Be a Freelance Web buider
By Amy Cowen
(1/12/99)
Today's technology market is perfect for Web builders who have a hankering to set their own hours, determine their own price, and choose their own projects. Whether you're a JavaScript programmer who wants the flexibility to take an afternoon off to go sit by the beach, or an interactivity designer who likes to take impromptu three-day weekends in the mountains, Web freelancing could be the way to increase your work/life balance, pad your pocketbook, and do work that you love.
Although several Web-related jobs translate well to the self-employed world, some translate better than others. Content creators often work as freelance writers on numerous Web sites, and Web designers are often called in at the beginning of a project to conceptualize how a site will look, as well as to create graphics along the way. Many companies also hire technical developers, such as programmers and site architects, on a contract basis since they often don't have in-house expertise. Sometimes even project management is outsourced.
Before you fire off your resignation letter, though, you'll need to face up to a few facts. Not every Web builder is cut out for freelancing. To be successfully self-employed, you'll have to initiate contacts with clients, complete projects on time, and handle all the paperwork related to the project. That means a head for numbers, good organization skills, and the ability to handle criticism are just as important as your Web building skills are. You'll also need to keep cool under last-minute deadlines as you juggle Web work and the related administrative tasks. After all, as a freelance Web builder, you're not only your own boss, but also your own marketer, bookkeeper, project manager, and production assistant.
That's a heavy load. But if you can't shake the vision of seeing what your Web skills are really worth, or if you've already taken the plunge, this guide will help you jump-start your new business.
Web business basics
Ironically, moving into the self-employed world doesn't actually make your life simpler.
Even on the Web, being your own boss is fraught with paperwork and legal issues. As an
employee, you can leave the day-to-day workings of your job to your parent company. As a
contractor, you are the parent company. You can do a number of things early on to
ensure your new Web firm is set up properly.
Your official calling card
As you transition from being an employee to being your own boss, you may need to file for
a business license. (Check with your local county clerk's office, where you can file the
paperwork if necessary.) Many companies require a valid license before they'll even open a
purchase order with you, so take care of this right away. Fees vary, but expect to pay
somewhere between $30 and $150 a year.
You'll also have to sort out what kind of business you are setting up, so you'll want to talk over your options with an accountant or legal advisor.
Finally, you have to decide whether you want to register a fictitious business name, or Doing Business As (DBA). Whether you need a DBA is debatable. Some people believe a business name, rather than your own name, makes you appear more professional. But as sole proprietor you are your company, and there is no reason you can't contract under your own name.
Before you file, be prepared with a list of alternate names in case the one you want is already taken. Since your Web site will be central to your business, you'll want to secure an available domain name before you select a DBA. That long GeoCities URL just won't cut it for your business.
Your other calling card
Even though you're working on the Web, you still need business cards. You might think
you'll be online all the time and never actually see anyone, but it doesn't
actually work that way. Not only will some clients insist that you come to the office for
meetings, but you'll probably be engaged in a number of networking activities as
you try to attract new clients. Email isn't always portable, so you'll want a business
card on hand whether you're waiting in line at the post office or cruising a major trade
show.
You can create your own business cards on your computer or have them professionally printed. Online printers like iPrint let you choose the style, colors, font face, and even import your own graphics and logo. These sites are also good sources of stationery, labels, and other company-branded paraphernalia.
Organizing your Web firm
Even for the most detail-oriented personality, the record keeping demanded by running your
own Web firm can be intimidating. One of your most critical record-keeping tasks is your taxes. Although the best
policy is to file receipts as you get them, that's not always possible. It may be more
doable to keep a pending file on your desk where you store invoices and receipts,
and then file them away once a week. Contracts, proposals, estimated and yearly taxes,
client invoices, and records of your travel (for mileage deductions) are just a few
samples of the kinds of paperwork that will soon be flooding your home office.
The home office is one of the perks of being self-employed, and it's a nice built-in deduction, if you do it right. Make sure you read up on what you can deduct, how much, and how to ensure your home office actually qualifies as a home office.
