Freelancer’s Survival Guide: Money Part 5

Freelancer's Survival Guide On Writing


The Freelancer’s Survival Guide: Money, Part Five

Kristine Kathryn Rusch

Thought we were done with money, didn’t you? We discussed expenses (a lot) and profits (a little) and you thought that was the end of it.

Nope. There’s a lot more to income. A lot more.

If we were discussing writing, I could probably deal with income for the rest of the summer. Income is complicated, no matter what business you’re in.

But I’m trying to keep this freelancer’s guide general, and I don’t know all the ins and outs of income for, say, a building contractor. Or for a quilter.

I can handle retail store owner, therapist, restaurateur (sometimes), landlord, publishing, and writing because I’ve had hands-on experience in all of those industries—some because I’ve owned the business and some because some poor misguided soul put me (at the time, an hourly wage earner) in charge of handling the finances.

But I can’t cover everything for every freelance business. I’ve been getting forwards and pingbacks from all sorts of industries, from realtors to financial advisors to travel agencies. And I’ve been getting comments and donations from places as far away as Canada, Norway, and Japan. (Thanks, y’all.) So rather than try to write everything for everybody (and in no way do I know the business tax laws of Japan!), I’m trying to write a little for everyone.

Before I go any farther, a few bookkeeping things for the site. If you are new to the Freelancer’s Guide, go back and reread from the beginning. Every now and then, I post a guide to the guide (I’ll do the next around the 20th, after I finish teaching a workshop). You can find the most recent guide to the guide here, but that doesn’t include the money posts, which you should read in order before you get to this one. In last week’s post (, I list links to the others.

Those of you who have been reading the day the Guide comes out might want to go back and read the comments section, particularly in the money sections. Lots of wisdom here from folks who have been or are in the trenches. If I don’t have an idea that works for you, I’m sure someone else does.

Which brings me to e-mails, comments, and donations, as well as website statistics. The number of people coming to the site keeps growing, which means you’re all forwarding the guide. I appreciate that. I also appreciate the occasional donation to keep me going on this. I really, really appreciate the comments because—believe it or not—I don’t know everything (I did when I was a teenager, but I have since forgotten most of it) and so anything you have to add, however small, will benefit the readers.

So a big round of thanks to all of you reading, commenting, and contributing in whatever way you can.

I do have to say that I’m enjoying this a lot more than I expected to. I put off writing the guide for years because I knew what a slog writing nonfiction is for me. This hasn’t been a slog at all, and that’s because of the interaction. If I didn’t know you were out there, I don’t know if I would have made it to Part 5, let alone Part 15.

Okay. Enough mushy stuff. Let’s move onto the things you really want to read. Like income. Profits. Money. Or as the e-mail in my spam file puts it: Income! Profits! Money!!!!

We still have a lot of topics to cover, including (but not limited to) income streams, billing, and toughness.

First, income streams.

I know a lot of freelancers who have one client. Just one, who pays a lot of money to the freelancer, and that single client keeps the freelancer in business. It’s a freelance arrangement, because the freelancer works from home, handles her own taxes, and is usually paid by the task.

One client and one client only is the riskiest way to run your freelance business.

If the client dies, has financial troubles, or shuts down his business, your business disappears along with it, just like your day job would disappear if you worked for a sole proprietor at, say, a dentist’s office.

If the client dies—even if he dies suddenly—you’re actually better off than you would be if he has financial troubles or if he shuts down his business. I hate to be crass about this, but if your single client dies and you’re quick about billing, your final bill will be paid by the estate.

If your client has financial trouble, you’ll probably be one of the last people paid. Or you might get paid, but only when the client needs you. Chances are that you’ll get stiffed on your last few bills, and you’ll never be able to recover that money.

Getting stiffed is part of doing business. The key is to minimize the losses. I’ll discuss some of that in a later post on billing.

If your client goes out of business—especially if it’s sudden—you’re probably out of luck. Not only will you never see the final payments on your last few bills, you will lose the income source for your business forever.

Just like employees at a restaurant that locks its doors one night and never reopens, you’ll be outside in the cold without your final check, looking for a new job.

How do you solve this problem? Simple.

Work for more than one client/company.

That way, if your main client shuts down, you’ll have income while you’re getting through the tough times. You’ll have income while you’re looking for someone to replace that really big client. While you’ll be struggling to fill that financial gap, you won’t be going from large checks to no checks. You’ll have something to tide you along the way.

