If you’ve been working as a UX designer for a while, you may be thinking about becoming a freelance UX consultant. In this post I’ll share some tips on getting started and what you can expect in the early days of your ramp-up.
Keep Your Day Job
First and foremost, don’t quit your day job just yet. And don’t expect work to come flooding through your door just because you’ve hung out your shingle. If you’ve got a good job, stay there for now while you build your business on the side.
Make A Plan
You need a plan to give yourself sufficient runway time. There are so many things to consider before making the jump. Having a clear plan will give you the confidence to move forward.
When I started back in 2006 and it was time to give notice at my job, I gave seven weeks instead of the usual two. I’m so glad I did, because 1) it gave my boss plenty of time to look for a replacement, and 2) during that transition period word got out that I was going to be freelancing.
I had already lined up two paying clients before giving notice, so by the time I left the company I had three months of paying work in place. That was enough runway to get things up and running.
While it’s impossible to cover everything in a single blog post, here’s a good list of things to think about:
Be realistic about your current financial situation. If you are saddled with debt or have family obligations this may not be a good time to bail on a steady paycheck.
Freelance income is inconsistent. Do you have a sufficient monetary cushion to fall back on during the inevitable slow times? If not, build up at least 3-6 months of living expenses in a savings account. Start today.
Do you have quick access to credit, such as a home equity line of credit (HELOC) or a high credit card limit? I’m not suggesting you use these to startup your business, only that they may help you with cash flow from time to time if your savings run low.
Do you own a computer with the appropriate software you’ll need to do client work? What about basic office supplies, admin and backup software?
Where will you work? While co-working spaces are very popular right now, it might be best in the early days to stick to the kitchen table to keep your expenses down.
Support from Family and Friends:
Do you have the support of your significant other, family and friends? This is crucial! Make sure the people you care about the most are ok with your plans.
Working on your own can be very isolating, so make sure you have other outlets besides just client work. Meet people for coffee or lunch on a regular basis. Join a gym or pursue a sport you enjoy with other people, such as tennis or golf.
How will you get them? What kind of work do you want to do? What problems will you solve? Who is your ideal client? Have you thought through a lean canvas or sketched out a basic persona? These are great tools for you, too!
Speaking of clients, best way to get your first clients is via referrals. Tell everyone you know that you’re starting a consulting business, and see if you can find someone who fits your ideal client profile from your personal network.
You’ll need an updated portfolio website to demonstrate your work and experience. If you work at an agency that can be difficult due to NDA agreements, so you may have to do some pro bono or personal projects that you can publicize freely.
Do you have an updated resume? Even if you plan to be an independent consultant, potential clients will likely want to see your experience on paper.
This is a biggie. Do you know how much you need to charge to make a profit? Despite what some recruiters may tell you, dividing your current salary in half to come up with a “competitive” hourly rate is not realistic at all. Here’s why:
Let’s say your current salary is $60,000. Conventional wisdom and many recruiters will insist that your comparable hourly rate should be $30 per hour. This simple calculation divides your salary in half and chops off the last three zeros.
What this doesn’t account for is that you are no longer employed by the man, meaning you will not have taxes or benefits deducted from this number.
Instead, you will be responsible for ponying up the cash for these expenses every quarter. And they can really add up, especially healthcare costs.
Here’s what really happens to your $30 an hour when you are paid as a 1099 contractor vs. W2 employee in the United States. Keep in mind these are rough estimates for illustration purposes only and don’t include deductible business expenses. Your mileage may vary depending on your eligible deductions, tax bracket, retirement and healthcare requirements:
- $30 – $7.50 (Just as your employer would, you’ll need to deduct 25% or more for federal and state taxes depending on your tax bracket)
- This leaves you with $22.50 an hour.
- $30 – $4.50 (you are now responsible for all of FICA)
- This leaves you with $18.00 an hour.
- $30- $3 (10% retirement savings. You should be saving at least 10% of everything you make as an independent)
- This leaves you with $15.00 an hour.
- $30-$3 (10% healthcare costs)
- This leaves you with a net $12.00 an hour. This is why you must charge a higher hourly rate.
To see what yours should be, check out the handy hourly rate calculator here. As you get more experience, you will likely want to move away from hourly to fixed price work.
Running The Business:
As a freelance UX consultant, you will likely spend less than 50% of your time actually doing billable client work. The rest of your time will be spent running the business.
That means you’ll need to be responsible for sales and marketing, operations, and finance. Getting a handle on all of these roles takes some getting used to.
Most freelancers start out as sole proprietors. This enables you to report your income using your Social Security number on a regular 1040 tax return. But it also makes you liable for anything that touches the business.
So you may decide to create an LLC (limited liability company) or larger corporation. See your accountant for details. You’ll also want a separate business checking account so you can invoice clients and receive payments accordingly.
Many clients will require you to have basic liability insurance. This isn’t very expensive and is worth every penny. You’ll also want to have your computer and any other business equipment properly insured.
I hope this helps you figure out if independent consulting is a possible career path for you. If you do make the transition to freelancing, remember that one day you may have to go back to the cube farm. But if that’s the worst thing that could happen, then you don’t have much to lose.
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