- The freelance economy has grown immensely in the past couple of years and is on track to expand. According to Upwork and Freelancers Union's Freelancing in America 2019 study, 57 million Americans are now freelancing.
- If you're considering making the move from full-time work to freelance, you're not alone. Many freelancers earn more than in a 9-to-5, and many freelance jobs can command six figures.
- But how do you get started — and become successful? To find out, we spoke with a wide range of freelancers in various industries who make more money now than they did in their previous roles.
- Below is an inside look at the process from start to finish, including details about resources and infrastructure, how to budget your money and time, and how to find clients and recurring gigs.
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For many, the American dream is no longer a corporate job, but working independently as a freelancer. The numbers are huge and continue to balloon: Over a third of US workers have been identified as part of the gig economy (about 57 million people), and it's been predicted that by 2027, over half of American workers will be freelancers.
Yet one thing has traditionally held some back from ditching their day job and becoming a full-time freelancer: financial fears. Freelancers often get lumped in the "starving artist" category in the collective psyche, considered something that people do more for love than for money.
Research has found that freelancers make more than 9-to-5ers in many countries, and some freelance jobs can command six figures; the annual mean wage of independent artists, writers, and performers was over $104,000 in May 2018, according to the Bureau of Labor Statistics. Other types of freelance jobs, like web developer and graphic designer, can also be lucrative. According to a recent 2019 study commissioned by Upwork and Freelancers Union, freelancers contribute nearly $1 trillion in income to the US economy, which is almost 5% of the US GDP.
But even knowing that you have the potential to rake in more money than you do in traditional employment, it's tricky to make the shift from a regular, reliable paycheck to independent, client-based work. There's a lot you need to understand first — from infrastructure and budgeting to finding new clients and setting up a support system.
For behind-the-scenes guidance, Business Insider surveyed a wide range of freelancers in various industries who make more money now than they did in their previous staff position. Read on to learn what the process is like from start to finish, and what you need to know to make the leap from having a boss to becoming your own.
What infrastructure do you need to put in place to become a freelancer?
The freelancers we surveyed agreed that it's not smart to go cold turkey when making the transition to independent work. Creating a sustainable infrastructure should include a solid financial position, as well as setting up several standard business systems to avoid reinventing the wheel.
- Financial footing. Kenzi Wood, a writer and the owner of Kenzi Writes, emphasized the importance of getting out of debt before quitting a full-time job.
"I knew this would help me grow the business without fear of my personal finances," Wood said. "That meant putting full-time writing on the back burner for a year, but today I'm more successful because of it." - Administrative systems. Wood also recommended creating systems for accounting, client communication, task tracking, and building up a stream of regular clients, so that you can rely on solid processes rather than approaching each project piecemeal.
Hannah Attewell, who recently became a freelance success-and-business coach, agreed with the importance of automation: "Automate everything you can — admin can eat up a lot of time that you then can't use to profit from." - Tools of the trade. Equipment is another vital part of your infrastructure, and this will vary depending on your industry.
Stacey L. Vaselaney, a public-relations and social-media freelancer who quit her job as a senior PR specialist with a large Cleveland advertising agency in 2013, said a computer, a printer, a scanner, and a website were all she really needed to launch.
Attewell explained that she was able to get started after setting up some solid SEO on her website, along with PR for backlines and carefully placed advertising. Many freelancers also recommended investing in accounting software before you begin freelancing.
What resources do you need before leaving a full-time job to go freelance?
Being prepared rather than naïve about what's to come is critical to getting your freelance business started on the right foot.
- Cash reserves. In addition to getting out of debt, many freelancers homed in on the importance of building up some cash reserves before collecting your last paycheck from your employer. Marc Andre, the founder of the personal-finance blog Vital Dollar, set aside about $30,000 as an emergency fund when he left his full-time job as an auditor.
"We didn't have any kids at the time, and my wife was still working, so that money would have lasted us for a while if needed," Andre said. "I'd recommend having at least a few months' worth of living expenses, and I think it's good to be more cautious if you have dependents."
Lance Beaudry, who previously worked in youth ministry and now owns a small SEO and content-strategy company called Avalanche Creative, advised having at least six months of your desired income in the bank, not just six months of expenses. - Support system. When you leave an employer to become a freelancer, you also abandon an in-house support system that you may have taken for granted. Kathleen Osborne, who recently gave her notice at her full-time job and is preparing to kick off a freelance business, said that ensuring she had positive references was her initial priority.
