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Budgeting Your Transition to Freelancing Full-Time

Before I first transitioned into a full-time freelance designer, I had a fantastic position at a tech company as the Senior Art Director. I had been headhunted and was making a very good salary considering I was only in my early to mid 20s at the time and making more than my counterparts. However I always had a drive for entrepreneurship. I had been doing some design work for some friends on the side, for fun. Since I loved designing so much, that it never really seemed like work for me. So when I started getting more referrals, I just could not say no.

I came to a point where I had a realization that maybe I could do this full-time and support myself by myself. There was more going on in my life at the time that I needed careful consideration, as I had recently broken up with my boyfriend who was living with me at the time. Now, I had to decide if I could afford my current apartment on my own or do I need to downsize and find a more affordable approach?

Then I had an idea, what if my current employer would let me change my position as an in-house Senior Art Director to a contract designer and they would be one of my clients. Genius idea, right?! So before I asked my employer, I needed some reassurance and advice.

My dad who is an entrepreneur his whole life, gave me this advice, you should take the risk now as you are talented and young, and what would be the worst that could happen? The worst? Well, if your client base dries up then you could just go back and find another job. You are still employable, right? Of course! So then how could you fail? Either way you will find your way and be successful whether that is working for yourself or for someone else. So, just try it.

And you know what? That was the best advice I could’ve ever asked for. It was true, I could always get another job. So I walked into my bosses office and I gave him the proposal that I would love to stay and be a contractual designer as a dream of mine is to have my own business and take on other clients. His response was totally unexpected, he was not happy and said absolutely not, I will not work for anyone else but them. I’m not one to take dictatorship orders very well, so right there and then I respectfully responded with thank you but I’m going to have to put in my two weeks notice today.

I walked out feeling somewhat liberated but also quite nervous about what the future holds. I know I had enough projects that would tie me over for now. But then what? So I started to plan. I planned my strategy and my finances. The result? Well, for starters I didn’t need to move and I never looked back! The wheels were in motion and I was on a roll.

Declaring yourself a freelance designer doesn’t automatically mean you’re bringing in client work (duh) and unless you were able to balance enough client work to replace your salary and work your full-time job, you will need to spend some time finding clients after you resign from your full-time job. Month 1 is typically spent doing just that, and really creating lasting professional relationships with the current clients you have. In months 2 and 3 you’ll most likely win a project or two more and then spend month 4 doing the work, balancing your cash flow and doing more planning for the next quarter. If everything goes according to plan, you should receive payment in month 3. This is a pretty common cycle but it could be longer!

So now what? You want to transition into freelance designer full-time but you need money in the bank. Who wants to wait 3 months for a paycheque? The short answer is: you’re going to need to save.

The long answer is that a good rule of thumb to follow is to have enough savings to cover 3 months of expenses, but the bigger the safety net the better. This can be a mix of savings and projects you’ve won.

Let’s break it down further:

What if…
You need $5,000 per month to live.
You have $4,000 in the bank.
You will invoice $1,000 for current projects.
You only have 1 month of expenses covered, keep that resignation email in your draft folder.

Or maybe…
You need $3,000 per month to survive.
You have $6,000 in the bank.
You will invoice $3,000 for current projects.
You have 3 months of expenses covered. It could be tight, but you might make it!

Or perhaps…
You need $2,500 per month to survive.
You have $8,000 in the bank.
You will invoice $7,000 for current projects.
You have 6 months of expenses covered. Congratulations it’s time to freelance full-time!

The journey to transitioning to freelancing full-time can look different for everyone, but remember you’re not alone in going through it! There are others out there that feel the same frustration as you try to hit that 3-month mark. Try to put your profits back into your business and hold some profits for a safety net. Even though it can be tempting to dive right in and take the risk, taking time to prepare yourself strategically and financially increases your chances of making it in the long run.

Do you have a question or need advice about what to do in your situation? Feel free to drop me a line, or sign up for the Free Guide to Starting a Freelance Design Business. There’s lots of tips and insights to help you along the way. Good luck, you got this!!

Business + Marketing

CATEGORY

11/15/2021

POSTED

The prospect of leaving your corporate woes behind and diving into freelancing full-time can be tempting. Who doesn’t want to leave the draining commute, endless zoom check-ins, nosy coworkers, and uninspiring office behind?! But before you write that resignation, it’s time to check in on your strategy and finances.

you are resilient
you are innovative
and you are a mother f*ING

boss!

Just in case no one's told you today...