How to start a freelance business from scratch

Starting a freelance business is an exciting venture that combines your professional skills with business savvy. The barrier to entry is lower than ever, but that accessibility also means you will face plenty of competition.

This guide will take you through the practical steps of validating your business idea, defining your services, obtaining the necessary licenses, and acquiring your first clients to help you launch a successful freelance business in the U.S.

Step 1: Plan your business and validate your idea

Research your market and competition

Start by exploring freelance platforms like Upwork or Fiverr to see which services are in high demand. Use Google Trends to compare search interest for different skills. Many new freelancers fail by being too general, so use this research to identify a profitable niche.

Once you have a niche, analyze the top 5-10 freelancers in that space on LinkedIn. Note their services, pricing, and client reviews. A frequent misstep is setting your rates too low, so see what established professionals charge to set a competitive, sustainable price point.

Calculate your startup costs

Mapping out your initial investment helps you set clear financial goals. While freelancing has low overhead, some upfront costs are unavoidable. Your initial outlay will likely fall between $300 and $1,500, depending on your needs and location.

• Business Registration (LLC): $50 - $500, varies by state.
• Website (Domain & Hosting): $100 - $200 for the first year.
• Essential Software: $20 - $100 per month for tools like project management or industry-specific applications.
• Home Office Equipment: $100 - $700 for basics if you don't have them.

Here are three immediate steps to take:

• Analyze five top freelancer profiles in your chosen niche on LinkedIn.
• Use Google Trends to compare the popularity of two potential service specializations.
• Create a startup budget that lists your specific software, legal, and equipment costs.

Step 2: Set up your legal structure and get licensed

Choose your business structure

Most freelancers start as a sole proprietorship, which requires no formal action. Your business income is reported on your personal tax return. This is the simplest path, but it offers no liability protection.

For liability protection, you might consider forming a Limited Liability Company (LLC). This separates your personal assets from business debts. State filing fees for an LLC range from $50 to $500, and processing can take a few days to several weeks.

Handle federal, state, and local requirements

If you form an LLC, you will need an Employer Identification Number (EIN) from the IRS. You can apply for an EIN for free on the IRS website and receive it immediately. Sole proprietors can use their Social Security Number instead.

State and local licensing depends on your location. Check your state’s Secretary of State website for business license requirements. Also, look up your city or county clerk’s office for a potential home occupation permit, which can cost $25 to $100 annually.

Here are 3 immediate steps to take:

• Decide between operating as a sole proprietorship or forming an LLC.
• Apply for a free EIN on the IRS website if you choose the LLC structure.
• Check your city’s official website for home-based business permit requirements.

Step 3: Protect your business with insurance

Your main focus should be professional liability insurance, also known as Errors & Omissions (E&O). This protects you if a client claims your work was negligent or caused them financial loss. General liability is another policy to consider for covering third-party property damage or injury.

For E&O, a $1 million policy is standard and typically costs between $250 and $1,000 annually. Some clients may require this before they sign a contract. Many freelancers overlook this, assuming a client's policy protects them, but that is rarely the case.

If you have expensive equipment, your homeowner's policy likely will not cover it for business use. You may need a separate business property policy. Since you have no employees, you can skip workers' compensation. Health insurance, however, is a personal responsibility you must plan for.

You might want to explore providers that specialize in small businesses and freelancers. Companies like Hiscox, The Hartford, and Next Insurance offer online quotes and policies tailored to independent contractors. Get at least two quotes to compare your options.

Here are 3 immediate steps to take:

• Request a professional liability insurance quote from two different providers.
• Review your homeowner's or renter's insurance policy for business equipment exclusions.
• Decide on a coverage amount, starting with $1 million as a baseline.

Step 4: Set up your workspace and get your gear

Create your professional workspace

Most freelancers work from home to keep overhead low. Your city may require a home occupation permit if clients visit, but this is rare for remote work. Designate a specific area solely for your business, even if it is just a corner.

