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3 Ways to Raise Your Freelance Rates

Wednesday, October Post a comment

With the end of the year approaching, many freelancers are thinking about raising their rates in 2021. I often see advice that basically amounts to raising your freelance rates 10% (or whatever) each and every year, which is fine as far as it goes. If you underpriced yourself when you were starting out, it might make sense; in some cases, you might be able to double or triple your rates and still get projects. Once you’ve been in the business for some time, however, you probably can’t get away with large, frequent increases.

The key is to find your sweet spot, and that requires a strategic approach to raising your freelance rates.

As you gain experience and expertise, your work is more valuable to clients—and no doubt you’re faster and more efficient. To me, there’s no reason to wait till the end of the year to bump your rates. If you’re so busy you can’t remember the last time you needed to market yourself, raise them now. Maybe you’ve discovered peers who are charging a lot more for similar projects and clients, or perhaps you’ve acquired a new skill or certification. The raise-your-rates alarm should really be screaming if you can’t remember the last time you got turned down for a project based on price.

Suffice it to say, there’s a long list of reasons to consider raising your freelance rates. So how do you do it without creating client pushback?

  1. The Grandfather Clause. This one’s simple: Keep existing clients at their current rate, while quoting new prospects at a 10–20% higher fee. That way, you can test the market, while eliminating the concern about losing loyal clients who’d react poorly to a price hike. (If you’re freelancing for the long haul, of course, you’ll eventually need to raise prices for loyal clients, too—a much easier conversation if you have a strong relationship and deliver results.) 
  1. The Stealth Raise. I’ll be honest: I’ve never understood why some freelancers feel obligated to make a big deal about a price increase. The stealth raise works exactly like it sounds: Build in another 10% in every new quote, including new and existing clients. Or if you do estimated ranges, which is my favorite approach, nudge the higher end a bit higher. No one needs to know but you. 
  1. The Circumstantial Increase. There’s no reason you shouldn’t raise your fees during busy times or during the holidays. Think of it as a broad application of minor rush fees during a period of high demand (i.e., when you want to carve out some personal time away from the desk).

Note that all three of these are easier to execute if you generally provide project estimates. Indeed, I believe the ability to seamlessly raise rates is one of the best arguments in favor of using estimates whenever you can, rather than an hourly rate or publishing a rate sheet.

Two final thoughts on why there’s no wrong time to consider a fee increase: (1) Pricing serves as a market signal of your value, whether it’s high or low. (2) One of the strangest dynamics in the freelancing world is that, in most cases, higher-paying clients are better clients. That’s a pretty sweet side benefit in addition to the extra income.

 

Jake Poinier made the leap into freelance writing and editing in 1999 after a decade of positions in the publishing industry, giving him key insights from both sides of the desk. As the founder and owner of Boomvang Creative Group, he has worked with a diverse array of Fortune 500 and small businesses, consumer and trade magazines, and independent authors. Jake is committed to helping freelancers improve their businesses and shares his knowledge and experiences frequently as a speaker at industry conferences, through webinars, and on his blog.

Categories: Business, Freelancing, Jake Poinier

The More Unique and Popular You Are, the More Your Compensation

Sunday, April Post a comment

How much does a writer for your local advertising weekly earn? How much does J.K. Rowling earn?

What’s the reason for the difference?

In my view, there are primarily two reasons.

First, popularity. A lot more people read Rowling than the advertising weekly. It’s only natural she earns more.

The second reason is a little more esoteric: uniqueness. Almost anyone who can string 50 words together can write for the advertiser. Only Rowling was able to deliver more Harry Potter.

If you think about it, this same paradigm is pretty much true of other career paths:

  • Unique and popular musicians earn more than cover bands.
  • Unique and popular actors earn more than extras.
  • Unique and popular visual artists earn more than those who only copy the Great Masters.
  • Unique and popular historians earn more than high school history teachers.

And so forth.

Let’s be clear here: I’m not telling you what to write. I’ve worked with lots of people and I’ve never told any of them what to work on next. I’m just saying that if I like a certain kind of material, and I can get similar material from a hundred or a thousand different writers, I’m going to pay relatively little for the next installment of that material.

I’m going to pay a lot more for the next installment of material I can get only from one writer.

Is this just another argument for you to find and cultivate your own voice? Absolutely. That’s one of the main reasons I encourage you to strive toward becoming the best version of your creative self that you possibly can be.

Is this another hurdle on the road to success that you have to leap? It doesn’t have to be. Many people I’ve worked with start out fearful that finding and developing their unique voice is a terrible obstacle that’s difficult to overcome. As I’ve coached, mentored, and counseled them, I’ve helped them recognize that it’s really an opportunity. In fact, it’s a privilege and an opportunity.

 

Robert Moskowitz is an award-winning independent professional writer who has written and sold millions of words in just about every format over five decades. He instinctively sees the big pictures, breaks each one down into coherent slices, meaningfully prioritizes and sequences those slices, and then executes the tasks inherent in each slice in very productive ways. Put more simply, Robert knows how to succeed as an independent writer, covering all the bases from soliciting assignments to delivering polished work, from pricing jobs to budgeting and managing personal finances, from organizing a conducive office environment to establishing and following sensible guidelines regarding life, work, and productivity. Having done all this, and having paid attention to how he did it, Robert is now in a position to pass along what he knows to others.

Categories: Business, Robert Moskowitz, Writing

Keep Your Creativity and Your Business Separate

Sunday, April Post a comment

One of the biggest mistakes that a creative professional can make is to blur the line between creative efforts and business efforts. You don’t expect a doctor to diagnose every person she meets. You don’t expect an auto mechanic to tune up every engine she encounters. You don’t expect a musician to sing every line she utters and never talk.

