Complete guide to starting a freelance business

Luke Hurst
Written by Luke Hurst
on May 10, 2023 10 minute read

So you’re ready to jump on the freelance bandwagon? We know that’s why you’re here, and we’ve got your back. There are already around 27 million freelancers doing their thing right now across the European Union alone, so you’re in good company. 

Going solo means you get to set your own agenda. You get to work when you want, where you want, how you want (just don’t drop your laptop in the hottub). And crucially, you decide how much you work, and how much money you want to earn. 

Setting up a freelance business does take a bit of work, but we’re going to walk you through it step-by-step. Let’s get to it.

What is a freelance business?

Running a freelance business is a type of self-employment, where the freelancer does work for a client, usually on a short-term contract or project to project basis. Freelancers often offer their services to more than one client at a time. And you can freelance in any number of different professions and fields. Writers, designers, coders, accountants, marketeers, gardeners - the opportunities are endless!

So a freelancer is basically their own business. It’s a weird sentence but it’s true. They can give themselves a businessy brand name, set up a limited company for themselves, or just roll with it, invoicing clients in their own name as they go. 

As a business, freelancers need to do the things for themselves that a company would typically deal with if they were an employee. That means paying their taxes and taking care of their own benefits - for example paying into their pension and saving for holidays. 

The real beauty of running a freelance business is of course the freedom it provides. Here’s how to get started.

Steps to start a freelance business

Define the goals for your freelance business

Nobody in their right mind starts a business without a clear goal in mind. The same goes for starting a freelance business. You need to decide what you want from it. 

Is it going to be your full time job? Are you setting up a freelance business as a side-gig to supplement your income from another job? Are you just dipping your toes into the freelance pool to test the waters? Step one: decide your overarching goal.

 

Pick your freelancing niche

So you know what you want from your freelance business, but what is it you are actually going to be offering? Freelancers will usually have some form of expertise they can offer, whether it be writing awesome articles like this, being a professional cuddler, or anything in between. 

Then take a look at the market. What sort of freelance jobs in your area of experience are being offered on platforms such as Xolo? You can make a broad offering as a freelancer, but many freelancers find more success - and money - by defining their own niche. 

Let’s say for example you are a graphic designer. You might specialize in web design over print design. Now dig down further into your niche. You might have experience in designing dentistry websites. By marketing your services as an expert in web design for dentist clinics, and targeting that market specifically, you are differentiating yourself from competitors and positioning yourself as an expert in that particular area. This could help to attract that client base, and you may be able to charge higher rates for your specialization.

Create a portfolio

Many freelancers use a portfolio to showcase their expertise and experience to prospective clients. After all, would you hire someone who had no proof of their competence?

Portfolios come in many forms. They can be entire websites, a single web page, a PDF, a Notion page, a LinkedIn profile, a YouTube playlist - whatever can quickly and effectively show a target client that you know your stuff and you’re worth hiring. The type of portfolio you create really depends on your field, but there are a lot of resources out there to help you create one, many explaining how you can do it for free. 

For industries where a portfolio website might be expected, paying for a custom domain name could go a long way to signaling your professionalism to clients.

Establish your online presence

Businesses invest time and money in marketing their services for a reason. Freelance businesses that want a steady stream of clients should do the same. By creating social media profiles to show off your skills and knowledge, and link to your website, you give anyone who comes across your content the chance to find out more about you and get in contact.

Many of the most successful freelancers are also excellent content creators with a decent online following. LinkedIn can be a great platform for creating useful content that gets you noticed, but depending on your industry and niche, any number of social media platforms may be worth at least investing some time in.

Build a brand for your freelance business

Tied in with the two points above is branding. As a freelance business owner, you may want to give yourself a branded identity, something that helps to signal your professionalism in your chosen field. That could include making up a brand name, creating your own logo, and even maintaining a consistent writing style and color palette across your communications.

Work out your pricing

As a freelancer, you get to decide how much you’re worth. Some companies in some industries - such as journalism - might have set rates for freelancers, so the freelancer has to decide whether or not that rate is worthwhile. In many other cases however, the freelancer agrees their own rate with the client. 

