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How to Start a Freelance Business in 7 Simple Steps
How to Start a Freelance Business in 7 Simple Steps
November 2022 * 5 min read

Freelancing is all the rage these days, whether full-time or as a side hustle. In fact, more people are working for themselves today than any other time in the last 15 years. However, it can be overwhelming to start a venture like this—especially if you don’t know anyone else who’s done it.

That said, it’s definitely doable. If you’re struggling to figure out where to begin, don’t worry—we’ve got you covered. These steps should help give you some clarity and get you started in the right direction. 

Note: We are skipping the step of determining what sort of business you want to form and whether there’s a market for it. We’re assuming that if you want to freelance, you already have a specific skill, and you just want to go independent with it. If not, then that will be Step 1 for you!

1. Choose a name for your business

The first step in setting up your self-employed business is picking a name. This can go one of two ways—either really easy or really hard. Many freelancers simply operate under their own legal name, in which case, this task is already done. However, if you want to operate under a different name or register your business as an LLC, you’ll need a name. 

Don’t fall into the trap of thinking your name needs to be perfect. It needs to make sense and be somewhat memorable, but it doesn’t need to be overly clever. In other words, don’t spend months waffling back and forth and failing to move on to more important steps. 

In fact, the only reason we have this as number one is because it needs to be done so you can move on! For freelance designers, for example, something like “Your Name Studios” or “Your Name Creative” is perfect. 

2. Decide on a formation and register your business

With your name decided on, it’s time to register your business. However, first, you need to decide what type of formation you want to use. Here, you have a few options, but the main two are sole proprietorship and LLC.

  • Sole proprietorship: A sole proprietorship is the simplest business structure—it’s just you. The business is owned and run by a single person, and that person is entitled to all the profits of the business. However, there is no separation between the owner and the business, which means you are responsible for all the liabilities.

  • LLC: A limited liability company (LLC) is a legal entity that exists separately from its owners. This means that the LLC assumes liability for any legal issues or debts, which in turn protects you from potential repercussions.

Aside from the liability distinction, there are a few other differences between these two formations:

  • Taxes: The main tax difference between an LLC and sole proprietorship is that an LLC has the option to file as a corporation. Most people won’t see much difference between the tax process between the two.

  • Registration: With a sole proprietorship, you don’t need to register anything or perform any special action to get started, as long as you’re operating under your own legal name. If you want to use a company name, you’ll need to file for a DBA (doing business as) with your state. For an LLC, you’ll need to file articles of organization with your state. Most states also require a fee and additional forms, though this does vary from place to place.

  • Financial separation: With a sole proprietorship, you can mix and match your business and personal finances however you like (though this isn’t particularly wise or recommended!). An LLC requires strict separation of business and personal finances and records.

Is a sole proprietorship or LLC better for freelancers?

Generally speaking, there’s no reason not to form an LLC. While it does require you to register the business and there’s a fee attached, these are relatively small inconveniences compared to the liability protection it provides. However, if you’d rather not worry about it, a sole proprietorship works just fine, too.

3. Build your website

There’s no two ways about it—you’ll need a website. This serves as a point of contact and a place to showcase previous clients and testimonials. It’s also a great spot to host a portfolio or other links to examples of your work. This is very important—it serves as proof that you can actually walk the walk, not just talk the talk. 

Your website also gives you a place to answer common questions, like how you work and how much you charge. It also tends to make you appear more trustworthy and professional in the eyes of potential clients, which goes a long way towards winning them over and justifying higher rates.

Creating a website sounds difficult. It certainly can be, but modern website builders like Squarespace and Wix make creating your site much simpler. If you have cash to burn, you can also hire the job out to another freelancer, but that’ll likely come later. For now, focus on getting online and putting together something that you can point prospects to that screams “Hire me!”.

Choosing and purchasing a domain name

When you register for a website, you get to choose your domain name (the web address—for example, Found’s is found.com). This is an important part of your business’s branding, so you should follow some best practices. According to Google, a good domain:

  • Is short (less than 3 words)

  • Is simple and easy to remember. 

  • Includes keywords for local businesses, such as the city you’re located in.

  • Reflects your brand.

  • Is good, not perfect—if you try to hit the perfect domain name, you’ll waste time that could be better used elsewhere.

4. Package your services to sell

Next, you need to put your services together into a sellable package that attracts clients. You also need to decide how much you’ll charge for these services and what your process will look like. 

Let’s say you’re a copywriter. You might offer email, landing page, and full website copy packages. Each of these is technically copywriting, but they are very different end results that require different amounts of work, are targeted to different customers, and would have different costs attached. These would be your service packages.