In the same way, you shouldn’t expect yourself to bring your creativity to every business task you tackle.

 

It’s Just Business, Not Personal

The brightest line between business and creative activities demarcates the simple fact that lots of people can do business, but only you can do your creative work. That’s why it’s important you learn to recognize when you are doing business, and when you are creating, and that you intentionally bring different traits and skillsets to each of these two categories of activity.

 

When to Wear Your Creative Hat

Obviously, you’ll want to wear your creative hat when you are fulfilling a creative impulse, or a creative contract. This includes the times when you are actually working, but also such times as when you are

  • planning the work
  • contemplating the work
  • researching or investigating the work
  • gearing up for the work
  • polishing the work.

These are among the times when you’ll be drawing on your professional training and experience, tapping into your innate creative resources, and generally letting rip your creative powers. You’ll be in or near—or trying to achieve—a state of flow. You’ll be making your own professional choices and decisions. You’ll be enjoying yourself in what will often become a peak experience.

During these times, you need not—and should not—be thinking about business considerations.

 

When to Wear Your Business Hat

But at other times, you’ll want to doff your creative hat and put on that more practical, more hard-headed, more logical and material hat that denotes your emphasis on a business frame of mind.

When you wear your business hat, you’ll almost pretend that your creative side belongs to another person. You’ll stop trying to solve problems in new ways, stop trying to send a message or deliver meaning to an audience, stop trying to draw on those creative talents and innovative ideas that others just don’t have.

Instead, you’ll put into practice some basic, simple functions that reflect a well-defined collection of black-and-white guidelines and practical policies that have been shown to maximize your level of success in the world of business.

These include times when you are

  • pricing
  • billing
  • collecting
  • marketing
  • negotiating

Let’s take a closer look at each of these, in turn.

 

Pricing

As a professional writer, you produce output. This output is worth money. How much money it’s worth depends to a large extent on the value you set for it, and your determination in sticking to that valuation.

Pricing is a purely business function that depends primarily on how much supply you can deliver, how much demand there is for your output, and what range of values the market allows for your work.

For example, if you can crank out a professional-quality piece of work in a day, you’ll probably be satisfied to take less for it than if the same work takes you a week, a month, or a year. What’s more, if you can find only one buyer for your work, you’ll probably be forced to take less for whatever you write than if 25 buyers are clamoring for everything you can produce.

In the same way, the market sets a range of prices for your work based on the number of suppliers, the number of demanders, and other key market factors.

To illustrate: if your competition charges $5,000 to $10,000 for a certain kind of written item, you’ll probably be hard pressed to get $20,000 for something similar that you generate. But you’d almost certainly have an easy time getting $2,000 for it. Pretty much the same situation obtains for work that falls into all different price ranges.

Given all this, the Holy Grail of pricing professional work is to find the price that brings you the most money. This could entail selling lots of material at relatively low prices, selling very few pieces at very high prices, or—for most of us—selling many pieces at prices well within the range established by many other professional writers.

Setting a price entails very little creativity. It is much more like practical experimentation. If buyers are reluctant to accept your price, that’s a signal it may be too high. If buyers snap up your work, that’s a signal you may be pricing it too low. For most of us, the goal is usually to find the “Goldilocks” price that’s just right.

 

Billing

As a professional writer, you ask for money for your work. This entails not only setting a price, but drawing up an invoice of some kind that states the item you are selling, the buyer of it, and the price you’ve established for the work, along with any relevant conditions such as rights or royalties.

You might also establish other conditions, such as how long you’re giving the buyer to pay, how the money is to be paid, and so forth. Billing also entails communicating this information to your buyer. There’s little or no creativity involved in this work, yet it’s important to do it well, on a timely basis, and to keep track of who you have billed for what.

 

Collecting

As a professional writer, pricing and billing are only two of the business tasks you’ll need to accomplish in order to receive payment for your work. Collecting is perhaps most important, because without the act of collecting the money you’ve asked for through pricing and billing—particularly when buyers are slow to respond to your routine billing efforts—you may never get paid.

Collecting begins with checking the bills you have sent out and determining your next action on each of them. For relatively fresh bills you’ve just sent out, you’ll probably decide to wait and do nothing extra.

But as a particular bill ages, there will come a time when you’ll want to consider contacting the buyer to see how far along she is in paying your bill, then later perhaps sending the same bill again as a reminder that you’re still waiting to get paid, and eventually taking more drastic steps. These might include cutting off any further deliveries of your work, charging interest on the unpaid balance, asking a professional collector to go and get your money, or taking the buyer to court.

I don’t see any need for creativity here. Do you?

 

Marketing

As a professional writer, you’re interested in selling your work. Naturally, you can’t sell unless you can find buyers, which automatically brings you into the realm of marketing.

While there may be some creativity involved in marketing efforts, you don’t need to expend any of your own creativity in this area. Very intelligent and creative people have spent many years developing lots of interesting and effective ways to find buyers and to persuade them to buy. All you have to do is study the world of marketing and emulate what the most effective marketers do.

Marketing itself is beyond the scope of this article. But it’s well within my scope to suggest that you include marketing as a prominent part of what you do when you’re wearing your business hat.

 

Negotiating

As a professional writer, you’ll regularly be making deals with buyers who want to obtain some of your work. As soon as someone expresses interest, you’re a denizen of the world of negotiation. You’ll want to reach an agreement with each buyer on the terms of each purchase, including your obligations to the buyer and the buyer’s obligations to you.

Although there are some industry standards for the sale of professional writing, there remains a great deal of latitude within the areas of rights, promises, remedies for broken promises, deadlines, parameters of the work you’re selling, and more.

As with marketing, you don’t need to invent any negotiation techniques. Simply study and learn what the best negotiators do, and add those skills and behaviors to the repertoire you draw on when you’re wearing your business hat.