And make sure you take a picture of your home office. If you move, you may still need to prove you had a home office if you are ever audited!
Home sweet home office
You may have always had a home office of a sort--the place you store your home computer.
Building a real Web business, however, involves a number of home-office necessities.
You want to make sure your workspace appears professional to your clients. Unless you do all your business by email, that means no screaming children in the background and answering the phone in a business-like manner.
No more busy signals
Freelance Web builders must have an extra phone line. Although you may have visions of a
totally electronic life swirling in your head, in reality, many of your clients will want
to reach you--live--from time to time. And since you'll be logged on all day, living with
a single phone line just isn't an option.
Depending on what's available in your area, consider installing an ISDN line, a cable modem, or a DSL line. These services cost more, of course, but the extra speed is worth it.
Another issue to consider is voicemail. Your answering machine picks up when you aren't in the office, but you don't want clients to get a dreaded busy signal when you're on the phone. Check with your local phone company to see if voicemail is available.
A cell phone or pager may not be necessary for some freelance Web builders, but if you like to run out to the gym during the day, it's a good idea to have one or the other.
Computer power
Although you may not have the cash to buy new equipment right away, take stock of what you
have and what you need. Your system requirements will differ depending on what kind of Web
building you do. Web developers often need Windows NT to run servers and other development
applications. Web designers, meanwhile, will need plenty of RAM to work with large
graphics files. Content creators who spend most of their time in a word-processing
application will require less system power. Evaluate what you used in your full-time Web
building job to assess your needs when self-employed.
In addition to your core system, make sure you have adequate backup strategies. Once you're on your own, the corporate IT department is no longer watching out for your data. If your hard drive crashes and you don't have a backup, you could be out of business. An external storage device, like a Zip drive or a rewritable CD-ROM drive, is something most Web builders can't live without.
Outfitting the office
Depending on your space, you may need to invest in special furnishings to outfit your home
office. Make sure you stay tuned-in to the ergonomics of your new purchases. In Web work,
you're at a computer all day--with few breaks or distractions--so you want to make sure
you are aware of your hands, your back, and the spatial arrangement and location of the
items you use often. Mouse pad gel rests, split
keyboards, keyboard gel
strips, and other ergonomic accoutrements can help circumvent repetitive strain injuries or carpal
tunnel syndrome. You'll also need to be conscientious about taking breaks and
stretching. You should take a minute or so every 20 minutes to refocus your eyes by
looking away from your computer and exercising
your fingers and wrists. Set an alarm clock if you forget.
The other basic furnishing you'll need is an ergonomic chair. You may hate the idea of spending a lot of money on a chair, but when you think about how much time you'll spend sitting in your office chair, this is not a good place to scrimp.
Secure the premises
As a freelancer, your whole business--from paper files to disks to your hard drive--sits
in your home. If something goes wrong, you could lose everything from work in progress and
IRS records to all your hardware and software.
Insurance is definitely something you'll want to add to your to-do list. If you already have renter's or homeowner's insurance, check with your agent to see what kinds of equipment riders are available.
It's often possible to purchase additional coverage
for your computer equipment. Make sure, too, that your agent knows you'll be working from
home. Some companies offer a discount for people who work at home because they are
at home so much.
What to charge for Web work
One of the most ambiguous areas of Web freelancing, especially when you are starting out,
is figuring out how much to charge.
Fight the urge to send messages to every mailing list you're on asking that very question. It's against the law in the United States for competitors to discuss rates. That means that, legally speaking, self-employed people can't talk to each other about how much they charge.
So, how do you figure it out? Hopefully, you gave some thought to pricing before you walked out of your cushy in-house job. After all, you decided, up front, how much you needed to make, right? Of course, Web jobs vary, and what you can charge is often directly related to how technical your job is. For instance, if you're coding HTML you may be able to charge $10 to $20 per hour, but if you're a programmer, your price may be anywhere from $75 to $200 per hour. You can start to figure out a reasonable fee by checking out various salary surveys on the Web, but you'll first have to decide whether to charge by the hour or by the project.
