When you’re on a vacation, there are two sides to your trip: front-end activities like visits to historic sites and back-end procedures like hotel accommodations and transportation plans.

Your freelance business is no different. It needs both the front end and the back end to work harmoniously. The front end consists of client work, marketing and networking, your website, social media and other content channels, and your marketing materials. The back end includes your business structure, physical office and other favorite locations, your business systems, and your business technology.

In this chapter, we’ll focus on the back end of your business, which includes four components:

• Business structure
• Office setup
• Business systems
• Business technology

Let’s look at each component in more detail.

Setting Up Your Business Structure

As a freelancer, you have two main options for launching your business. We’ll cover the basics here, but keep in mind you may need to consult an accountant for details specific to your country.

Sole Proprietorship vs. Incorporated

With a Sole Proprietorship, you’re the owner and personally liable for the business. This structure is less expensive to start, with minimal formalities. You are not required to pay unemployment insurance, and you’re subject to self-employment taxes. This is the easiest pathway to take when you’re starting out.

With an Incorporated business structure (LLC, Inc., Ltd.), the corporation has a continuous life, and shareholders in a corporation are not liable for corporate debts. You are required to pay unemployment insurance, and only salaries are subject to taxes. You could become an employee of your own company and take a salary. This is the option you’d choose if you have a virtual team or want to sell products or courses.

Once you’ve decided on a business structure, here are the steps you’ll take:

Register Your Business Name

• Register your business name with your local state, province, or country business registry.
• Depending on where you live, often you don’t have to register your business name if you are using your own name for the Sole Proprietorship.
• Setting up a business bank account will often require a registered business name.
• Registering your name also ensures that you are not using someone else’s business name on your website or in your marketing materials.

Determine Business Tax Rates

• Consult with an accountant or tax specialist regarding the tax process for a sole proprietorship or incorporated business.
• Consider the potential business write-offs for running a home business.
• Average tax rate should be 20-30% depending on where you live and what “write-offs” you have.
• Determine how often you will pay taxes (monthly, quarterly, yearly).
• Consider what “Sales Tax” you need to charge clients in your respective state or province.

Business License and Insurance

• Many states and provinces either require OR recommend sole proprietors apply for a business license if they have an at-home office.
• You can choose to EITHER set up business insurance to cover your business equipment OR add it to your house insurance plan.
• You might consider “liability insurance” to protect you from potential lawsuits from clients.

Creating Your Ultimate At-Home Office

Have fun with this part! You can design your virtual office in a way that makes you feel comfortable and helps you thrive. Make sure that it’s a warm, relaxing environment conducive to focused work. Here’s a handy checklist you can refer to:

Office Setup Checklist

Furniture

• Spacious desk with room for desktop, laptop, and a space for writing
• Comfortable, ergonomically-sound office chair
• Storage bins for printer paper and stationery
• Locked filing cabinet for business documents, marketing materials, and other technology equipment (external hard drive, headset)
• Bookshelf to store favorite business books and resources
• Bright halogen lamps

Technology

• Desktop computer (and/or laptop)
• Monitor (ideally a dual monitor setup to maximize productivity)
• Printer / Scanner
• High-speed internet access (Get the fastest package possible.)
• Cell phone (or Google Voice or Skype for Business)
• Network router to connect multiple devices
• Backup external hard drive
• Timer (phone or egg buzzer)
• MyFax.com
• Quality mic and headset

Accessories

• Real or artificial plants
• Inspirational pictures or wall quotes
• Family photos
• Calendar
• Desk toys
• Relaxing chair or sofa

Sometimes working in other locations outside your home can inspire creativity and improve focus. So, when you need a change of scenery, feel free to venture out to a library, coworking space, favorite coffee shop, or outdoor location.

Set Up Business Systems

You’ll want to set up three main systems in your freelance business: client intake, client management, and client billing systems. Let’s take a look at each in detail.

Client Intake System

This is the first system you’ll want to set up so that you’re ready to receive your first client. There are four parts to this system:

1. Free Consultation (Discovery Call)

Free consults or discovery calls are 30-minute calls where you build rapport and showcase your skills and experience. They help you see if potential clients are a good fit for you and your business. You can ask them about their business, provide valuable information, and lead them toward considering your proposal.

