Referral business is extremely valuable for a few reasons. First, you don’t have to spend time trying to find the business. If you’re bidding on projects from freelance sites you can easily spend several hours to have a chance at landing even a small gig. With referral business, the clients are coming to you. Second, inquiries from referrals tend to convert to paying clients at a higher rate than most other potential clients because the person doing the referring is actually helping to sell your services. Since the new client trusts the opinion of their friend or colleague that is doing the referring, they will typically feel more comfortable with you than they would with a stranger. Third, referral business tends to build over a period of time. So the work that you put in now can pay off exponentially in the future as you have more clients out there who are sending business your way.

Keys to Building Referral Business

Since there is so much to like about referral business it is worth taking a look at the things you can do to increase your chances of getting referrals from your clients.

1. Quality of Work

The most important and most obvious key is the quality of your work. If your clients are excited about the work that you have done for them they will be much more likely to refer others to you. But if they’re not pleased with the quality of work, it’s unlikely that they will ever send referral business.

The work that you do for a client impacts your ability to land new work in the future, so make sure that you are placing enough emphasis on doing the best job that you are capable of for your clients.

2. Quality and Ease of Service

In addition to the quality of the design work that you do for the client, they’ll also have a positive experience overall if you provide them with good customer service and if you are easy to work with. A pleasant working relationship is always helpful when it comes to getting referrals. Your clients will want to know that their friends and colleagues will have a good experience with anyone that they recommend.

Clients will also be more likely to refer people to you if they know that you are  easy to get in touch with. Whether it be by phone, email, IM, or social networking, clients will want to know that you will be easy to reach for anyone that they refer to you. If you have a habit of not getting back to the client or of being difficult to reach, the client may figure it is just easier to recommend another designer.

Quality customer service is important for a lot of reasons, and referral business is just one of them. If you make an effort to give your clients a positive experience working with you, they’ll be more willing to send people your way knowing that you will provide the same type of service.

3. On-going Contact

Staying in touch with your clients is also a key to getting referral business. Even if you do a great job for a client, if it’s been a long time since you’ve had contact with them, they may not be thinking of you when an opportunity for a referral arises. If you’re not doing on-going work for the client you may want to send a card during the holidays or on the client’s birthday, send an email just to check in and see if there is anything you can help them with, or you could even set up a mailing list or newsletter to have consistent contact with your past clients.

Simply getting in touch with the client a few times per year will help to keep you in the front of their minds for those situations when they are talking to someone who might benefit from your services.

4. Awareness

Some clients won’t even think to refer someone to you without a little bit of prompting. They may be completely happy with the services you provided for them, but referring people to you is not on their list of priorities, so even if they know of someone who could benefit they just may not think of it. It never hurts to simply ask your clients if they know of anyone else who could use your services. Make them aware of the fact that you would appreciate any referrals and that you could provide the same type of service for anyone that they send your way.

In addition, the client should also be aware of the specific services that you provide so they know exactly what you have to offer. Most designers offer a variety of different services, and something that you didn’t do for that particular client may be of use to one of their friends.

5. Incentives

If building referral business is important to you and it’s not happening naturally, you may want to think about offering some incentives to your clients if they refer others to you. The incentive could be monetary, it could be a discount on your services, or it could be something applicable that you could throw in to sweeten the deal. For example, if you are a hosting reseller you could give a few months of free hosting as a bonus to anyone who sends you a new client.

Incentives aren’t necessary to build referral business, and they don’t take away the need for quality work and quality service, but they can help to speed things up if your referrals are coming in slowly. Use incentives carefully so as not to de-value your services or to look like you are desperate for work, but use them when appropriate.

What’s Your Experience?

If you have experience with building referral business please feel free to share your own tips in the comments.

For more posts on running a freelance business please see:

• 40 Sites for Finding Web Design Jobs
• 15 Proven Ways to Gain Exposure for Your Design Portfolio
• 10 Extremely Useful Time Management Tools
• 13 Ways to Challenge Yourself in Your Career as a Web Designer
• 5 Tips for Handling Pricing Objections
• 5 Principles of Effective Networking

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Being a freelance designer entails more than just the act of designing. Master the business side of design and you’ll thrive. Neglect it and watch your business take a dive.

There can be severe consequences for those who mismanage finances, fumble along without a business plan or don’t understand clients.

Fortunately, this article will serve as a crash course for beginners who want to learn about the business side of freelance design.

In this broad overview, we’ll take a look at creating a business plan, choosing a location to work, determining a going rate, understanding financial information, the importance of insurance, obtaining clients, showing your portfolio, writing proposals, keeping clients happy, writing contracts, understanding copyright laws and finally, taxes.

Buckle up!

Business Plan

From the beginning, you should have a solid business plan in place. Some people spend more time planning what to eat for lunch than they do planning their business.

