7 Things I Wish I Knew Before Starting My Freelancing Business

What I would tell myself to focus on (and avoid) if I started from scratch today

Some clients even ask you to use Microsoft Teams! GROSS!

I started my web development company in 2008 out of sheer necessity when I lost my job, so I never really had the time to sit down and think and plan out how to create the best company I could.

It was just: “Congrats, you don’t have a job anymore! So you’re either self-employed, or unemployed!”

I can’t say I was prepared for the challenges of being a solopreneur. I wasn’t at all.

Most of the people I knew who were self-employed worked in totally different industries, like plumbing, roofing, or wedding photography, so it wasn’t like I could just find people doing what I did and copy them.

I had to learn over time what to do, mostly by trying things that didn’t work and then thinking, “Wow, there has GOT to be a better way to do this.”

In case anybody else finds it helpful, here are seven things that I wish I had known before I started my freelance web development company. (Note: almost everything here applies to just about any small business, regardless of industry).

#1: Cash flow is REALLY challenging

People talk a lot about debt on a regular basis, but very few people ever talk about cash flow, which is kind of related but is not the same.

Sometimes, you may be able to make enough money “on paper” to survive… but when you’re stuck between billable projects, or while waiting to close sales, there are dry spells where you might not be able to deposit any money at all into your account for a week, or two, or even more.

Sometimes, banks are jerks, and they’ll hold a big portion of your deposits and lock it away for no good reason.

For example, once, my bank held a $13,000 deposit I made for 14 ENTIRE DAYS. That was absolutely punishing. I was thrilled to finally be able to catch the big whale and make this enormous deposit, which would let me coast for a while, but then the big, bad bank said: “NOT SO FAST MOTHERF*CKER!”

This kind of nonsense can absolutely crush a small business to death.

Finding ways to stay afloat during these kinds of lulls is really, really hard. You may make a decent amount of revenue by the end of the year, but finding a way to keep your business cash flow positive is a skill in and of itself.

These days, I’ve become somewhat of an expert at juggling all my bills and receivables, but this took a long time to learn, and sometimes I just have to tell people, “I just can’t pay this right now. I’m sorry.”

If at all possible, be your own bank: save money to draw from, rather than going into debt racking up spending on a credit line. As solopreneurs, we’re already riding the wild roller coaster of self-employment and earning every single dollar ourselves: we should do whatever we can to make this ride a bit less bumpy wherever possible.

#2: Find passive income streams if at all possible

I stumbled on this realization by accident after a few years when I discovered that if I offered web hosting for all the websites I built, I could start charging my clients every year or every month, and this would bring in passive income basically forever.

These days, I host every website I build, and my clients pay me for hosting. I require it now. I won’t let them host their websites anywhere else, or I won’t work with them.

A small amount of monthly income multiplied by a decent number of websites amounts to a lot of money over time. Deposits for $50 or $100 per month aren’t much to celebrate, but $600 or $1,200 at the end of the year, that is really something.

Multiply that by 2, 3, 5, 10, or 50 clients, and now you’re talking real money. Whatever your business model is, you’ve GOT to find some way to create passive income like this that just accrues as you sleep and then automate the billing for it.

Bingo. You wake up in the morning, and, “Hey, look at that!” — there’s money in your account.

It took me way, way too long to learn about this. If you can, in any way, find a way to bill your clients every year, every quarter, or every month—whatever you can offer that’s of value to them, DO IT.

#3: Save up money for taxes

Everybody in every industry says this, but it’s absolutely true: When you’re self-employed, you should be saving a percentage of your income so you can pay your tax bill at the end of the year.

It’s a rookie mistake to spend all your income and then wait for your tax bill to come and nearly have a heart attack when you see just how much you owe.

Don’t do that.

Save up money every month to pay your taxes.

That will give you peace of mind to sleep at night. Do it, or you will regret it.

#4: Use a “whichever comes first” contract clause

I used to write my contracts in such a way that the final payment for a website was due the day of launch. Not anymore.

These days, I write it in such a way that I count out a certain number of days or weeks and then say something like: “The final payment is due on the date of launch OR (insert date here), whichever comes first.”

These last three words are an absolute magic trick.

I learned this genius step from someone else years ago (can’t remember who), that was older and wiser than me, and he said it in passing, almost as a throw-away comment at the end of a discussion.

I’m glad I heard it and implemented it: it’s a total game-changer.

When you wait until the project is finished in order to get your final payment, you can rack up a serious balance with clients whose projects are on hold, temporarily or perhaps even permanently.

This hurts you, especially if you’ve done the work, but they’re just “too busy” to approve your design. Don’t let that happen to you.

Figure out what date makes sense (20 days out, 50 days out, 100 days out—whatever) and make sure the client agrees that even if they haven’t completed all the tasks they’re responsible for, you’ve got a “go live date” and the full amount is due, even if you don’t actually “go live” on that date.

This prevents you from being stuck in purgatory, waiting on them to approve your work or finish making selections, but you can’t move forward because they won’t move forward, and now you’re at their mercy, and they’re holding you hostage.

