5 Reasons Your Freelance Business Isn’t Making More Money
You hear these stories of people who are bringing their end of year income into the six figure range freelancing. Many of those people also appear to be working about half as much as the rest of us do, only to make several times our profits.
Once you have moved beyond the feelings of seething jealousy, you may begin to ask yourself how that is possible. Did they have some amazing, high profile job that made them an in demand commodity once they set out on their own?
That doesn’t mean that the rest of us can’t find significant success. Making more money is possible, but you have to isolate why your profits aren’t higher in the first place.
Here are five likely culprits.
1) You Don’t Have Any Passive Income
You want to make money, but you don’t always want to be working to do it. It is a conundrum, but one that isn’t difficult to solve. All you need is a form of passive income that is adding up day by day, giving you a final check at the end of the month or quarter.
Regardless of industry, there are plenty of ways to do this. Start up a blog and begin to monetize it through tools like Adsense and other PPC plans. Write and launch an ebook or paid video tutorial course. Sell stock graphics for others who require images for their projects.
There are also affiliate programs, such as the Motiv Partnership Program. We offer a full 30% recurring commission on referred accounts.
2) You Aren’t Properly Estimating Costs VS Profit
A shocking number of freelancers do not properly estimate their costs versus their profits at the end of every project, month, or fiscal year. Because of this, they never know how much they should actually be making. What you take home will end up being hundreds (sometimes more) less than you are actually seeing in your projections.
There are three primary ways freelancers underestimate costs:
- They forget to include taxes.
- They forget to include fees and other business expenses.
- They forget to take give wiggle room for delayed projects.
Remember that you have to withdraw taxes from every project, not just as a bulk amount at the end of the year based on final take-home profits. This keeps you on task through the year, and keeps you from having any nasty surprises come tax season.
It also keeps you honest. Because you don’t always know when clients are going to be filing you as a real business cost (many do not), you can be tempted to only pay taxes on “official” work. But this leaves you at risk if they suddenly decide to file later on, or if you are ever audited. So pay taxes on all work, no matter what it is, or whether the client will ever deal with your country’s tax commission.
Next, you have fees and business expenses. Some of these are obvious, such as tools you are going to use for running your business (Motiv would be an example). But are you always factoring in the PayPal, Stripe or other financial fees for each transaction? That can add up very quickly.
Just PayPal alone is 2.9% +$0.30 for people living in the US. If you get a $1,000 payment, that is almost $30 in fees for a single transaction.
Then there are other minor expenses you might not be factoring in. Do you use a bidding site or job board like oDesk? That is another transaction fee, plus a 10% takeaway on all payments through their escrow service. What about those three cups of coffee per week you consume when you choose to work at the cafe instead of at home?
Finally, we have the client element. If you are expecting to make $150 a week from a client, and they end up delaying things some weeks and cutting your hours, you are going to make less. Have some wiggle room by finding some places that always need a bit of work to be done, or taking on a little more than you technically need to every month to hit your minimum.
3) You Aren’t Charging Enough
Here is an obvious one. Sometimes, you just aren’t charging enough to justify your services, and so you aren’t making as much as you should be.
You also may be underbidding in an attempt to compete with other freelancers, which is a big mistake. Not only does this short change you financially. It will also undermine your own authority and perception of quality. The clients you attract will not be the ones you want, and the ones you want will think you are a budget freelancer below the caliber they require for their project.
Use our Motiv Freelance Hourly Rate Calculator to find a fair rate that gets you where you want to be.
4) Your Service List Is Too Short
There is something to be said about being a specialist. It becomes a problem, however, when you only specialize. In a market as saturated with talent as this one, you have to be willing to diversify to be noticed.
Sure, you can have a couple of areas where you settle your focus, and where you really shine. But you want there to be a handful of service options that will widen your net a bit, and catch more fish.
If you are a web designer, don’t just do one kind of website. If you are a developer, don’t just manage one single kind of coding. If you are a writer, don’t write in a single niche.
In fact, don’t just remain in your own industry. Designers and developers can get into writing, even if it is technical. Writers can utilize other talents they may have, like photography, or illustration, or even something as simple as editing.
Increase your service list. You will both be breaking into other industries and niches, and increasing your authority.
5) You Don’t Understand The Value Of Investment
“Never do work for free.” At the face of it, this is a decent rule to follow. It is also one that should occasionally be broken. When you have an opportunity to do something for free (or just well below your rate) that could generate future work, you should consider doing it.
For example, a friend of mine did some free work for a non-profit that was running a fundraiser, creating a landing page for the event. It didn’t make him a dime at the time, but it led to a job revamping the actual non-profit website itself on his usual rate. Which led to referrals, which led to him becoming rather well established as a web designer for that niche.
I occasionally guest post on websites that don’t pay what I would normally charge for certain work, like Listverse. Yet, the article I did for them has gotten me more attention than any other I have published on the web. It has nabbed me some really great clients as a result.
Never underestimate the benefit of investments in the freelance business world.
Making More Money Is Possible, If You Know Where To Start
There are so many ways that making more money is within reach for you. All you need to do is recognize where you are currently lacking. If you have any other examples of ways you may be losing money, leave them in the comments!
Photo Credit: SEOPlanter