If a home office is not feasible, a co-working space is a good alternative. You might want to look for month-to-month memberships to maintain flexibility. Many offer a free day pass, so you can test the environment before you commit.

Once you have a space, you can get your equipment. A common misstep is to overspend on high-end tech. A reliable mid-range computer is often all you need. Instead, you could invest that money in an ergonomic setup for long work sessions.

• Ergonomic Chair: $150 - $500. This is a smart investment for your health.
• Reliable Laptop/Desktop: $800 - $2,000.
• Second Monitor: $100 - $300. A second screen can significantly improve productivity.

Choose your software stack

You will also need applications to manage projects and finances. For project management, platforms like Trello or Asana have free plans that work well when you start. For accounting, consider QuickBooks Self-Employed or FreshBooks to track income and expenses.

Here are 3 immediate steps to take:

• Designate a specific area in your home as your office.
• Research and budget for an ergonomic chair and a second monitor.
• Sign up for a free plan on a project management platform like Trello.

Step 5: Set up your payment processing

Define your payment terms

How you get paid is a key decision. For project work, a 50% upfront deposit is standard practice. This secures your time and covers initial costs. For ongoing retainers, you can bill monthly. Common payment terms are Net 15 or Net 30, meaning payment is due within 15 or 30 days.

When you look for a payment solution, prioritize low transaction fees and fast access to your money. Many freelancers get caught with high processing fees that eat into their profit. Some platforms also hold your funds for several days.

Choose your payment solution

For freelancers that need to accept payments on-site or on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit and digital wallets directly through your smartphone - just tap and done. At just 1.99% per transaction with no hidden costs or extra hardware needed, it's particularly useful for consultants or photographers who collect payment after a session. Other providers often have rates closer to 3%.

The process is straightforward:

• Get Started: Download JIM app for iOS.
• Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone.
• Access Funds: Your money is available right on your JIM card as soon as the sale is done - no waiting for bank transfers.

Here are 3 immediate steps to take:

• Decide on your standard payment terms, like 50% upfront and Net 30.
• Draft a simple invoice template with your payment terms clearly stated.
• Download the JIM app to see how it works for your business.

Step 6: Manage your finances and secure funding

Secure funding for your launch

Most freelancers self-fund, but you have options. The SBA Microloan program offers loans up to $50,000. Interest rates typically range from 8-13%, and you will need a business plan to qualify. These are great for covering initial software and marketing costs.

You might also consider a business credit card for startup expenses. This can help build your business credit. For grants, you can search on Grants.gov. Also, look into specific opportunities like the Amber Grant for women-owned businesses, but know that grant funding is highly competitive.

Set up your financial systems

Open a separate business checking account right away. Many new freelancers mix personal and business funds, which creates major headaches during tax season and can put your personal assets at risk if you have an LLC. A dedicated account keeps everything clean.

With that in place, calculate your working capital. You should aim to have enough cash to cover 3-6 months of business expenses. For most freelancers starting out, this buffer might be between $1,500 and $5,000. It ensures you can operate smoothly without constant financial pressure.

Here are 3 immediate steps to take:

• Open a dedicated business checking account.
• Calculate your estimated operating expenses for the next six months.
• Research one SBA microloan lender in your state.

Step 7: Build your team and streamline operations

Hire your first subcontractor

When you are consistently booked, consider hiring help to grow. Most freelancers start with a subcontractor or a Virtual Assistant (VA), not a full-time employee. A VA can manage your calendar and emails for $20-$40 per hour.

For specialized tasks, you might hire a junior freelancer in your field. Their rates could be $40-$75 per hour. Many freelancers stumble by not formalizing these relationships. Always use an Independent Contractor Agreement to outline the scope, payment terms, and deadlines clearly.

Set up your collaboration systems

With a helper on board, you need organized systems. Your project management platform, like Trello or Asana, is perfect for assigning tasks and monitoring progress. This avoids confusion and endless email chains about project status.

You should also create a central place for team communication. A free Slack workspace keeps project conversations separate from your client emails. This ensures important files and decisions are easy to find when you need them.

