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Ask Lawrence: How do I plan my budget when I freelance?

26 Sep 11:00 by Lawrence Akers

Lawrence Freelance Budget

For many freelancers, being able to work across a variety of companies creating a range of work is a dream come true. They can avoid having to deal with internal politics, earn a fairly decent rate and, most importantly, they are their own boss. Don’t feel like working over a certain period? No problem, I’ve asked the boss and they’re ok with that!

Where it does tend to fall apart is when it comes to finances. For many people, not having the security of a regular salary can be enough to drive them away from being a professional freelancer.

No one can guarantee where work is going to come from next. Sadly, this is part and parcel of working freelance. Follow some of these tips though and at least then you know what you need to achieve and some idea of how to find it.

How much do you need to make?

This might seem really obvious but do you know how much money you actually need to live on?  

Seriously, have you sat down and done something of a budget to determine how much rent or mortgage, utilities, groceries and some put aside for savings.

You also need to ensure that you’ve put aside some money to just have ‘fun’, whether that be dinner and drinks or going away for the weekend or hitting the club because life is going to be very dull if it is all work and no play.

Once you know how much you need to live (or even better for those who are ambitious, how much you want to earn in a year), you need to break that down into 48 weeks (because you’ll want to take time off), divide that by 40 hours in the week and there you’ll have roughly how much you’ll need to make in an hour.  

For instance, if you wanted to earn $100,000 in the year, divide that by 48 weeks ($2083.33), divided by 40 working hours in the week, leaves you with $52.08 per hour (inclusive of Super).

This is, of course, not entirely accurate as you would need to factor in public holidays however it should give you a fairly close indicator.

Planning for the future.

In recruitment, we often talk about focusing on six weeks in the future. This is because if we don’t, we run the risk of completing all the work that we currently have on our desk and not having anything to go to. It is that balancing act between doing what needs to be done now as well as focusing on who is next.

What does that actually mean?

If you’re a professional freelancer, then the chances are that you’re tapping into work across multiple sources.

You’ll have some jobs that come through recruitment agencies. These are likely to be last minute and at a lower rate than what you would charge directly as the agency will need to factor their fee into the charge rate for the client.

Other revenue streams may include advertising yourself directly, which means researching who you wish to approach, determining who the best decision maker is in the business and, *gulp* cold calling them.  

This does also mean that one other hat you’re going to have to wear occasionally is the ‘accounts’ hat and you may find yourself having to chase outstanding invoices. This is where having revenue across multiple revenue streams is an advantage as some work will help keep you afloat while you chase up the rest.

As long as you have your business budget in mind (we’re not even going into business marketing plans here today), then at least you know how much you need to bring in each week to keep on track and to ensure your financial obligations are being met.

Understanding market requirements and keeping skills current. Supply and demand.

Lastly, we’re in an industry that is changing frequently. Especially on the digital technology side of things, what is ‘current technology’ now is out of date as soon as next year.

To be competitive and to ensure that you’re offering a service that is relevant, you need to keep across what is happening in the market and what clients want.

A smart move is to package out your service across a couple of tiers. This way, you can clearly show clients what the dollar price of the package includes and you can also use this to determine if you’re giving them what they want.

If you find a reoccurring trend is the question, ‘Oh, but it doesn’t include [offering]?’, then you know this is something that you need to explore.

Admittedly, this weeks blog is very high level; we’re talking about some big concepts here that have been abbreviated down to a handful of words and each part could form an entire article in itself. However, in this world of getting to the point, this may help to offer up some points of insight if you’re considering moving into freelance or to help provide a renewed sense of direction for those who are feeling that being professionally employed can have those moments of being overwhelmed.

 

If you have any thoughts, questions or simply would like to get in touch with me and offer up a topic for the next Ask Lawrence, you can contact me on lawrence@creativerecruiters.com.au or you can find me and connect with me on LinkedIn. You can check out more jobs by going to our website or you can search for them on Twitter via #CRJOBS.

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