
Finding a method to manage your time is important if you are working for multiple clients. You could end up working far more hours than you'd hoped.
You're in Charge of All Aspects of Your Freelancing Career
Invoicing, bookkeeping, and marketing are all part of freelancing. In essence, you need more skills than just the ability to do the work. Unless you can hire people to take care of these tasks, you need to take care of them on top of delivering your service.
You'll Have to Pay for Your Own Benefits
You'll lose out on perks like employer-sponsored healthcare and retirement plans. Depending on the work you do, there might be professional associations that you can join to get group health insurance rates.
You'll Have to Pay Self-Employment Tax
This is the flip side of paying taxes on less income. When you work for someone else, your employer pays half your Medicare and Social Security taxes, but when you freelance, you?are?your employer—meaning you'll have to pay both halves. This is commonly referred to as the self-employment tax.?
Getting Started as a Freelancer
Getting started as a freelancer can be as easy as visiting one of the freelance websites to find work, or networking within your current sphere of influence to find your first client. Consider using a freelance site, such as Freelancer.com or Upwork to find work. They might pay less than you want, but this can be a great way to get your name out there and to get testimonials and referrals.
Beyond using freelance sites, there are a number of factors you'll need to decide upon before starting.
Be wary of some clients on large-scale freelance sites. Make sure you follow the rules set up on the site for communicating and receiving your payments from clients—sites like Upwork work hard to prevent identity theft, but there are people using the platforms for criminal activities.
Decide What Services You'll Offer
Will be you a generalist in your area or specialize? For example, you might offer social media management across many platforms or focus on one, such as specializing in managing Pinterest marketing.
Determine Your Target Market
You'll have to see if there is a demand for what you want to do. This is also the time to decide your brand and your unique selling proposition. You may have the skills and experience to market yourself to large corporations or want to work only for smaller businesses.
Decide Your Rates
Setting the right rate is a balance of getting what you're worth while being attractive to clients. If you don't charge enough, it might suggest your work doesn't have value and you might not attract clients. If you ask too much, you may not find clients willing to pay you.
When you are deciding your rates, use the available platforms to see what other freelancers are charging. This can help you make yourself competitive for your skill level and abilities.
Decide on an acceptable charge per project, as many freelance projects may be one-offs (a single time-limited project) in which the client will want an estimate of the total job. Other freelancers have ongoing clients that pay a regular rate or retainer. For example, a freelance writer might write eight new articles for a blog for $400 per month, or a virtual assistant can provide 10 hours of work a month for $200.
Create an Online Portfolio
Build a profile that promotes what you have to offer. Eventually, you'll want to invest in business-building tools, such as a website that can offer you more customization and flexibility, but LinkedIn is free and it's a great online resume that can help you promote your service. You might also consider Portfoliobox, SquareSpace, and Journo Portfolio.
Market Your Services
There are many low cost and free ways to market your freelance business and attract clients. Some options include networking on social media, offering a free consultation, asking for referrals, and email marketing.