8 brutally honest facts about freelancing and owning a small business

Want to become an entrepreneur? This article will be worth your time to read.

(Or, if you're just curious about why more people don't freelance or why it seems like it costs a lot to hire a freelancer, you should read on, as well.)

Twelve years after quitting my full-time job with a reliable paycheck to start what was then Corie Communications, I don’t regret for a second that I started this business.

But that doesn’t mean it’s been easy.

In hindsight, it’s clear that I had no idea what I was doing. I naively thought that I could bring in 20 times my hourly rate every week and still be working part-time. After all, it seemed that, if I were working 20 hours a week, I would be paid for those 20 hours.

Whoa, was I wrong.

I also thought that if I could just land a couple of great clients, I’d be set. No stress. Fun work. Easy money.

Wrong again.

And that’s just the beginning of lessons I’ve learned.

As we at CorComm Creative celebrated our 12th anniversary this month, I have been reflecting on lessons I’ve learned over time. What follows is a list of eight things I wish someone would have told me before I took the leap into freelancing — but instead are lessons I have learned the hard way.

My hope is that someone considering a similar career will take these considerations seriously — but also with a grain of salt. If that person is you, keep your head up. If you have the itch to start a business, and you know you won’t be satisfied until you do, do it. It won’t be easy, but entrepreneurs don't start their businesses because they're looking for easy work. We all know it will be hard. But we also have the grit to get it done. So be encouraged, but be prepared. You can do it!

8 brutally honest facts about freelancing

1. Setting your price low to entice clients will only hurt you in the end.

This is hands-down the hardest lesson I have had to learn — and the one with the longest-lasting consequences.

The fact is, there will always be someone who is willing to do similar work as you do, but for less money. Trying to be the lowest-priced provider will only result in a “race to the bottom,” as many professional business coaches will explain.

It’s better to set your rate at what you’re worth, and then seek clients who understand the value of what you do and are willing to pay for it. Man, this is tough. It’s NOT easy to find clients. And even harder to find clients when you have a price tag that seems high — at least compared with freelancers working for businesses that promote freelance designs for as little as five bucks.

My attempt to land my first clients is why I set my rates low — too low — when I first started out.

But as my business, our team, our services and our quality of work have grown in 12 years, the value of our work has increased faster than I can comfortably raise prices. So not only were my prices too low to begin, now they’re even farther behind the going rate for other businesses providing the level of services we do (at least for clients who have been with us for many years; newer clients come in at rates that are closer, but still below, the regional average). It feels like we’re digging a hole the better we get, not climbing out of one.

Don’t do this. If you’re serious about a freelancing career, do your homework and figure out what the going rate is for similar work in your area. I’d recommend not going below 75 percent of that value to start. As you grow, you can begin to raise your rates. But that’s much easier to do for new clients who come on board than it is for established clients.

2. Trying to be everything to everyone isn't the best way to get business — and it will drive you crazy.

When you’re first starting out, you’ll want to take whatever work you can find. This is a good move, generally speaking, because it helps you build your portfolio and the network of people who could refer business to you in the future.

But it’s not something you should do forever.

Being clear about who you want to serve (your target market segment) will help you tailor your messages in your marketing materials and face-to-face networking opportunities. You can identify problems that people in that market segment face, and explain how you can help them overcome them.

Solving problems for your clients is how you build business.

For example, let’s say you set your sights on providing a wide range of services for a wide range of clients — for example, “we do event planning, logo design, branding, marketing, communications, advertising, website design, website content management, writing, design, photography and social media for small businesses, not-for-profit organizations, churches, governmental and semi-governmental agencies, health care providers, universities and more.” What will you say when it comes to explaining how you will solve their problems (why they should hire you)? A person in health care won’t have the same problems as a person in ministry.

It’s much better to approach your business with a narrower focus. Identify a particular type of client with whom you enjoy working (or think you will), then figure out how you can help that type of client. Be intentional with the language you use when explaining what you do and how you help the people you serve. You’ll find it much more effective to say, “We help marketing professionals in the health care industry expand their reach by planning, organizing and promoting special events,” for example, than to say that long line of text above.

