Author Archives: Kim Clark

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A Profitable Partnership

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Whether you are making a plan to start a business or expand one that exists,  inviting partners to join you may be the best way to achieve business goals.  Ideally,  partners bring some combination of complementary skills,  capital resources and strategic relationships that will make the business grow and prosper faster.

Before initiating a partnership,  evaluate the resources you need to launch your venture.  If you anticipate that start-up or expansion capital may not be available,  then taking on a partner or two may be the only way to take your business from the drawing board to reality.  But if skill sets beyond what you possess are the issue,  you may be better off hiring  a few key employees.  Speak with a business attorney to devise a way to attract key employees for your management team by offering equity in the business,  but not so much that you risk losing control.  Remember to include the option of your being able to buy back shares if you like.

Similar business goals and priorities

Business partners must share a vision of the long-term goals and priorities for the venture.  How big do you want the business to be? How much of your life are you willing to devote to building the business?  Have conversations and brainstorm different scenarios that might happen during the life of the business and how each of you thinks it would make sense to respond.  Partners must be able to agree on a course of action to move the company forward if success is to be realized.  Serious discussions about each partner’s preferred vision of the future will give valuable insight into how to handle challenges and opportunities that might present themselves down the road.  Write a business plan together and as you do,  almost everything will come out in the wash.

Similar approach to customer service

Customer service is an important aspect of the business brand.  Customers must know what to expect when doing business with you.  It will only confuse and frustrate clients if one of you is willing to burn the midnight oil and move heaven and earth to exceed expectations every time and the other is willing to let whatever it is wait until 9:00 AM the next morning.  Whatever approach you take,  devise standardized,  written customer service protocols that all partners can accept and agree to abide by.

Mutually agreeable exit strategy

Is this a one-off project based partnership,  or is everybody in it for the long-term?  Do you envision building the company rapidly and attracting a buy-out offer,  or is this a business you would like to pass to your children? Guided by a business attorney,  discuss the circumstances by which a partner can quit the partnership and how the transition will take place.  Who can buy out a partner? What is the protocol if a partner becomes medically incapacitated and can no longer work in the business? In a divorce,  can you wind up being in business with a business partner’s ex?

Partnership agreement

Your state may not require a written agreement to form a General Partnership,  but you are strongly advised to do so anyway.  A written agreement will clarify the parameters of the partnership.  Specify the share of the business owned by each,  the division of net income (or losses) and the duties and responsibilities of each partner.  Commit to writing everyone’s shared understanding of the partnership business arrangement.

Forming a partnership and going into business with one or more people can be an enjoyable and profitable experience,  but it doesn’t work for everyone.  When partnerships go wrong,  they ruin relationships and bank accounts.  Choose partners wisely,  be realistic and transparent and put everything in writing.

Thanks for reading,

Kim

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C x 5 = Success for Your Business

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If one intends to succeed in business,  then it is necessary to manage the business effectively,  because in the long run,  the better-managed businesses  succeed.  Dan Barufaldi,  Freelance management consultant active in metro New York City,   authored the 5 C’s for Success in Business list.  According to Dan,  success in business requires that you attain and leverage these five resources:

Clients

Credibility

Cash flow

Credit

Capital

I.   Clients

But of course a robust client list is necessary if one expects to keep the doors open.  Clients are the life blood of every business and priority is given to acquiring and retaining the  source of revenue.  There are a number of tactics  strategies that business owners can use to find and retain customers,  including:

Advertising and promotion

Advertising in newspapers,  blogs,  newsletters,  trade journals

Email marketing campaigns

Trade show and conference  exhibits

Participation in local charity events

Brand

The focus may not be on a specific product or service,  but branding is marketing/advertising designed to enhance the reputation of the company/ consultant in the marketplace.  It is important to communicate to current and potential customers that the company/consultant is reliable and trustworthy.

Customer service

Create good word of mouth  (still the best form of advertising)  and stimulate referral business by providing excellent customer service and exceeding expectations every time.

Networking

Those whose target clients are B2B will greatly benefit from membership in the local chamber of commerce,  Rotary Club and neighbor hood business association.  Those whose target customers are B2C will be wise to take part in neighborhood charity events and otherwise be visible in the community.  B2G oriented businesses and Freelancers will attend information sessions and certified vendor conferences sponsored by city,  state,  county and federal organizations.

