Again, and not to beat a dead horse, but it’s crucial that you handle your books regularly. If you need assistance then contact a bookkeeper such as Erin. Don’t neglect this chore.
One last point I’ll make, regarding managing your finances, is that you need to understand the difference between not having any business and not having any money.
I’ve consulted for way too many small businesses who call me freaking out because they have no money in the bank. The freaking out entrepreneur, however, starts these conversations by saying that business is dead. In other words, they assume that the fact that they’re broke is due to business being slow.
Upon talking to such people, however, it turns out that they actually have quite a bit of business. It’s just that they spent the money as fast as it came in, usually on indulgences (including large indulgences such as high end cars).
“Not having any business” would mean that you’re twiddling your thumbs and that you have nothing to be working on. If you’ve got a mountain of work to do, and no money, then it’s probably a sign that you need to practice better financial restraint.
It is vital that you manage your administrative tasks as well as affairs involving your finances. Administrative tasks include timely filing of any necessary documents with the Secretary of State, keeping your business licenses up to date, and so on.
Not keeping these affairs in order could be devastating. You don’t want to be sitting there, in the middle of a coding project, only to find out that you’ve lost your legal right to do business for the time being, all because you didn’t file a piece of paper with a regulatory entity. Know your licensing and regulatory requirements and, if necessary, hire an attorney to help you with these matters.