Projects versus hourly rates
Web builders will likely have occasion to charge both by the project and by the hour. The
benefit to a project rate is that you can ballpark how many hours you think the project
will take, how much money you will spend on the project (buying stock art or
project-specific software or components, for example), and what skills the project
requires. This often works to the advantage of everyone involved: You get to set a flat
rate (or a range) and feel comfortable with the baseline you'll make for a job. And the
client knows that, regardless of how much time the project takes, the high-end estimate is
the most it will cost. The IRS also views project pricing as a sign of a contractor's legitimacy. (See sidebar.)
Project pricing won't work all the time, and it has some pitfalls. If you've ever agreed to build an entire Web site for a set amount and then worked three times as many hours as you expected to, you know the dangers. Charging by the hour can protect you from a low-ball estimate, or from piles of changes requested by fussy clients.
For maintenance-type jobs, for example--handling weekly HTML updates or providing monthly traffic reports--you'll want to establish an hourly rate or consider a monthly retainer fee. You may also want to consider monthly minimums for ongoing clients. After all, you are keeping time open to respond to client needs. If nothing comes up in a given month, you've wasted time during which you could have been working on other, paying jobs.
Keep in mind that geography matters. If you live in a big city, your hourly rate will likely be higher than if you were living in a rural area. However, competition for freelance Web work is fierce in big cities. If you're coming late to an already crowded field, finding opportunities may be challenging. Those in smaller areas, on the other hand, usually charge less but find the area ripe for the picking. (Keep in mind many Web contractors work almost entirely by email and phone. In other words, don't let where you live limit your potential client base.)
To some extent, your clients will help you refine your pricing policy. You'll know your rates are too high if you are losing jobs you bid on, or if a prospective client comes back with a counter offer or an honest "we were really looking to spend less." You're probably priced right if you're failing to close about one-third of the deals you submit because the prospect thinks your price is too high.
In fact, you can learn a lot by what one client is willing to pay for a certain project. If it's a big company, you may be able to charge similar prices to other big companies, on the assumption that their spending strategies are similar. Keep in mind, however, that you may find more work with smaller businesses, and they may have smaller budgets.
Freelance pricing is a juggling game. You'll have to make some hard calls as you work out your pricing strategy, and you'll probably adjust project prices on a project-by-project basis. For example, you may decide to charge less for intranet work than for Internet work. You may charge more for projects with incredibly short timelines, or less for a project you really want to land in an attempt to establish a relationship with a company. While your project rates may vary, when it comes to setting your hourly rate, your best bet is to be consistent.
What Web surveys say
The problem with most of the salary surveys you'll run across on the Web is that they
represent the incomes of salaried employees. Successful contractors tend to make more than
their full-time, in-house counterparts, so you can get a ballpark figure by increasing a
full-time salary by 40 percent--that's usually a company's overhead expense. Use these
salary surveys to narrow down a price range based on your geographic location, technical
skills, and experience.
- Enter your geographic location, pick the title that best fits your skill set, and find out what you're worth with the 1998 Interactive Salary Survey from Pencom Systems. While the numbers represent salaried positions, this gives you a sense of what your skills are going for in your area. A Boston Web builder who works for a software firm makes about $44,000 if she has one to two years of experience, according to this survey.
- JobSmart's Computer and Engineering Salary Surveys page links to both online salary surveys and freelance-specific salary information. For instance, according to The Real Rate Survey, a Colorado-based Perl/CGI expert can charge about $51 per hour.
- NetMarketing's Web Price Index archives articles that can give you a strong sense of how much businesses are paying for certain Web-related activities, including Web site upkeep and what it costs to build a transaction site. As a contractor, you can see where your skills fit into the overall estimates. For instance, one article states the average charge for hosting and maintaining a small site per month is $2,500 while for a large site the average is $14,750.