 

Networking

As a professional writer, relationships are frequently central to your success. Relationships bring you opportunities to sell your work, to learn new skills, to expand your creative powers, and more. These relationships have to be started and cultivated, which is precisely where networking becomes important.

As with marketing and negotiating, there’s little advantage to you expending your creative energy on developing new and better ways to network. Simply recognize the need for it and use the well-established best practices of networking, which you should do on a regular basis. This is an important task for the times you’re wearing your business hat, and you should consider it so.

Over the years, I’ve found great pleasure in watching talented writers grow from timid souls who feel that the business side of our profession is not their cup of tea to marveling at the raw power and financial benefits these same writers can produce by putting a little elbow grease into the mechanics of business, without ever compromising their inborn creative capacities.

 

Robert Moskowitz is an award-winning independent professional writer who has written and sold millions of words in just about every format over five decades. He instinctively sees the big pictures, breaks each one down into coherent slices, meaningfully prioritizes and sequences those slices, and then executes the tasks inherent in each slice in very productive ways. Put more simply, Robert knows how to succeed as an independent writer, covering all the bases from soliciting assignments to delivering polished work, from pricing jobs to budgeting and managing personal finances, from organizing a conducive office environment to establishing and following sensible guidelines regarding life, work, and productivity. Having done all this, and having paid attention to how he did it, Robert is now in a position to pass along what he knows to others.

Categories: Business, Robert Moskowitz, Writing

The Dogs Days of August

Sunday, April Post a comment

August has always been an awesome month for me. It’s my birthday month. (Shout out to my fellow Leos.) It’s the month that I experienced my first kiss. It’s the month I survived what should’ve been a life-ending accident. (Got run over by a pickup truck 1,000 miles into an ill-fated cross-country bike trip, when a guy fell asleep at the wheel in broad daylight in the middle of Nowhere, Montana.) It’s the month I finished writing my first book, The Science, Art and Voodoo of Freelance Pricing and Getting Paid. But above all, it’s the month that I quit my final corporate job forever back in 1999 to go into this wild and wacky world of freelancing.

So, while the rest of the world tends to do their State of the Personal Union in January with New Year’s resolutions and all that jazz, for me, it’s August when I think about where I’ve been and where I’m headed. A recent article in the Atlantic, Your Professional Decline Is Coming (Much) Sooner Than You Think, happened to strike just the right note at just the right time. No matter where you are in your career, I highly recommend reading it—it’s a lot more hopeful and thoughtful than you might believe by glancing at its headline.

Being of a, let’s say, particular age, this concept jumped off the page for me: “Vanaprastha . . . whose name comes from two Sanskrit words meaning ‘retiring’ and ‘into the forest’ . . . is the stage, usually starting around age 50, in which we purposefully focus less on professional ambition, and become more and more devoted to spirituality, service, and wisdom. This doesn’t mean that you need to stop working when you turn 50—something few people can afford to do—only that your life goals should adjust.”

I’m no mountain-top mystic nor am I especially touchy-feely, but this hit my browser at a time when I’d been thinking those same thoughts. I recently started mentoring some younger freelancers. In 2019, I’ve spoken at the ACES and Editorial Freelancers Association conferences, and I’m looking forward to doing the same at the NAIWE Be a Better Freelancer Conference in October.

Sure, I’m as ambitious as ever and not retiring anytime soon. The later I get in my career, however, the more I get a charge out of seeing newer freelancers (of any age) strike out on their own.

 

Jake Poinier made the leap into freelance writing and editing in 1999 after a decade of positions in the publishing industry, giving him key insights from both sides of the desk. As the founder and owner of Boomvang Creative Group, he has worked with a diverse array of Fortune 500 and small businesses, consumer and trade magazines, and independent authors. Jake is committed to helping freelancers improve their businesses and shares his knowledge and experiences frequently as a speaker at industry conferences, through webinars, and on his blog.

Categories: Business, Freelancing, Jake Poinier

Why a Website? Highlights of the Conference Session

Friday, April Post a comment

I’m looking forward to talking about websites for freelancers at “Gateway to Success,” this year’s Be a Better Freelancer conference, coming up October 11–13, 2019, in St. Louis. This topic is always fun to discuss because there’s always something new in the world of creating and managing websites and because it lends itself so well to graphics and illustrations. It’s also kind of fun to share what doesn’t work in a website, alongside what does make an effective site to promote your freelance business.

It’s become common knowledge that freelancers in any skill set need websites to build and support our business efforts. Sure, you can promote your business at LinkedIn, Facebook, and Twitter, but a website is important because:

  • It’s all yours; no one else controls or limits how it looks and what it presents.
  • It helps you be found—it comes up when someone searches for the skills and services you provide. That’s especially important for anyone starting out, because unknown freelancers won’t be found by their names.
  • It gives you a permanent email address.
  • It’s flexible—you can choose what to post, what and when to update it, the amount of information you provide, etc.
  • It speaks for you with clients who aren’t local and you aren’t likely to meet them in person to show your work samples. It’s your portfolio in an era when you probably will work with more clients who aren’t in your geographic area than ones who are.

 

Even if you already have a website for your freelance services, you’ll probably find the insights discussed at this session beneficial. You might gain new resources for making it look or read better and to attract business and educate prospective clients about who you are and how you work.

Think of your website as the base and office of your freelance business. It’s your showroom. It’s your path to being a better freelancer!

To benefit from this session—and many other ones—you will need to register for the conference.

 

This is the 14th offering of the conference, and the first-ever partnership between Communication Central and NAIWE. We hope to see you there!