Sometimes, however, entire industries shut down. The tried and true example, used in every single economics class I ever had is buggy whips. When Henry Ford invented the automobile more than 100 years ago, he destroyed the buggy whip industry.

Before cars, you’ll recall, people rode horses everywhere. And often, they rode in a carriage with either a single horse or a team of horses pulling a carriage. This, by the way, is the reason we still use the term “horsepower” as a measure of the power of a car’s engine. The term “horsepower” was an advertising term for early automobiles, telling prospective buyers that the new car was the equivalent of 5 horses or 50 horses.

Horses didn’t go away. People still ride them, mostly for pleasure, although some do so as part of their job. Carriages didn’t go away. Every major city in the U.S. has a horse-drawn carriage ride around some romantic or historic part of town. But buggy whips—I’ve only seen one in use in my entire life, and that was for show.

Many in the carriage industry moved over to building carriages for cars. (That’s why your car’s middle is called its carriage.) My grandfather, a rural mail carrier who started his route with a horsedrawn carriage, kept his horse until the horse died, long after my grandfather moved to using a car.

But buggy whips were an accessory, replaced year after year, and were a hugely profitable industry. The whips were also specialized—can you think of another use for them? I can’t, off the top of my head—and over a relatively short period of time, whips went from something most households owned to something of a curiosity.

An entire industry wiped out in the space of about (I’m not looking this up; you can) twenty years. It declined within five years of the day Henry Ford introduced the idea of credit into the economy, making cars affordable to everyone. (But the introduction of credit into American life is a topic for another day—and a different guide.)

Have I seen industries go away in my lifetime? Yes, dozens of them. Some were blips—how many of you have a dedicated fax machine these days?—and some were essential, like daily milk delivery. In the early 1960s when I was a little girl, we had an aluminum box outside the front door of our 3-bedroom ranch house, and every morning (or at least once a week), a delivery man put a glass quart of milk inside the box. I have no idea how my parents paid him or when that service ended. I only remember it because I got my butt paddled one day for putting garbage in that box (a bag of dog poo if I remember right) and the look on my mother’s face as she pulled that garbage out of a place that was built to house milk.

Every industry changes. Every industry goes through boom and bust cycles. One industry’s bust is another industry’s boom.

For example, realtors are hurting right now. A few years ago, realtors could sell a shed with an outhouse and call it a fixer-upper. Now, perfectly good homes are not selling at all, which means that realtors are suffering great losses in their income. Those realtors who understand boom and bust cycles saved during the boom, and those savings are helping them ride out this bust. But several others are probably looking for a new profession right now.

On the other hand, an entire industry is growing right now. People who clean out empty houses and prepare them for sale have more work than they can handle. With the rise in foreclosures, former owners have left their homes in a hurry and often in a disaster. The cleaners make sure the house is show-ready (as much as possible). Often the bank hires the cleaners in the hopes of making the property presentable and saleable.

Sometimes, however, work in all industries simply stops. It has happened to me at two different times in publishing. The first time is too arcane to explain here, having to do with distribution system changes and an industry reacting in fear.

But the second time is memorable, and easy to explain.

I work for a variety of publishers. Eight years ago, all of my publishers were in New York City. When 9/11 happened, several of my publishers were only a few blocks away from Ground Zero. They were closed for a month, unable to get to their offices.

Other publishers lost key people or had people on family leave because those people had lost a loved one. For six months after 9/11, my husband and I didn’t receive a single check from a large New York City publisher, even though we had several due—in September.

Business simply stopped for a few months—at least in New York.

Fortunately, I have other publishers in France, Germany, Israel, and Russia, just to name a few places. They didn’t stop publishing—although for a while, science fiction and fantasy publishing in Germany went through such a bust that German sf publishers weren’t buying any books from anyone.

So I learned. I have different publishers—different clients, if you will. But I also work in a variety of related industries.

For example, I write science fiction novels. Those sell to one set of publishers. I write fantasy novels. That’s a wider set of publishers. I write mystery novels. Yet a different set of publishers. And romance fiction—a fourth set of publishers.

I continue to write nonfiction, even though I complain about it. I sell that to magazines and online publications. I write short stories, which sell all over the country to magazine, online publishers, and anthology publishers.

I also sell books and short stories overseas. Each publisher in each country represents a different client.

I also teach. And I give speeches. Mostly, I charge a nominal fee (I’ve learned that people don’t value something they don’t pay for). I don’t make a profit on that, but look at teaching as paying forward. Other professional writers taught me, and I can’t pay them back. But I can teach newer professional writers as a way of continuing that giving.