Freelancers must manage their development in an efficient manner

A freelance developer’s “substantive” work consists of the tasks which they are actually paid to perform. In other words - development work.
If you’ve come this far into this guide then I think it’s fair to assume you’re interested in making money. Assuming that you are on a quest for prosperity, and that you haven’t read this article because there was nothing interesting at the public library, we’ll devote this section to making your substantive work as profitable as possible.
As mentioned above, the key is to identify your high value activities and to ensure that such activities receive a serious and efficient time commitment on your end.
To help you get there, this section will discuss the need to focus on the right tasks, how to make sure you’re putting in the right amount of time, and tips for making sure that you’re using that time efficiently. If you focus on these things, then you’re likely to make more money. If you don’t…then you’re not.
The most important part of getting rich is making sure that you’re focusing your time into higher value activities. This concept is pretty simple: identify the tasks which yield the best results and do more of those tasks!
While that sentence may leave you going “duh,” you’d be surprised at how many entrepreneurs fail to recognize this concept. Let’s look at some specific examples, both in terms of your substantive work and your marketing activities.
Suppose you develop what you consider to be a typical small business website for $3,000. The site includes multiple pages, lots of media, and extra functionality (such as online ordering for a restaurant).
Now say that such a project typically takes you about twenty hours to complete. This means that this type of work yields you $150 per hour ($3k/20 hours).
Now suppose that you can drum up work building one-page “starter websites” for small businesses for $500 a pop. You can typically handle such projects in two hours (given that you’ll likely develop a number of templates to work from). This means these “starter” sites can be completed at a rate of $250 per hour ($500/2 hours).
While the latter may pay less in total than the former, it actually pays more per unit of input. A developer who actually wants to make money would focus on doing more “starter” sites and less on the larger projects I mentioned.
While the math I just laid out may seem obvious, you would be shocked at how many developers (and small business owners for that matter) fail to focus on the work which yields the most per unit of input. This can be due to not keeping track of the inputs (i.e. not tracking how much time you’re putting into something) or simply focusing on the price tag as opposed to the hourly profit.
Whatever the reason, those who fail to identify their most profitable activities, and focus on them, are making a big mistake.
Mark Cuban is on record as saying that diversification is “for idiots” and Warren Buffett is on record as referring to diversification as “madness.”
This is also true when it comes to the activities you are engaging in as a freelancer. If you identify an activity as being more profitable than any others then it makes NO sense to engage in other activities. Instead, you should be trying to drum up as much of that profitable activity as possible.
This is true in terms of your substantive work, your marketing activities, and pretty much anything else. In short - focus on high value activities.
Once you identify your high value activities then it is vital that you put a lot of time into them. Think about how much you need to work should as a function of efficiency and time (a few speeches from Elon Musk really opened my eyes to this).
Consider it in these terms: Jill and Joe perform similar tasks as freelance developers. Jill, however, works twenty-five percent more efficiently than Joe, meaning that Jill can get twenty-five percent more done in an hour.
You might think that Jill is going to make more money than Joe, right? The problem, however, is that Jill only works thirty hours a week and thinks her increased efficiency makes up for any lost time. Joe, by contrast, works forty hours every week. At the end of the week, Jill’s thirty hours of work will produce the same amount that Joe would produce in 37.5 hours (30 hours worked by Jill * 1.25 of Joe’s efficiency).
Since Joe works forty hours each week, he’s going to get more done than Jill. Since Joe produces more than Jill, due to his better work ethic, he will make more as a freelance developer. If Jill had just worked forty hours, like Joe, then one week would yield an amount of production that would have taken Joe fifty hours (40 hours * 1.25 Joe’s production = 50).
What you can take from the epic story of Jill and Joe is that you have to put in the hours while working as efficiently as possible.
The foregoing concept is why I put a minimum of 43.3 hours into my business each week. My hourly requirement of 43.3 hours is based on a simple formula: if I’m working at the same level of efficiency as some hypothetical person, and that individual only works forty hours a week, then by putting in 3.3 extra hours per week I add one working month to my year.
In other words, someone working at the same level of efficiency as myself, who is only putting in forty hours a week, will take thirteen months to equal the level of production I reach in twelve months.
It’s important to stress that the average of 43.3 hours a week is a minimum that I put in. If there is additional work which must get done due to some type of deadline, then I put in extra time. Any extra time that I put in can then be taken off from a later week.
When working efficiently, however, it isn’t too often that I have to go over my 43.3 hours. By adding an extra working month to my year, using this method, I feel my production greatly increases.
The point of putting in your hours is so important that I’m going to rant about it for just another moment. An overhyped belief is that it is important to work “smarter not harder.” To this idea I say:
It is, instead, important to work smart and hard. I deal with plenty of self-employed individuals who put in many of hours and manage to get nothing done. This is because they work in an extremely inefficient manner. You can put in sixty hours a week, but if you’re only working at fifty percent efficiency, then the average Joe will equal your production in just thirty hours a week.
At the same time, the math shown above in the hypothetical about Jill and Joe shows that you do need to put in the time. This is why the amount you produce, which largely dictates how much you make, is a function of both working efficiently and putting in the time. There can be no compromise on either.
Here’s an important tip, which I cannot stress enough, for working as efficiently as possible: always assume that you’re operating inefficiently.
I work with way, way, way (way) too many people that are convinced that they are operating in an efficient manner. After going through how they do things, however, it quickly becomes obvious that improvements can be made.
My approach to my business is to assume that I am inefficient and to be in a constant state of trying to do things better. Remember that no matter how well you think you are doing, there is always room to do better.
Now that we’ve gone over the importance of identifying high value activities and putting time into them, let’s give some specifics on how you can run your business more efficiently.
Again, it’s vital that you streamline your operations. It’s too easy, after all, to work all day, not get anything done, and then go home feeling like you’ve actually accomplished something simply because you put in time.
The tips below (which by no means should be considered an exhaustive list) will help you eliminate “noise” which causes unnecessary distractions, eliminate unnecessary work, and avoid self-inflicted extra tasks. Let’s get to it.
How to work more efficiently:
The first step for working efficiently is to develop the Only Handle It Once (O.H.I.O.) method. This is a straightforward time-saving idea which too many entrepreneurs fail at.
The idea is simple. Do not deal with an item unless you are prepared to take action on it at the time you deal with it. Consider how often the following occurs. Joe receives an email from a customer. He skims it and says to himself “I’ll deal with this later.” When “later” comes, Joe then has to read the email a second time before dealing with it. In other words, Joe to take the time to read the email twice instead of just reading it once and dealing with it.
Now multiply the wasted time of one extra reading by every email received in the course of a year. The time lost quickly becomes mind-boggling. Instead of making this mistake, Joe should not even open the email until he is prepared to deal with it. This will save him the time of a second reading.