 

 

Ruth Thaler-Carter has been a full-time freelance writer, editor, proofreader, and desktop publisher for more than 30 years. She has been published locally, regionally, nationally, and internationally in, and does writing, editing and proofreading for, publications, associations, nonprofits, websites, service firms, and businesses. She sold her first freelance articles when she was still in high school. Renowned as a skilled networker, Ruth is active in about a dozen professional associations, serving as a newsletter editor, webmaster, publication author, speaker/presenter, blogger, program host or planner, and chapter leader. In 2006, Ruth launched the Communication Central “Be a Better Freelancer”® annual conference to help aspiring and established freelancers find greater success and connections with colleagues. Ruth is the owner and editor-in-chief of the An American Editor blog and received the Philip M. Stern Award of Washington (DC) Independent Writers for service to freelancers; the Writers and Books Big Pencil Award for teaching adults and contributions to the literary community; EFfie awards for writing, editing, and newsletters; and the APEX award for feature writing. She was also an IABC/DC Communicator of the Year.

Categories: Business, Marketing, Ruth Thaler-Carter

Should You Earn More by Working Longer Hours?

Sunday, March Post a comment

There came a time, early in my career, when I was faced with a difficult situation: I needed to earn more money. But since I generated my income from publishers and others, there was no simple way I could get them to pay me more for the same volume of work I was already doing.

My choices seemed to boil down to the following:

  • Work longer hours
  • Leverage the work of others
  • Lower my professional standards to spend less time on each piece
  • Automate my work to produce more material in less time
  • Speed up the internal processes involved in writing.

 

I spent many weeks contemplating the details and ramifications of each strategy and came up with the following thoughts and conclusions.

 

Work Longer Hours

At first blush, this seemed the simplest answer to my problem. If I could earn (in the old days) $100 working an eight-hour day, simple math told me I could earn $125 by working a ten-hour day. What could possibly go wrong?

But as I dug into the details and implications, I began to see some of the problems this strategy would entail.

For example, I was already working as many hours a day as I comfortably could. Working longer hours would reduce the time I could spend with my wife and child. I wasn’t sure it was worth the extra money to cut back on the most important parts of the life I was working to build.

Working longer hours on paid writing projects would also leave me less time and energy for the unpaid writing projects that were dear to my heart and possibly stepping stones to a better career.

Even worse, working longer hours would require more effort, and that would tend to leave me even more tired at the end of the day. If not immediately, then eventually this additional fatigue would cause me to think and write less well. I would inadvertently begin to allow more errors—not just typos, but errors in thinking and in factual accuracy and depth—to creep into my writing. Perhaps my stylistic flair and creativity would degrade as well.

I wanted none of this to intrude into my professional life.

 

Leverage the Work of Others

This approach is the basis of success in the world of business. After all, Henry Ford did not build Model-Ts with his own hands. Nor does Elon Musk actually construct the cars, rockets, satellites, and other products that are the foundation of his businesses—and his incomes.

In the old days, Michelangelo, Caravaggio, and other Great Masters relied on students and apprentices to do much of the work required to move their masterpieces a long way toward completion, and today writers like James Patterson do much the same with the written work they crank out.

So it made sense for me to try to hire other writers to do at least the initial parts of some writing projects that publishers and others wanted to buy from me.

However, this strategy never worked for me, partly because I could rarely find suitably talented or skilled trainees and apprentices to work for me. But even when I did, I invariably felt that supervising their work took more of my time and effort than simply doing that same work myself.

Because leveraging others didn’t pencil out for me, I stopped thinking of this as a viable way forward (although I have continued to hope I’d find someone suitable).

 

Lower My Professional Standards to Spend Less Time on Each Piece

This is one of the classic approaches to success in American business: lower production costs as a means to increasing profits.

However, lowering my standards was something that proved hard for me to abide. This is probably because—at least to me—writing professionally is only partly a business. It’s equally—perhaps more so—an art form, a product of my creative energies, and even a reflection of my personality.

Delivering work that is only “B” quality when I could have pumped it up to “A” quality not only conflicts with my personal values, but also causes me emotional and psychic pain. For whatever reasons, I feel deeply there’s a minimum standard of writing that satisfies me, and when my work fails to meet or exceed it, I just feel bad.

 

Automate My Work to Produce More Material in Less Time

Back in the 1970s, I hung around with people who were experimenting with hobbyist computers. I was hoping that these early computers could provide a degree of automation to my writing that would reduce the total time required for me to complete at least some of the work I had on my professional plate.

But that was a pipe dream—at least until 1979, when I discovered that dedicated word processors were on the market, and for the most part, they worked pretty well. Later, I found that home computers could run word processing software powerful and reliable enough to help me write better and faster than ever before.

I jumped on that bandwagon and have never looked back.

 

Speed Up the Internal Processes Involved in Writing

Logically, this is a sensible way to try to earn more. Because of the way my mind works (I’m always looking for ways to do things faster, better, and easier), this approach has long been in either the back or the front of my mind. Why not apply this same brand of thinking to the internal processes of writing?

The problem was—and remains—I don’t really know how to do this. I’m pretty certain that I have done it, but I don’t know how.

I have some thoughts and feelings on how I manage to write much faster today than I did in years gone by, but I can’t swear they are true, or that—if true—they will work for anyone else. However, I offer them here:

  1. I research what I am writing. The less I know about a subject, the more hesitant my writing becomes. Pounding away at research eventually gives me the confidence—and the knowledge—to write freely and quickly.

 

  1. Having fed the process through research, I allow what I’ve learned to ripen in my mind. I don’t try to force my writing. The best way for me to write faster is to hold off until I feel ready to write. I’ve become confident that when I’m ready the words will gush out of me quickly and well. So far, I’ve been right about this.