II.  Credibility

Freelance consultants and small business owners must package and present ourselves and our products and services in a professional manner.   We cannot afford to advertise and brand like the major corporations,  so we must be creative in our use of promotional resources.  A good ongoing branding campaign to enhance reputation is essential,  as is excellent customer service.  Promote your brand and build trust with good customer service,  to create good word of mouth that can earn you recommendations and testimonials.  Teaching is a time-honored way to demonstrate one’s expertise.  Speaking on (or moderating)  a panel at a professional development symposium is another excellent way to create visibility among your peers and potential clients.

III. Cash Flow

For Freelance consultants and small business owners,  cash flow can sometimes take precedence over  short-term profitability.  Cash flow glitches will result in unpaid accounts payable,  the inability to take advantage of special offers,  an unmet payroll and/or the inability to cover immediate and urgent expenses.  It’s a smart idea to project cash flow needs over 8 – 12 weeks,  so you’ll know when to invoice clients,  when receivables are expected,  when accounts payable are due and have time have time to cover any gaps that appear.  It may be possible to extend the due date on certain accounts payable,  accelerate the collection of accounts receivable,  adjust expenses or even get a bridge loan  (or a temporary job).

IV. Credit

Available credit supports cash flow management.  An honored request to increase the credit card limit allows one to float expenses when accounts receivable collections are unexpectedly slow,  or allows the business to stock up on inventory when prices are favorable.  Those with good credit ratings pay lower credit card interest rates,  which is also good for cash flow.

V.   Capital

Those looking to grow their business may need to make large expenditures and that will require access to capital.  If significant business growth is part of your organization’s three-year plan,  start now and improve your credit rating by paying off debts,  if that is an issue.  The establishment of a good relationship with a bank,  along with a credit rating and financial management practices that demonstrate good judgment and fiscal responsibility,  will be very helpful when it is time to seek financing.  Make an appointment with the manager of your bank to discuss your plans,  learn how much you are qualified to receive and the payment terms.  Meet a banker as you network at the local business association and get a second opinion.

Thanks for reading,

Kim

Marketing , , 9 Comments

A Winning Email Marketing Campaign

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I’ve not done many email marketing campaigns,  mostly because I dislike being on the receiving end of such campaigns,  so I made the decision to basically avoid that method of outreach.  I was remiss,  because there are times when an email marketing campaign fits the bill.  Content marketing,  or the new advertising,  is an excellent way to stay in contact with clients and cultivate prospective clients and that strategy forms the basis of email marketing campaigns.

What I needed to do was learn how to craft an effective email message,  create a catchy subject line,  avoid looking like spam and send the email to the right group of people.  In other words,  I had to learn how to do a proper email marketing campaign.  To that end,   I invite you to copy my homework.

1.   Start with a good list

Everyone on your email list should want to receive your emails.  Include a safe unsubscribe feature to allow those who would rather not receive your emails to opt out.  When collecting names,  ask if the person would like to receive email updates from you.  To track emails sent,  you may want to invest in Did They Read It  http://didtheyreadit.com, which will anonymously report to you the read rate of your emails.  Constant Contact  http://constantcontact.com ,  the email marketing platform,  will send out and track your email marketing messages and your newsletter,  too.  According to the Email Marketing Metrics Benchmark study done by the marketing firm Silverpop in 2012,  the open rate is 20%.  The click-through rate,  or the measurement of how many people clicked on a link that was embedded in your email and most of all the conversion rate,  or how many people signed up for a special offer or did business with you,  reveal the value of your email list.  Still,  the open rate is a very telling measure because nothing happens until the email is opened.

2.   Information, not sales

A few paragraphs that give newsworthy updates about the industry sectors of your principle client groups,  or info that can be used to help list members solve a common problem,  will greatly improve your email open rate.  An email marketing campaign is not the forum in which to swing for the fences and score a big sale or assignment.  Rather,  an email marketing campaign is the place to let your expertise shine and offer no-cost value to current and prospective clients.

3.   Subject line that pops

Be edgy and provocative, be witty,   be amusing,  but don’t be boring.  When your recipient opens emails and is faced with a huge stack,  make him/her want to open yours and see what you have to say.

