With the anniversary of my 10th year as a freelance designer coming up, I thought it might be a nice idea to share some of my tips that I have learnt along the way.
The switch to being a freelance designer can be difficult. When you first start out, there’s a range of tasks that are important to get correct from the start. Here’s my tips for new freelancers, firstly you need to work out what your business structure will be.
Company or Sole-trader?
Most freelancers start out as sole-traders. This was the setup that worked well for me, and to date, is still what I use. The are some big differences between these two setups.
Some of the main differences are;
- Different tax rates (company is 30%, for sole traders it is based on your personal marginal rate)
- As a company you need to lodge 2 tax returns (a company one and a personal one)
- Sole traders have the fewest compliance costs and the least paperwork
- Registration fees are less or non existent for sole traders.
ABN’s and GST
Once a decision is made on your business structure, you will need to apply for an ABN. You need this to be able to run your business. It’s easy to apply for an ABN online.
After this, you will need to decide if you want to register for GST. GST registration is only required if your business has a gross income minus GST of $75,000. I decided from the start that I would register for GST. I did as I felt it was less confusing for my clients as nearly all of them were registered for GST.
One of the best tips I got was to open 2 bank accounts. These need to be completely seperate from your personal spending accounts. Do this from the start and you will quickly reap the benefits at tax time. Use one account to receive all payments and to pay all expenses out of it. When you keep these seperate from your personal ones, it becomes easy at tax time to work out your income and expenses.
Accounting Programs / Project Management software
I never purchased a subscription to either of the above until about my 2nd year in business. But looking back, they made such a positive impact on my business, that my tip would be to try and budget for them from the start.
I currently use Xero for my accounting. It allows me to view a snapshot of my current cash flow and business accounts. I use it to invoice my clients, set reoccurring invoices and print reports for my tax agent at the end of the year.
For keeping track of my projects, quoting, purchase orders and tracking time on them, I use Streamtime. They currently offer a new online version of their software that is priced perfectly for freelance designers. It also integrates with Xero, so there is no need for double handling.
This is my next big tip! Track time on all the projects you work on from day dot! I learnt very early on, that not tracking meant I had no idea if I was making money or not. As I started to take an interest in the time I was spending on projects, I found I was working for less than the hourly rate I was aiming for.
Once I started using Streamtime, not only could I see what time I had allocated to a project, but I could also see any expenses (like stock images etc) I had spent on that project. Another option for project management is Billings. I used this program for the first year, and while it was great, I would recommend if your budget covers it to use Streamtime. They have a great product and their support is first class.
Get the best equipment you can afford. For me, I took advantage of the $20,000 instant asset write-off to purchase all my business equipment. Currently they have extended this write -off threshold until 30 June 2018.
Finding the right workspace within your home, or in a shared office space can be tricky.
I have always worked from home. At the start it was just a small desk in our office, but over time that stopped working. I had a young family, and it was getting very noisy in my work space. In about my 4th year, I looked at moving into an office space, but with 2 small children, it still made sense and worked better for my family for me to be work at home.
Now, I have a seperate office under our home. This space is for me and my designers only. We have it setup with all our equipment, and its a no-go space for the kids. Having this space makes it easier for me to seperate my work life from my home life. It gives me a space to be in, and when I am there it means that I am in work mode. It also give clear boundaries to my family, that when I am in my office, I am working and where possible, I don’t want to be interrupted.
Now my kids are in school, working from home has some major benefits when it comes to school holidays.
Well that is my top tips for starting out as a new freelance designer.