"The first thing I considered before making the decision was deciding on whether or not I had the strong network I needed that would vouch for me in terms of the quality of work that I do and/or be a resource for me with networking for new business," Osborne said.
Max Kops, who left a job as an IT consultant to freelance in blockchain, agreed with the importance of ensuring you can obtain initial references when starting out. "What is most important is that you are not only an expert in your field, but you can also convey your value to your prospects," Kops said. - Understanding of benefits and tax implications. You'll be leaving behind employer benefits and tax structure as well when you give your notice, so an important consideration is how you'll account for these changes. For health insurance and other benefits, some independent workers opt to join freelance unions for group plans and advocacy, but most of the freelancers we spoke with didn't feel this was a necessity.
"I don't belong to any freelance unions at the present moment, and I don't really think it's necessary when starting out," said Drew DuBoff, whose freelance specialty is online business management.
It's critical, however, to have a strong understanding of the difference between being a W-2 employee and a 1099 contractor when it comes to tax preparation.
"There can be a fine line with laws of employment versus contractor," said Nicole Gallicchio, whose freelance background includes serving as a virtual operations consultant. "It is important to account for taxes as soon as you get an invoice paid. I have learned that you should put away at least 35% of each check."
What's the process like of leaving your job to start a freelance business?
Once you have your ducks in a row with infrastructure and resources, be prepared for some challenges as you shift your work life from employee to freelancer.
Our panel shared a variety of experiences leaving their employer, some of which were difficult. Many said they entered the situation with jitters and reservations but pushed through the fear.
- Weighing costs and benefits. Beverly Friedmann, who works as a freelance content manager, said it was a difficult choice to leave her corporate position to embark on an untried path as a freelancer. Friedmann was among those who found themselves tallying possible pros and cons before deciding to take the plunge.
"I was told by friends, colleagues, and even family that I was making quite a risky move," she said. "The obvious downsides? Potentially losing benefits without joining a union, including health insurance, workers comp, and unemployment. The upsides? Setting your own hours or working additional hours if desired, increased autonomy, the potential to make even more money by taking on more clients, less travel (depending on your position), and the ability to actually thrive in an industry you enjoy." - Facing politics. Telling your employer that you're quitting can be uncomfortable, even when it goes well. Some respondents said that while they were excited about delivering the news, it was met with mixed results from their unsuspecting boss and teams.
"I absolutely loved leaving my job," Attewell recalled. "There was definitely a big drama with the job I was in — I imagine because they didn't see it coming. In my case it was more exciting than scary because I was right at the beginning of my career so didn't feel returning to full-time employment would be too tough if it didn't work out." - Losing healthcare. Vaselaney too had a difficult time pulling the plug on her steady job, paycheck, and benefits — particularly because of her health situation.
"It was a very difficult decision," she said. "As a cancer survivor, I am considered high-risk for insurance coverage. Ensuring I'd have healthcare coverage was my biggest concern. After I discovered that I'd be able to be on Cobra for 18 months, I felt confident enough that I could quit my job."
How do you budget your money and time?
The specter of a paycheck-to-paycheck existence is often evoked when freelancing is mentioned, but most of the freelancers said they avoided this fate through proper budgeting and planning. Having enough time to get everything done as a freelancer, though, was flagged by many as a significant issue.
- Put clients on retainer agreements. Some respondents said that to avoid feast-or-famine syndrome, they sought retainer-based client relationships to ensure a steady stream of income. Requiring clients to agree to a retainer fee allows you to receive a rate that's either fixed or variable, but is negotiated in advance.
Brett Downes, a freelance SEO consultant, said retainer contracts were "peace of mind, as I know I get a minimum payment each month." - Save to avoid overreliance on current payments. Friedmann said that while she had occasionally found herself living paycheck to paycheck, she mitigates this possibility by ensuring that she always keeps a savings account as well-funded as possible.
"I would definitely recommend freelance workers take on as many clients as they can and always save," she said. "Savings accounts become key when you're in freelance, as months can be very hit or miss." - Master self-discipline. With no boss breathing down your neck for that assignment, it can be easy to let things slide too much and find yourself in a constant last-minute crunch. Our sources said that successful freelancers are savvy about building in time to manage their whole business — including for invoicing, marketing, accounting/taxes, and other administration.
Tom Wills, who shifted from a sales role in a digital agency to freelancing as a pay-per-click and SEO specialist, said it's vital for aspiring freelancers to learn to manage their time successfully.
