What one of the things I love most about freelance writing is that I only need a few tools to get my job done. I can work nearly anywhere and any situation. I prefer my laptop and an internet connection, but if I have a pen or pencil and some type of paper, I can be just as productive. Because there are only a few necessary resources for writing, the operating costs for a freelance writing business are low. You can have a successful writing business without spending much, or even any, money on the actual business.
Phone and Internet
Internet service is one of the most crucial aspects for my business. It's absolutely necessary for communicating with clients, researching, and sending my work. I could work at the library, a local coffee shop, or any other business that has the internet, but I prefer the convenience of being able do everything from home.
I don’t use the phone much in my business, but I know that other writers that do. You can use your personal phone for your writing business if your call volume is low. Consider getting a Google voice number to use specifically for your business, especially if you don't want clients to have your personal phone number.
Marketing costs
These vary depending on how you market your business. You may have to pay for business cards or brochures. If you have an online portfolio, you’ll have annual domain and webhosting fees, perhaps $70 or more each year.
Computing and software
Thankfully, we don’t need the most advanced computer or the latest version of Microsoft office. A good laptop will cost from $600 to $1,200 and probably last two to four years. Knowing this, you might set aside money each month, $20 to $50 is good, so you can afford to replace your computer when it's necessary.
Once you purchase a document processing software, it can outlast your computer. I'm still using the 2008 version of Word, which is fine for the clients who prefer their work in .doc or .docx format. There are also free options for creating documents, like Open Office and Google Docs.
Accounting costs
You can do your own accounting or you can hire an accountant. Doing it yourself is cheaper, assuming you do things right. Doing it yourself, you'll still have tax preparation fees, unless you do your taxes by hand using paper forms. You’ll also pay an additional cost if you use an accounting software for invoicing and billing.
Payment processing fees
If you accept payments through a third-party processor, you’ll typically have to pay a percentage of each transaction. For example, Paypal charges 2.9% + $0.30 for transactions. Paypal fees are slightly less if your monthly sales are more than $3,000.
Self-employment taxes
All workers pay taxes, but self-employed workers are required to pay self-employment taxes on net earnings. The Temporary Payroll Tax Cut Continuation Act of 2011, makes the self-employment tax rate 13.3% for 2012 (as it was in 2011). Otherwise, the rate is 15.3%. We have to pay self-employment tax in addition to federal, state, and municipal taxes.
Books, magazines
You might subscribe to magazines or regularly purchase books within your niche. If you want to lower that cost, you can stay up-to-date by borrowing books and magazines from the library or by reading on the web.
Overhead for freelance writing is very low, which is good because it means you get to keep more of the money you earn. What other business-related expenses are fellow freelance writers paying?
Excellent list!
Gas is another expense. Sometimes, local clients like to meet face-to-face. Personally, I prefer to take advantage of Skype and or my cell phone. The former is a great tool for video chatting. For example, if you’re co-writing a book, book series, screenplay, eBook, etc., you can use Skype to meet instead of getting into the car, burning gas and spewing emissions into the atmosphere; and fighting traffic and flying debris from semi-trucks. 🙂 The latter isn’t fun, especially when your car gets hit by an extra, extra large rock. This happened to me yesterday as I was traveling 60mph down the highway. I was thankful the rock didn’t crash through my windshield. Furthermore, I was thankful I was able to “snap” my dome dash light casing back into place. I only hope that the rock didn’t damage other vehicles or hurt anyone.
I may make it a policy that a client has to be in a certain mileage range for me to meet with them face-to-face. I had clients in Florida and Vancouver, B.C., when I lived in Arizona. It wasn’t a problem to communicate with them via email and or phone when necessary. I’ll think about implementing my ‘new’ policy.
I forgot to mention that freelance writers could keep track of their mileage and use it for tax purposes.
That’s true! Mileage or car expenses, if you use your car for business. I also keep track of the miles I drive to the library or bookstore when those trips are business-related.
As Amandah says, transportation – car expenses in my case often result in a nice deduction… this is a great list.
I’d comment I plan/budget for updating my desktop – my preferred working computer – every two years. Sometimes I go three, but when I’ve already saved the money the transition isn’t quite so painful.
Yes, Amandah! I just received a discount on my auto insurance renewal because I work from home. Every little savings counts. Thanks for the great list, LaToya.
Great post, LaToya! About PayPal, how do you make up for those fees? Do you write them off on your taxes or consider those fees when quoting prices to clients?
Wow! That’s something I haven’t considered, Amandah — keeping track of car expenses. Mileage going to networking events, the library, bookstore, etc. adds up! 🙂
I can’t speak for LaToya, but I do both Jeanna. My rates account for fees related to payments. And the Paypal fees are a business expense, so they’re written off like other business expenses.
You know, there are all these little things around the home – higher power bills (which you can claim as a business expense, at least here), more coffee (ditto – it’s the law for businesses to provide tea and coffee for employees), and even things like toilet paper (which you probably could claim,but just no).
There are all kinds of things that employers pay for that you have to account for – one really nasty one is NZ’s accident compensation scheme. It’s kind of like insurance, where if you have an accident or suffer some other injury – workplace or otherwise – you get compensated out of those levies rather than being able to sue someone. You take it for granted and hope you won’t ever need it, until you have to pay for it yourself…
Although a freelance writing business can be run on the cheap, we can’t forget those items that don’t jump right out at us, but which can come up each year, at least for me and the colleagues I’ve talked to: webinar/teleseminar/online/offline registration costs, ink cartridges, expo/conference fees, bank fees, tips and yes – transportation fare and/or gas, etc. I say this, because I have basically the same list as above when I start out preparing for my tax submission, but when I pull out my receipts in April for my accountant, I’m constantly saying to myself, “Oh yeah, I forgot about that category . . . and that . . . and that . . . and that.
I think an important cost to consider is how much it costs to buy professional membership on certain networking sites. I certainly did not anticipate the advantages that paid membership can give you, and I think it makes a big difference – though I do not yet have enough to afford paid membership on any of the sites I use!!