(Art Credit: Sisi Recht)
Working as a freelancer offers a lot of advantages such as the freedom to choose where and when you work. However, there is one major drawback – unstable income and uncertainty of what tomorrow brings.
Insufficient capital or cash flow is considered as one of the main challenges small business owners face, accounting for 23% of cases of business failure.
As a freelancer, you don’t get paid a fixed amount of money each month and you have to make sure that you are booked with projects a few weeks or even months ahead. Relying only on a couple of clients can endanger your cash flow at some point. What if they suspend projects simultaneously or run out of cash?
If you want to gain a bit more stability and maintain your cash flow, you should consider developing multiple streams of income. Diversifying your income will help you stop worrying about your finances and give you a chance to enjoy the benefits of freelancing to the fullest. So what options do you have?
Passive vs. active income streams
Most freelancers focus on generating active income – taking up more client work and trading their time for money. Active income is the easiest stream to establish when you just start. However, in the long run, you won’t be able to stretch your day beyond 24 hours. As your time is limited, to grow your freelance business, you will also have to diversify your active income streams with passive income.
Generating passive income doesn’t require your time and effort once this revenue stream starts to work. However, you usually have to dedicate a lot of time in the beginning and establish the right habits to get it to work. So what projects could contribute to building passive income?
Think of online courses, paid community access, selling books, and affiliate marketing.
For example, Jon Loomer, a Facebook Advertising expert, promotes his online training on Facebook conversion events by selling two products – lifetime access to his course and monthly recurring access.
If you decide to create a course about becoming a successful freelancer, it will take time to prepare materials, record them in either audio or video form, edit, and, most importantly, promote them. However, once people start buying your courses, you don’t have to do much.
Ideas for income streams
Let’s review some of the most popular income streams that you can start developing for your freelance business. Pick two or three the most suitable and the easiest to develop.
Client work is one of the active income streams. Getting more work to increase your earnings is not always possible. If you no longer have the capacity to take up more client work, think of the ways how you can charge more for the work you do for clients.
Sometimes, raising your rates means rethinking your target persona. If you have focussed on working with startups that haven’t reached the break-even point with their products, you might explore other market segments and target your services at companies that are now at the growth strategy and have bigger budgets for services that you offer.
Once you know what client can be more profitable for your business, you can draft a strategy to attract such clients through various channels. Implementing this strategy can also mean tweaking your website copy, so it communicates the right value proposition for your new audience.
If the kind of consulting or client work you do is highly specialized – let's say, you advise medical practices on new equipment purchases or assist law firms on new acquisitions – your prospective client may be reluctant to hire you because the expense of new medical equipment or buying another firm might be too expensive, what can you do to get that business?
One tactic might be to point them toward revenue-based finance options. These are financiers who invest in projects like this and are repaid from future revenue. By helping your client to finance this way, you make yourself indispensable to that client while securing the client’s project work for yourself.
Subcontracting is one of the ways to get started with passive income. If you are an IT consultant and advise companies with implementing new technologies, you shouldn’t necessarily implement code all on your own. Instead of doing more client work, you can source a few good developers who can take up projects you wouldn’t otherwise implement by yourself.
You can then charge your client a certain amount of money and pay subcontractors once the work is done. Preparing good estimates and setting up reasonable margins to earn on each project is the key to your success with this income stream.
Finding good specialists is not always easy. That’s why you have to start with establishing a network of tried-and-tested professionals and be ready for the situations when your client suddenly requests a project.
Online courses are one of the most attractive ideas for freelance experts who like to share their knowledge with others, have the skills to record and post-produce visual materials, and have a good understanding of how course platforms work.
You can create a course and publish it on popular course platforms such as Udemy. However, if you choose this option instead of publishing on your website, you will face fierce competition from other professionals who offer similar courses. This factor can also make you set a lower price on your course than you plan.
To check competition in your niche on popular course websites, head over to Udemy and choose your category. For example, with a quick search for online marketing courses, I have ended up with hundreds of options on Udemy.
If you want to create premium courses and sell them online at a higher rate, setting a course on your website is always a better idea. This option is perfect if you want to build your brand and are ready to invest in creating a community of fans who will buy your course.
To promote a course, you have to build a strategy on distribution channels such as Google and Facebook ads, podcasts, YouTube channels, and SEO optimization to get more people to land on your course landing page and generate more sales.
Among your potential clients' list, some companies don’t want to outsource work to external freelancers, but instead, want to keep the knowledge in-house. They also have people and other resources to perform work within their team. However, young teams often lack the know-how.
By offering consulting services, you can charge much more than what you would do for client projects. You would also spend less time on consulting work than you are doing on client work. By engaging in consulting, you can continue working with clients who you would otherwise lose as they wouldn’t plan to work with external contractors.
As a freelancer, you like using certain tools that you can also recommend to clients. That’s an opportunity to develop affiliate marketing into another income stream. When thinking of affiliate marketing, you probably believe that you should have a blog where you could hyperlink promoted products.
Surprisingly, you can engage in an affiliate marketing strategy even if you don’t write a blog. You can promote a tool during your call with a client and then send a link by which your client can sign up for it.
Some software solutions such as Unbounce have affiliate programs that incentivize both an affiliate and a buyer. They offer hefty commissions to their affiliates as well as a discount to referred users.
For your client who is looking for a tool like this, it’s worth using an affiliate link, because they can save money. It breaks all objections about using affiliate links!
Selling a book
Publishing a book shouldn’t necessarily be an expensive option. With self-publishing, you can cut the costs of publishing a book, maintain full rights to it, and keep all revenue coming from sales.
If investing in printing a book is not an option for you, you can consider writing an ebook to sell in a digital form.
No matter if you choose to go with a digital or traditional form of publishing, you should spend quite a lot of time on writing a book. Also, similar to online courses, to sell a book, you should have a loyal community that would want to buy it.
It means you would have to work out a strategy for the distribution of your promotional content. Here are some of the ideas for promoting a book:
- conduct regular webinars and choose the best webinar platforms to drive the interest of your subscribers;
- hold Facebook live sessions to land more sales;
- set up Google and Facebook ads (especially as retargeting);
- optimize your sales landing page for SEO;
- create a referral program and find partners who would promote it for you.
There are a lot of options you can choose from when it comes to developing additional income streams. Make sure you don’t overstretch yourself at work by focusing solely on active income streams such as client work or coaching.
Consider balancing active revenue streams with passive ones, so you can earn money even when you don’t work.
It’s up to you what streams you want to start building – your preferences can also be affected by the niche in which you operate. Make sure you explore one revenue stream at a time.