How To Increase Your Freelance Marketer Profit
The most common question I hear from social media marketers and freelance copywriters is, “How do you make more money?”.
Unfortunately, by asking a broad question, you will only get a broad answer. Instead, look at your current business finances to determine 1. If you’re actually making money, 2. Whether your business is profitable, and 3. If it’s still profitable after you pay your taxes.
And then, after you’ve determined your “True Profit”, you can start figuring out how to make more of it.
Surprisingly, most freelancers don’t follow this process. Over 90% of freelance marketers we polled don’t know how profitable they are, and the rest were less profitable than they thought.
You may be one of them.
And if you think you’re making more money, you’re likely spending more money, which is bad for your business.
As a solopreneur, you’re running your own business, meaning you’re responsible for your own business finances.
And unlike employees on a corporation’s payroll, you are responsible for your own taxes.
While the larger business community generally defines profit (or EBITDA) as the money a business has left over after expenses but before taxes, you need to be keenly aware of your ongoing tax obligations if you’re going to build a successful business.
As a freelancer you need to know your True Profit.
WHAT IS “TRUE PROFIT”?
True Profit is the cash left in your pocket after everything and everyone relating to your business is paid off – bills, contractors, and taxes. It’s the actual money you have remaining to pay yourself.
TRUE PROFIT FORMULA
The simple formula to calculate True Profit is Revenue – Expenses – Taxes = Take Home Pay. And there are only three ways to increase True Profit:
- Increase Revenue
- Decrease Expenses
- Decrease Taxes
Here are the most effective and straightforward steps to positively impact each of the three variables in the True Profit formula.
1. Increase Your Revenue
Growing your business’ revenue is the single most powerful step you can take towards ultimately growing profit.
Increase your revenue by adding more clients, selling more products, and raising the rates of your service or product to reflect the fair value of what you provide.
Easier said than done, right? Growing your marketing business income isn’t as hard as you may think.
In fact, the two best methods to drive revenue through the roof are entirely customer-centric.
And if you act on these two steps, your customers will go out of their way to help you grow your business.
The first rule of growing revenue is wow your customers.
As a marketing consultant, always over deliver, regardless of what you’re selling.
When your customers have a question or problem – answer promptly and be responsive, honest, and thoughtful.
Make sure they have a way to reach you – phone, email, even text or chat; whatever is easiest.
Just because you’re a marketing expert doesn’t mean you can’t provide an excellent customer experience.
And if you don’t have customers yet?
Refine and perfect your value proposition: what benefit are you providing?
What problem are you solving?
Then take that value prop to your friends and family and ask them what they think.
If they’re afraid to give you real feedback, ask your potential clients.
For true validation, ask for their business or what you can improve to get their business.
THE POWER OF REFERRALS
The second rule of growing revenue is understanding the power of referrals.
Word-of-mouth is the strongest form of advertising, so focus your efforts on generating this type of buzz.
Referrals from customers that you’ve wowed are the cheapest form of customer acquisition.
Some of the most profitable companies in the world don’t spend much on advertising; their customers do it for them.
If you’re actually wowing people with your product or service, referrals will come naturally.
But it’s still important to stay top of mind with your clients and make it easy for them to refer you.
If your clients know you are fast to respond (as part of your customer service), they will feel even more confident referring you knowing that you’ll make them look good.
And don’t forget to show gratitude to your clients for their referrals.
Earnestly implementing these two steps maximizes the lifetime value of each customer by building repeat and referral business, which is crucial to growing revenue and profit as a freelancer.
2. Decrease Your Expenses
Now that we’ve covered the most important aspect of increasing profit, let’s talk about the second-most important factor: shrinking your expenses.
Set up a dedicated checking and credit card account for your business that’s separate from any of your personal accounts.
Having separate business accounts makes it much easier to see your total business expenses quickly and to identify categories where you can trim your costs, especially if they don’t add real value to your business.
For example, Mark, a self-employed social media consultant, pays a local web designer $500 per month to manage his website, which includes ongoing SEO and analytics services in addition to hosting.
This expense is 25% of his business’ monthly overhead. Mark could only pay the designer for SEO services and host the website on his own for $10 a month on GoDaddy.
He negotiates with the web designer to continue performing SEO for $250 a month.
Including his new hosting fee of $10, Mark saves $240 a month which directly increases his profit before taxes.
3. Decrease Your Taxes
Did you know it’s possible to increase profit while keeping your taxes the same or lower by taking all business deductions you’re eligible for?
If you follow the steps I’ve outlined to increase revenue and decrease expenses, your profit is going to grow (which is awesome). But since taxes are calculated on profit, more profit means more taxes.
But don’t worry. There’s a simple task you can do which is often overlooked by many freelancers: increasing tax deductions.
If you can believe it, the average freelancer leaves over $3000 on the table every year by not taking all available deductions and paying too much in taxes!
Any money spent advertising your business – either online or in print – is a deductible expense, along with conference fees, professional subscriptions, the business portion of mobile phone and internet bills, and a host of other expenses.
Check out the full list of top tax deductions for freelance marketers and copywriters here, which goes into detail on topics like what your home office deduction might be worth.
Since freelancers are business owners, you list your business revenue and expenses on “Schedule C” of IRS Form 1040, which helps calculate your taxable profit. Make sure to read the instructions for these forms as well as consult your tax preparer, if you have one, for deductions specific to your situation.
You’re a business owner and marketing professional. You’re not an accountant or tax scholar. Your time is best spent where you provide value as a marketer: building and communicating your client’s message.
At Hurdlr, our passion is automating steps #2 and #3 so you can focus on #1: creating and delivering real value to your clients. Download Hurdlr now so you can set your finances on autopilot and start growing your True Profit.