You often hear about people who started a side hustle who went on to become very successful, or at least much happier than they were at their day job. However, those stories often gloss over the actual business side of freelancing. When you decide you want to move from a regular full-time job to freelancing full-time, you'll need to take careful steps. Don't get discouraged, however; take them one at a time and get as many pieces into place as you can.
Take a close look at your current work contracts or agreements. Some companies prohibit their employees from holding competing jobs, including freelancing in the same field; others have non-compete clauses that go into effect once you leave the company.
Side gigs for which you receive 1099-MISC forms are actually contracting businesses. Create a business plan, even if it's a simple one that outlines your marketing and networking. Contact your city or county to inquire about business licenses and decide if you want a name for your business other than your own name; these "fictitious business names" have to be registered with your county. Once you have your business name set up, create your online presence and build a portfolio of samples, if applicable.
Separate your personal and business finances, even if you're a sole proprietor. Having a separate bank account for your freelancing income helps you with taxes and with monitoring your business' growth.
Look at when you pay your bills and how often money might come in. If you're used to getting a paycheck every two weeks or every month, freelancing is going to be a shock. You'll need to figure out how to run your budget when you don't have those regular paydays.
You're paying your own payroll taxes now, and you'll also have to pay estimated taxes. If you're relatively new to freelancing, set up a plan that details how much you'll deduct from each payment you get. You might want to meet with an accountant, especially if you choose a more complicated tax identity like an S-corp.
When you've got your budget and taxes ready, set your prices. Your pricing should be competitive without blatantly undercutting your colleagues' prices while still covering all your costs.
Do whatever you can to have savings set aside before you start freelancing full-time. You'll want at least six months' worth to ensure you can pay your bills while building up your business. In certain circumstances, this might not be possible, but you need to have as much of a cushion as you can or stay at your day job for a little longer.
Join associations, forums, and social media that could help you find leads and get advice. Stay within your budget (those association memberships can add up), but look where you can because you never know where you'll find a fantastic lead.
You need to figure out where you'll work, and don't assume home will be the perfect place. Make sure you can work uninterrupted. Also, your best times for your freelance work may turn out to be very different from the typical 9-to-5 workday.
At first, you'll likely handle everything for your business. Re-evaluate that as time goes on and see if there is anything you can outsource, such as administrative work to a virtual assistant, or if you need advisors for taxes or other topics. As your business expands, you may need help so that you aren't working 24/7.
Meet Kyle Waugh, a personal training and rehab specialist and read more on how COVID-19 hit made him start his business.
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