- ZDNet's SalaryZone shows that 21 percent of graphic designers who filled out their survey make $29,000 to $35,000 a year. The next largest category was $24,000 to $28,000 with 18 percent.
- TechWeek's "Rapid growth in Web jobs" says that the five highest-paid Web jobs are electronic commerce manager ($118,000), Internet strategist ($115,000), Internet strategy director ($100,000), creative director ($100,000), and design manager ($84,200). (Salaries reflect average in Northern California.)
- The Real Rate Survey article states that IT professionals are hard to find. There is no such thing as an entry-level consultant, and qualified junior consultants can earn $70,000 to $120,000 in salary, with $3,000 to $30,000 in bonuses.
- Wired's "Freelancing in the Web world: how do you rate?" says programmers are in the highest demand and can charge $100 to $200 per hour, while straight HTML coders can charge a mere $10 to $20 per hour.
Advanced money matters
As a self-employed Web builder, things are going to be different:
- You won't be receiving regular checks of standard
amounts.
- Taxes and social security payments will not be
automatically deducted from your paychecks.
- You don't have the benefit of company retirement
plans, profit sharing, or other financial perks.
- You have to keep careful records of what you spend and what you make.
On the up side, you may make more money as a freelancer, and you can work as many hours as your client-base will bear. With the added expenses, you'll need that money. On the other hand, if you want to work less, you have that freedom, too.
Still, as a contractor, you work day to day, and often project to project. This means freelancers tend to be short-term oriented. When it comes to your money, however, you're going to need to keep the big picture in mind.
Split personality
Many accountants suggest you set up a separate bank account for your business even if
you're working under your own name. You'll also want to designate one of your credit cards
for business use only. Not only will this help you track what you spend, but the interest
you pay on your business card is deductible.
Bookkeeping 101
First off, you'll want to start using some form of financial software right away. A number
of packages are available, such as QuickBooks
or PeachTree
Software, and many offer demos so you can see which package best meets your needs.
Once you set up your business finances, keeping track of your expenses and income should be fairly straightforward. You'll have to make a concerted effort to use the software, but it shouldn't take you long to get in the habit of recording your day-to-day transactions.
Taxed to the max
Say goodbye to the 1040EZ form and hello to a Byzantine maze of IRS forms, regulations,
and obligations. Tax time can be a huge time-sink and a major stressor. An accountant is
the best solution. Plus, it's a business expense.
Estimated taxes
As a self-employed Web builder, you are responsible for paying quarterly taxes due on
April 15, June 15, September 15, and January 15 (for the previous calendar year). Your
accountant will help you determine your pay schedule for the year and, if you're lucky,
send you off with preprinted forms (so all you have to do is write a check and mail it in
each quarter).
For the first year, your taxes will likely be based upon your total earnings for the previous year. The standard rule is to pay 100 percent of your previous year's tax obligation in quarterly payments. Your first year, however, may land you in a unique situation. Since you weren't previously self-employed, you may have made considerably less than you plan on making in your new self-employed career. In this case, you could wind up owing a considerable chunk of change come April 15. Keep this in mind as you plan your finances your first year of freelancing.
Based on your anticipated earnings, your accountant can help you determine what your end-of-the-year obligation may look like (including how much money you may be able to invest in an SEP retirement plan). Even if you're bringing in buckets of money, be careful to set aside enough money so that you don't wind up in trouble when tax time rolls around.
After your first year, your estimates should be much more in line with how much you're making. So, your quarterly estimated tax payments will be more accurate, and you shouldn't have to stockpile as much money for the end of the year.
Even if you plan to use an accountant, take time to familiarize yourself with the various IRS publications targeted for small business owners. The Your Business Tax Kit gives you online access to the forms and instructions you need. The IRS site also offers access to relevant forms and publications.
Planning for the future
As a self-employed individual, you don't have the benefit of a company retirement plan.