Next, you need to decide how you’ll price your services. This is a highly personal matter, and best practices can vary from one industry to another. Some of the most common pricing schemes include:

  • Hourly: Pretty straightforward—you bill a certain amount for each hour of work.

  • Retainer: A retainer is a flat fee billed on a regular basis—often monthly. 

  • Fixed project price: A fee based on a scope of work for a particular project. These rates can be either set for all work of a given type, or totally bespoke for every customer and project.

Another general rule for pricing is to compete on value to the customer, not on price. Competing on price is a sure-fire way to burn yourself out.

How much should you charge?

Ah, the eternal question. What’s a fair price for your services? 

There are several options to help get a feel for what other freelancers in your industry and niche are charging:

  • Check freelance websites. Freelance marketplaces like Upwork aren’t necessarily the best long-term path (they introduce a middleman), but they can be useful for benchmarking prices in your industry.  

  • Ask other freelancers. If you know people who freelance, ask them what they charge! 

  • Search online. Pricing is a hot topic for freelancers, and there’s no shortage of surveys, roundups, and other guides online. A quick Google search of “what do your industry freelancers charge” should give you some promising results.

5. Establish how you’ll manage your finances

When it comes to managing finances, you have a few things to consider. First, you’ll need to choose where to put the money you bring in. 

Many freelancers, especially those who opt for a sole proprietorship structure, just dump everything into a single personal account. This certainly keeps things simple, but it also opens up some potential issues, particularly around tax time. Additionally, if you decide to form your business as an LLC, you’ll need to separate your business and personal finances.

For these reasons, dedicated banking for freelancers is important. You’ll want to choose a banking option that makes it easy to access your money.

Beyond small business banking, you’ll also need a few other financial tools to:

You can get all this in a single place with accounting software designed for self-employed people and freelancers. Some of these tools (including Found) also incorporate banking, so you end up with a one-stop shop for all your bookkeeping needs. 

6. Find your first clients

This can be a scary proposition. When you’re setting out, it can feel like you’re one tiny person shouting out into the vast world. However, there are potential clients out there, and there are ways to reach them—and no, it’s not all about dumb luck.

There are several strategies you can use to find your first clients:

  • Networking: Your personal network is a fantastic resource for initial clients—especially if you’re freelancing in an industry you’ve previously worked in. People in your network are familiar with you and your work, which gives you a leg up. They can also vouch for you to other potential clients. 

  • Freelance job boards: There are a number of job boards and communities geared specifically toward connecting clients and freelancers. These boards can be a bit hit-and-miss in terms of the quality of clients you’ll find there, but there are good clients on some of them. They’re worth checking out periodically even after you’re well-established as a freelancer.

  • Direct outreach: You can also create a shortlist of potential clients you’d like to work with and reach out to them directly. This can involve cold emails, building relationships with relevant people on social media, or going to businesses in person (this can be especially useful for local freelancers like photographers or journalists).

  • Inbound marketing: Finally, you can use inbound marketing techniques like your website, social media accounts, and blog to attract potential customers. This is generally not very effective at first, because you won’t have the audience to attract much traffic. However, if you work at it over time, it can be built into a reliable source of clients.

7. Build on your initial success 

Once you’ve got your initial clients and have had some success, your next step is to continue to build on it. Of course, you want to continue with the tactics you used to find those initial clients. However, this is also the time to add two more tactics:

  • Referrals: Referrals are very often the number one source of new clients and work for freelancers. When you work for someone, and they’re happy about that work, as for referrals! It also doesn’t hurt to periodically check in with old clients and remind them that you appreciate referrals. 

  • Testimonials: Additionally, as you complete projects, ask for testimonials from clients. This helps build social proof that further shows you're reliable and trustworthy. This, in turn, helps you land bigger and better clients as you provide stronger and stronger social proof.

Long-term, the ultimate goal of many freelancers is a sustainable business where the work comes to you, rather than you needing to go out constantly and hunt for work. Doing excellent work is important to this goal, but it also requires you to be proactive about networking and marketing yourself.

One of the simplest and most effective ways to do this is to make networking a priority—particularly with your past clients. Keep in touch with them and focus on building relationships. This helps keep you top-of-mind and can open a surprising number of doors. It’s also a fantastic way to recession-proof your business.

Freelance better with Found

Freelancing can feel overwhelming—especially at the start. However, it can be broken down into clear steps, from choosing a name and structure to finding your first clients and solidifying your reputation to secure referrals. While these steps aren’t easy by any means, they are relatively straightforward.

The right tools make all of these steps easier, and that’s where Found comes in. Our banking and accounting software for small businesses and freelancers can help streamline your processes and give your freelance business a more professional look. 

This material has been prepared for informational purposes only.

Found is available on iOS, Android, and desktop.

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