This is where a bit of trial and error can come in. When starting out, many freelancers offer services for lower than market rates, to build experience and establish their freelance business. While this can be worthwhile in some cases, it’s important not to undersell yourself. You’ve got to pay yourself your own benefits after all!

Check out the rates other freelancers in your field are charging. Platforms like Upwork and Fiverr are good for this sort of research. Once you have some clients and a steady stream of work, you can always try to up your rates for any new clients, safe in the knowledge that if they say no, you already have some clients or projects in the bag.

Get your first client

You know your niche, your portfolio website is all new, shiny, and spellchecked, and you’ve figured out how much to charge clients. Great! Rods at the ready - it’s time to go client fishing. Getting the first client is often the toughest bit of setting up a freelance business, but remember: there’s millions of freelancers doing just fine out there, and they all started at zero.

A good first approach is to leverage your professional and personal network. Make it known in your network that you are looking for work, and ask for referrals. If you left any previous jobs on good terms, you can get in touch with them and see if they could use your services.

Another good option to get started is to check out freelancer job boards like, you guessed it, Upwork and Fiverr (other freelance marketplaces are available). Make sure your portfolio is prominently displayed so clients trust you know your stuff. And you might want to start out charging lower rates than the price you want to set for yourself, to give you a better chance of landing those first few jobs. With successful jobs and reviews on your profile, you’ll then be more likely to secure jobs at your chosen rate.

If you’ve established an online presence, make sure your followers are aware you are looking for clients. Finally, if you want to test out the salesperson side of yourself, you can also cold-email, cold-call, or even cold-visit local businesses to see if they are interested in hiring you. 

Get more clients for your freelance business

Once you’ve got your first client, it’s time to build momentum! You can keep following the steps listed above to find your next clients, but it’s also important to use the current clients you have to build your profile in your niche. If you do good work, communicate well, and keep the client happy, they will be likely to help you find more work in a number of ways. 

Firstly they might give you more work at their company. They could refer you directly to other businesses. They can also provide you with testimonials, which you can then share on your social media, LinkedIn profile, and portfolio. If you find clients on freelance marketplaces, make sure to ask them to leave you a review, which will help you to get more work on those platforms.

 

Register or incorporate your freelance business

For many freelancers, registering with the government as self-employed is the simplest and quickest way to get going in their freelancing career. For some it makes sense to register or incorporate a company. The reasons for doing so differ country-to-country, but in many cases freelancers choose to formally set up a company when their earnings reach a certain threshold.

Registering a company requires officially declaring it to the government where the business is based, and it involves setting up a more formal business structure, for example opening a business bank account. This can provide potential tax advantages, legal protections, and creates a more professional image. Incorporating a company means creating a separate legal entity, which provides even more protection for personal assets, however this process involves more administration. 

For freelancers who want to keep things simple, Xolo Go provides the tools to issue legal invoices, collect payments, and get expenses reimbursed without going to the trouble of officially registering a business. 

 Manage admin for your freelance business

It probably won’t be your favorite part of running a freelance business, but it’s important to do your business administration properly. This means keeping on top of your accounting, invoicing, and taxation. The best thing to do is set up a system that makes everything as easy and automated as possible. Using a tool like Xolo Go covers things like calculating VAT, invoicing, and managing business expenses, all with a business bank account. 

For taxation, it will work differently depending on whether you are registered as self-employed, or if you’ve registered or incorporated a business. Your income as a self-employed freelancer is subject to income tax, while with a registered or incorporated company things can work differently, depending on where your company is set up. With an official company, business profits will often be subject to corporation or business tax rather than income tax, which can be advantageous. Many freelancers hire accountants to help them out, while some figure out how to file self-employment tax returns all by themselves. 

Expenses to set up a freelance business

Thankfully there aren’t many costs involved in getting started for many types of freelancers. However there are some you should be aware of as you set up your freelance business.