4.   Interesting photo or video

A picture is worth 10,000 words,  so add a good photo or two to your email,  one that communicates some aspect of your message.  A short video of you speaking to a topic,  or a testimonial by one of your clients,  is also compelling.

5.   Easy call to action

Once you’ve made the case,  remember to ask the recipient to do something with the information that you’ve provided: take a survey,  sign up for a free 30 minute consultation,  sign up for your newsletter.   Resist the temptation to go for the jugular and force a sale in your email marketing campaign.  The more successful strategy is to entice the recipient to make some small contact with you that appears to have more benefit for them than it does for you.  Build trust and familiarity first and you will become the obvious choice when your services are needed.

6.   Optimize for smart phones

It has been reported that nearly half of all emails are now opened up via smart phone.  Figure out how to size and space your email and links to make it easy to read on a smart phone.

Despite numerous pronouncements to the contrary,  email marketing is alive and well,  according to a January 2013 survey conducted by the marketing services provider Experian.  Their survey indicated that correctly conceived email marketing campaigns remain the best way to draw traffic to your website and increase sales revenue.  So copy my homework and get busy creating one for your business.

Thanks for reading,

Kim

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The Freelancers Union

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Front page top half of the Sunday March 24 New York Times business section features a lengthy article on the Freelancers Union,  a Brooklyn,  New York based 501 (c) (3) organization that benefits Freelancers.  The organization was founded in 2001 by Sara Horowitz,  a New York City labor law attorney who 20 years ago was hired into a Manhattan law firm as a contract worker and found aspects of the experience unsettling.  There was a precursor group Horowitz founded in 1995,  Working Today.

The Freelancers Union is not a certified union,  but an association of independent workers,  from screenwriters to management consultants to nannies,  that promotes the interests of Freelancers.  It has no collective bargaining power,  does not negotiate contracts and does not represent members in grievances.  If a client stiffs you on an invoice,  the Freelancers Union will not go to bat and help you collect.  Members pay no dues or membership fee.

Freelancers Union keeps issues of concern to Freelancers alive in the media,  as a strategy to impact government policies that benefit us.  The group advocates for legal reform on worker’s compensation,  unemployment benefits and tax relief  (our taxes are higher, as you know),  areas in which we are vulnerable.   In 2009,  the group successfully persuaded New York City to eliminate the unincorporated business tax levied on Freelancers who earn less than $100,000,  a saving of up to $3,400/year.

An internal Freelancers Union survey found that 58%  of its members earn less than $50, 000/year and 29%  earn less than $25,000/ year.  Bear in mind that most members reside in Metro New York City and pay rates are usually higher there than in other areas of the country.  Also,  some prefer to work part-time and that limits earning potential.

In the March 24 article,  there were questions about the practical value of Freelancers Union beyond the delivery of health insurance.  Gordon Lafer,  professor of labor relations at University of Oregon said,  “The question is,  can they get any leverage to get a fair shake from employers,  to get companies to give a fair share of their profits to Freelancers? They may need to be more creative to do that.”

Still,  Freelancers Union is a fast-growing group that has 207,000+ members and more than 50%  live and work in New York state.  The website states that there are 42 million independent and part-time workers in this country,  workers who are not eligible for benefits of any kind.  In response,  the Freelancers Union’s primary deliverable is providing affordable insurance through its for-profit insurance company: medical,  dental,  disability,  retirement and life insurance policies.  Unfortunately,  not every form of insurance is available in every state.  I cannot at this time obtain medical insurance in my state,  but all other forms offered are available.

Its health insurance company has enrolled 23,000 Freelancers in New York state.  Premiums are $225.00 – $600.00/month.  The Obama administration recently awarded Freelancers Union $340 million in low-interest loans to help the organization establish in New York,  New Jersey and Oregon cooperatives that will provide health insurance to Freelancers and others who need coverage.

For Sara Horowitz,  the goal is to persuade Freelancers to band together and set up social purpose institutions that serve our mutual needs.  “The social unionism of the 1920’s had it right”,  she stated in the March 24 New York Times article.  “They said: we serve workers 360 degrees.  It’s not just about their work.  It’s about their whole life.  We  (Freelancers Union)  view things the same way.”   See  http://freelancersunion.org for more info.