It might seem like you’re excluding a large audience of potential clients, and honestly, you are. But by making it clear what you do and how you can help those ideal clients, you’re creating a stronger draw for the kinds of clients who will care about what you do and will be willing to pay for it.

Having a few great clients is always better than having a lot of clients with whom you don’t enjoy working, who consistently dispute invoice amounts and who don’t understand the value of the work you do. They would never become long-term clients, and you’ll spin your wheels constantly looking for new clients to replace them.

3. People won’t refer business to you as easily as you think they will.

Even extremely satisfied clients aren’t going to be referring new clients to you as often as you think they will. The reality is, they have their own jobs to do, and they’re not always going to be thinking, “How can I encourage this person, who has a stake in the work I’m doing, to contact this other person I know who does great work?”

That’s not to say you’ll never get referrals. In fact, nearly 100 percent of our clients have come to us as referrals. And satisfied customers are the best people to champion your business. Prospective clients will be more likely to try a company that has come highly recommended than they will to try someone they simply find online.

It’s just that those referrals are not likely to come as quickly as you think.

For this reason, I highly recommend that even the most talented creative people not start their own businesses right after finishing college. It’s extremely important to develop a strong, large network of professionals who know the quality of your work before you begin to rely on them to help you build your business. Getting a job (or, better yet, multiple jobs, over time) in the field of work you want to do on your own, doing your best work while employed there, and taking advantage of opportunities to network outside of that organization is the most effective way to build a base of professionals who could champion your business in the future.

There’s more

Other lessons learned don’t require as much explanation.

4. Clients won’t pay you quickly. Just because you invoice $4,000 one month won’t necessarily mean they'll pay you (and therefore you’ll bring in) $4,000 the next month. You will have bills to pay, so plan accordingly. And don’t be afraid to send reminders and ask for payment when invoices are past due.

5. You will have a boss. In fact, you’ll have several of them. They’re called your clients. If you don’t keep them happy and serve them well, they will fire you.

6. You will need more clients than you think.  If you're planning to work full-time, you'll need lots of clients — to be safe, plan on 20 or more — to keep you busy. Not every client needs something every day, and even if you charge a retainer fee or monthly subscription to your services, clients come and go.

7. It costs a lot more to run a business than you think it should. You’ll have expenses (many of them monthly) for:

• every piece of software you use
• accounting services
• insurance
• website hosting, domains and development
• a customer relationship management (CRM) tool
• self-employment and other taxes
• educational opportunities
• membership fees for networking organizations
• if you’re not careful, credit cards and other debt.

If you take on employees, you’ll also have payroll and payroll taxes (and employees who expect to get paid, even during slow months). And if you have an office space, you’ll have to buy furniture, appliances and office supplies, and then manage monthly rent and utilities.

Be realistic about what percentage of your income will be consumed by your costs before you get started; these expenses can become quite large!

8. You probably won’t make nearly as much money as you might be tempted to think. There is a lot of non-billable time involved in starting and running a business. In fact, you should plan on about 50 percent of the time you spend working in and on your business as time that will not be paid. (No one will pay you to attend a conference, update your website, meet with your accountant, write invoices, go to the bank, edit your budget, work on your strategy, monitor your cash flow, shop for office supplies or interview vendors, for example. And there are no paid vacation days, sick days, lunch breaks, bathroom breaks, email breaks or read-the-news breaks.)

So, in my case, when I was planning on being paid 20 times my hourly rate for 20 hours of work, the reality was, I was only being paid about 10 times my hourly rate on average.

But take note: It’s not all doom and gloom!

If you’re considering a freelancing career, be sure to balance these truths with the fact that there is no other job where you can have as much control over your time and work compared with starting your own business.

And, although the work isn’t easy, it is rewarding. The value of being able to look at the big picture and think, “I created this business, and I love it,” is worth more than any client paycheck.

Chime in!

What questions do you have about freelancing or entrepreneurialism? What advice do you have for others who are just starting out? Please share in the comments section! We’d love to hear from you.

A version of this article first appeared on the CorComm Creative blog, The Buzz.