That's too bad, but a Simplified
Employee Pension Plans (SEP IRAs) can definitely work to your advantage. You aren't
hampered with the $2,000 yearly limit that employees face with a standard IRA. Instead,
your maximum contribution (up to $24,000) is directly related to your year's earnings. And
what you invest in your SEP comes off the top before taxes--almost like an expense.
Depending on your personality, you may find it hard to sock away all that money, but it's both a tax-smart and future-smart move. Plus, it's empowering to see your future cushion start to grow.
Remember, you have until April 15 of the following year to complete your SEP contribution, and your accountant won't be able to tell you what your maximum contribution will be until you know your end-of-year earnings.
You can work with any bank or brokerage (for example, Charles Schwab or ETrade) to set up your SEP. Or, you can meet with a financial planner. If, as the year progresses, it becomes clear that you're doing well, go see a financial planner. A financial planner can help give you a sense of where you stand as well as offer some good tax solutions, disability insurance offerings, and investment strategies.
Don't forget medical insurance
If you're not already covered (for example, by a spouse's plan), health insurance is
something you have to consider when you go solo. Be warned that individual policies are
often more expensive than the company policy you may have had in the past.
You can check with major insurance providers in your area for individual policies. If those don't pan out--or are just too pricey--consider the group plans offered by professional organizations, such as the National Association of the Self-Employed (NASE), Media Alliance, and the Home Office Association of America. The Association of Internet Professionals (AIP) recently started offering health insurance to its members. (For more information on the AIP health plan, contact the health plan administrator toll free at 877/291-8499 or via email at [email protected].)
Finding contract Web work
It's no secret that spreading the word is critical to your success as a freelance Web
builder. Even during your busiest times, you'll want to keep your eye out for the next
client.
If you have a database full of potential client names, you can probably convert some of those into paying customers. If you've got a smaller list of prospects, you may face some lean months as you try and break into the business.
The key is to find ways to let people know that you're there and that you do good work. If you land a project with a big or diverse company, that can be a terrific conduit for other projects. Do good work for one client, and maybe your name will come up when a colleague needs someone. Let the possibility of that future underwrite your work for the client--even to the point of doing extra work not specified in the contract. You want to make sure that your client is so satisfied that not only will you be rehired for other projects (or retained for maintenance), you'll be recommended to others.
But don't leave it all to others to find work for
you. Networking--over
the Net and in person--is an essential part of building any freelance business. And there
are always other places
to look for Web building work.
Networking
Networking is a critical process for any freelancer. Competition is fierce, and clients
tend to hire people they know and like. Your job is to make sure people know and like you,
as well as know and like your work.
Electronic networking
For Web builders, electronic networking is even more important than the face-to-face kind.
Email lists, bulletin boards, online discussion forums, and other virtual communities all
offer great ways to meet and impress potential clients and collaborators.
You'll need some good filters to keep things manageable, but email lists are invaluable networking resources. In addition to offering pools of like-minded netizens, job postings are often distributed via lists. Countless email lists are available, so you'll need to spend some time searching for ones you want to try--Liszt, Publicly Accessible Mailing Lists, or The List of Lists--or ask other freelancers what lists they use. One set of lists to definitely check is WebMonster's lists, which ranges in topics from Web design to Web programming.
Other electronic networking options you might find useful include newsgroups, ICQ groups, and IRC groups.
Finally, many one-way lists distribute job openings; one of the most well-known is the List Foundation (formerly Craig's List), which serves as a conduit for San Francisco Bay Area job listings. Bulletin boards like Builder Buzz are also good sources for both job-hunting and online networking. In the Buzz, you'll find niche topics from Web authoring and site architecture to Web design and graphics. You'll also want to monitor job board sites, although they frequently focus on full-time placement only.
Face-to-face networking
No matter how good you are on email, from time to time you need to unplug and be seen. You
don't have to go door to door--or cold-call--but you do need to shake a few hands, pass
out a few business cards, mingle with other freelancers, and introduce yourself to
potential clients. Not only can this increase your business, but it also lets you see what
other contractors are doing.