Running a successful business requires plenty of planning. The act of preparing a business plan will arm you with the knowledge you need to move forward efficiently and without any unexpected surprises.

Key elements of a business plan usually include:

• executive summary
• a description of the business
• your market strategies
• a competitive analysis
• your development plan
• operations plan
• financial components of your business

If you just read that list and saw a few things you have never even thought about until now, you may be in for some trouble down the road. But it’s never too late to create a business plan. It takes time, but it’s well worth the effort.

A Google search will reveal a plethora of business plan templates to choose from, but a few of my favorite resources include:

• Bplans.com’s Graphic Design Sample Business Plan
• SCORE.org’s Templates for Your Business
• Entrepreneur.com’s Business Plan Samples, Writing a Business Plan section

Location to Work

Next on the list of things to do is choosing a location to work. Many freelancers work from home, but sometimes this can be confining (especially if you live in an apartment), but there are some alternatives.

Shared working spaces, such as Hive at 55 in New York, are becoming increasingly popular because they provide business essentials such as WiFi, a fax machine, a printer, copier machines, as well as conference rooms and human interaction.

Of course, if you have the dough, you can always rent some office space, but that might have to wait for a few years until your profits and client list have grown substantially (time to consult your business plan!).

Still, other alternative workspaces include coffee shops, which can sometimes be loud and crowded, and even public parks.

Figuring Out How Much to Charge

One of the most important things you will need to do when starting a freelance design business is determining an appropriate going rate. Some designers prefer to charge on an hourly basis, while others prefer a per-project fee.

You’ll need to do what makes the most sense to you. Check out these resources to help you decide:

• FreelanceSwitch Hourly Rate Calculator
• Rates for Your Website Design Business: Hourly or Per Project?
• Trading the Hourly Rate for Task-Based Pay: Should You Do It?
• How Much to Charge for Design Work?
• How to Quote Per Project By Secretly Quoting Per Hour

In my experience, charging per project makes the most sense for large projects and for projects with a time requirement designers can accurately gauge, while an hourly fee works better for smaller projects and revisions.

Keeping Finances in Check

Interpreting information about the financial health of your business is essential. There are three main equations that you need to familiarize yourself with.

1. Balance Sheet

The first is called a balance sheet. The balance sheet lists assets, liabilities and equity.

Assets include cash, accounts receivable (invoices sent out that haven’t yet been paid), fixtures, buildings, land, equipment, security deposits and other intangible items such as patents, trademarks and copyrights.

Liabilities include accounts payable (money you have been invoiced for), lines of credit issued by banks and mortgages.

Equity pertains to any monies invested in your business plus fiscal profits.

By comparing the balance sheet at any two points in time, you will be able to determine how healthy your business is.

2. Profit and Loss Statement (P&L)

The second equation is the profit and loss statement, which is oftentimes referred to as the P&L.

Your gross profit equals your revenue minus costs.

Your net profit is your administrative or overhead expenses (like salaries, office supplies and health insurance) plus depreciation and amortization subtracted from your gross profits.

3. Cash Flow

The last — but not least — of the three equations you need to know and understand is the cash flow statement, which determines your liquidity.

Understanding cash flow is simple. If your accounts receivable increases over a given period of time, you are basically providing credit to those clients and will have less cash on hand. On the other hand, if your accounts payable have grown, you may have more cash on hand but will end up owing more money.

Insuring Your Business

Having insurance is the ultimate form of planning ahead and you need it because — let’s face it — things rarely go exactly as planned.

If you or your business runs into an unexpected situation (say your equipment is stolen or you find out you need to have a $150,000 surgery), your insurance agency will be there to help.

In some cases, freelancers working at home may feel that their renter’s insurance is enough to cover any losses from a catastrophe such as a fire or flood.

Legal defense can also be quite expensive and is yet another reason why it pays to have insurance.

Finding Clients

You wouldn’t have a design business at all if you weren’t able to bring in clients. Did you know that the best freelance designers are actually great salespeople? You may hate sales, but it’s a fact of life for freelance businesses.

Having said that, there are a number of places to find clients for your fledgling business.

Of course, you’ll want to have a great website or hosted portfolio (on places such as Behance), but there are also some "old school" techniques that still work nicely when it comes to snagging clients.

One such technique is to contact every ad agency or design studio in your local area because, as a freelancer, you are perfectly positioned to handle overflow from their business.

Another possible source of clients are local publishers such as newspapers or book houses.

Print shops often receive design work in which they don’t specialize in and so are happy to have a local freelance contact whom they can contract for help.

Leads can literally come from anywhere: grocery shopping, family, local business organizations or the phone book. Keep your eyes open and have a business card handy wherever you go.

Also, once you’ve completed a project, it doesn’t hurt to ask for referrals and a testimonial.