Financially, plan for this expense. A good guideline is to keep subcontractor costs below 40% of the total project fee. This approach lets you take on more work while protecting your own profit margin.

Here are 3 immediate steps to take:

• Draft a basic Independent Contractor Agreement template.
• List three administrative or repetitive tasks to delegate to a VA.
• Set up a free Slack workspace for your business collaboration.

Step 8: Market your business and get clients

Build your online foundation

Your first step is a simple portfolio website showcasing 3-5 of your best projects. This is your digital storefront. You can use platforms like Carrd or Squarespace to get a professional site live in a weekend without writing any code.

Next, optimize your LinkedIn profile. Use keywords from your niche in your headline and summary so potential clients can find you. You might want to ask two past colleagues or clients for recommendations to build initial social proof.

Start your client outreach

Focus on two marketing channels to avoid burnout. A combination of direct outreach and content creation works well. For direct outreach, aim to send 5-10 highly personalized cold emails each day. A common misstep is sending generic templates, which get ignored.

Instead, reference a specific project or recent news about the company you contact. A good response rate for this approach is 5-10%. For content, you could publish one helpful article on LinkedIn or your blog each week to attract inbound leads over time.

Here are 3 immediate steps to take:

• Select 3-5 of your best projects to feature on your portfolio website.
• Update your LinkedIn headline and summary with keywords for your niche.
• Draft a personalized cold email template that you can adapt for each prospect.

Step 9: Price your services and create proposals

Choose your pricing model

You have three main options for pricing. An hourly rate, like $50-$100 per hour for a new writer, is simple but requires you to track your time. Project-based pricing offers a flat fee for a defined scope, which clients often prefer for budget certainty.

A third option is a monthly retainer. This provides you with predictable income for ongoing work. Many freelancers underprice themselves at the start. To avoid this, calculate your desired annual income, add 30% for taxes and expenses, and then divide by your estimated billable hours for the year.

Craft a winning proposal

Once you agree on a price, you need a proposal. This document outlines the project scope, deliverables, timeline, and cost. It protects you from scope creep, which is when a client adds work without increasing the budget. Think of it as a pre-contract agreement.

Your proposal should be clear and professional. It confirms you understand the client's needs and sets expectations for the project. A well-crafted proposal can be the final step that convinces a client to hire you over someone else. Keep a template ready to customize for each new lead.

Here are 3 immediate steps to take:

• Calculate your target hourly rate based on your income goals plus 30% for overhead.
• Research the rates of five other freelancers in your niche on a platform like Upwork.
• Draft a proposal template with sections for scope, deliverables, timeline, and payment terms.

Step 10: Maintain quality and scale your operations

Establish your quality standards

To maintain quality, you need clear metrics. You might track your revision rate, aiming to keep it below 15% per project. Another good measure is a client satisfaction score. After a project, send a simple one-question survey asking them to rate their experience from 1 to 10.

Many freelancers do not have a formal feedback process, which can damage client retention. This simple step shows you value their input and helps you improve. It also gives you testimonials you can use for marketing.

Know when to scale

Growth requires a plan. A solid benchmark for expansion is when you consistently work over 45 billable hours per week or turn down more than 20% of qualified leads per month. At this point, your workload has outpaced your capacity.

This is the signal to bring on a subcontractor, as discussed in Step 7. To manage a growing client list and workflow, you might want to upgrade your systems. A CRM like HubSpot's free version can help you track leads so none fall through the cracks.

Here are 3 immediate steps to take:

• Create a one-question client feedback survey to send after each project.
• Define your maximum weekly billable hours to identify when you need help.
• Sign up for a free CRM like HubSpot to organize your client pipeline.

Starting your freelance business is a journey of small, consistent steps. The key is to focus on one client at a time and deliver great work. That focus builds the reputation you need for long-term success. You have the roadmap, now go build your business.

As you get paid, remember solutions like JIM can help. It turns your phone into a card reader for a flat 1.99% fee, with no extra hardware. This makes payments simple from day one. Download JIM to get started.