Conferences, trade shows, and other industry events allow you to meet and mingle with large numbers of your target audience. Also, consider joining professional organizations like the Association of Internet Professionals (AIP), World Organization of Webmasters (WOW), or Webgrrls. These groups often have regular meetings and sponsor industry-specific panels and conferences. Go to them. Yahoo's lists of Web organizations and Internet organizations are good places to start your search.
User groups--like the Bay Area Internet Users Group (BAIUG), Bay Area Linux Users Group, New York MacUsers' Group (NYMUG), ColdFusion User Groups, and the Seattle HTML SIG--vary by area, but a quick search will turn up a list of local users' groups.
If there's an established group that focuses on your skills or favorite scripting languages, it's worth going to at least one meeting to see if it's useful and to meet other local developers. (Who knows, you may eventually need to subcontract work out--or need backup--so finding other Web builders whose work you respect is also critical.)
If you don't find a local interest group that fits your area of expertise, consider starting your own. Toss out the idea on local email lists you use, and see if others are interested in getting together, informally, to talk about scripting, new HTML editors, or whatever. You can initiate special-interest groups when you want to pick up a new technical skill, as well.
Other places to look
There are a wealth of marketing
and networking opportunities available on the Web and via email.
Your own site
Your Web site is your number one marketing tool. Although your site won't necessarily draw
people to your company, it's the best way to give prospective clients a way to evaluate
your work.
After initial conversations with clients, you'll typically encourage them to visit your Web site and check out your online portfolio. To make this ploy work, however, you have to have a deal-maker Web site. If your site stinks, well, you get the picture.
There are certain basics your site must have:
- Resume--You'll want to have a text-based copy of your resume ready to fire off via email, but you also want an online version available.
- Portfolio--Don't just link to the sites you've worked on. Make sure you explain what your involvement in the project was. If the site no longer exists--or has been redone since you worked on it--include relevant screen shots.
- Clips--If you're a freelance writer looking for Web work, make sure you have both a list of recent articles--hyperlinked to the full text where possible--as well as a few representative clips that clients can peruse without leaving your site.
Temp agencies
If you're looking to fill some slow weeks between projects, don't rule out temp agencies.
Many, like BrainTrust in San Francisco, WebStaff, MacTemps,
and Muses Inc., specialize in short-term Web work.
Although online job-search engines are primarily a repository for full-time positions, some warehouse temporary contracts as well. Keep your eyes open.
Online promotion
Although you shouldn't rush out to create "for-hire" banner ads, you should be
scouring local sites that may catalog freelancers, list available consultant gigs, and
otherwise allow you to get your name out there.
For example, you could list yourself in the World Wide Freelance Directory. Or if you're a ColdFusion guru, make sure you're listed in Allaire's databases via an Allaire Alliance program. Or, if you've set up a Yahoo Store (formerly ViaWeb) for a client, you may want to register as a Design Partner. Many ISPs also offer referral programs that pay you a commission for clients you set up with the ISP, and you'll be listed on their for-hire designer-developer pages.
A worthy cause
If you don't have a large portfolio to show clients, you may find yourself stuck in the
dreaded catch-22--to get work you have to have experience, and to gain experience you have
to get work. One option, if you can afford it, is to do some pro bono work for nonprofit
organizations. These kinds of projects let you cut your teeth in Web building and tuck a
URL under your belt. If you're really stuck, personal sites are another way to build your
portfolio. Talk to your friends and family, and be creative.
The client in hand
Don't get so caught up trying to land new clients that you forget about your existing
clients. Make time to check in with past clients now and then just to see how things are
going. Remember, past customers should be your best source of new work.
Contractually speaking
Almost every freelancer has a horror story
about a time when the client just wouldn't pay up. The other typical nightmare is the
project that just wouldn't end.
You can protect yourself from these problems with a properly written contract and, secondarily, with the right invoicing strategies. Although your contract should outline the terms of payment, you should include some statement regarding your policy on late payments when you send in your invoice. For example, you may want to include a statement such as "an interest of 18 percent annually (1.5 percent monthly) accrues to all past-due amounts."
