How Freelancers Can Transition Into a Small Business

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How Freelancers Can Transition Into a Small Business | Most people start out on a freelance career to gain some independence. However, if you’re particularly good at what you do, you might find that the demand for your services outgrows your ability to provide them personally. Alternatively, your position in the industry could provide you with insights into gaps that a small business could successfully engage with. As such, you may well be considering the potential to shift your freelancing career into running your own enterprise.    

However, while the prospect of creating a successful small business can be exciting, and your freelancing has provided you with some skills, it’s not always easy. We’re going to take a closer look at some of the areas you should focus your attention on to affect a successful transition from independent contractor to small business entrepreneur.  

Making a Plan

You can’t just leap into turning your freelance practice into a small business. If you’re doing this, it means you’re simply reacting to the demand for services or don’t fully comprehend the challenges and responsibilities that you face. A reactive approach can lead to poor organization, inefficient operations, and — frankly — a lot of unnecessary stress. Rather, you need to take the time to prepare in a way that ensures you can sustain a productive business.

This begins with creating a thorough business plan. Don’t just assume that your enterprise is just an extension of your freelancing. You need to treat it as its own entity, and taking time to build your plan will help to enlighten you as to what the likely differences will be, where you need to apply additional research or focus, and the resources you’ll require to proceed. Indeed, the majority of lenders will require a business plan as part of your application. If you’re not familiar with the process, don’t be afraid to use a template that walks you through each element that you need to include in a solid plan. This will usually include a description of your planned activities, a market analysis, financial projections, and sometimes a route for growth. 

When you start to dig into creating your plan, you’ll notice just how important it is to be able to identify who your customers will be. This informs your projected income, your range of services, the financial resources you need, and your potential for scaling. As such, now can be a good time to hammer out how you plan to find, reach and retain customers; in other words, how you plan to create customer growth. Take time to figure out a strategy for not just converting customers but keeping them loyal to your company. Research what your target demographic values in customer service, design a website that is geared toward usability and good experiences. Most importantly build a schedule for regular customer outreach into your day-to-day operations so that it is central to your processes, rather than an occasional activity that you may have undertaken as a freelancer.  

Sourcing Finances

Unlike your freelancing career, starting your own business is likely to involve some significant capital. After all, your operating expenses as an entrepreneur are no longer likely to be limited to an internet connection, a computer, and perhaps access to the occasional coworking space. You might have payroll to consider, marketing costs, business licenses, and insurance to take care of. As such, you need to put some energy into identifying sources of funding.  

The good news is that there is an increasing number of funding resources that are likely to be open to you as a small business. Often the type you choose will depend on the amount of capital you need and how immediately you need it. Small Business Administration (SBA) loans are backed by the government and are accessible to most entrepreneurs, but there is a lot of bureaucracy that can result in a lengthy application time. However, if you need funding for specific resources, you may want to consider a business line of credit, instead, which can also result in lower interest payments.     

If your decision to shift toward a small business is a result of significant interest from your current clients, it may be a good idea to leverage your reputation to gain funding. Where long-term or large projects are available, take the time to negotiate with your clients to receive a proportion of your fee in advance to take care of initial operating costs. However, your ability to do this will depend on your relationships with your clients, and your ability to assess whether your advance will be enough to fund operations. 

Understanding Human Resources

One of the most difficult elements when transitioning from freelancing to a small business is how you handle the staff situation. If the impetus of this shift is growth, you will certainly need a group of talented, committed contributors to help you. However, hiring and maintaining employees is a serious responsibility, and you must gain a thorough understanding of what’s involved.  

This is where spending a little time returning to education can be beneficial, and many entrepreneurs decide to apply themselves to getting their Master of Business Administration (MBA) before the transition. These courses are designed to provide you with valuable insights into the legal and administrative frameworks that can keep your burgeoning business compliant, functional, and able to sustain growth. You’ll also develop the communications skills that are vital as an employer. Some curriculums include reviewing how the finer points of payroll, contracts, and labor laws impact your operations.      

However, don’t forget that there is more to human resources than the technical aspects. Being an employer also means you need to develop soft skills that help to ensure your workers are productive and happy during their time with you. This is particularly important when you engage remote workers or freelancers who may be more at risk of depression and loneliness. Be mindful of the kind of boss you want to be, and create protocols that help you to maintain a positive approach. 


Transitioning from freelancing to a small business can be an exciting prospect. However, it’s important to take time to make adequate preparations in the form of a solid business plan and identify the most appropriate financial resources. This, alongside some attention to good employment practices, can help to ensure your new company can develop healthily and positively. 

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