 

  1. I get a first draft done. Some writers claim they agonize over every word, phrase, sentence, paragraph, and page. They can’t move on to the next word, phrase, sentence, paragraph, and page until every word they have already written is perfect. This has never worked for me. My method has been to write all the way through the end—using whatever words seem okay at the time to get the thoughts out of my head and onto paper (or screen). I’m going to polish the material anyway, so I find little value in holding up the flow of thoughts just because my first attempt is not perfect. My writing mantra is essentially: “We’ll fix it in post.”

 

  1. I have several projects in mind and in progress at once. When I bog down on one, I simply switch over and try pushing forward on a second one. Or a third. I trust my subconscious to be working on my projects 24/7 without my awareness. It’s another angle on number 2 above.

 

So while my title to this piece about earning more from writing asked whether to work longer hours, my answer is firmly “no.” Once I’m working as many hours as I comfortably can, I have found it’s better for me not to try to increase my income by throwing more hours at my projects. It’s better to find some other way.

 

 

Robert Moskowitz is an award-winning independent professional writer who has written and sold millions of words in just about every format over five decades. He instinctively sees the big pictures, breaks each one down into coherent slices, meaningfully prioritizes and sequences those slices, and then executes the tasks inherent in each slice in very productive ways. Put more simply, Robert knows how to succeed as an independent writer, covering all the bases from soliciting assignments to delivering polished work, from pricing jobs to budgeting and managing personal finances, from organizing a conducive office environment to establishing and following sensible guidelines regarding life, work, and productivity. Having done all this, and having paid attention to how he did it, Robert is now in a position to pass along what he knows to others.

Categories: Business, Freelancing, Robert Moskowitz, Writing

Qualified Business Income Deduction

Sunday, March Post a comment

You may deduct 20% of qualified business income (QBI) from a partnership, S corporation, LLC, or sole proprietorship. In the case of a partnership or S corporation, the deduction applies at the partner or shareholder level. The business must be conducted within the United States. Special rules apply to specified agricultural or horticultural cooperatives.

Generally, income from rental real property held for investment purposes and reported on Schedule E (Form 1040) is not eligible for the QBI deduction. However, you may be eligible for the QBI deduction, if you are operating as a real estate business. In addition, you may qualify for the QBI deduction for a rental real estate enterprise if you provided 250 hours or more per year of rental services to the enterprise.

The QBI deduction reduces taxable income, not adjusted gross income (AGI), so the QBI deduction does not affect limitations based on AGI. Also, it does not reduce self-employment income (or self-employment tax). The deduction is available to both non-itemizers and itemizers.

A limitation based on Form W-2 wages and capital of the business is phased in when the taxpayer’s taxable income (computed without regard to the deduction) exceeds the threshold amount.

When your taxable income exceeds the top of the threshold amount phase-in range, the QBI deduction is disallowed with respect to specified service trades or businesses.

 

Threshold Amount

Qualified business income is subject to limitations for individuals with taxable income exceeding the threshold amount. If your taxable income is above the threshold amount, you must apply a limitation, which reduces the QBI deduction. If your taxable income is under the threshold amount, you will not apply any limitation.

The threshold amounts for 2020 (i.e., where the QBI deduction starts to decrease) is

  • $326,600 – Married Filing Joint
  • $163,300 for all other statuses

 

Form W-2 Wages/Property Limitation

If your taxable income is at least $50,000 above the threshold ($100,000 for married filing jointly [MFJ]), the 20% qualified business income deduction cannot exceed the Form W-2 wages/qualifying property limit.

The Form W-2 wages/qualifying property limit is the greater of:

  • 50% of the Form W-2 wages paid by the business, or
  • The sum of 25% of the Form W-2 wages paid by the business, plus 2.5% of the unadjusted basis immediately after acquisition of all qualified property of the business.

 

Example: Mike operates a sole proprietorship that makes beef jerky. His qualified business income for 2020 was $180,000 and his taxable income is $225,000. The business bought a new high-tech dehydrator for $100,000 and placed the dehydrator in service in 2020. Mike has one employee and paid total wages of $20,000 for the year.

Mike’s business income deduction is $10,000, which is the lesser of:

  • 20% of his business income ($36,000), or
  • Form W-2 wages/property limit ($10,000), which is the greater of:
    • 50% of Form W-2 wages ($20,000 × 50% = $10,000), or
    • Sum of 25% of Form W-2 wages ($5,000) plus 2.5% of the basis of the dehydrator ($100,000 × 2.5% = $2,500), which equals $7,500.

 

Qualified Trade or Business

A qualified trade or business means any trade or business other than a specified service trade or business, and other than the trade or business of being an employee. However, the specified service trade or business exclusion from the definition of a qualified trade or business is phased-in if your taxable income exceeds the threshold amount. It does not apply if your taxable income is below the threshold amount.

Specified service trade or business. A specified service trade or business means any trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners, or that involves the performance of services that consist of investing and investment management trading, or dealing in securities, partnership interests, or commodities. The law specifically excludes engineering and architecture services from the definition of a specified service trade or business.

If your taxable income is at least $50,000 above the threshold ($213,300), all of the net income from a specified service trade or business is excluded from qualified business income.

If your taxable income is between $163,300 and $213,300, the amount excluded is computed by determining a percentage that reflects the excess of taxable income over $163,300 ($326,600 MFJ) in a fraction over $50,000 ($100,000 MFJ).

 

Example: June is an attorney with taxable income of $178,200. Her qualified business income is $150,000. Her business is a specified service business, and her taxable income is over the threshold amount ($163,300), therefore her qualified business income deduction is limited. Her phase-in reduction is computed:

$178,200 – $163,300 = $14,900/$50,000 = 29.8%

Qualified business income of $150,000 is reduced by $53,104 ($178,200 × 29.8%), which equals $96,896.

June’s qualified business deduction is $19,379 ($96,896 × 20%).