Thanks for reading,

Kim

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The Unexpected RFP

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Have you ever received an RFP out of the blue? I’ve received two and I was gullible enough to respond to both and both times I received exactly what I deserved—nada!  Really,  I should have known better.   An RFP that slips into your mail box is a Trojan horse.  In fact,  I received a phone call this morning from an unknown person who claimed that she was looking for corporate trainers  (or some such)  and wants to include me in the search,  so I am about to receive unexpected RFP #3.

In reality,  what this dame and other stealth RFP senders often want is to round out a list of candidates in accordance with their company directives,  to make it easier for them to hire who they’ve already planned to hire.  Or,  the game is to either get the job done at the lowest price,  or free consulting advice through a fake RFP.

I was caught in what I suspect was the latter game a couple of years ago by a Harvard University-run charity,  no less.  They were looking for ways to juice their fundraising strategy and invited me in to talk for an hour.  I suspect that either no one was hired,  or the person hired was pre-determined and may have been given my ideas  (and maybe also the ideas of other suckers)  to implement,  along with my pricing info as a benchmark.

Whatever the motive,  beware the out-of-the-blue RFP.  The targeted Freelance consultants gain nothing but false hope and the  “opportunity”  to sally forth on a fool’s errand.   However,  I’ve decided that if  this latest RFP is sent  ( I provided my email address),  I will respond—my way.   I will telephone the contact person and ask a few questions…..

The first question I’ll ask is,  who referred me?  The second question I’ll ask is,  who is performing that job now?  The third question,  what is motivating the change if someone is already doing that job,  whether in-house or a Freelancer? Is that person doing an unsatisfactory job and in what ways?  I shall listen very carefully to the replies.

If the answers do not add up,   I will decline the RFP and politely state that I don’t get why I’ve been invited to apply,  that I typically respond to RFPs from clients with whom I have a relationship,  after we’ve discussed project objectives.

On the other hand,  if the answers to my first three questions pass muster,  I will ask three more:

1).   Who is the project decision-maker and the stakeholders and may I meet with them?

2).   What information will the perfect RFP for this project contain?

3).    How will success for this project be measured and who holds the yardstick?

Nevertheless,  while meeting is helpful,  it is not a fail-safe.   My fake RFPs both included a face-to-face.  If you are invited to come in and speak about the project,  do so without submitting a proposal.  Give them nothing beyond an hour of your time.

If the company insists on wheedling information out of you  “What would you do in this situation…?”,  tell them you’ll be happy to discuss that going forward if it looks like you should work together.  Put nothing into writing.  If recipes to solve a problem are required beforehand,  know that it’s an RFP shake-down.

RFPs are awarded by clients with whom we have a relationship and even then,  you might not win.  Three years ago,  I brought a program concept to a decision-maker at a not-for-profit.  During a $40.00  lunch that I paid for,  I was invited to write a proposal.

Bingo! I said,  but it was not to be.   After more consideration,  it was determined that the staffing needed to support my proposed program was not available and there was no budget to hire.  I believe that the intent was not to screw me,  but I was devastated and it still stings.

So what should you do if an unsolicited RFP comes your way? Proceed with caution,  ask questions to help reveal the sender’s motives,  listen carefully to the answers and whatever you decide,  do not get your hopes up.

Thanks for reading,

Kim

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FOR IMMEDIATE RELEASE: How to Write A Press Release

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In numerous posts,  I have urged readers to send out press releases.  Despite the presence of social media outlets,  traditional media outlets still matter and the usefulness of a well-crafted press,  or news,  release continues.  When you win an award,  participate in a major charity event in your community,  teach a class, host a webinar, or debut a new product or service,  a press release should be sent to the appropriate media outlets.

Writing a good press release can be a challenge.  The stakes are high for Freelance consultants and other small business owners who must promote their products and services to target markets on a shoestring budget.  The press release is an important representation of you and your brand and it’s imperative to make it effective. Reporters might receive dozens of press releases a week,  so the relevance of your story must be obvious.  The key to success is an interesting news hook,  says Lou Colasuonno,  former editor-in-chief at both The New York Post and The New York Daily News and now Senior Managing Director at the New York City P.R. firm FTI Consulting.

