Suppose you already took the first steps into the freelancing jungle, you started to build connections, and actually secured/completed your first projects. Chances are, however, there's still a bunch of good practices to be acquired - and managing your cash flow is maybe among the most pressing ones.
Why? Because it's closely related to your provider-client interaction. I wrote about this aspect a while ago here, but this time I learned something more about how dealing with clients actually impacts your income and why this dynamics is such a fine balance between compromise and holding your ground.
It happened after attending the last meetup in the Kickstart Your Freelancing Career series by Untitled- The Almost Ultimate Marketing Experience and FullStack Cluj.
This time around, the wisdom was provided by:
- Doru Catana - online marketing, website and business developemnt expert
- Gabriel Dombri - CEO of Tapptitude
- Robert Eduard Antal - digital marketing expert, co-founder of SEONID.
- Andra Lazar - the moderator of the event, former full-time freelancer, currently founder of Untitled Studio.
1. Finding your value on the market
The first months of a freelancing attempt seem to be a guessing game in establishing the rates you'll charge, while also gaining the reviews and reputation necessary for better financial prospects. How does one do that?
First, be clear on what's the timeframe for your freelancing trials; depending on that, you can choose an approach: either lower rates and free work at first (if you aim for the long run) or a more 'aggressive' tactic based on reading the clients well and targeting those who can pay you more. That is, if you go full-on confident and are not afraid to risk it a bit (as Doru noted, clients might be impressed by a daring pitch so it's worth at least giving it a shot).
*Wait, though. Did I just use the phrase "free work" while talking about finance management? *
Indeed, but only because it has to do with perspective and, as Gabriel pointed out, the fact that one should work free of charge if it's a compromise for gaining skills and if that time is actually used for further growth. Likewise, it's worth going for lower rates if you really want to get involved into a particular project because of the value you'll get from it.
The idea is, don't make it an endless loop of unpaid/underpaid work.
Evaluate yourself fairly, take your time if you need it, and also look around: how are other freelancers coping with this? As Andra learned by talking to fellow freelancers, you might discover your work is worth more, you can actually ask for more, and this leads to a better definition of your purpose and positioning on the market.
2. Pricing Strategy
In a broad sense, we've got the hourly rate vs. project-based pricing dilemma, which is - largely speaking - industry-specific and platform-specific. In the case of marketing/content strategies, as Doru indicated, the focus is on the result and you can't always define a quantifiable amount of work to be done within a specific timeframe.
Plus, it's also about the conditions you feel comfortable working in. If you're not sure about this, at least follow Gabi's advice and charge hourly until you have an exact understanding of the craft and how you can manage it more conveniently (both time-wise and finance-wise).
3. Risk Assessment
Once you hit a steady cash flow and have a minimum cushion of resources to fall back on, your value is more or less confirmed. Which should give you the confidence to come forward and ask for additional payment - especially in case you exceeded the goals.
But what if the client says they don't have the cash? Sometimes, it might happen no matter how experienced you are. In most of the cases, nevertheless, it's worth applying a set of good practices during your initial conversations with the client:
- Make it clear, from the beginning, that you might charge additionally as the project evolves, becomes more demanding and/or it implies additional research to be completed. This will not only set the ground for fair expectations, but it'll also tell the client they're working with a connoisseur who understands the project in-depth and who's putting in all the thorough work.
- If possible, divide the project in several parts for which you charge separately. In case something happens and the client doesn't get to pay all the work, at least you make sure you're partially covered.
What I mentioned above actually ensures a solid foundation for another aspect of cash flow management in freelancing: renegotiating.
When and how to approach it? You can take what Doru suggests and:
- Highlight how little micromanagement you needed (if this was the case).
- Learn new skills to add more services (and make sure you let the client understand that your improved value brings them improved value, in the first place).
- If the project benefits from it, advance an additional service to compliment your main one(s).
- Make renegotiating your rate a matter of fairness between both parties, not one of financial urgency from yours (for that, you need to secure a financial buffer from other sources, prior to going into the renegotiation phase).
Other than these, it also helps if you don't undercharge at the beginning - it's not like you'll be able to bargain as many times as you please. Better go for a fair rate, then put in the best work to give solid reasons for your requests afterwards.
And last but not least, pay the utmost attention to how you communicate, what words you use so that you make sure the client commits to the deal as much as you do (an "as we discussed" mentioned consistently could do the trick, Gabi suggests).
Other aspects of risk management:
- What to do with non-billable hours? Again, inform the client about your policy on this kind of work, but do it from the initial talk.
- Client requests extra work after the project has concluded and you've already been paid? The solution is open here: you either agree to it so as to get that mighty 5-star rating (on condition that you don't do this on a regular basis) or you discuss the matter in such a way that a long-term client perceives your compromise as a strength, not as a weakness.
Cash Flow Management - A Many-Faced Aspect
As you were able to learn during this recap, indeed, finance is not a standalone issue. It's a closely-knit affair between risk assessment, damage control, communication mastery and diplomatic, tactful approaches.
That's why I think freelancing provides you with pretty much all the soft skills needed in any career.
So the next time things don't quite go as planned, remember this, look ahead, then power through. And if you're still on the fence about a freelancing path, maybe a few tips from the previous meetings in the series would help (here's advice on mindset, and here on finding clients).