 

Qualified Business Income

Qualified business income is determined separately for each of your qualified trades or businesses. Qualified business income means the net amount of qualified items of income, gain, deduction, and loss with respect to a domestic qualified trade or business. It also includes gain from the sale of a partnership interest to the extent the gain is treated as gain from a sale of property other than a capital asset.

Qualified business income does not include:

  • Specified investment-related items of income, deductions, or loss (dividends, interest, long-term capital gains and losses, annuities).
  • Any amount paid by an S corporation that is treated as reasonable compensation.
  • A reasonable amount of guaranteed payments for services rendered by a partner.
  • Wage income.

If the net amount of qualified business income from all qualified trades or businesses during the taxable year is a loss, it is carried forward. Any deduction allowed in a subsequent year is reduced (but not below zero) by 20% of any carryover qualified business loss.

 

Kajli Prince (“Prince”) has over 20 years of experience in small business tax preparation; he is the office manager of H&R Block’s Sudley Manor Office in Manassas, Virginia. As a self-published author, Prince holds a special appreciation for NAIWE and its members. One of his passions is sharing relevant information with people and showing them how best to use it for their benefit. Prince is a small business owner of 25 years, and his specialties include emerging currencies (e.g., virtual/crypto currencies), information technology, intellectual property, and business administration.

Categories: Business, Freelancing, Kajli Prince, Taxes

Developing a Business Plan

Friday, February Post a comment

If you want to be a professional writer, then you should seriously consider treating your work as a business. And that means developing a business plan.

As a newbie to the professional writing industry, you probably won’t need a complex plan; you may even be able to scratch out a totally adequate business plan on the back of an envelope. But if you’ve got some experience under your belt, or you have major ambitions, you’ll benefit from a more robust, comprehensive, and heavily detailed plan.

Either way, having a business plan gives you a road map for what to focus on, what to do next, what to expect in the future, how to handle the unexpected, and how to assess the progress you are making toward your goal of becoming a successful professional writer.

 

What Will You Do?

The first part of your business plan should contain a simple but complete, high-level statement of your planned professional activities:

  • What products and services will you offer?
  • To whom will you offer them?
  • How will you make yourself known to these potential buyers?
  • What performance milestones will you aim for?

Do some clear thinking as you write this part of your plan, but be ready to come back to it with refinements after you figure out the details in the sections to follow.

 

Products and Services

In this section, try to describe the work you expect to be doing in more detail.

Start by naming and characterizing each of your products and services: scripts, novels, booklets, plays, speeches, etc. Then specify the relevant details, such as word lengths, audiences, and formats.

While you’re at it, try to identify the benefits of your products and services. What’s special about you and your offerings? Why would someone want to hire you or buy from you? What differentiates your products and services from those of your competitors?

Incidentally, if you think you don’t have any competitors, you’re almost certainly wrong. You probably haven’t found them because you haven’t done enough research into the market(s) you plan to enter.

 

Sales and Marketing

In this section of your business plan, try to include all the important details about how you will obtain paying clients.

  • How much will you charge for each product or service?
  • Will you advertise? Where? How often?
  • Will you participate in trade shows or display at conventions? Which ones?
  • Will you mail or email sales and marketing materials? To whom? Saying what?
  • Will you make personal connections within your network? Where? When? How?
  • Will you pay for sales and marketing help from an agent? A publisher? A collaborator?
  • Will you develop a web presence? How? With what sales and marketing messages?

Try to list, describe, and specify enough details so that you could—if you wish—simply hand off this information to a sales and marketing agency and afterward feel confident that they will implement your plans as you intended.

 

Practical Matters

When starting a business, it may be beneficial to work through several practical matters that will effectively translate your dreams and rough ideas into a tangible business entity. Such matters as:

  • Where and when will you work?
  • Who will do your billing? Accounting? Taxes?
  • What will be the name of your business?
  • How will it be organized: as a sole proprietorship, a limited liability company, or a corporation. And what state will it be registered in?
  • Who will own the business?
  • How will you ensure compliance with applicable laws and get answers to the inevitable legal questions?
  • Are you a party to contracts or agreements (non-disclosure, non-compete) that limit your ability to do what you are planning? If so, how will you handle these limitations?
  • Where will you obtain start-up capital?

 

Management and Decision-Making

Who will run your business? You alone, or you with others, or just these others? What authority will management have, and not have, to impact your everyday work and your ability to make deals (and other business arrangements)?

Will you have any advisers, partners, or collaborators? What influence will these people have on your work, deal-making, and business activities?

 

Growth

What’s your plan for growing this new business? Will it always be just you, or will you bring in others as contractors, employees, partners, coaches, or people in other roles to help you grow your business?

How will you measure your business’s growth? In terms of income? Number of people doing the work? Number of items sold? Some other way? Remember to measure what is important to the future of your professional writing business.

Include goals in your business plan that emphasize the success you’d like to achieve as a professional writer.

 

Finances

In the financial section, project the amount of money you will need to operate your business. These will be yearly projections for the first five years.

Once you’ve calculated these expense figures, add up the money you expect to earn as a professional writer. Take into account the prices you will charge and the quantity of products or services you expect to sell each year. Since you can’t nail this down to the exact dollar, work with a range of likely minimum to likely maximum income for the first five years you’ll be in business. Also list cash on hand, loans, investor capital, and equity.

Now compare your anticipated income against your anticipated expenditures. How long will it take until you break even? How long after that until you recoup the money you spent and make a profit and also save for retirement?

Be cognizant that your new business might accumulate significant value as it grows. For example, any assets it owns might become valuable, including its contracts, its relationships with solid customers, its inventory and unspent earnings, its real estate or other property, and so forth.

All this work to develop a business plan can be fun, as you run through all the possible scenarios and contemplate your potential success as a professional writer, as well as meaningful.