Colasuonno advises his P.R. clients to consider how newsworthy their story will be to a publication’s target audience. Colasuonno also advises that the press release email subject line summarize your story hook in 10 words or less.  Your release needs a good headline,  so that the editor or reporter will immediately see how your story will impact their readers.   He recommends that you customize your press release to the editor or reporter who has responsibility for whatever your topic is,  to improve the likelihood of a response.  Finally,  he cautions that you visit media outlet websites and note publishing deadlines.  Two weeks lead time is standard for many newspapers and a bi-monthly magazine may require three months lead time.

  • Determine the story your release will tell
  • Write a  “hook”  that communicates why your story qualifies as news to recipient media outlets
  • Avoid using words and phrases that are likely to get your email blocked by a spam filter
  • Keep to a 400 word maximum release

Follow the standard format when you compose your release.   At center top in capital letters,  write FOR IMMEDIATE RELEASE and below that include the contact information,  with email address,  web address,  telephone number and today’s date.  Centered below the contact info and written in bold capital letters,  provide your headline.  If your press release must exceed 400 words or one page,  include a short synopsis of your story below the headline.

Many press releases begin with a dateline,  giving its city and state of origin in parentheses.  In the first paragraph,  summarize the story’s theme and newsworthy info very concisely.  The most significant items appear at the top of the page and less important information is stated in subsequent paragraphs.   The final paragraph gives standard company info,  including the company mission,  when the company was founded,  awards that have been received or other major achievements,  so that the media recipient will have some background information.

Add credibility to your news release by including at least one quote from someone in authority  (maybe that’s you).   An insightful quote communicates to readers why your story is important and deserves publication.  You might also add audio-visual aspects to your press release and include a YouTube or podcast link or link to a client testimonial from your website.  Finally,  it’s recommended to send your news release in the body of the email and also as an attachment,  since many editors and reporters will not open an attachment from someone whom they do not know.

Alas,  even when we follow all the  “rules”,  our press release may go begging.  Carson Stanwood,  Freelance PR/media consultant and COO of Channel Signal,  a social media analytics platform in Jackson Hole, WY,  claims that in his experience,  only about 10% of press releases receive a response from recipients.  He recommends that you follow-up your press release with a phone call and cautions that you not call daily or otherwise make a pest of yourself. I prefer to call the editor or reporter first,  to determine whether there is interest in my story.

I pitch first and then send the press release if appropriate.  My strategy does not always work,  because editors and reporters sometimes lie,  unfortunately.  Really,  whether your story sees the light of day depends on what other news is happening and what the editor or reporter finds compelling.  But keep sending out press releases when appropriate,  because that is how relationships with the media are developed.  Offer to take a business reporter or editor to coffee and pitch your story in person.

Thanks for reading,

Kim

Sales , , , 2 Comments

Pick Up the Phone and Sell

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Reaching decision-makers becomes more difficult every month.  No one answers the phone,  unless they already know me.  Once I’m on an assignment,  98%  of communication happens on email and that’s OK for all concerned.  But what if I’d like to follow-up with a prospect I’ve met somewhere and he/she suddenly gets elusive?  Or what if some influential person says,  “Call so-and-so and tell him/her that I told you to call”  and then that person never picks up?

Playing telephone tag with someone you want to connect with is a real drag and a time-waster.  If there is a way to get the Very Important Prospect to either pick up the phone or holler back,  you need to know it.  Sales guru Geoffrey James,  author of  “How to Say It: Business to Business Selling ” (2011)  says that if an assistant takes the call and offers to transfer you to the VIP’s voice mail,  ask if VIP actually listens to voice messages.   Evidently,  a significant minority of people do not listen to voice mail and consequently,  do not return calls.

As book publicist Yen Cheong observed in an April 1, 2009 New York Times article,  “Once upon a time,  voice mail was useful.”   Ms. Cheong communicates primarily by text and occasionally by email.  “If you left a message,  I have to dial in,  dial in my code.  Then once I hear the message,   I need the phone number.  I try to write it down and then I have to rewind the message to hear it again.”

