Business Musings: The Freelance Scramble Part Three: The Unthinkable

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Two weeks ago, I wrote what I thought would be a short post explaining a term I’d used, “the freelance scramble.” Only that post turned out longer than expected. In fact, I realized I had a short series here.

The freelance scramble happens when the cash doesn’t flow the way that a writer expects it too. Longtime freelancers have learned the dance that I call the freelance scramble, which is mostly about replacing expected income with something else.

Last week, I explained how the scramble actually takes place.

But the week before, I explained why freelancers have to scramble. Most of that post, which I encourage you to read now, dealt with cash flow. Here are the salient points for those of you who refuse to click your way to enlightenment.

Freelancers must plan how they will get through a year financially. Which means they need four cash flow charts. Now, realize, when I’m talking about cash flow, I mean how the money owed will arrive. It generally will not arrive in one lump sum.

So here are the three charts that I listed in the first freelance scramble post:

The first chart shows how everything might flow.

The second chart shows how it probably will flow.

The third chart shows the absolute worst case scenario…assuming the freelancer does get paid.

For more explanation of those charts, please read the earlier post. In it, I also recommend a reserve savings account to get you through the hard time, and paying off all of your debt. That means a paid-for car, paid-for house, and paid-off credit cards, among other things. 

After I laid out those first three charts, I mentioned that there is a fourth chart that every freelancer has.

The Fourth Chart shows the true worst case scenario—what happens when no one pays.

Does that happen? Oh, sadly, yes. Especially to new freelancers. Freelancers who’ve been at it longer usually know how to mitigate the circumstances, which I’ll discuss in a future post.

How can no one pay?

Well, let’s look at it from the new freelancer perspective first.

New freelancers often give their work away for free. Not just online and in ebook venues, but in all sorts of places “for the experience.” The problem is that sets up an unprofessional attitude on the part of the freelancer from the beginning.

Freelancers who do this generally have day jobs. So they, subconsciously or not, view their writing as a hobby. Everyone knows that hobbyists pay out of their pocket for their hobby. No one pays them to do it.

There’s a rule for writers which is a really good one:

Money flows to the writer.

(Yes, yes, I know. There are some gray areas now because of indie publishing. The short version is this: If you’re in traditional publishing, all money should flow to the writer. If you’re indie, the writing income should flow to the writer, but you’re also a publisher, and as a publisher, you will have reasonable expenses.)

Think of money flowing to the writer only in terms of doing work for companies not your own. If you’re writing short stories for a magazine you don’t own, then that magazine must license your copyright on those stories and pay you for that license.

They must pay you. Got it? Do I have to repeat it again?

(And if you don’t understand what I mean about licensing copyright, go buy The Copyright Handbook right now. If you don’t understand copyright, then you should not be a freelance writer. Period. You have no idea how the fundamentals of your business work, so you will [I repeat will] get screwed because of that lack of understanding. Repeatedly screwed.)

Do not volunteer to write anything for free. Ever. You make your living as a writer. Do you go to your day job and tell them they don’t have to pay you for your efforts this week? Then why in God’s name would you ever do that as a freelancer?

Value your work so that other people value it as well.

The problem of undervaluing what you write isn’t just a traditional writer problem. It’s also an indie writer problem.

In the United States, the myth is that artists (writers, painters, actors, musicians…) starve. And so anyone who chooses the lifestyle of artist, it follows, should expect to do a lot of work for very little money.

That attitude is what causes so many writers to undervalue their own work. Indie writers do it more than traditionally published writers. Most traditionally published writers have at least gotten the memo that they should, at worst, get an advance on their novel.

Most indie writers will often put their books up for free to “build an audience.” I deal with this a lot in Discoverability. (Pick up the book here or free on the website [albeit out of order].) There is a few right ways to use free as a loss leader, but there are a million wrong ways. Most writers do it wrong.

So there are writers who are or want to be freelancers who give away their work every single day. If you want to be a professional, you do not give your work away. (Except as a short term promotion, used correctly, and even then, you don’t give away all of your work.)

Indie writers often get little or no money despite thousands or tens of thousands of sales. These writers can’t freelance, and don’t have a base on which to build their finances.

In these cases, the indie writers aren’t receiving monthly income because the writers have undervalued their product.

Those are the mistakes that beginning writers make which keep those writers from launching a fulltime freelance career (or harms the career they started to build).

But what about the rest of the freelance community? Every so often, we all experience a complete breakdown in which we do not get paid.

When I say (as I did above) that no one pays the writer, I mean not a single one of the writer’s current clients pays.

Sometimes the reasons are obvious and catastrophic, like the example I used in the first scramble post. September 11, 2001, had a wide impact on freelance novelists (in addition to all the other people it harmed). Dean and I did not get paid by any of our New York traditional publishers for six months after 9/11, even though some of that money had been due since July. In some cases, we went more than a year without payment from our usual sources. We survived because of the freelance scramble.

