Mo’ Money, Mo’ Freelance: How to Budget for Freelance Workby Laura Williams Published in On a Roll on
With so many freelance websites and communication platforms to choose from, it’s easy to hire freelancers. As an entrepreneur, you just can’t do everything! And while budgeting for writers, illustrators, and video editors isn’t always cheap, it certainly beats the cost of covering overhead and benefits for full-time employees.
Hiring talented freelancers can supplement the hard work you do for your business and help you grow quickly. But before you start emptying your bank account to pay the talent, you have to devise a smart approach (duh!).
Budgeting isn’t as glamorous as viral videos or crazy PR strategies, but it’s even more important. So today we’ll teach you how to budget for freelance projects.
How to Budget: The Basics
Get a grasp on the big picture.
You need to have a solid grasp on all your expenses before you budget for freelancers (or for anything else!) It’s easy to let this fall by the wayside when you’re getting started with a new business, especially when you’re still able to afford your rent.
So get yourself some basic budget and finance tools. My favorites are Quickbooks, Mint, and You Need a Budget (YNAB). You can even sync these programs up with credit cards and bank accounts to figure out where you’re at. Ultimately, you’ll be able to see how much is safe to set aside for freelancers.
Decide how much you’re willing to spend.
Each year, you should plan how much you’re going to spend. Usually freelance work will fall into your greater marketing budget (though it might fall into engineering or something else). You might decide that 25% of your budget for the year will go into marketing. Then you’ll need to categorize and divide that up.
One of the first things you do when you set up ANY budget is to figure out what expenses go where. For instance, I set up separate categories for shopping, eating out, and auto expenses like gas and parking in my personal budget. I calculate how much money comes in and how much I’m willing to spend on each of these things each year.
So decide what you want to spend your money on and order your choices from most important to least important. Then, calculate how much each will cost and adjust to see what you can afford.
Here we’ve created an example marketing budget for a company that will spend $12,500 on marketing (25% of their total yearly spend of $50,000):
|Resource||Frequency/Campaign Length||Rate||Total Cost||Amt. Left Over|
|Facebook Promoted Posts||1 post per week||$30 per post||$1560||$10940|
|Google Ads||1 campaign per year||$5 per day||$1800||$9140|
|Affiliate Marketing||1 campaign per year||$5000 per year||$5000||$4140|
|Content Creation (freelance)||1 article or project per month||$100 per post||$1200||$2940|
|Web design and illustration (freelance)||Ongoing projects||$500 per month||$2400||$540|
Analyze the past.
At the start of the year, it’s hard to know what projects will pummel you throughout the next 12 months, so check out what happened last year, or the year before that. This will give you a decent starting point.
For instance, if you’re in the energy business, and in the past you’ve done a marketing push for summer energy savings, go ahead and set aside money for a springtime campaign, one that will require some freelance help. Think about each month in relation to your business strategy, and plan your budget accordingly.
Make it easy with project management tools.
Once you’ve received quotes from qualified freelancers, use a project management system to help you plan and budget. Planbox and Clarizen (among others) allow you to set deadlines, assign tasks, track progress, and estimate the hours worked and hours to completion for any given project.
This keeps everyone on the same page, enhancing overall productivity, and preventing big projects from ballooning into something bigger than you budgeted for.
Note: Solid communication tools like Skype, Trello, and GoToMeeting, help, too. See The 7 Secret Keys to Working with Freelancers to learn about more tools and strategies for creating good relationships.
Independent or Agency?
Understand that the amount you need to budget, and how you need to budget, depends on the type of freelancing you pursue. Many independent freelancers are willing to work at lower rates than firms who offer freelance consulting and services. That said, freelance companies and firms can help you manage your projects– they’ll help with strategy and pull together a team.
Hiring individual freelancers.
Hiring individual freelancers is a good idea if you have one particular project in mind, are on a tight budget and want to save some cash, or already have a strategy in place. You can find individual freelancers through referrals, but they’re also all over the web.
Let me put this in perspective. When I work on my own, I charge a fee that amounts to $20 to $100 per hour, but when I offer the services of my company, consisting of up to 350 freelance bloggers, I charge 2 times higher than my usual rate, which accounts for my own time, my expertise, my connections, overall project management, and the actual payment for the freelance work.
Getting help from an agency.
When considering any freelance work or project, ask yourself whether you need one freelancer or a team of freelancers to complete the task. If you need a team, decide whether you want to manage each freelancer yourself, or if you’d like a separate company to manage overall production.
