Life as a freelancer

8 Strategies To Help Freelancers Manage Income Fluctuations

Lack of income certainty is one of the most difficult aspects of freelancing. Some months you may make double or triple what you used to earn at your 9-5, making you wonder why you didn’t ditch it sooner. Then other months, you hit a sudden lull in your workload, and with no way of knowing for sure when things will pick up again, you can quickly flip to missing your old office job and daydreaming about the certainty it offered.

To overcome this income anxiety, you need to focus on two main goals:

  1. Developing a consistent workload from a diverse portfolio of clients who are as reliable as you are, and who never leave you waiting for invoice payments.
  2. Regulating your finances so you can make income forecasts, plan for expenses, budget accordingly, and save money to see you through any slow times.

Each of the tips below has been designed to help you reach these goals and develop a sense of stability, despite the inherent unpredictability of freelancing.

1. Consider holding onto your dayjob

We use the word “consider” here because the answer to the dayjob question is going to be different for every freelancer. If you have no debt, no great expenses to speak of, and can live rent-free with your parents while you launch your business, then by all means, quit your dayjob and put 100% of your resources into making your freelance career soar.

However, if you have medical bills, car or loan repayments to factor in, a family to support, or any other pressing needs, then it’s worth considering the idea of holding onto your dayjob until your freelance work takes off.

Some freelancers opt for the middle road and cut down to part-time hours, enjoying the safety net of a steady income while they launch their home business. Though not all companies will allow this, you’d be surprised at how flexible some managers can be. The trick lies in being bold enough to ask (bonus points if you come up with a proposal for how the shift will benefit the company as much as it benefits you).

2. Always exceed expectations

The best way to ensure you always have work flowing in is to consistently deliver brilliant results. This means avoiding the trap of overpromising and then underdelivering because you made your offer too good to be true (something many new freelancers do in a bid to secure clients).

Instead, offer a realistic proposal and timeframe for completion. Rather than offering an unreasonably low price or tight turnaround, communicate the reasons why you’ve set your price and timeframe with clarity, persuasiveness, and conviction.

Be sure to read all instructions thoroughly and ask questions about any aspect of the brief that seems unclear to you. Some clients know exactly what they want and how to convey it in a brief, while others are hazy on the details and inexperienced in working with freelancers.

It’s important to gauge where your client falls on this spectrum, and if necessary, spend some time clarifying what they’re after. This will save you from submitting a completed project only to have the client come back and say it wasn’t what they wanted. If you can deliver the goods on the first submission, you’ll be saving yourself hours of revision time while also making a positive impression that may help you secure future work.

Make it your mission with each assignment to exceed expectations on as many metrics as possible. This could mean delivering projects a day or two before deadline, conducting extra research, using time-saving tools like Grammarly to ensure every detail of your written work is correct, and other aspects that are dependent on the niche you’re working in.

3. Favor long-term projects over one-off gigs

Of course, when you’re just launching your freelance career, you’re not going to turn down paying work, even if all you’re finding is one-off gigs. However, when you’re hunting for work, it’s best to focus on approaching businesses that will be able to offer ongoing assignments.

By developing a roster of clients who regularly supply you with work, you will save yourself all the (unpaid) time and energy it takes to be constantly seeking jobs.

4. Diversify your portfolio of clients

This can be tricky if you’re following the above tactic and seeking out longer-term projects. Though you may find you’re getting a lot of work from one client, it’s important to have as many sources of income as you can reasonably manage if you want to safeguard yourself against uncertainty.

Clients can sometimes be late with payments (more on how to manage this in the next point), or their work can dry up, and since you’re not on the payroll, they have no obligation to give you advanced notice if they won’t be able to send anything else your way. Not to mention the fact that unexpected events like the 2020 global pandemic can bring businesses to a halt in a way that’s almost impossible to predict and plan for.

If you only have one or two clients, this can be a huge blow. However, if you have an array of clients, then any drop in work from one can often be picked up elsewhere. You will still have fluctuations, but the chances of you having a $0 month are greatly reduced.

5. Develop clear payment terms

Give a deadline for payment of invoices and send gentle, polite follow-ups if this date is missed. If you’re nailing point 1, then you’ll have set up an expectation between you and your clients that deadlines are always met. Be sure to thank and compliment them for invoices paid promptly as this positive reinforcement will help develop their speedy payment into a long-term pattern.

If you want more certainty that this, you may wish to consider establishing a contract with each client. Both you and they will sign to the terms laid out, giving you more of a firm ground to stand on if they’re late with payments. Some freelancers even work a late fee into their contracts to incentivise clients to process payments on time. This may not suit your business niche or personality; however, it’s definitely something to consider, especially if your invoices are in the thousands.

Another tactic that’s popular, particularly with freelancers who work on big projects with large invoices, is to have clients pay in stages. Milestone payments can easily be written into your contract, with the following terms being the most common:

  • 50% payment upon commencement of work;
  • 25% at the halfway mark;
  • 25% on completion.

If it’s a demanding project, you may wish to work some extra increments in and adjust the percentages to suit. This works well for both you and the client. On your side of the equation, you’ve got some financial certainty from the upfront payment. On their side, they have set times when they know they’ll get to check in on your work, and though they have payments to make at each milestone, these come with a review session that allows them to share any feedback they may have and walk away with peace of mind that the project is headed in the right direction.