Sometimes,  a land line voice message will include  a cell phone number to call.  Dial the cell phone.  If VIP answers,  thank him/her for taking the call,  cut to the chase and state your reason for calling,  referencing either the person who recommended that you make  contact or follow-up from a previous conversation.  If you were invited to call and make an appointment,  then ask if that is possible now.  VIP may be able to schedule an appointment right there on the smart phone.   If not,  you will be given a better time to call the office land line.

To set the stage for an appointment,  offer to send some relevant piece of information that keeps the ball in play and initiates an action that  is easy for your VIP to digest without feeling pressured,  making it more likely that future calls will be accepted.  Confirm the email address and  send ASAP.  Resist the temptation to launch a sales pitch,  unless VIP opens the door by asking questions.  Even then,  be very concise and respectful of time.  People on cell phones are often in transit or otherwise distracted.

The pearl of this story is text messaging,  a tactic which I’m willing to bet most of you haven’t tried when pursuing a prospect.  So why not?  According to a 2008 study for Sprint by Opinion Research Corporation,  91%  of people under age 30 respond to text messages within an hour.   Adults aged 30 and older are four times more likely to respond to text messages than voice messages.  So if the VIP’s voice message includes a cell number,  pounce!

Web developer Charlie Park says text messages are more respectful of the recipient’s time.   Text information or your intent to send same,  or ask for an appointment. Texting is an efficient tool to keep the sale moving forward and much more effective than telephone tag voice messages,  which only cause your prospect to give up on you,  because the two of you can’t connect.

The next time you call a VIP and the assistant answers,  ask if voice messages are listened to and also ask if texting is possible.  If you can’t confirm that info,  try sending a text anyway.   You might be pleasantly surprised by a prompt reply and a successful telephone sales call.

Thanks for reading,

Kim

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Content Marketing Is the New Ad Copy

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Several times this year,   you will be presented with opportunities to advertise your Freelance consulting services in a print or online publication.  You probably belong to at least one professional networking organization,  whether it’s one that caters to peers in your field,  or a local business association.  The organization will have a newsletter and a directory and you will be asked to make the decision about buying an ad.  What should you do?

The answer is to confirm your budget after checking out the rate card and jump on it if you’re able.  Consider the advertising opportunity as an extension of whatever content marketing you produce.  If you don’t write a blog or newsletter,  then ads are  your content marketing and you must make the most of them.

Consider who will see the ad.  If potential clients are members of the organization,  then you definitely want to advertise in newsletter and directory.  Additionally,  there is  a second audience for your advertisement,  the organization big shots.

Placing ads with the newsletter and/or directory of the right organization will cause the big shots to look upon you more favorably.  They will likely reward you with valuable opportunities for exposure.  In exchange for your ad,   you can expect to be invited to moderate or speak on a panel or receive some other showcasing opportunity.  You may even be nominated to become an organization big shot yourself.  It’s a political thing and if you can scrape together the budget,  you are advised to join in.

Frame your approach to the ad in terms of content marketing,  that ubiquitous new term for advertising copy.   Content marketer and ex- advertising executive  Barry Feldman says that first,  determine what potential clients need to know about where and how your services fit into their business needs and then decide what action you want them to take on the road to hiring you to solve those needs.  Those pillars shape your ad copy,  i.e. the content marketing message.

Your content must be compelling,  communicating the story and providing  information that matters to prospective clients,  even if the audience consists of your peers and not prospects.   Peer organization big shots may be good referral sources,  so take the time to produce persuasive content.  Because life has become a barrage of marketing messages emanating from various media,  create content that makes your ad pop.  Spotlight three or four primary services maximum,  so potential clients and referrers will not become confused about what you do.  Hire a graphic artist to design a sleek and eye-catching ad.

Be authoritative,  never arrogant,  and perhaps be  a bit provocative as you concisely describe the challenges that cause clients to hire you and the unfailingly excellent results that you deliver.  Weave in terminology that clients use,  so that content will resonate.  Remember the call to action,  to inspire prospects to call you when in need of your kind of services.   After they’ve read your ad and decided they might want more info,  what do they do? You must tell them.

Maybe they send you an email or give you a call,  which gets a conversation going.   Maybe they go to your website and fill out a short questionnaire to get the ball rolling.  Generating prospective client follow-up,  also known as in-bound marketing,  entices prospects to commit to evaluating the fit between your services and their needs.  Most ad viewers won’t take the plunge,  but if even one does you will be on the road to good ROI for ad dollars spent.  If you get invited to a meeting with your prospect,  you will be 85%  of the way to a contract.