Presentation Matters

Solid presentation skills will help you win new accounts. Clients typically look for five essential items when evaluating your services. In order, they are:

• Methodology and professional skills
• Ability to deliver what the client wants
• Ability to graphically represent the client well
• Ability to provide a solution, not create additional problems
• Ability to meet deadlines

So, if you are showing off your portfolio in a meeting, make sure that your are targeting your presentation to that specific audience. Whether it’s the nature of the work, the illustration or photography style or a specific market, make sure to keep it as focused as possible.

When it comes to your portfolio, it’s best to narrow it down to your top 10-20 pieces and to keep it as current as possible. The same goes for your online portfolio. The fact that you have unlimited storage space on your website doesn’t mean that you should put up everything you’ve ever designed.

Writing Requests for Proposals (RFPs/RFQs)

As your business grows, you’ll inevitably get approached to write up a proposal or submit a bid for a large project. This is referred to as a request for proposal (RFP) or request for quotation (RFQ).

Whether or not you should participate in a bidding war is another question. I’d say if you are a small 1-2 person team, bidding against larger companies may not be the best idea. It’s time-consuming and can detract from your regular billable time.

If you have the time and patience though, winning a bid can be like landing a whale — you can live off of the blubber for quite a long time.

Keeping Clients Happy

Once you’ve built up a client base, you’ll need to work on keeping them happy. Many freelancers derive more than half of their annual income from repeat business.

The best way to make your clients happy is to sacrificially meet all of their needs and expectations. After all, nobody said freelancing was easy.

Don’t overlook the importance of what you say. Remember, a big mouth can land you in big trouble, so don’t oversell yourself.

Does this mean you have to wine and dine local clients? Well, perhaps. Not all freelancers like having meetings — that could be one of the leading reasons why they left the rat race in the first place — but sometimes meetings are required to cement the deal.

My best advice? Learn to go with the flow.

Most of all, always, always be honest with your clients. If there is a problem, you should let them know. Good communication will prevent problems in the future.

Contracts

A contract is a legally binding document that spells out the parameters of a business relationship. Things like deliverables, number of revisions, time frame and payment are all covered in a good contract.

Why use a contract? For protection, of course. If something goes wrong on the project, you will be able to point out in the contract exactly what you are accountable for.

Contracts are also great for preventing scope creep (when a client wants to expand the project for the same amount of money).

You’ll also want to spell out who owns the rights to what you design — you or the client?

For more on design contracts, check out these resources:

• Using Freelance Graphic Design Contracts
• What to Include in Your Design Contracts

Dealing with Payments

Part of running your own business is dealing with the collection of payments. In order to avoid potential hassles, a good rule of thumb is to get everything in writing including proposals, estimates, letters of agreement, contracts and schedules.

Make sure you have a payment schedule in place and make sure your clients understand when you expect to get paid. It could be once a month, up-front, upon completion or at a different set interval.

Before you do a single ounce of design work, I would always recommend getting a deposit. The industry standard is to collect 50% of the quoted amount unless the project is large.

To manage invoicing, I’d recommend using an online tool such as Freshbooks. It’s convenient for both you and your clients and makes keeping records a cinch.

Copyright Laws

Understanding copyright laws can be a bit tricky.

Let’s start with what is copyrightable. If you are the author of an original work in any tangible medium (such as literature, music, drama, graphics etc.) you can copyright that work. In fact, as soon as you create it, it’s copyrighted.

What can’t you copyright? Here are a few things that can’t be copyrighted:

• US government property
• ideas
• methods
• procedures
• concepts
• slogans
• discoveries

If you own a copyright, you have the exclusive right to authorize reproductions, distribute copies to the public and prepare derivative works.

If anyone else wants to use these rights, they must first obtain your consent. If someone decides to rip you off by creating something similar, it may be hard to prove that you were the original creator, so it’s a good idea to fill out the copyright assignment form and record this with your respective Copyright Office.

Taxes

What are the two sure things in life? Everybody together now! Death and taxes.

I can’t offer much advice about death, but when it comes to taxes, you had better be prepared. Keep records of everything including income and expenses.

One thing you won’t mind keeping track of is write-offs. If you work from home, you can deduct the square feet used as on office. If you’ve already graduated from college and decide to head back for more, you could deduct those expenses. Professional equipment, travel and transportation can all be deductible so make sure to keep track of your mileage and receipts!

You’ll absolutely want to hire an experienced tax professional to help you sort through everything when the time comes. Also, if you plan on participating in the social security system, then you must pay the self-employment tax.

Got Something to Say About the Business Side of Freelancing?

If you have thoughts, additional tips, suggestions, and experiences to share, please do contribute in the comments below.