If you don’t get the business plan right, you’ll be depending on luck for your success. And it’s highly unlikely you’ll be the one in a million writer who lucks into success as a professional. If you do get your business plan right, though, your chances of success take an immediate leap into the realm of the possible, the do-able, and even the likely.

 

One Final Thought

Many people make the mistake of thinking that just by stating a goal, or writing it up as part of a business plan, that you must achieve it. Totally untrue. Any goals you state—and intend to achieve—are simply distant milestones to help guide your direction. To achieve them, you must actually do the necessary hard work and do it as well as you can.

 

Robert Moskowitz is an award-winning independent professional writer who has written and sold millions of words in just about every format over five decades. He instinctively sees the big pictures, breaks each one down into coherent slices, meaningfully prioritizes and sequences those slices, and then executes the tasks inherent in each slice in very productive ways. Put more simply, Robert knows how to succeed as an independent writer, covering all the bases from soliciting assignments to delivering polished work, from pricing jobs to budgeting and managing personal finances, from organizing a conducive office environment to establishing and following sensible guidelines regarding life, work, and productivity. Having done all this, and having paid attention to how he did it, Robert is now in a position to pass along what he knows to others.

Categories: Business, Freelancing, Robert Moskowitz, Writing

Earn More While Working Less

Friday, December Post a comment

I don’t know about you, but while I greatly enjoy writing, and I love to re-read my finished work (plus I metaphorically glow every time I hear the occasional “you changed my life”), I have never forgotten that under the capitalist system there’s always the component of money.

As a result, I have spent a good deal of my professional time and effort thinking about, and finding ways to increase, my income from writing.

Here are some of the methods I have used to accomplish this important element of writing:

  1. Raise Your Rates

This is fundamental to increasing your income. In part, I’ve always thought of this process as a simple scenario: Suppose you’re in a room or on the phone with a relative stranger, and you ask them to give you $10. Chances are, they’ll scoff and brush you off with a forceful “no.” That’s a natural reaction. But when you are in a room or on the phone with someone who is negotiating to buy your work, you can ask them for that same $10 (extra) with a much greater likelihood they’ll say “yes.”

That’s one big reason I’m routinely exploring how much more I can get for every word I write.

Asking for more is the basic tool for earning more. If I’m getting $1.00 a word from most of my clients, I’m likely to quote a slightly higher rate to my next prospective client. If she balks, I can always change my tune and offer the lower rate that I’m already getting from so many others.

Of course, you don’t want to appear avaricious, nor do you want to queer a deal by behaving too greedily or money-grubbing. But there’s nothing wrong with considering the total earnout from a piece of your work and trying to maximize it.

Aside from outright asking for more, there are a couple of other considerations to keep in mind when trying to raise your rates.

First, part of the process of kicking up your rates is to establish and maintain a minimum rate, under which you will not work. If you don’t have such a minimum, it’ll be extra difficult to resist the inevitable capitalist pressures on you to work cheaper and cheaper. Naturally, you’ll want to keep raising this floor as you cement your ability to get higher and higher rates for your work.

Second, calculate how much you “should” earn, and how much you “want to” earn by summing up your living expenses for the year and dividing by the number of hours you generally work. If you spend $100,000 a year and work 2,000 hours (40 hours times 50 weeks), you should earn $50 per hour to meet your expenses. If you want to earn $120,000 next year, you’ll have to find ways to get $60 per hour.

Since inflation eats away at the value of your dollars, this calculation contains a built-in incentive for you to keep raising your rates.

Of course, you can always work more hours or spend less money, but that’s for a different discussion.

  1. Specialize and Become an Expert

Most writers should choose between specializing on a single field of knowledge or writing on a variety of topics.

Aside from any other considerations, however, choosing to specialize can bring you more income. This is because

  • you’ll tend to establish yourself as an expert
  • you’ll be writing on a topic that few others can cover as well as you
  • you’ll be writing for a narrower audience of people who may feel more willing to pay well for good information
  • you may uncover ancillary sources of income such as speaking, teaching, editing, researching, or something else.
  1. Work More Efficiently

We’ve already touched on the number of hours you can work in a year and the amount you can earn each hour. Reading those ideas, you may have realized that another way to earn more is to produce more output per hour.

This brings you into the world of productivity and efficiency.

Back in 1980, I found a great way to increase my income by switching from an electric typewriter to a word processing computer. I not only cranked out more material on the computer, every line read better because I could craft it more meticulously.

At this late date in the computer revolution, there are probably very few changes you can make that offer a comparable productivity advantage. But you might want to think about

  • speech-to-text software instead of typing
  • auto-correcting software to reduce the time needed to clean up your work
  • automatic formatting software to facilitate writing scripts and plays
  • mind mapping software to help you develop complex characters and plots.

You could also pull a “James Patterson” and simply supervise as others do your writing for you. But that’s a topic for another post.

  1. Self-Publish Your Best Material

During the gold rush, it wasn’t the prospectors who tended to make a fortune. It was the prospectors buying equipment and supplies who made many shopkeepers rich.

Along the same lines, it isn’t the writers who tend to make most of the money available from crafting the written word. More often, it’s the publishers who do.

Fortunately, self-publishing has become much easier than ever before.

The techniques of self-publishing are topics for a different discussion, but there’s no shortage of information and advice on how to do it. In fact, by one reckoning, many of the most successful self-published books unabashedly cover the topic of how to self-publish.

Of course, that’s not the only topic that works as self-published material. Look into it. You’ll discover that when you are keeping 100% of the sales income, you don’t have to sell very much to earn more than what you might receive from a project that pays you only a small fraction of the total sales or, even worse, only a flat fee.

  1. Negotiate for a Piece of the Action

One of the nice things about TV, film, and music is that the writer can reasonably expect to get paid not just an upfront fee, but a portion of all the revenue the work generates.