"You need to be very self-disciplined," Wills said. "So if you don't have this trait, I would seriously reconsider going freelance, as getting up for work is easy when you have to, but much more difficult if you are your own boss."
How do you find clients and get recurring gigs?
Once your freelance business is off the ground, you have to find ways to keep it up and running. According to our experts, there are a variety of ways to generate a steady stream of new business.
- Build up referrals. Many of the freelancers we spoke with said they get most of their repeat clients through word-of-mouth referrals. This requires first doing great work so that you stand out in a crowded field of freelance talent.
"Just do a Google search to remind yourself that freelancers are a dime a dozen," said Kristi Grigsby, a freelance marketing consultant. "You've entered a field where you are truly replaceable — within hours. That reputation of exceptional talent and integrity starts now and is crucial to your success as a freelancer."
"It comes down to being a good person to work with," Wood said. "If you deliver a quality product on time with a smile on your face, you're a unicorn; it's so hard for businesses to find that in a freelancer. Be so good that they want to keep working with you."
This strategy can lead to positive outcomes, said Alice Donoghue, a writing, marketing, and communications specialist: "If you do great work, you'll get repeat business from your clients, plus referrals." - Use Facebook groups. Some freelancers, including DuBoff and Lindsay Stead of Gilded Blooms Communications, said they found all or nearly all of their clients by networking online through niche Facebook groups.
"People are always shocked by this, but almost every single client of mine has come from being active and engaged in Facebook groups," said Stead, who left her job with the local school board five years ago and now employs a core team of seven. "Having said that, in order to find new clients, you need to get very clear on who your ideal client is and go hang out where they hang out."
For example, since Stead's ideal client is a woman who is a wedding professional, coach, or creative entrepreneur, or works with a not-for-profit, she found Facebook groups that support these women. "I show up regularly, I give value freely, and I make connections," Stead said. - Get creative. By necessity, freelancers are a driven bunch — complacency in identifying new opportunities can leave self-employed workers with little to no income if they lose a key account. Respondents highlighted a wide range of additional ways they gain new and repeat business, including traditional in-person networking, researching companies they want to work for and offering services to them, joining industry associations, attending events, offering thought leadership, and using different freelancer platforms such as Upwork and Fiverr.
How do you make more money than you did in your full-time job?
After all is said and done, the bottom line still matters: If you can't pay your bills as a freelancer, you may end up back in the rat race. Fortunately, we found many freelancers who reported having the opposite experience.
"Within six months I was earning more than my full-time job, and within a year I had more than doubled my earnings," said Attewell, whose timing of rapid income ascension was typical of those surveyed.
Our experts shared thoughts about how they managed to make more than they did before and how others can too.
- View freelancing as a business. Attewell pinpointed her approach to her vocation as the key to her financial success as an independent worker.
"So often people diminish their position by calling themselves 'freelancers' and not treating their freelancing as a business that needs marketing, budgeting, and proper systems like any other business," she said. "The key to making money was that I tracked what I did and reinvested in avenues that were producing clients and revenue streams. Similarly, I would regularly trim out anything that wasn't making enough money to justify the time and expense." - Parlay freelancing into an actual business. Some freelancers go even a step further. Andre said he added $20,000 to his salary in his first year of freelance writing but felt he could make even more money by managing his own websites — so he used freelancing as a bridge to get him to that point.
"It's been a great full-time business for more than 10 years now," Andre said. "I had a salary in the low $40,000s at my old job when I left in late 2008. In 2009, I made about $60,000 in my first year of self-employment. Every year from 2010 to 2018, I had a six-figure income." - Find a niche. While some freelance fields are very specialized by nature, others, like copywriting or graphic design, leave the door open to many possibilities. By identifying a target niche market that you can specialize in, you could build your income faster than you could as a generalist.
"I think the key to making money freelancing is niching down," DuBoff said. "When I first started, I offered a lot of services, but I didn't do any of them particularly well. Once I refined my offerings, I began to attract the right kinds of clients that valued my expertise and skill."
Along with all of the advice above, keep timing in mind, and your financial and emotional readiness to make such a big change in your career path.
"It doesn't matter how cruddy you think your full-time job is, or that the work isn't fulfilling," Wood said. "If you jump off to freelance at the wrong time, there's a good chance you'll have to go back to a full-time job working for someone else."
If you time it right, though, the sky can be the limit.
"Being a freelancer has been great for me," Vaselaney said. "I can't imagine ever going back to an office job."
This story was originally published July 3, 2019.
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