6. Work follow-ups into your schedule

Sometimes those one-off gigs from early in your career can turn into lucrative long-term projects. Or a client you did a brilliant job for a few months ago may have a friend who needs similar work done. Though people will often come back to you when new work arises, there’s a chance that they may misplace your contact details or simply get so overrun with work that they forget which freelancer did what.

The best way to ensure you’re always in the front of people’s minds when new opportunities arise is simple – follow up with them. Once your invoice has been settled and the final thank yous exchanged, set a reminder in your calendar to send a follow-up email.

Thank them again for the opportunity, and detail the ongoing services you’re able to offer. Crucially, be clear on how you believe these services would contribute to the growth of their company. Let them know you have a bit of space in your schedule, and if they don’t have any work at the time, don’t be shy about asking them to refer you to anyone they know who may be able to use your services.

Simple catch-up emails with repeat clients are also worth adding to your schedule. Set yourself a reminder to check communications with your clients on a regular schedule, and if you haven’t received work from someone in that period, send them a short, polite, and personalized email asking how they are.

If you’re in a field like copywriting or data entry, scheduling follow-ups in your favorite calendar app will probably do the trick. However, if your gig involves pitching multiple potential clients, you may wish to consider a CRM (customer relationship management) system to help you organize everything and know precisely when you need to follow up on a proposal.

Some freelancers communicate with prospects for weeks or even months before they’re able to convert them to a paying customer. A user-friendly CRM system will help you track all these leads and ensure no-one gets unintentionally forgotten about. Most systems come with a free trial period, and each one has slightly different features, benefits, and characteristics. So, it’s worth testing a few out until you find one that suits your business and your budget.

7. Allow tech to take the stress out of financial management

Since we’re on the topic of useful tools for freelancers, we should take a moment to dive into financial management. Each year, digital accounting tools like Xero and FreeAgent get more and more advanced, allowing freelancers to manage their finances in a stress-free manner (with some even handling their own tax and avoiding accountants altogether).

The best part about these tools is that you can use them to create a budget that allows you to track your earnings and create forecasts based on this data. Over time, you’ll be able to spot trends you otherwise would’ve been blind to.

Maybe your work always drops off around the holiday season and then picks up in the New Year. Or vica versa. Or perhaps your trends are even more subtle than this. The one thing that’s certain is this – you will have no way of understanding your income and making accurate projections if you don’t track it. And it’s this data that will allow you to take control of the financial uncertainty of freelancing.

Make sure you factor in all of your regular and one-off expenses so you’re prepared for what’s to come each month. The last thing you want is to realize your annual Adobe subscription is due but it’s been so long that you forgot it was going to roll around again.

Not only will budgeting allow you to plan for dry spells, but it will also help you plan for profits. Indeed, over the long-term, this is the more important side of the equation (though it doesn’t seem that way when you’re eating store-brand noodles and ketchup sandwiches for two weeks, waiting for work to roll in).

Knowing your peak seasons will allow you to:

  • plan mentally for tackling the bigger workload;
  • ensure you plan holidays for non-peak periods;
  • be proactive and get a headstart on certain projects;
  • plan how you’re going to build up your savings and investments;
  • schedule bill-paying and subscription renewals to balance out your income and expenses;
  • predict how much you’ll need to set aside for tax;
  • assess your rate of growth and identify opportunities and weaknesses.

We could go on, but you get the point. Data has become one of the world’s most valuable commodities (just ask Google or Mark Zuckerberg), so make sure you’re collecting yours and putting it to good use.

As with CRM systems, budgeting tools come in many forms, so once again, we recommend researching and testing out a few until you find one that fits your unique needs and budget constraints.

8. Build an emergency fund

This advice applies as much to personal finance as it does to home businesses. Backup cash is essential for buffering yourself through quiet periods. Not only will it allow you to maintain your lifestyle and keep paying bills, but it will also do wonders for your mental health.

If you’re tracking your finances, you were expecting this dry spell, and you planned and saved accordingly, then you can enjoy far more peace of mind than those freelancers who haven’t done any of these things and so have no way of predicting when the lack of work will end.

Most financial advisors recommend having at least enough saved up in your emergency fund to cover expenses for three months. Keep in mind, you’ll need an emergency fund to cover three months of personal expenses too. If you can get this up to a six month fund, you can relax even more.

Set up a high-interest online savings account, funnel a certain portion of every invoice payment into it, and make sure you only touch that money if it’s a genuine emergency.

Where to from here?

When you’re just starting out, freelancing can seem like it’s doomed to always be a feast or famine affair. However, if you take the time to work the strategies above into your business model, you should gradually start to see positive changes, both in the consistency of the work you’re getting and in your ability to understand your income fluctuations and plan accordingly.

You may have noticed that these tips (particularly the first point about underpromising and overdelivering) will work best if you’re on top of your productivity. If this is something you struggle with, check out our favourite tips for boosting productivity when working from home.

Do you have any questions about managing the unpredictability of your income as a freelancer? If so, please feel free to comment below and we will get back to you.

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