Top Nav

chain to desk

How to be self-employed without living invoice-to-invoice. Plus a rate setting primer.

Yesterday, a BrainyFeet reader disagreed with me in the comments.

I’ll give you a minute to recover from the shock.

What!? You’re not shocked? Hmm…neither was I really.

Here’s what happened:  Yesterday’s post listed 6 big, business killing mistakes I really hope you don’t make, in which is introduced the idea that Unsustainable: The trap of selling your life away in hourly chunks.

Ben disagrees with my possibly-too-harsh suggestion that punching a clock is still punching a clock, even when you do it for yourself. He basically asked, what’s wrong with working for yourself “if you’re succeeding on your own terms as a freelancer, if you have a solid base of clients who pay you well and if you’re spending your time the way you want to spend it?”

Then a few more people mentioned they don’t want to be self-employed wage slaves either.

So, I decided to write this post in response.

This isn’t just a concern for freelancers. It vexes all kinds of self-employed people.

If you base your income on a resource as limited as your time, you put a hard, impenetrable ceiling on your earning potential.

While I understand Ben’s line of reasoning, I definitely want to caution BrainyFeet readers about this wage-earner-mindset trap.

Moving from a paycheck-to-paycheck situation at a job you hate and into an invoice-to-invoice situation doing work you love, is not even a lateral move.

Now that all of the expenses and risks rest squarely on your shoulders, it’s a step backwards right into dangerous, life-sucking financial quicksand.

You basically have two options if you want to avoid the quicksand.

But first, before we talk about your options at all, I need to remind you of another part of yesterday’s post: Know your specialty and do that.

If you’re a freelancer, DO ONLY what you rock at and outsource everything else. Build the cost of that outsourcing into your rate*.

Think about it. If you loathe bookkeeping, it will never get done. It’s not getting done will cost you a lot more money in the long run. Find a bookkeeper. Pad your rates to cover it. Or pay the bean counter with babysitting or lawn mowing until you can pay him in cash.

Now, about those two quicksand avoiding options…

Option 1

Build some kind of one-to-many income stream.

By that I mean you’ll make something once that many people can buy.

Again, I’ll suggest you stick with what you rock at doing.  So, for example, if you’re not comfortable teaching, don’t do workshops.

Some ideas: Graphic designers can make stock, customizable, budget-friendly logo blanks or create and sell icon sets. Writers can create form letters or templates for standard documents. Knitters = patterns. Photographers = stock photos.  You get the idea.

This is not meant to replace your project-based income stream. But, when you’ve hit the ceiling of how many hours of your time you can sell to clients,  your one-to-many offer can help you keep your business growing while loosening your desk chains a bit.

But some people have no interest in creating a product. I get that.  Which is why I give you Option 2.

Option 2

Build a safety net around the quicksand.

By that I mean save enough money to cover all of your living and business expenses for at least 3 to 6 months.

Don’t choke. You can do this.

You can do it by working a side gig or day job or padding it into your rates (along with the padding for insurance, taxes, admin, office expenses, etc*).

It’s crucial that you do this because that money will be your protection against the inevitable seasonal peaks and valleys, slow paying clients (which is most of them), time off for illnesses (for when you or your spouse or your kid or your sitter get sick) and those 4-day weekends in the mountains with the family or visiting Grandma at Christmas.

Without that protection, you’re living invoice to invoice, which is scarier and harder and way less fun than living paycheck to paycheck.

Option 3

I know, I said you had two options and then I had the gall to write three. And ya know what?  This is actually the option I suggest most people consider:

Cover your bases and do both 1 & 2.

*Now, a quick rate setting primer

As a freelancer, contractor, consultant or service provider, you can choose to charge by the hour (but don’t), by the project (with a very specific contractual agreement) or on retainer (also with the contract).

Offering retainer packages for your clients can be a great win-win: They have a level of service they can count on plus their costs are totally predictable…and so is your income stream.  Which is nice.

You can use’s awesome rate calculator as a starting point. You’ll enter all of your assumptions about expenses and time to find your base hourly rate. Multiply this rate by the hours you expect a project to take or the hours you will be retained each month.

Then you can use a great time-tracking tool like freckle to see if those assumptions you made were correct. If not, go back to the rate calculator and make the reality-facing adjustments.

One final note about rates: If you find that your market won’t bear the rates you need to charge to cover all of your expenses, then most likely you’re either targeting the wrong market, or you need to tweak your offer or you need to put some serious thought into the viablity of this venture.

These are all things I can help you with through one-on-one advising.  Please don’t struggle with this stuff alone.  Drop me an email at and we’ll talk.

Image: Jonathan W

, , , , , , , , , , , , , , , , , , ,

7 Responses to How to be self-employed without living invoice-to-invoice. Plus a rate setting primer.

  1. CourtneyRamirez January 19, 2012 at 11:15 am #

    I’ve really been enjoying this series – and agree that charging by the hour is not the way to go. But the examples that you list for a graphic designer or writer don’t make a lot of sense. If someone can buy a blank template, why would they pay a professional? Isn’t the target market for template DIY approach a lot different from doing custom work? I’d love to hear your thoughts on this.

    • LarahRitchie January 19, 2012 at 2:51 pm #

      @CourtneyRamirez Hi Courtney! Let me just say that I don’t suggest focusing on one-to-many until you’re getting close to hitting that one-to-one ceiling. By the time you’ve hit that, you have a pretty good idea of what your clients most often need & want.

      You’re right and thank you for point that out….if you’re making a DIY version of your premium, custom service then yes, that will be a different market.

      For design, here are a few links to businesses I think have done a nice job of offering a personal, yet one-to-many solution:

      For copywriting, I like what Allison Nazarian has created here: She’s offering a DIY Media Kit & a copywriting how-to book. Neither of these are perfect for her copywriting market, but they were most likely created in response to a need she noticed while doing that work.

      So your one-to-many offer may not necessarily be for a *completely* different market. You may find that doing this expands your market to people who’s only barrier to doing business with you before was cost. And, they will return when their needs evolve to a more custom solution.

      I hope that helps! ~ Larah

      • CourtneyRamirez January 19, 2012 at 6:11 pm #

        @LarahRitchie Thank you so much Larah! I work extensively with Allison – so I’m definitely going to pick her brain about those resources. I like the idea about offering something to someone who is not a good fit for services right now…but may be later. I hate turning people away – I’m such a softie. But I’ve got a business to run!

      • Patricia June 13, 2013 at 1:03 am #

        Hi Larah,

        Thank you for using my little etsy shop as an example,, has been something I have worked on for the love of logo design and it has paid off! I have the opportunity to create the kind of design that appeals to me and luckily to many.

        All the best ~ Patricia

  2. LarahRitchie January 27, 2012 at 4:42 am #

    @MasterBizCoach I’m so glad you loved this post! Thank you for sharing it!

  3. Sonya76 February 1, 2012 at 11:27 pm #

    I think that if you’re very hands on in your business then you are still punching the clock, albeit for yourself. You are essentially an employee of your business. If you can’t go away on holiday for a couple of weeks and not answer the phone/email then you are an employee of your business not a business owner.


  1. Protect yourself against these six common reasons micro-businesses fail | BrainyFeet - January 18, 2012

    […] Sure, start here if you need to…with a well thought out plan to evolve past this point. […]

Leave a Reply