Just add a date and say, “Whichever comes first.” I’m telling you, man, it’s magic.

Do you know anybody who would find this valuable? Feel free to share it with them with my thanks. C’mon, do it—you’ll look helpful, and smart! -Ron

#5: For larger projects, ask for smaller, more frequent payouts

In the early days, I’d ask a client for 50% of the project total up front and then 50% upon completion. This feels great upfront when you get half the money before you’ve even started any of the work (cha-ching!), but it also leaves you with far too much exposure. The bigger the project total, the more of a threat this becomes.

Let’s say you have a $12,000 project and you’ve gotten a down payment of $6,000. Yeehaw! Partay!!!! That feels all well and good at the time, but by the time you get to 80% completion of the project, you’ve still only been paid for 50% of the work.

This is a very dangerous place to be.

Let’s play out the worst-case scenario: let’s say you’ve completed 95% of a $12k project: you’ve essentially performed $11,400 worth of the project, but you’ve only been paid $6,000. Yikes. That’s a terrifying amount of billable work you’re on the hook for now.

You could choose not to launch the website if they don’t pay that final bill, but you’ve still already put in the time and done the work.

Small businesses (which are mostly the companies I work with) are notorious for having their own cash flow issues or for experiencing personal family tragedies that affect their companies directly. If they have a hard time coming up with paying your final invoice, but you’ve already done all the work, you could take a tremendous financial hit.

Even if you have clients that you think are “good people” or who you believe would never stiff you, tragedies happen. Companies get acquired by larger companies that sometimes choose not to honor existing liabilities (including your contract).

Even worse, something bad could happen to your client.

I once had a client whose company owner died in the middle of a project. The company immediately halted all work.

Fortunately for me, I had been paid almost everything I was owed on the project, and the company honored the existing contract, but man, if they hadn’t, I would have felt horrible trying to collect an outstanding debt from a dead person even if I legally could.

In the end, using the 50% down / 50% due on completion option is fine for really small projects that are done quickly. But when the dollar amounts start getting higher, or you anticipate the project taking much longer, split up your payments into a few more, smaller payments. I recommend something like the following:

• 3 payments: 50% + 25% + 25%

• 3 payments: 40% + 40% + 20%

• 3 payments: 33% + 33% + 34%

Do whatever makes sense for you based on your risk tolerance, what your clients can afford, plus the length of time of the project.

Do not allow yourself to be made or broken by your client’s ability to pay their bill.

Do not assume they’ll always pay “because they’re good people.”

#6: Recurring income will save your life

Similar to the small amounts of passive income mentioned above that I make from hosting websites, I also have recurring service contracts with several clients. In addition to project-based fees, where I charge a fixed price for a specific deliverable, I provide services where I get paid every month.

This is different than passive income from hosting: it’s a much more active, engaged contract for services delivered on a regular basis. Instead of just getting $30, $50 or $100 per month of passive income for hosting, which is just a small (but necessary service), this is more like five or ten times that amount for extremely valuable, constant work on the client’s behalf that actively bring in revenue for them.

These days, about half of my income comes from recurring monthly contracts with clients who pay me every month, and the other half comes from one-time projects.

This took me a few years to figure out, but I’m glad I did. It allows me to have some sense of a monthly budget where I can expect a baseline for the basics.

Project-based income is good. Recurring income is better. Having both is best.

If I can go sell more project work that brings in a few big payments, that’s great, but if I can survive for an entire month, or two, or even a full quarter without relying on new sales, because I already have a buffer or cushion of dependable, regular recurring income, that’s the best of all worlds.

However you can do this, do it! Memberships, annual agreements, maintenance packages—whatever it takes. Get that money flowing in monthly. This also helps you tremendously with projections; your bookkeeper and accountant will love you for it.

7: "Just Say No" to bad clients

This is a lesson I’ve learned over and over and over again. There are some great clients out there, some good ones, some bad ones, and some REALLY bad ones.

Almost always, you can tell who the bad clients are right away.

They present signs that make you feel uncomfortable, or they do certain things that make you think, “Oh, I really don’t want to work with this person.” Later on, during the project, you find yourself pulling out your hair and regretting taking the work in the first place, but it’s too late because you’ve taken their money and you’re committed.

You say, “I should have seen this coming! There were some red flags in our initial discussions.”

Yes! There were red flags! Pay attention to the red flags! Pay attention to your gut feeling. Trust yourself.

Just say “no” to the bad clients.

Remember: You will regret more of the bad clients you say “yes” to than the good clients you say “no” to.

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I hope you’ve found this helpful. This is an article from Free Soloing, which is a labor of love I’ve been building for a few years as a resource for freelancers. If you like content like this, check out

Free Soloing

on Substack and let me know if you’d like to see more.

After 18 years of running my own business and three years of mentoring and coaching startups, freelancers and solopreneurs, I’m finally trying to take it seriously and put myself out there as someone who knows and cares about small businesses and wants to help them not get taken advantage of, not fail, and actually thrive.

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