Generally speaking, bigger projects are worth farming out to a separate freelance firm, despite the higher rate, while smaller projects are reasonably easy to manage on your own. It really depends on your budget, strategy, and goals. If you need help with something specific like SEO, an agency’s expertise could come in handy.
Warning: Agencies are expensive and cost thousands per month, so carefully research and court multiple agencies before choosing one.
When you’re working with freelancers on web platforms like Elance or Guru, keep in mind that the sites will charge a fee–not all of your money will go to the freelancer. Contently (an awesome place to get freelance writers) charges a 20% mark up for using the writing, editing, and scheduling platform.
How Much Will It Actually Cost?
The reason it’s so hard to find going rates for various kinds of freelancers is because they fluctuate a ton based on experience, type of project, and timeframe.
After all, some of the freelance work you need is open-ended, without a set termination date, while some work is just a quick project. Also consider that different types of freelancers charge different rates, and some charge per hour while others charge a set fee.
What are the going rates? C’mon! Just tell me.
Even though it’s hard to pin down numbers, I’ve done my best to compile information on how much different types of freelancers cost. These projected rates are just estimates (though they’re pretty good ones):
Get yourself some quotes.
The best way to accurately budget for big projects is to approach at least three well-respected freelancers in your area and ask for a quote.
Before you ask for quotes, do your research and be prepared to provide freelancers with specific details about the project at hand. This enables them to be more accurate, which in turn helps you properly budget for the expense.
Some freelance projects are incredibly simple in terms of contract structure. Let’s say, for instance, you’d like an infographic made. This small project can be given to a freelancer, as can other one-time projects, such as logo design, or the development of a custom WordPress plug-in.
To budget effectively for these expenses, plan to pay $40 to $50 per hour, and expect a week or two for the work to be completed. This may seem expensive for a “simple” undertaking, but the reality is that this type of custom design work takes time and expertise, and it frequently requires a lot of back-and-forth between the client and the freelancer to get it right.
Like smaller undertakings, big projects typically have a set end date, but they may span over a period of several weeks or months. The writing and publication of an eBook or the design and development of a new website are examples of larger projects.
Big projects mean big expenses, so it’s important to plan in advance and set aside the money necessary to cover their costs. Also, think of these larger efforts like construction projects – overestimate expenses by at least 10%. It’s nearly inevitable that changes and adjustments that inflate the original budget are going to be made.
You should already have money reserved for unplanned expenses, just in case your dog chews your wires, but it’s a good idea to designate a portion of it for contingency freelance projects. If something unexpected happens, such as a website outage, you need to have the funds available for your web administrator to perform tasks not typically covered by contract.
For instance, my own website recently went down due to unexpected levels of traffic – this is a great problem to have, but it’s one that needs to be fixed quickly. I had to contact my web administrator late in the evening to ask if he could adjust our web server capacity to account for the problem. Luckily it didn’t take long, and it was an easy problem for him to fix because of how our servers are set up. But this one event set me back $200.
How to Pay ‘Em
A lot of freelance websites have payment components built in, but if you’re working one-on-one with a freelancer, you’ll need tools for payment. Often, these freelancers will already have a system for invoicing in mind, so you won’t have to worry about it.
If both you and the freelancer are new to paying online, I recommend WaveApps which allows you to set up automatic payments. It also catalogs and saves your payments for future analysis. Stripe is also a good option.
You can always use your standard online banking to send freelancers an electronic check.
Keeping Your Money Safe
The money part of working with a freelancer can be super awkward if you’re not clear from the get-go about payment. In order to protect your funds, try the following:
Put it in escrow.
If you’re concerned about keeping your money safe, consider using a service like Escrow.com. This platform allows you to set money aside, not paying it out until you’re 100% satisfied with the work.
Create formal contracts.
Drafting a formal contract before the freelancer begins will help you ensure you’ll get what you need. These contracts outline expectations, detail the scope of the project, and put you and your freelancer on the same page. Include a payment structure in the contract so it’s clear when and how the freelancer will get paid.
Be wary of non-traditional payment methods.
If someone wants you to wire funds or use a money order, be wary. Even Western Union and Moneygram can be forged. Always use a payment method you know and trust.
Plan Your Money Away
Working with freelancers will make your life a lot easier, so get planning and budgeting this year. It’s tough to set aside funds for freelancers, but I hope this post has helped you get started.
Your Turn: Have you budgeted for freelance work? What rates did you see out there? Any tips or recommendations?