Major crises happen, from the stock market crash to the fall of the Berlin wall. And sometimes those crises have an impact on freelance writers (as a group).

Other times, though, it’s just a series of bad circumstances that keeps every client from paying the writer. One client goes bankrupt. Yet another shuts down his business for good. A third decides to pay a different writer instead of you.

Everyone is late, significantly late, for a variety of different reasons. There are techniques to get money from each of these clients, and I’ll give you some techniques later in this series, but for the sake of argument, let’s say you know you’re not going to get any cash for the next six months, despite what’s owed to you.

What now?

If you’re a longtime freelancer, you’re prepared for this contingency. You might hate it, but you’re ready. You have a plan.

The plan, simply put, is this:

You use your reserve funds to pay this month’s bills. And then you find new work. That new work will not pay as quickly as the work you’ve already done should have paid. But it will eventually pay.

You just need to hang on until the new money comes in.

These events are why you have a reserve fund. They’re also why your house should be paid off, your car should be paid for, and your credit cards should be paid down. This is why you don’t have gym memberships that debit money from your account monthly, why you don’t sock money into accounts that you can’t reach without accruing a huge penalty.

You need ready cash to get you through the crossover between the work that should have paid and the work that does pay.

Here’s the tough part, though. You must reset all of your writing priorities.

If a client tells you he can’t pay you for another six months, but he still wants the project you’re working on next week, you have to say no. He’ll get the next part of the project when you know he can pay you. He might not like it, but deep down, he’ll understand.

You move your late-paying (or non-paying) work down the priority list—way down—and immediately do the work that will pay the bills. Sometimes, the new work will pay a lot less than the old work, but here’s the thing: the new work pays. And money in hand is always better than money promised.

If you’re stuck in this fourth chart, then you have to realize that these are emergency measures. You’ll be doing some things here that I normally would not advise freelancers to do. You will probably take on more work than you can do, which is why I recommend reprioritizing the old stuff.

And you might end up burning some bridges. We’ll get to the ways to handle that later in this series.

Mostly, though, the fourth chart is all about you and not about them. The non-paying clients are dealing with their own crises, whatever they may be. Let them. You have to get through what we call in our household “cash-flow hell.” You’ll probably have some sleepless nights, particularly in that first month. You’ll end up reprioritizing your workload three, four, five times before it all ends.

But if you scramble and work hard, it will end.

The key to handling this fourth chart well is an early diagnosis. You need to be able to look at your finances—and the money that everyone owes you—with a cold eye. You need to figure out—quickly—if the problem is something you’re making up (because you’re skittish about money) or if everyone really will have trouble paying you.

Usually, a writer is just skittish. Generally speaking, you’ll be in the third chart a lot more often than the fourth. The third is that payments are significantly delayed but they will be made. The fourth is that you might never see the money. Ever.

I’ve only been truly in that fourth chart once in my career. We handled the failure of one of our businesses wrong and therefore didn’t manage the accounts receivable properly. We had to shut down the business with $250,000 still owed to us, money that we never collected.

Twice since, I’ve thought I was in that fourth chart. One of those times was 9/11. Dean thought so to. So on the day that everyone else was watching their televisions in horror (or trying to find out of their loved ones were safe), Dean drove to Portland to sell some collectables so that we had cash to survive on for the next three months. Good thing he did too, because the place where he sold those collectables closed its purchasing window at the end of that day and didn’t reopen for another month.

We’re used to the freelance scramble, and sometimes that scramble means liquidating assets for quick cash.

We did get paid after that crisis, but that money was very late, and it was a hard winter.

Here’s the other thing you need to realize, my fellow freelancers. It doesn’t matter how much money you are earning, whether it’s tens of thousands, hundreds of thousands or millions, if you suddenly stop earning, the money you have put aside will run out—especially if your expenses match (or exceed) your income.

A few commenters two weeks ago mentioned taxes. Taxes, at least in this country (I can’t attest to other countries), have caused more artists financial problems than any other single thing. Why? Because, as someone said, the taxes are due a year or more after you’ve earned the income.

So you made $200,000 last year, and will make $50,000 this year. You will still have to pay taxes on that $200,000 this year. If you didn’t save for it (or pay estimated), then you will have to pay those taxes out of that $50,000.

This is why, in addition to copyright, the other thing writers need to learn to maintain a long-term career in this business is how to work the tax system to your benefit.

Because a good half of my readership for this blog are not in the United States, I am not going to go into a long tax discussion here (or in the comments). Suffice to say that you need a good accountant who works with non-traditional clients—particularly musicians and other writers. Because the tax law is different for those of us who freelance, run businesses and/or make a living as artists. There is no one-size-fits-all tax preparation and no one-size-fits-all answers to tax questions.

If you need a way of thinking about this fourth scenario, think of it like this: You got fired from your day job and you have no prospects for a new job. You still have to pay your bills and cope with the day-to-day stuff, but you have no unemployment coming in and no safety net except the one you build for yourself.