I look at speeches as a bit of promotion and as a way of giving to my readers. I don’t do many speeches, and I suppose a time will come when I will have to charge the going rate, just to keep the demand down. But right now, I choose not to.

However, both of those skills—teaching and speechifying—could become additional income streams if I need them some day.

So, the lesson here is simple: Diversify

Offer more than one product (short stories, novels in different genres) to more than one market. Use all of your skills, not just a few, and you’ll make more money.

I can’t tell you how many opportunities have come my way because I work in more than one part of the publishing industry. When I went to the World Science Fiction Convention in Denver last year, I got offered three different editing jobs. I turned them all down because I don’t want to edit any longer. But I had worked in that part of the industry for so long and people liked what I did well enough that I still get job offers for that work, more ten years after I quit.

When possible, get paid more than once for the same work

That’s not possible in every industry. But in a lot of freelance industries, you produce a product that you might be able to sell in more than one place. For example, I have an entire inventory of stories and novels that have sold in the United States. I can remarket all of those stories and novels overseas. I can also resell those stories and novels to different U.S. markets, depending on the rights I initially sold.

The nice thing about writing as opposed to, say, plumbing is that my work from twenty years ago still generates income. If you have a freelance gig like mine, figure out how to make your past work earn for you and how to make your current work do double and triple duty.

Keep good records

It’s easy to keep track of everything if you only have one client. But if you have dozens of clients and hundreds of products, like I do, the only thing that will keep you afloat is excellent record-keeping. If you work alone, then your record-keeping system can be as idiosyncratic as you are. If you have employees, you’ll probably need to develop set systems for record keeping.

But I keep an extensive tickler file (a reminder file, for those of you who haven’t worked in business), and I use it not just to keep track of my own deadlines, but also my clients’ deadlines. In other words, I keep track of when money is due and how much to expect, so that I don’t have to dig through files or back e-mails to find information.

I keep my records by project and by client. For example, if a book sells in the United States, that’s one project and one client. If I resell that book to Germany, then I create a new file for that project with a different client.

Then I have my accounts payable file. I know who owes me money and how much. I’ll discuss this more in-depth in the billing post, but suffice to say that my record-keeping keeps my business afloat.

Finally, keep track of industry changes

Right now, huge changes are going on in publishing, mostly because of connectivity, social networking, and the web. I am doing my best to explore new markets created by these changes. I don’t automatically close my mind to online publishing as so many of my colleagues have. They’re afraid of theft. I’m more interested in expanding my audience.

This blog is an experiment in new media. Cutting out the publishing middleman is appropriate for some projects—like this one, which is timely. However, I need to be paid per project, and that’s why I have the donation button up. Frankly, the more I earn from the project, the more likely I am to repeat this experiment.

Right now, I’m exploring various venues to get my out-of-print novels and stories back in the hands of readers. I haven’t decided if I’ll republish some of them or if I’ll find a publisher to do so. I also haven’t decided if I’ll use my own website as a forum for those stories.

But these opportunities exist now. They didn’t exist ten years ago. Ten years ago, an out-of-print novel remained out of print unless a new publisher was interested or a writer hit the New York Times list with a similar book.

A lot of my colleagues are stuck in the past. They won’t publish anything on their websites. They won’t join social networks. They won’t explore online markets. They’re overwhelmed by the changes or they’re not working to understand them.

Most of what I hear from these folks is uninformed fear. And that fear may limit or curtail their careers in the future.

Just this weekend (the Fourth of July!), I received two different business opportunities, one through a Facebook contact and one through Twitter. Both opportunities wouldn’t have come to me if I weren’t exploring these new social networking sites. Whether either opportunity will turn into income remains to be seen, but I suspect at least one of them will.

And—honestly—I’m happy to have the chance. I always feel that way about new opportunities. The chance is important, whether or not it ends up going my way.

Let’s go back to the buggy whips, carriages, and the introduction of cars. I’m sure a lot of carriage makers went out of business in those years as well. But the far-sighted ones learned how to change one part of their industry to suit the newfangled machinery.

That’s what every small business owner should do. Keep up with all the changes in your industry and see how you can profit from those changes. In the beginning, the profits might be small. But in the end, you’ll be ready to make the changes long before everyone else in the industry, and that will help you survive.