Related Content

• How to Find Awesome Clients
• How to Make Remote Team Collaboration Work
• Why Branding Yourself is Important
• Related categories: Project Management and Productivity

About the Author

Chris McConnell is an entrepreneur, designer and author who co-founded the design firm Brandeluxe. He writes regularly on his blog, Freelance Review . You can connect with Chris on Twitter or LinkedIn.

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Today’s prize fits perfectly into this concept.

About Harvest

As a business owner myself, experience has proven to me that the financial transaction between you and your customer is one place where you want to give great service and be as streamlined as possible. Harvest is a great web application that can assist you achieve this.

The Harvest interface.

In today’s age, there is no reason to scramble to find out who owe’s you what or what payments are overdue. With the tools that are available, every business owner should be able to quickly ascertain the current status of their accounts.

Our Look/Review at Harvest

We looked at Harvest earlier this fall and the consensus was that it does everything you need to stay on top of your business. The ability to create attractive invoices and estimates, track your time, and create reports in a pinch are easy and enjoyable with this app.

For companies of almost any size, Harvest might be worth a look. It’s smartly fluid, with a ton of different ways to track and look at data about how your company works.

An attractive interface with a powerful feature set make Harvest a tool that can benefit you — and therefore your customers.

How to Enter

How can you win this one? Simple tweet about it — let Danny and the crew at Harvest know how much your appreciate their work with the folllowing: “@webappstorm I love @harvest and would love to win a free membership”.

The winners will be announced at the end of the day! And a big congratulations to our winners from Day 14 — enjoy uploading!

And Over at Mac.AppStorm: Delibar

Don’t forget to check out what’s going on over at Mac.AppStorm! Today they’re giving away a few copies of Delibar.

Delibar provides a great looking interface for your Delicious account, right on the Mac desktop. Sitting in the menu bar, it allows you to search for links, quickly add bookmarks, follow what your friends are posting, and stay on top of what’s popular online.

Read more and enter the competition

Come Back for Day 16

It doesn’t stop here. The giving continues each day until our grand finale on the 24th. Tune in each day for the newest prize and keep up to date with our RSS feed or Twitter account.

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These are what I call the ‘must do’s’ for running a successful business, so keep this list close at hand and review it on a regular basis to keep you on track:

1. Develop the ability to see what others want/need/desire through your own research, findings and searching. As my business partner Neil Travers always says, “keep your head up and eyes open, opportunities are all around.”

2. You don’t have to invent a brand new product to be successful. Look for the gap in the market gap for a new product/service or the development and improvement of an existing product or service. Richard Branson wasn’t the first to have an airline, but he successfully built his businesst on the premise of improving on what was already being offered.

3. Focus on service, service and service as too many businesses and entrepreneurs overlook this simple business premise. They focus all their efforts on the ‘front end’ of the business with little or no regard for what happens next.

The technology now available with help desks and virtual assistants means there is no excuse not to give exceptional customer service, no matter what the size of your business is.

4. You have to start somewhere, and you have to get started now, not spend time thinking about it. That first step of registering a domain name meant I had begun that business, then I had to keep going, but you go nowhere if you havent’ made a start.

STOP putting off what can be done today and get started NOW!

5. Start small and grow to ANY size you want to. An Information Marketing business can get started for a few hundred pounds and grow into a multi million pound business by reinvesting your profits.

6. Keep using the Internet and other sources such as your local library for acquiring new information about your market, customers, competitors and ideas!

7. Generate and create entrepreneurial excitement about your business and keep that feeling as you continue to grow.

8. Always charge the most you can for your products to create bigger profits for you and your company. Having good profit margins will give you the advantage when developing marketing campaigns, new products and for meeting any problems head on.

9. Develop a strategy that helps your customers grow, enjoy, improve or profit from the information, products and services you sell them.

10. ALWAYS maintain honesty and integrity in your dealings and stay true to your values.

11. Every business owner is going to have to deal with anxiety, frustration and problems so cope with them by developing tenacity and perseverance.

12. Always be on the look out for mistakes and how to avoid them. Remember the saying… “to trip over a rock in a campsite is an accident, to fall over it twice is a warning and to fall over it a third time is stupidity.”

13. Remember, you must continue to win back your customers over and over again. You cannot take them for granted.

14. Constantly review your numbers, results and checkpoints within your business. Having control and an understanding of your business will help you as you grow.

15. Diversification within your business is the way to offer more to your costumers and prospects by bringing related products and services to them. It will also strengthen your position in the market.

16. Look to sell your business when it no longer interests or excites you.

17. Look for something that is worthwhile, fun and enjoyable to do with the money you earn. Otherwise why are you doing it?

There are other things I could add to this list, but it’s a great place to get started.

Are you missing any, or could you add some more?

Post from: SiteProNews: Webmaster News & Resources

17 Key Tips To Become A Successful Internet Marketer

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