That’s the scenario I’m describing here.

Yes, it’s scary. Yes, it’s hard. Yes, it might happen to you.

The key to surviving it isn’t to hide your head in the sand. The key is to plan for it. Expect it, at least once in your freelance career, and then when it hits, do your best to find new work.

And again, sometimes that new work is a day job.

But honestly, the best way to survive this fourth scenario (besides being prepared for it) is to replace your old paying clients with new better-paying clients. Sometimes “better-paying” means actually paying you. Remember, as I said above, it’s better to be paid a medium amount in a more-or-less timely fashion than it is to be paid a huge amount maybe never.

A bird in the hand, and all that.

Okay, so…

Now that we’ve discussed how the cash might or might not flow, how to scramble for work, and the worst case scenario. Next, we’ll discuss how to make sure you’re actually paid for the work that you’ve already done. There are ways…and things you must understand…and bridges you never really want to burn.

If you want more information on money management and the freelancer, please look at The Freelancer’s Survival Guide or the short book (a section from the Guide) How To Make Money. You can find the original posts on freelancers and money here (marked money):  Remember these are for the general freelancer and business owner. What I’m writing right now is for the freelance writer. And yes, when I’m done, clearly this will be another short book. 🙂

I have no idea why I thought a single blog post on the freelance scramble would be enough. Not paying attention while working on other things, I guess. Part of my own scramble, apparently.

Thanks to everyone who has been commenting and emailing suggestions. I also greatly appreciate the donations as well, since the money is what determines how I prioritize the blog in my writing list of priorities.

So…if you learned something or if you like what I’m doing here, please leave a tip on the way out.



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“Business Musings: Freelance Scramble Part Three: The Unthinkable,” copyright © 2015 by Kristine Kathryn Rusch.



5 thoughts on “Business Musings: The Freelance Scramble Part Three: The Unthinkable

  1. I may be posting this too late for those who read Kris’s column when she originally posted it, but here goes for others. I’m a member of Romance Writers of America, which offers inexpensive ($10-20) or free on-line courses on numerous subjects. Two or three years ago, Cindy Kelly, author and tax advisor gave a workshop on handling taxes for writers. I learned a great deal, even though I had previously owned two small businesses. I second those suggestions regarding finding a CPA who is familiar with the situations and needs of writers and artists.

    And, thanks Kris, for another informative post.

  2. Our Gracious Hostess severely understated:

    Because a good half of my readership for this blog are not in the United States, I am not going to go into a long tax discussion here (or in the comments). Suffice to say that you need a good accountant who works with non-traditional clients—particularly musicians and other writers. Because the tax law is different for those of us who freelance, run businesses and/or make a living as artists. There is no one-size-fits-all tax preparation and no one-size-fits-all answers to tax questions.

    After having spent the past two weeks wrestling with back tax issues for a well-known author-client (which wouldn’t have been “back taxes” issues if a “professional” had not given very bad, scary advice that led to ostrich-like behavior), I want to reinforce this.

    There is no commercial tax service, in North America or Western Europe, that is worth a [insert foul and despicable expletive here] to a freelance author. Rule of thumb: If the name of the tax advisory service does not include “chartered/certified public accountant” or “attorney at law” after the name, run away.

    And it’s almost worse for tax-preparation software, at least in the US market. All but one of the common programs not only fails to consider things important to authors, but actively gets some relevant general advice wrong in ways that result in either heavy overpayment, severe penalties, or both (and believe me, it’s more than just possible to do both with the software from a certain Bay Area software behemoth that may also provide your {noncompliant} accounting software). The one saving grace is that you’re smart enough to blame only yourself for errors made as a result of trusting a mass-market piece of software for technical advice on tax matters that are not even covered in IRS Publication 17, right? RIGHT?

  3. Kris, thanks so much for these posts. They have convinced me that I have no business being a full-time freelance writer. Ever. Just thinking about the financial ups and downs fills me with unshakeable anxiety. I have flirted with the idea of attempting a full-time writing career from time to time but I will keep my day job for now, as onerous as it is. In a weird way, having an annoying and boring day job makes me work harder to find time to write. I might not work as hard at writing if I didn’t have it.

  4. Kris, this series is so important. I’ve already passed it along to several fellow authors who are in this situation right now. And it’s such a great resource for people who need these strategies in the future. As usual, thanks for taking the time to write these posts and for passing along your experience and ideas! So valuable.

  5. Kinda related, when I practiced law, I got together with other lawyers and we talked business — the money side of the law. I vividly recall that one day we were talking about collections — the money we got — versus billables — the amount we billed. A partner at a local firm said his collection rate (collections/billables) ran 85% — and he was bragging.

    Pro bono work? You take the uncollected bills at the end of the year and write them off. That’s your pro bono. If you really, really did not like the client you send him a 1099 and let him fight the IRS.

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