To set up the first free consultation, you’ll need the client’s business name and website URL so you can research them, their current business and project needs, and their budget (fee range).

2. Create Proposal

If the client is interested after the discovery call, you’ll then send them a proposal. A great client proposal should be 100% crystal clear, brief and to the point. It should also answer the WIIFM (What’s in it for me?) question so the client recognizes the benefit of working with you.

Here’s a sample proposal outline. A tool like Dubsado can automate this process.

Section 1: Personalize Introduction

• Use a formal salutation (Dear Mr. Smith).
• Express your interest in working together.
• Reiterate your support in helping them realize their vision and goals.

Section 2: Scope of Services

• State your deliverables.
• Be very specific on the exact tasks and services.

Section 3: Pricing Plan (or Compensation)

• Break down the cost of the project.
• Determine pricing plans.
• If necessary, break down the specific costs per item.

Section 4: Proposed Timelines

• Determine how long it will take to deliver the project.
• Include specific dates of major deliverables.
• This will not apply for retainer or ongoing relationships.

Section 5: Next Steps

• Lay out steps the client needs to do:
  • Accept the proposal.
  • Sign contract.
  • Proceed with the first payment.

Section 6: Bio or Qualifications

• Finish out with social proof (testimonials).
• State skills and experience as it relates to this project.

3. Freelance Agreement

It’s good to have your own written agreement, but sometimes clients will send you theirs. The key points to include in the agreement are as follows:

• Description of services
• Timeline
• Payments (along with Payment Policy regarding late payments)
• Termination clauses (e.g. 30-day or 15-day clause when either party can terminate the relationship)
• Ownership of Work Product
• Limited Liability (e.g. to protect yourself for computer issues that aren’t your fault)

4. Welcome Kit

You can establish a strong first impression with a client by providing a Welcome Kit that makes you look organized and efficient. It should include the following:

• Client Policy (how you work with clients)
• Copy of agreement
• Listing of services
• Technology list (passwords required)
• Client Information form (e.g. birthday, information about products and services)

The important elements of a Client Policy are confidentiality (what you will and will not share), turnaround times (when the client can expect to receive responses to emails), availability and schedule, communication channels (the best way to stay connected), payment policy, and ethics (e.g. honesty, integrity, avoidance of unethical behavior).

Client Management System

Now it’s time to set up the day-to-day, month-to-month system for managing your work with a client. Here are some tools you can choose from to manage your business in six key areas:

• Project Management (Asana, Trello, or Basecamp)
• Time tracking (Toggl, My Hours)
• Client Intake System (Dubsado, 17hats)
• File Storage (Google Drive, Dropbox)
• Document collaboration (Evernote, Google Docs)
• Billing (FreshBooks, QuickBooks Online)

When you’re setting up your client management system, be sure to follow these steps:

• Set up a project management system. (Use either the client’s or yours.)
• Set up client intake software. (Consider using the free version at Dubsado.com.)
• Create a Dropbox folder with your client’s name.
• Set up a time tracking tool to export and share with the client.
• Set up a billing system to manage and receive payment (e.g. PayPal, Harvest).
• Determine your communication schedule and method (Skype, Phone, Zoom, etc.).

Billing System

Finally, you’ll want to determine the three components of your billing system:

1. Determine payment method (e.g. credit card, PayPal).
2. Identify payment schedule and policy (e.g. prepayment, partial prepayment, Net 10 upon invoice or 10 days following receipt of invoice).
3. Create and track invoices. (e.g Create invoice with FreshBooks.com, Dubsado.com or 17hats.)

Creating Your Payment Policy

Your payment policy should be included in your agreement AND as part of your client policy. It’s important to be crystal clear on your payment expectations for your clients right from the start. Be clear with your clients on when they will receive your invoices each month. Prepay options are obviously the safest route to take where possible.

The Value of Prepay Arrangements

Prepay arrangements ensure that you get paid before any services are delivered. They provide you with accountability to ensure that you get the job done with excellence. They also provide continuity in your relationship with the client.

Note: Partial prepays tend to be an effective model as well and share the risk between the client and YOU! New clients may prefer a partial prepay arrangement.

Now let’s move on to pricing and packaging your services!