So, in short, here are a few things you need to do to maximize profits for your business.

1. Have more than one client

2. Diversify

3. Get paid more than once for the same work (if possible)

4. Keep excellent records

5. Take advantage of changes in your industry

The more sources of income you have—whether it’s an abundance of clients or an abundance of opportunities—the more chances you have for success.

I told you a few weeks ago that you need to be a realist and/or a pessimist when you’re looking at your expenses. When you look at potential income, you must be an optimist. Always assume that a new client will be interested in you, or that you can learn the new computer program that will allow you to streamline your business.

Approach each new thing, client, or opportunity with an open mind and an eye to the future. You’ll be much more successful if you do.

You can now order either an e-book copy of the Guide or a trade paper copy of the Guide. It’s in slightly different format and has been organized, so that related topics are in an easily accessible place.

You can get the print version here.

For those of you who’d like to buy an ebook, here’s the Amazon link as well as the Barnes & Noble link. The e-book will also be available on all the other e-book sites. If you want it in your favorite format, and the book hasn’t yet been uploaded to your favorite site, try Smashwords. You’ll be able to download in a variety of e-book formats.

6 thoughts on “Freelancer’s Survival Guide: Money Part 5

  1. Thanks for doing this guide Kris! It couldn’t come at a better time for me as I work on looking at writing as a business.

  2. Excellent advice. Not only do I make sure I have multiple clients, I’m somewhat cautious about the so-called 80/20 rule, which for those who don’t know it, 80% of your revenue comes from 20% of your clients. (This rule can be applied to a lot of things, but in the case of revenue and freelancing, it tends to be true). It does apply, but it makes me nervous. 80% of my revenue is too much to lose, so I’m cautious. I would point out that one year I had a big client that earned me more than $60,000. Typically now it’s around $30,000, which isn’t pocket change, but, well, HALF of that great year. If that client were to ask me now why I have diversified, I’d say, well, it’s because although you’re a great client, I can’t count on how much money I’ll earn from you.

    To that end, I’ve recently started a publishing company that will start publishing an e-newsletter to a niche market in my area of expertise. Will it take over my business? It could. Do I want it to? Hmmm. Back to diversification. On the basis of a single e-newsletter? Makes me nervous. But that e-newsletter with other clients? Sure. That e-newsletter with other e-newsletters? Possibly.

    So I’m doing the same thing. Diversifying. Having multiple clients. (Because one thing I’ve learned in 5 years of full-time freelancing, it’s that things change). And taking a hard, hard look at changes in the industry and trying to adapt to it.

    1. Glad you folks are enjoying the posts and finding the advice useful. You’re exactly right, Mark, and I forgot about the 80/20 rule because I don’t follow it. (Thank heavens) But so many folks do and that can be scary. Patrick, sounds like you’re making the right choices at the moment. It’s tough out there right now, and I don’t advise anyone to make risky changes right now, unless they have to. Planning is always the key–and I hope the Guide helps with that.

  3. Kris, these posts are all so wonderful and informative. Thank you so much for doing them, and for all of your teaching time in general. Thanks for paying it forward. You set a great example.

  4. “Have more than one client.”

    This is the primary reason I am not a freelancer. I am a software consultant for a large company. I am an employee. My company outsources a significant percentage of the work that I do to partners and freelancers. The rates that they outsource are 2-4 times my salary(including insurance, 401K match, and other benefits)

    I have the relationship and reputation to go independent, and even though I would be working for different companies at each engagement, my ‘customer’ would be my current company.

    I could get the work direct, but I wouldn’t be able to charge the same rates that my company does or even the rates that my company would outsource at, and then I would probably need to account for time for sales – finding new customers.

    It’s been a debate for me for a few years now. If I was able to stay busy for two years and build up two additional years of savings for a cushion, I could then cut back to working 50% of the time –

    If it wasn’t for that only 1 customer issue…

    I learned this lesson from one of my early jobs. The owner had 95% of his business tied up in one customer. They kept buying more computers and consulting from him. Each year the contract grew and he hired more staff. It went on long enough that he never even really considered it a risk to lose it. One year it went out to bid – and he just assumed he would get it again – and someone underbid him. Well, I forget the exact scenario but that has the same effect. He might have even forgot to put in his bid or something like that.

    He had to lay off 32 people. Said it was the worst day of his life, but he had hired that many people for that one customer and basically had to rebuild his business from scratch.

    Basically, I’m just saying – This is a brilliant post! Excellent!

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