  • Equipment: Different types of freelancers need different types of gear. If you want to be a freelance photographer for example, the upfront costs for your work equipment could be quite hefty. A writer on the other hand just needs a functioning laptop. 
  • Incorporating a business or registering as self-employed: If you decide to set up an actual company for your freelance business operations, there will be some cost involved there. In some locations, such as Spain, you even have to pay extra fees just for the privilege of being a freelancer - before you even earn a single céntimo.
  • Website: A portfolio website can be useful for showing off your work to clients, and hosting that website will incur a small cost. Hiring a designer to make you a fancy website, or buying a template, will also cost some more.
  • Marketing and advertising: You may decide to invest in marketing yourself to potential clients, with paid adverts on social media for example.
  • Insurance: As a freelance business owner, you may need to purchase liability insurance or other types of insurance to protect yourself and your clients. 
  • Workspace: Many freelancers like to rent a desk at an office or co-working space. If working from home, you may need to invest in a home office setup with the essentials like a monitor, printer, keyboard, and lava lamp.
  • Taxes: As a freelancer you must remember to set aside enough of your income to pay the man when tax season comes around.
  • Accounting and legal fees: There’s a good chance you will need an accountant or to use an all-in-all business management tool like Xolo Leap to help you work out accounting and file your taxes correctly. Sometimes a consultation with a lawyer will also be needed.  

Tips for running a freelance business

Once you’ve got some freelance projects under your belt, you might want to think about ways to manage your business and improve the way it’s run. Here are some pointers.

🎯Tips: Here are 21 tips for beginner freelancers

Show your finances who’s boss

Keeping an eye on your income and expenses is important for gaining a holistic view of your business. You can see if you’re making enough profit, and if not, where you’re going wrong. You can also see where you’re making the most money, and double-down on that area. Get a system in place for tracking your finances, and do regular reviews.

Be a time wizard

Some freelancers end up taking on too much work, either because they don’t want to say no to clients, or they don’t want to say no to the money. It’s not a good idea to burn yourself out, so make sure you manage your time wisely. 

Set realistic goals, learn to prioritize tasks, and even use time-tracking tools to manage your workload effectively. Be strict about giving yourself sufficient time in the week to switch off from work too.

Water your money tree

It can help to have some longer term goals to work towards as a freelancer. Keep working on your skills, invest in your online presence and marketing, and keep growing and tapping into that network. As you grow in your field you will be able to charge clients more and grow your freelance business.

Be a massive showoff

It’s worth mentioning again - your online presence can have a big impact on your reach. To grow your business more, consider investing in some paid advertising, and if you have the income to do so, you could also consider hiring expert freelancers to spruce up your marketing materials.

Manage your clients

Make sure your communication with clients is on point. Set clear expectations around deadlines, deliverables, and payment terms. Using written proposals and contracts signed by all parties can help with this. 

Hit the books

As a freelancer, you’re responsible for your own professional development, so consider investing in courses, and stay up to date with the latest trends in your industry. Also make sure you ask clients for feedback so you can see areas to improve for future projects. 

Get a life!

We’ve said it once, we’ll say it again - factor enough “you time” into your schedule. You’ll know if you’re not working hard or smart enough because you won’t be making enough money. If the money is coming in but you feel like there aren’t enough hours in the day to get your work done, start managing your time more effectively, and swap out some of that income for some rest.

Invoicing like a company

One of the realities of running a freelance business is that you’ll need to stay on top of the business administration side of things. Specifically, you’ll need to invoice your clients like a business would. 

More than 120,000 people already use Xolo Go to professionally manage their solo business administration. They benefit from features such as a business bank account, an instant invoice generator, and an automated VAT calculator. 

Furthermore, there are no upfront costs - you only pay for Xolo Go when you receive payment, making it an ideal solution for those seeking an uncomplicated way to invoice clients and grow their freelance business.

It’s super easy to get started and you are just 10 minutes away from sending your first freelance invoice! 

It’s the perfect solution for freelancers who are looking for a no-strings-attached way to invoice clients. With the right tools in place, you and your freelance business can thrive.

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