As I’ve said before,  social media gets all the headlines,  but tried and true forms of advertising are still able to deliver results.  Advertisers must approach ad copy as content marketing now and aim to teach as much as sell.   From the Mad Men era to the new millennium,  if you tell the story in a way that grabs prospective clients,  you will get the sale.

Thanks for reading,

Kim

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Taxes: The Home Office Deduction

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Are you about to do your taxes,  Freelancer friend?  Read this post first and find out if you are able to deduct expenses for your home office.  The IRS sets a high bar for this deduction,  but if you pass the qualifiers,  it’s all yours.  Tele-commuters and outside sales reps might also deduct home office expenses.

1.   The space must be used exclusively and regularly for business purposes only and not for your personal life.  The space must be used regularly for business  and not just a few times a year.   Those who live in small apartments are at a disadvantage because no room can be consigned to business only.   However  if you use the space regularly for business,   it is not necessary to partition it off to demonstrate that you have established a separate workstation.   A desk in a corner of a room qualifies as a workstation,  along with a  “border”  of a few square feet.  Outside sales reps who must store product samples and marketing collateral at home can also include storage space square footage in the home office deduction.

2.   Does your home office exist primarily for your convenience,  or for the convenience of your employer or clients?  If your employer or clients have provided a location at which you may regularly conduct business,  then you are not allowed to deduct home office expenses.  To take the deduction,  you must have no other work space available  (you and your computer at Starbucks is not a disqualification).  Employees and independent contractors may have to give documentation to the IRS.  A letter from the employer stating that there is no office space provided for you and/or receipts for un-reimbursed business expenses and supplies will suffice.

3.  If you have more than one home-based business,  all businesses must meet the first two tests:  you cannot have any office space made available to you by a client or employer and you must devote that space  exclusively and regularly to business.  If any entity for whom you work provides regular office space for you,  then you are not allowed to claim the home office deduction and it’s an all or nothing proposition.   However,  disqualification from the home office deduction does not mean you cannot deduct other business expenses.  You are still eligible to file Schedule C  (Freelancers/Independent contractors)  or Form 2106  (outside sales reps and other employees)  to deduct other un-reimbursed expenses incurred while doing business.

Are you ready to complete Form 8829 Expenses for Business Use of Your Home?  To get started,  measure the number of square feet used at home exclusively for business purposes  (maybe measuring storage closets and the area of your desk,  plus a  “reasonable”  border,  instead of an entire room)  and divide that number by the total square feet in your home.  If your office is 12′ x 12′,  you have 144 square feet of office space.  Let’s say your apartment has 750 square feet of space.  Divide the area of your office by the area of your apartment: 144/750 equals 0.192,  or 19.2%.

That figure represents the percentage of your home that is devoted to business,  the percentage of the year’s home expenses you may charge off to the business and deduct.  There are direct expenses and indirect expenses to calculate.  The fraction applies to indirect expenses,  i.e. the total year’s utilities,  rent/mortgage,  taxes,  home insurance,  etc.  For example,  if you spent $800.00 on last year’s electricity,  you may deduct 19.2 %  x  $800.00 or $153.60 for that category.  Expenses incurred solely for the benefit of your workstation are the direct expenses.  Office supplies,  postage and office furniture are direct expenses.  Add your direct and indirect expenses.

The final test is,  does your home office deduction exceed the revenue generated/income?  Your home office deduction cannot exceed the money generated.  So if your business earned $1000.00 and your home office deduction adds up to $1200.00,  you may only claim $1000.00 for your home office deduction.  But that extra expense does not get wasted.  You may carry it forward to add to a future home office deduction in a year when revenue exceeds expenses.

The bottom line Form 8829 number is recorded on Schedule C  (Freelancers /Independent contractors)  or Form 2106 and Schedule A  (outside sales reps and other employees).  Employees must itemize deductions  (hence Schedule A),  to which the home office deduction is added to other un-reimbursed business expenses and all other Schedule A deductions.  Those deductions must exceed 2% of your adjusted gross income.  For more detailed information specific to your situation,  speak with an accountant or tax attorney.

