How to Level Up Your Freelance Career Into A Small Business

Man working at work table

When you transition from being an employee and into working as a freelancer, you develop a different perspective of time and money than you had before. When you’re an employee, potential is fixed. You make a certain amount of money per year in exchange for a certain amount of time. To earn more money, it requires that you put in over-time. As you increase in experience, there are opportunities for raises or promotions. But this growth is also fixed.

Freelancing changes the game. Now you set the prices. And when you finish a project, you’re done working—no need to stay at your computer waiting for 5pm so you can clock out. Being a business of one allows you to focus more time on doing what you love while setting your own schedule, and with the potential to earn much more than you could as an employee.

But the next level after that is to formally start a business and assemble a team, providing you with a vehicle to massively increase your revenue, and maybe even have passive income.

How you know when it’s time to “level up”

Sometimes freelancers start on their journey knowing that they eventually want to have a business. Others will find themselves in circumstances where going from being a freelancer to a business owner is a natural evolution.

You know it’s time to make the transition when…

You have more work than you can manage on your own

It’s a given that there’s only so much you can do in a given day, but the more clients you get, the more clear it will be there’s only so much you can do in a given week or month.

“If you have more business than you can handle and you are constantly getting new clients just from word of mouth, it’s a clear sign that you should either outsource some work or start an agency,” says Adam Hempenstall, founder and CEO at Better Proposals.

Clients only want to work with other businesses

If your work has been recognized enough that large companies are seeking out your services, congratulations. However, this kind of recognition might be a double-edged sword. Many large companies, especially publicly traded corporations, have rules they must comply with that bar them from working with solopreneurs or freelancers, and require that specific services only be rendered by other corporate entities.

Even if compliance issues aren’t a barrier, you may find that you look more appealing to larger companies if you yourself have a small business structure and a few employees, rather than just coming to the table with yourself and your own limitations.

You’re overpaying in taxes

One of the curses of freelancing is that you are liable for so much more in taxes than you are as an employee, until you get the hang of business write-offs. However, there could come a point where you’re making so much money that even the write-offs can’t make a dent in your liability.

Corporations of all types come with their own tax benefits. Consult with your accountant or CPA and discuss at what point financially it would make sense to incorporate and start collecting payments as a business rather than an individual.

How to Do It

When you’re ready to make the leap into owning a business (or it’s apparent that you have to), here’s how to “level up” from freelancer to entrepreneur:

Structure your company

Corporations get a lot of preferential treatment in our society. Aside from eligibility for certain types of loans and government aid, corporations also benefit from tax loopholes, and can even serve as a shield between their owner’s assets and anyone trying to sue them.

There are tons of ways to incorporate or otherwise create a business entity, and it’s imperative that you talk to a knowledgeable accountant or attorney about which type would be best for you. LLCs, C-Corps and B corps all serve wildly different purposes. Do some research but always ask for expert opinions.

“Incorporating early, when you are still a sole proprietorship, will offer you a few advantages that include access to small business loans, credibility with new clients, tax advantages and limited liability protection,” says Anna Caldwell of Caldwell Media Arts. “In the eyes of the law the finances of an unincorporated business run by a sole proprietor are indistinguishable from that proprietor's personal finances. In the time of Covid-19, freelancers who held LLC's are eligible for small business loans that are not available to freelancers without that business designation.”

Brand your business

If you’re in a position to level up from freelancing, chances are you became excellent at branding yourself and the work you do. Now you get to do it all over again for your company! What’s different now is that you’re not just thinking about the work you personally bring to the table, but are in a position to highlight the skill and expertise of your entire team—including the types of experts you could feasibly hire, whether they’re actually on board or not.

Then of course there’s the aesthetic of your website and branding, and all the bells and whistles of developing your marketing and you the company is represented.

This is a chance to really raise your credibility, which will have a direct impact on the rates you can justify charging as well.

Become a master of acquiring customers

When you are a business owner and have people depending on you for a paycheck, this will lead to a massive shift in your priorities, getting you focused more on making money and less on executing work.

It will be up to you to develop systems for acquiring new clients on a regular basis and either maintaining the number you currently have or steadily growing in size.

There are some remarkable similarities between marketing yourself as a freelancer and marketing your business. Like you did as a freelancer, your business will have a niche, either in terms of the types of clients it attracts or the kind of work you do, and your industry network will be even more important than your network as a freelancer.

Become a master of delegating

Because you’ll be so busy focused on customer acquisitions as well, it will be imperative that you learn to delegate work to the team around you.

Your business team can look a number of ways. They can be full-time employees with very specific job roles, or experts who help with an all-hands-on-deck approach. You could also be supported by a part-time staff or freelancers—whatever works for you and your budget.

The most important thing is that you have a system and people in place so you can delegate work you need help with and focus on your big-picture goals.

Learn to scale

The primary point of running a business is that it provides a vehicle to grow revenue. It’s a formal structure that people can organize their labor around, but you will have to learn the art of creating and maintaining an ideal client-to-employee ratio so that everyone in the mix can be satisfied while still increasing your profit from the venture.

This is where the real fun of running a business comes in. Now you get to play with different types of product and service offerings, assemble, maintain and evolve the ideal team, and manage all the exciting and surprising energy that everyone will be bringing to the table!

When is it better to continue as a solopreneur

For many freelancers, leveling up into a small business is the goal from day one, or a happy evolution that unfolds naturally.

For others, becoming a small business should never be something they do. You’ll know that expanding to become a small business isn’t for you if…

You don’t like employing other people

One of the draws of being a freelancer is the ability to detach from office politics and focus on specifics. If this was one of the main reasons you went into freelancing, running a business might be incredibly uncomfortable. Even if you were able to skate around office politics when you were still an employee, they will be completely unavoidable when you are the employer.

Not only will you be working with these people—you will be responsible for providing their income.

Carefully consider your personality and values to see if running a business is right for you. It probably won’t be a comfortable endeavor even for people who have always dreamed of running their own company, but for some people, it’s just not in the cards at all.

You prefer to focus on details and produce

When you’re an employee or freelancer, you are being hired to perform certain tasks or provide a specific expertise. Getting mired in details and execution is par for the course—that’s what the people with money need from you.

But when you’re running a business, you are the person with the money. It’s your job to continue securing revenue, meaning you won’t have much time, if any, to be involved in the nitty gritty execution.

If you absolutely love this and have no interest in evolving into a bigger role, then starting a business may not be for you—it could be best to remain a freelancer so you can continue doing what you love.

There’s many pros and cons to running your own business, just as there are when it comes to being a freelancer. If you’re ready to level up, now could be the time! Otherwise, there’s no shame in remaining a freelancer. There are plenty of ways to increase your revenue and get bigger clients even without formalizing as a business entity.


Dustin Clendenen
Dustin Clendenen is a Los Angeles-based writer focused on personal finance, social impact and technology. His work has appeared in Yahoo! Finance, Business Insider, and Upworthy. Learn more at www.DustinClendenen.com.

Hi there! This post exists to offer you (hopefully) useful information and insights, but it cannot take the place of personalized professional advice. Please consult a qualified expert if you have questions about your business. Also, Azlo doesn’t endorse any third-party sites that are linked here.


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