If you’re a new freelancer, congratulations! You’re in for some pretty cool adventures. But I want to give you a heads up on a few of the most common money mistakes freelancers make when they’re first starting out.
These aren’t dealbreakers, necessarily. But they’re just dangerous enough to make your freelancing career harder than it has to be, that’s all. So, do what you can to avoid these little money mistakes.
- Money Mistake #1: Not Researching the Market Rate for the Services They’re Providing
- Money Mistake #2: Working for Free on Those “Trial Runs” ?
- Money Mistake #3: Price-Matching Freelancers Who Already Aren’t Charging Enough
- Money Mistake #4: Assuming Clients Have Any Idea What to Pay You
- Money Mistake #5: Keeping Your Rates the Same That Second Year
- Money Mistake #6: Going Silent When You Fall Behind
- Money Mistake #7: Not Planning for Taxes
Money Mistake #1: Not Researching the Market Rate for the Services They’re Providing
A lot of gigging mamas start out wondering how much they should charge for their services. Well, Mom, the easiest way to figure it out is to find out what the market looks like for your target audience. Your hourly rates have to be an amount your audience is willing to pay.
I think an easy way to understand the idea of figuring out what’s happening in your market may be real estate. A one-bedroom apartment in my rural-y county probably goes for about $900 a month on the low end. If I drive 30 miles west into Midtown Atlanta, rent for a one-bedroom apartment will easily be double that amount.
So, your job is to figure out if you’re serving my neighbors or the Midtown Atlanta folks. Once you know that, you’ll look at the rates your competitors are charging and find a happy middle. You may be tempted to be the cheapest option for them… but it’s rarely a good idea to build your business strategy around being the cheapest. Someone cheaper will always along and you don’t want to end up in a race to the bottom.
Money Mistake #2: Working for Free on Those “Trial Runs” ?
Free work, masked as unpaid trial projects is a wrong approach for dissecting the freelance market. Why? Because you don’t have to do free work to prove your value. When real clients want to see your work, they will ask for your portfolio. They’ll contact your previous clients. They’ll check out your online reviews (super-easy to do if you’re working on a gig platform like Upwork).
And if that’s STILL not enough, they can pay you a fraction of the project value to see you do a fraction of the project.
Your expertise deserves fair pay, and clients who are ready to do business and build long-term relationships understand this.
Now, there will be times when you’ll waive your set hourly rate or reduce your fee to work on a project that you really want to get your hands on. But only compromise on your rates IF AND ONLY IF doing so serves a greater purpose—a purpose like being featured in a famous publication that will attract greater visibility to your work and open the door to bigger and better opportunities.
If you’re relying on the money you earn from freelance work to pay the bills, you can no more afford to take on those “free trial” jobs than you could afford to drive in to a local job and work for free.
Skip those kinds of clients. They’ll be more trouble than what they’re worth.
Money Mistake #3: Price-Matching Freelancers Who Already Aren’t Charging Enough
At some point in your freelancing journey, it’s going to feel like low-rate freelancers are waging war on your business. But don’t fall for that, and don’t fret over clients who only want to pay bottom dollar. They are always more trouble than what they are worth.
As long as you remain valuable to and viable in your market, you’ll be able to find clients who will be interested in renting your expertise. I’m a firm believer that you attract what you are – so if you’re a high-value freelancer, you’ll attract high-value clients.
It’s better to get one or two high-value projects every week than a bunch of low-rate ones that sap you of your energy, time, and money. And before you pull the “passion overrides money” card in your defense, here’s a subtle reminder that passion won’t pay your bills. It’s great that you love what you do, but sadly, but love won’t buy your kids any brioche. If there’s no HUGE long-term benefit, resist working without pay.
Money Mistake #4: Assuming Clients Have Any Idea What to Pay You
As a newbie in the freelance world, you’ll be tempted to let clients decide what to pay you. Usually, this happens because a freelancer fears intimidating potential clients with high rates. Or because they’re being nice.