Thanks for reading,

Kim

Survival Strategies , , , 1 Comment

Where the Freelance Money Is

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You’ve written a business plan—now what?  Kim is the midwife who helps you take your business from the drawing board to reality in  “Business Plans:  Next Steps”.  Bring your completed business plan and join Kim and other hopeful entrepreneurs in round robin discussions where you’ll get a critique of your business model;  smart marketing/PR/social media  advice;  insights into sales distribution channels that make sense for you and your customers;  and suggestions on how to finance your business in today’s economy.  Wednesdays March 13,  20  & 27  5:30 PM – 7:30 PM at Boston Center for Adult Education 122 Arlington Street Boston.  Register at  http://bit.ly/Zd9dqR   or call 617.267.4430 class ID 9074.

Some Freelancers are more likely to earn the coveted but elusive six-figure annual revenue than others.   Maybe you’re there or could be,  with some good luck and timing,  opening doors with the right skills.  Here are six potentially lucrative occupations that attract Freelancers:

Writing

Magazines do not often pay $2.00/word anymore and there are only so many 5000 word articles bring commissioned in this era of short attention spans,   but allegedly there a number of Freelancers still able to pull in big money through writing assignments of various kinds.  This category includes not only magazine and newspaper article generation,  but also technical writing.  I am acquainted with two or three Freelancers who’ve made a nice piece of change in the latter category.  It’s very boom and bust,  but the money is sometimes there.   Also,  Freelancers pay Freelancer colleagues to produce content for websites,  blogs,  newsletters and marketing collateral.   Writers need no special equipment,  other that a computer and writing software like Apache OpenOffice or Scrivener.  

Translating

I have a friend who regularly gets assignments translating Arabic and German to English and vice versa  (hello George!),  although he has other revenue streams in addition.   According to the American Translators Association,  their certified translators average $72,000/year and those without that certification average $53,000.   As you’d expect,  much depends upon the language you translate.   No surprise that there is a big demand for Spanish translation,  with Arabic,  Chinese (Cantonese and Mandarin),  French,  German,  Japanese and Korean also showing strong demand.

Photography

Photography has long had the potential to produce a healthy Freelance income.   Wedding photographers have traditionally commanded large sums and they continue to do so,  in spite of robust competition from videographers.   Portrait photographers also command high prices—business owners and corpoate execs need a professional headshot for websites,  annual reports and other promotional uses.   E-commerce fattens the wallets of product photographers,  who make items sold on-line look appealing.  Food photography and fashion photography are lucrative sub-specialties.   Those lucky enough to have an  “in”  with colleges and/or big corporations can make a nice living,   as do those who have relationships with busy special event planners.  The downside is that good cameras and Adobe Photo Shop editing software are expensive.

SEO Search Engine Optimization

Freelancers who hope to drive traffic to their website pay confreres Freelancers for this potentially revenue-generating service.   Those new to the field can expect to bill $50.00/hour and allegedly the best known can command up to $500.00/hour from big corporate clients.  It is furthermore essential to be well-versed in the various metrics that prove your worth to clients,  so that satisfied customers can be recruited to give testimonials that help you obtain more clients.

Mobile App Development

Writing software applications for mobile devices like cell phones and tablets lured one million Freelancers to the field in 2010 and no doubt that number has grown significantly.  App development is like a modern day gold rush.   I recently read an article in the New York Times  (11/17/12)  about those who aren’t making money in the app development business and that is the usual scenario.  As author David Streitfeld details in his comprehensive article,  don”t quit your day job and developing for Apple is akin to sharecropping.   Still,  you may be the one who can retire on the residuals of the next  “Angry Birds”.  Another downside is that you must spend a hefty sum on the technology needed to test your apps in development.

Social Media Strategy

Millions of Freelance consultants and owners of businesses large and small feel that social media cannot be ignored and that in order to maximize its potential and not leave money on the table,  a specialist must be hired.  If you can convince decision-makers that you know how to choose social media that is appropriate for their business,   plan and execute a social media campaign and know how to  demonstrate measurable results,  you can be off to the races.  Newbies to the field can expect to bill $25.00 /hour and top-drawer known experts can allegedly bill $250.00 /hour to big corporate clients.

Thanks for reading,

Kim