Finance Tips for Freelancers and Contractors

Our 13 November 2023 webinar was about finance and accounting tips for contractors and freelancers. Thanks to Daniel Lavinder, CPA, for being our guest!

Watch the entire webinar on YouTube: https://www.youtube.com/watch?v=cdoiOkAFL4o

Here are some of Daniel’s top tips:

• Calculate your minimum hourly rate based on personal income needs, estimated business costs, desired profit margin target, and billable hours. Daniel had a formula for this, detailed below.
• Separate all business and personal finances. Open separate business bank accounts and credit cards for easy tracking. Be diligent about your bookkeeping.?
• Allocate revenue into buckets for profit, expenses, and savings so that you are always sure to have enough money for expenses (and saving!).
• If struggling to stay afloat, pay urgent bills before prepaying taxes, which may or may not be required based on where you live.?
• Maximize write-offs without raising IRS red flags by ensuring expenses tie directly to revenue generation. Deductibles include marketing, travel, professional services, software, trade dues, etc. Keep receipts and make sure that you can justify your write-offs if you had to (and we hope you don’t have to).

Daniel’s formula for determining your minimum hourly or project?rate.

This exercise provides an objective way to price your freelance work based on covering your financial nut rather than guessing or undervaluing your work.

1. Determine your monthly personal income needs as a baseline. Factor in regular living expenses and desired savings levels. Create your budget.
2. Add estimated monthly costs for common benefits like health insurance, retirement savings, and software subscriptions. This accounts for key things frequently covered by your employer, but in this case, you are your employer. Let’s say that you have $5,000 USD per month total in personal and business expenses.
3. Divide that total income goal by your target profit margin percentage. Often 50% profit margins are sustainable. This tells the gross monthly revenue required. $5K divided by 50% = $10,000.?
4. Calculate the number of billable hours you can do (part-time or full-time), and also consider market rates for your services. If you plan to bill 160 hours each month to bring in $10,000, you would need to bill at $62.50/hr or higher to meet your targets.

Watch the whole video for more information and advice!

Connect with us or learn more:

• CustomerCentricity.com?—?our website
• youtube.com/@cx-cc ? —?YouTube channel
• patreon.com/cxcc ? —?online community and free mailing list
• cxcc.to/ckys?—?“Customers Know You Suck,” my recent book on improving customer adoption, satisfaction, and retention