With family and friends, I don’t charge for resumes. I point them to a PayPal link that allows them to pay whatever they want to pay. Some pay. Some don’t. But then, I think the ability to land gainful employment is the American way.
Which makes me a patriot. I’m MAGAing all over the place.
You have to remember, sis, that your client wants to get maximum value for as little monetary investment as possible, while you want to get maximum dollar within a limited time. The only thing you two have in common is that you both want to project to go well.
Clients perceive your skill as an investment; hence they want to derive maximum returns from it. It’s not uncommon for clients to take advantage of your lack of experience and confidence and knowingly pay you much less than what they know you are worth.
My best advice about this is to set your own rates. We’ve penned a post about that very thing that you can read here.
Money Mistake #5: Keeping Your Rates the Same That Second Year
As a cardinal rule, you want to draw a standard rate sheet that clearly outlines how much you charge per unit of measure – whether that’s per day, her hour, per project, per page, per word… etc.
But as your skillset expands and – here’s the important part – you are able to bid and deliver on more complex projects that extend outside the scope of what your regular rates include, your rate card should change.
That means the list of services you offer should get a little longer and your rate for providing your services should increase. It may be smart to combine services your clients often order together or remove some services from your list of offerings.
The amount by which you boost your rates depends on your industry and whether or not you’re consistently adding new clients (because old clients may feel some type of way about paying more money for the same services).
But even if you aren’t adding new clients, you can let your existing clientele know that your rates will increase in the next 90 days or six months or whatever time frame you choose.
Doing this will give you the chance to prove your value and let them decide if they can afford to stick with you at the new rate.
Money Mistake #6: Going Silent When You Fall Behind
That’s not a money mistake, Sorilbran! You may think that, but read on and you’ll see why I’ve listed this one.
I’ve been there. You get behind on a project – again – and instead of pinging the client with an “almost done” update/promise, you go silent thinking it’s better that you just focus on delivering.
It’s good to focus on delivering, but it’s bad to keep your client in the dark. I’ve done this recently, actually. Before my kids’ school went 100% in on remote learning in the fall, I was taking freelance work. When the switch happened with my daughter’s school, I was working on two freelance projects in addition to my regular job as the head of content marketing.
Talk about swamped.
And “Has it been three weeks ALREADY?? I’m supposed to deliver tomorrow and I haven’t even started the research for this article!”
Then the embarrassment set in. And a little temporary shame. And I realized that as long as I’m sitting in on my daughter’s first-grade class every day, I don’t have the bandwidth to take on freelance work.
I had to buckle down and complete the projects then essentially tell clients I really liked working with that I’m not available. ?
My point is this: most of us will stare down the barrel of a missed deadline at one point or another, often from circumstances beyond our control. The best course of action is to be proactive. Ping your client via email or phone and request a much-needed extension. Admitting you’re going to miss that deadline is a better choice than ghosting a paying client.
Here’s what makes ghosting a money mistake. When something goes wrong with a meal you’re paying for at a restaurant, you typically want more than an apology, right? You want the matter rectified. It should be the same for your business.
What I do for clients when I fall behind is discount my rate for their project. If I’m behind one day, I discount it 10%, and an additional percentage point for every subsequent day I’m late. That way, I can give them more than an apology for not delivering on time.
Money Mistake #7: Not Planning for Taxes
The Tax Man cometh! Every year like clockwork, the U.S. Department of Treasury is looking for you to pony up any money you may owe from your freelancing gigs. If you’re still earning modestly and you’ve kept your receipts from any business expenses, you may receive a refund. But if you’ve done pretty well and you haven’t been making quarterly tax payments (based on what you expect your tax to be), you’re going to owe a pretty penny to the government.
You have to plan for this. When I talked about setting your hourly rate, I projected that taxes would account for about 20% of your income. Maybe more, maybe less. Either way, that’s money you have to start putting away so it’s available when it’s time for you to pay up.
These are just a few of the most common money mistakes new freelancers make. I made a few of these myself… some when I wasn’t so new. But hopefully, this post will help you avoid that awkward “mistake” period.