The O.H.I.O. method can be applied to a number of different contexts. Imagine every piece of administrative paperwork you receive (notices from the Secretary of State, forms you have to fill out, and so on). As with the email example above, it’s easy to look at such a document and put it off to the side for later handling. Again, when the task is completed this means you will have reviewed the document twice.
The idea of Only Handle It Once means just what it says - do not open an email, pick up a piece of paper, or start a task unless you are prepared to actually deal with it. The time savings that come out of this method can be extreme.
The next step for working more efficiently is to adopt the mindset that you’re not going to start on something until you finish it. In other words, don’t spend a little time each day working on numerous projects. Finish one project and move on to the next one. Failing to do this means that you never get into a groove with your work.
Let me explain this by way of personal example. A big part of our primary business is adding blog posts to our client’s websites. Also, we recently switched our virtual private server from the company we were using to Siteground. As a result of this switch, we had to migrate all of the websites we manage from one server to another (this was a lengthy process).
In regards to adding client content, and migrating websites, we could have taken the approach of adding content to a few sites each day and migrating a few sites each day. This would mean constantly switching tasks, however. So, instead, we set aside time where we weren’t going to add content and were going to devote ourselves to site migration until it was finished.
Once that was done, we devoted ourselves to adding content to the websites until that project was completed. In other words, we finished one thing before we moved on to the next.
The benefit of this is extreme: when you switch tasks it takes time to get into a groove with the task you just switched to. This “lost groove time” greatly reduces your efficiency. It is, therefore, important to finish one task before moving on to another. Don’t keep jumping back and forth between partially completed projects.
When taking on new freelance projects, I take a “one at a time approach.” If I’m building something out for customer One, and I know it’s going to take me a week, then I let potential customer Two know that I won’t be starting their project for a week. I also adjust my proposed delivery date accordingly.
Manage your workflow so that you’re working on one thing at a time, but so that you have a stream of work lined up.
It is common for us to have multiple projects lined up and under contract. We, however, always finish one before moving on to the next. We do not jump back and forth between projects. This allows us to get more done, in less time, and we make more money as a result.
The third step to increasing your efficiency is to deal with problems as soon as they arise. And when I say “as soon as they arise,” I mean immediately. Not doing so will simply allow the problem to swell and become larger.
Here’s a simple example - my business partner pointed out to me the other day that the app we use for syncing contacts between everyone’s email accounts wasn’t working. I immediately stopped what I was doing to fix it.
It would have been easy to say “I’ll deal with this later.” In between that moment and later, however, people in our organization would have needed to make notes about customers, to pull up contact info, and so on. The app not syncing would have created problems in others’ workflow. This would result in a small problem (the app not working) compounding into larger issues.
Not dealing with inefficiencies immediately can compound in other ways. Consider this real world example: I was once talking to a customer on the phone while they were heading to their office. Once they got to their office, it took them extra time to get in the door. This was due to the fact that the customer had an excessive number of keys on their keychain and she said “I don’t even know what most of these keys are for” while we were talking. When I talked to the customer again, about a year later, they made the same comment.
Now consider this - the customer probably loses thirty seconds a day fumbling through keys that didn’t even need to be on her key ring. That’s 2.5 minutes lost per week. Over the course of the year that works out to roughly two full hours that are lost. 2.5 hours of substantive work likely works out to several hundred dollars. If this customer had taken a time out to take unnecessary keys off of their key chain immediately after realizing it was a problem, they would be making several hundred dollars more a year.
The foregoing story of the key ring may seem silly to some. It proves the point, however, of dealing with issues as soon as they arise. Failing to do so results in ongoing lost production. Taking the approach of “I’ll deal with this minor annoyance later” will result in you losing many hours over time in order to save a minute today. Don’t sacrifice hours to save a minute.
The fourth, and one of the biggest steps towards increased efficiency, is to improve your management of communications. Communications are one of the biggest ways you can lose time, for completely unproductive purposes, while feeling like you’re getting work done. Let’s look at the need to completely avoid real time communications and to better manage email.
One of the biggest problems in many tech companies (and businesses in general for that matter) is the use of real time messaging platforms such as Slack, Microsoft Teams, Google Hangouts, and others.
The problem with these platforms is twofold. First, they result in people sending a large number of small messages as opposed to requiring that they put all of their thoughts into one message. This means that the reader of these short messages has work in a constant state of distraction. The individual gets far less done as a result.
Second, and perhaps worse, is the fact that these platforms lead to co-workers/employees/partners sharing random thoughts that don’t really have anything to do with the project at hand as well as the sharing of messages essentially saying how much one liked the last message.
These types of interruptions contain no actionable information and, instead, just lead to the reader being bombarded by extra noise. It is far more efficient to read one comprehensive message, which is why we avoid these types of platforms.
Many developers could also improve how they manage email. It is a mistake to read emails as soon as they come in. Instead, you should completely deal with your email inbox during one to two set times per day, and avoid it for the rest of the time.
There are several reasons for this. First, as stated above, you shouldn’t read an email unless you are prepared to act on it. Second, it is important to consider how people tend to use email. Way too many people fire off a message as soon as a thought enters their head.
It’s not uncommon for me to open my inbox in the afternoon and have multiple emails from the same customer. By waiting to deal with emails until a set time, I can then read all of their emails and write one consolidated response. This is opposed to writing separate responses, which would take more time.
Also, you actually create more email for yourself to read if you respond to messages immediately. Suppose Joe Client sends you a random thought and you respond. Now suppose that Joe does this several more times, and you respond, during the day. Joe is likely to respond back to each of your responses (creating a large number of emails to read). By writing Joe a consolidated response, at a set time of the day, Joe will only have one email from you to respond to. The net result is far fewer messages hitting your inbox. This saves a great deal of time.
After reading the prior paragraph on email management, you may be saying to yourself “but my clients want to hear from me right away.” If you go through your inbox at least once a day, then they’re never going more than about 24 hours without a response.
If something is so important that someone can’t wait 24 hours for a response then they should be calling you on the phone as opposed to shooting you an email.
I never go through my email more than twice a day and our customers feel that we give good service. Save yourself time and only respond to emails during set time blocks each day.
When you put all of the above-mentioned concepts together you will greatly improve your efficiency.
By using the O.H.I.O method you will reduce the amount of time you spend reading email, reviewing documents, and so on.
Only starting projects when you are prepared to finish them, and working on one thing at a time, reduces distractions and allows you to stay in a groove.
Dealing with problems as soon as they arise will result in you losing minutes today, but saving hours over time.
Finally by improving/reducing your communications, you will avoid distractions and actually have fewer messages to respond to. Put these things together with actually putting in the hours and you can look like this happy person:

Suppose the foregoing efficiency tips make you twenty percent more efficient than the average developer. Also, suppose you average a minimum of 43.3 hours worked per week (the reason why I use this number was explained above). Finally, suppose your competitors average forty hours a week at average efficiency.
You will achieve in one year what it takes your competitors roughly 15.5 months to achieve. If you focus all of this production on high value activities, then your bank account will grow quickly.

Action items for freelance developers who wish to better manage their business on a day to day basis

Freelance developers can greatly increase their net income by better managing all aspects of their day-to-day operations. The following is a list of “action items” which can help you to immediately increase profits:
  • Properly manage your financial and administrative affairs.
    • Read Profit First and adopt its suggested financial plan for your business. Alternatively, develop your own financial plan and stick to it. Sign up for accounting/bookkeeping software and get in the habit of doing your books regularly.
    • Research and learn about administrative requirements you must meet (i.e. filing for a business license). This will vary by state and locale. Your local Secretary of State’s Office may be able to assist with this information.
  • Manage your development work in an efficient manner and identify your “high value” work opportunities.
    • This is the work that pays the most per hour of labor, not necessarily the most in total.
    • Make a plan to focus your business on these high value activities and maintain a narrow focus in regards to the type of work you take.
  • Decide on a minimum number of hours that you will commit to the business each week. Make sure you hit this hour requirement on a weekly basis.
  • Adopt the Only Handle It Once (O.H.I.O.) method.
  • Adopt the habit of not starting on something until you are prepared to finish it.
  • Adopt the habit of dealing with problems as soon as they arise.
  • Improve your management of communications.
    • Avoid “real-time” communication platforms such as Slack or Microsoft Teams.
    • Set aside time each day in which you will deal with email. Do not deal with email outside of these designated time periods.

Conclusion

In no way is this guide meant to tell you every last thing you need to know about running your own business. Sticking with these tips, however, will help you to get out ahead of your competition.
Keep in mind that being successful in business requires effort in all of the areas described above. You’re never going to be better than the area you are weakest in. Because of this, I can't stress enough that you need need to be striving for constant improvement in all aspects of your business.

About Me

I am a web developer who maintains websites and other software on behalf of law firms through SEO For Lawyers. I am also a co-founder of Modern Website Design. I enjoy writing on issues related to small business and entrepreneurship.