Because it could happen
Even when a project starts off on good terms, it can fail somewhere in the middle for
reasons that aren't your fault. Clients may think they want one thing at first, and then,
when they see the finished project, realize they actually wanted something else entirely.
Worse, clients sometimes ask for things that are completely unrealistic, in terms of either the available timeline, the available budget, or for technical reasons. Setting clear expectations is critical. Listen carefully to clients; the closer you listen, the more you'll be able to spot potential trouble before it starts.
Learning to accurately predict the scope of a project--based on the outline of work, your interpretation of the client and the client's grasp of the project, and a healthy margin of error--will help ensure that your bids are realistic.
A good contract can go a long way toward helping resolve any issues that arise. You'll always want to start a project with a signed contract. Many clients who contact you will ask you for a proposal. You'll prepare a document that outlines your understanding of the project's needs, the timeline, your responsibilities, what you will deliver, what you won't deliver or what needs to be handled either by the client or another vendor, and how much you will charge (per project or per hour).
If all goes well, the client may come back and say, "OK, we want you to do this project." Don't let that be the final word; you don't really have confirmation that the client is accepting your terms and conditions, your price, and so on.
A good idea is to follow up with a contract, or at least a signature page, that seals the deal and makes clear the agreement is being made based on the terms you outlined in your proposal.
Since you're taking on a lot of responsibility with each and every contract you sign, having access to a legal advisor can give you peace of mind and save you time and money in the long run. Your attorney can draft contracts for specific projects or help you put together a contract template that you can customize for each project.
The ball is not always in your court
Depending on the client, you may not be the one preparing the contract. Large companies
often have extensive contracts you'll have to sign before starting a project. If, after
reading through the documents, you have concerns about any of the clauses or stipulations,
seek legal advice. It's worth the effort to make sure your rights are protected.
Coping with success
If everything goes well, you may find you have so much Web work that you need to find
someone to help. While expansion beyond a one-person operation may sound nice, it adds a
number of new headaches. You've got much more financial responsibility, and you'll need
more cash up-front to outfit your growing Web firm, particularly if you move from a home
office to an external office.
Don't even consider expanding to a real business until you've been freelancing for a while and feel confident that losing a few clients won't break the business. If much of your success rests on one company, you may not be ready even though you feel swamped.
You'll want to talk with both your accountant and legal advisor at every step; there are myriad papers you'll need to file as you move out of the self-employed (sole proprietor) range and into the world of partnerships and corporations. To get your feet wet, you can always try subcontracting first.
Subcontracting Web work
As an interim step toward expanding from a freelance operation to a full-fledged business,
you might consider informally teaming up with another freelance Web builder.
This kind of informal subcontracting partnership makes a great testing ground for a more formal arrangement. But managing the subcontractual relationship can be tricky. If a client wants to deal solely with you--or hired only you--then you'll want your partner to subcontract to you. In other words, you'll pay the contractor out of what you make from the client, and you'll prepare a 1099 tax form at the end of the year for the contractor.
Since this puts more responsibility in your court, you may want to see if your client will also hire the other contractor. (This probably isn't an option for projects already underway.) Subcontracting lets you marshal the troops on big projects without raising red flags with your clients.
If you and a partner are putting together a proposal for a new project as a team, then you can stipulate that, if the proposal is accepted, the client hire each of you individually. This leaves the tax paperwork obligation to the hiring company.
However you negotiate your subcontracting, go the extra mile and make your arrangements official for the duration of the project. Prepare some form of contractual agreement between you and the subcontractor specifying the terms of pay, the scope of the project, the timeline, and so on. Don't just agree--over the phone, for example--on an hourly rate to help out on that Web development project.
Early on in your subcontracting relationship, leave
extra time before project delivery dates to test and double-check work completed by your
partner. You want to make sure the work is up to snuff before you pass it to the client.