There’s a big difference between a thriving freelancer and one who’s barely getting by. The reality is: you CAN get rich as a freelancer. Even become a millionaire freelancer.
But you’re not going to get there by wasting your money on the wrong things.
So below, I’ve got a list of common expenses that rich freelancers almost never spend their money on.
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These expenses don’t grow a business, they waste your money and put your business at risk.
So the real question is: do YOU spend money on any of these?
A fancy office
This first one might surprise you, but freelancers who ultimately become very wealthy almost never spend money on a fancy office.
Of course, you need somewhere to work. And you should probably do more than work from your couch in your pajamas.
But spending thousands of dollars every month on a coworking space or (worse) leasing office space that won’t really generate more revenue is a quick way to kiss your freelance profits goodbye.
When it comes to your office, think “revenue per square feet.” In other words, if you get a bigger office, will that mean more income in your business?
And if not, you should think twice before wasting your money.
The latest technology
Would it be nice to always own the latest Macbook Pro or use the nicest DSLR for your web meetings?
Sure.
But will those things help you generate more revenue?
Probably not.
With technology, the key is to identify the point of diminishing returns. In other words, at what point are you actually losing money by not replacing your laptop because it’s constantly powering down unexpectedly or just takes way too long to process a PSD file?
The desire to be truly efficient (not fancy or boastful) should be the driving force behind your next big tech purchase.
Non-Revenue-Generating Assets
Technology isn’t the only thing you might be tempted to purchase for your business.
There are lots of non-revenue-generating tech gadgets and other expenses that won’t help you grow your income. Instead, they’ll take from your bank account every month.
These kinds of expenses include things like:
- An overly expensive office chair or desk.
- Expensive office art.
- Over-the-top office speakers.
While these assets may make your office a cooler place to spend your time, they’ll have only a marginal impact on your actual revenue.
That’s not to say you can’t have nice things in your office. But these are the kinds of indulgences you should save for, choose wisely, and limit in frequency.
Hiring too early on
It’s hard to know when to make your first hire. Do you hire so that you can get more clients? Or do you get clients and then hire?
The truth is, many freelancers hire too fast, too soon.
Startup culture has taught us that headcount (the number of team members you have) is one of the most important metrics of growth.
But the truth is: headcount is a liability. A cost. An expense.
Of course, to grow you’ll need to hire. But hiring for the sake of growth, or hiring in hopes that you will grow later is a risky way to run a freelance business.
Hiring the wrong role first
Not only do some freelancers hire too fast, but they hire the wrong role first.
We’ve had lots of freelancers tell us their first hire will be a VA (Virtual Assistant).
But a VA does not make the best first hire.
That’s because a VA typically handles administrative tasks—most of which may free up your time or take responsibilities off your plate, but do not directly generate revenue.
Instead, ask yourself: if I hire this person, will they help me generate as much or more additional revenue than I am paying them each month?
So many software subscriptions
What’s odd is when many freelancers are too timid to hire an employee or sub-contractor, many opt instead for software to help solve their problems.
This is particularly true as A.I. can do more and more in our businesses.
The problem is: there are very few software tools for freelancers that actually generate revenue for you.
Unless a tool is helping with sales (like Reply.io) or automating tasks like invoicing and proposals then software becomes just another expense keeping you from growing profits.
Services that don’t generate revenue (like a lawyer)
Similar to software, if you’re paying anyone on retainer and they’re not directly generating revenue for you, it’s time to take a second look.
While these service providers can be helpful (even critical) at times, keeping them on a monthly retainer can be dangerous.
For some services (like legal services) you can simply work with a lawyer on-demand; paying by the hour for services rendered.
For other services (like bookkeeping), explore your options. Instead of paying a bookkeeper, accountant and tax professional, you could sign up for Collective and get an entire team to help you for much less.
Attending events and conferences with your peers
Events and conferences can be a great way to build your book of business.
But sometimes freelancers make the mistake of attending conferences where all the attendees are their peers.
Instead, invest in conferences where all of the attendees are potential clients.
Agency-builder David did this to get tons of clients from events.
Then new agency-owner Clay tried it with massive success.
Now, David and Clay have both sold multiple agencies for a really nice exit.
Ineffective Ads: FB ads, client email lists, paying for followers, etc.
When you’re desperate to grow your freelance business and not sure where to find clients, you might be tempted to spend money on ads, email lists, or even paying for social media followers.
Fair warning: don’t.
Of the options mentioned here, NEVER pay for email lists or social followers.
Ads can work. And they do work for many freelancers. But it takes a lot of time, effort, and learning to make them work for you with a positive ROI.
Companies like Google and Facebook will try to convince you that running ads is a great way to grow your business. And while that may be true, start small, experiment and see if you can get anything to stick.
Where will you stop wasting money?
After reviewing this list, I just have one question for you: where will you stop wasting your money?
When it comes to business, remember ROI is king.
Anytime you spend money, ask yourself: will this investment generate more revenue for my business? And if it won’t you have to think long and hard about whether or not to spend the money.
The more none-revenue-generating expenses you can remove from your business, the better you’ll set yourself for long-term wealth and success as a freelancer.
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