You can gain increased income from this simple principle by trying to write for industries that offer such ongoing payments.

I’m not telling you to abandon your principles and your passion to write pot-boilers for network television. I’m simply saying that if you’re looking to harvest apples, you’ll do better in an apple orchard than in a fallow field.

To a lesser extent, you can also try to gain more revenue by negotiating a piece of the action from the kind of writing you already do for other projects and purposes.

  1. Stop Getting Screwed

Perhaps the most difficult, yet important, avenue for earning more income is to stop signing contracts or accepting assignments that allow others to take advantage of you. I’ve done lots of work for people that resulted in limited—even zero—income for me. I’m not proud of it. I don’t like to talk about it. It really galls me. But it motivates me to avoid making the same kinds of mistakes in the future.

I therefore suggest that you make one of your professional mottos the following: “Screw me once, shame on you. Screw me twice, shame on me.”

Working to increase your income from writing is different from, but related to learning the craft of writing. Based on my own career, as well as those of people I have helped to succeed as professional writers, I can tell you that half a loaf is better than none, and being able to afford to buy a full loaf is even better than that.

 

Robert Moskowitz is an award-winning independent professional writer who has written and sold millions of words in just about every format over five decades. He instinctively sees the big pictures, breaks each one down into coherent slices, meaningfully prioritizes and sequences those slices, and then executes the tasks inherent in each slice in very productive ways. Put more simply, Robert knows how to succeed as an independent writer, covering all the bases from soliciting assignments to delivering polished work, from pricing jobs to budgeting and managing personal finances, from organizing a conducive office environment to establishing and following sensible guidelines regarding life, work, and productivity. Having done all this, and having paid attention to how he did it, Robert is now in a position to pass along what he knows to others.

Categories: Business, Robert Moskowitz

About Getting Older

Friday, September Post a comment

Inspired by a colleague’s request to write about birthdays, I came up with a few thoughts. Here I am in my 60s, and not quite sure what it means—but not worried about it.

Supposedly I’m old—but I don’t feel old. Of course, it helps that I seem to still be mentally intact and involved, can still look after myself, and continue to be able to do the work I love. I think it also helps that I have a marvelous network of long-time friends who keep me feeling young. I think that is because we keep our wacky childhood and high school memories so fresh by staying close and seeing, or at least communicating with, each other fairly often.

Even if I did feel old, why would that be a bad thing? I’ve survived more than just the passing of the years. I survived a wide range of crises over those years, and that’s something to be proud of. It’s why I don’t let myself be pressured into coloring my hair when I go to the salon for haircuts (well, other than a splash of purple!): I earned every gray or white hair and see no need to cover them up.

I know how I got here: born, raised, lived; still living. That’s a good thing. As my mom used to say whenever someone complained about the infelicities and challenges of increasing age, “Consider the alternative.”

Some aspects of all these birthdays are a nuisance—my knees and hips have started to creak a bit and make it difficult to get up from a chair or the bed, and to negotiate stairs, but . . . consider the alternative.

Getting older does mean dealing with loss. Both of my parents have died, and I miss them constantly, but . . . I had my dad in my life for more than 40 years and my mom for 60; that’s a lot longer than many friends can claim, and those were all wonderful, loving, supportive, fun years—also more and better than many people experience. And it’s natural for parents to go before their children. When life takes the opposite direction, it’s unimaginable.

My beloved husband, who was 12 years older than me, died last year and I miss him every moment of every day, but . . . we had 30 delightful years together, which is—again—more than many people get from their relationships and marriages. He was a tough guy (a retired steelworker; my man of steel!) who accepted the limits of aging with surprising grace; rather than complain (“Consider the alternative!”) or give up. He focused on what he still could do. His attitude toward birthdays, aging, and increasing fragility was admirable: “I can’t do what I used to, but I’ll find a way to do as much as possible. If I can’t walk on my own, I’ll use a walker so I can still get around and go places. If I can’t carry all my cameras, lenses, and gear, I’ll switch to digital. If I have health issues, I’ll reconfigure my favorite recipes so I can still enjoy some of the things I love to eat. . . .”

Being “old” has its advantages. I qualify for Medicare, so I save a bundle on medical insurance, and can start getting my Social Security benefits whenever I’m ready to stop working (if that ever happens; I do find retirement hard to envision, but that’s because I enjoy what I do, and not—mainly thanks to my financial genius of a mom—because I have to keep working). And I get a kick out of senior discounts, even though I don’t see myself as “senior.” My recollection, although my brothers disagree, is that my dad loved using his 60-plus discounts; he said he deserved them, and I concur.

I see every birthday as a type of new year, so I have more than January 1 as a moment to reflect, refresh, and sometimes revamp. A birthday is an opportunity to celebrate still being here and to think about what new things I might do to stay as sharp, engaged, and active as possible, both physically and mentally; socially and professionally; intellectually and maybe even emotionally. This year, I decided that my birthday presents to myself would to be more creative and expand my interests beyond activities related to my work life. I’ve started playing around with painting and glasswork—neither of which I do very well (yet), but who knows where these might go!—and am looking into going back to a long-ago hobby of ceramics.

These projects are birthday gifts to myself that I think will take me into increasing age with increasing creativity and continuing mental and physical agility, a sense of joy and achievement, and appreciation for survival on many levels. They are my ways of fulfilling the concept of “I’m not (just) getting older; I’m getting better.” I am trying to embrace getting older and having more birthdays. After all, “consider the alternative.”

Here’s to happy birthdays for all of us, and graceful, grateful perspectives on getting older!

 

Ruth Thaler-Carter has been a full-time freelance writer, editor, proofreader, and desktop publisher for more than 30 years. She has been published locally, regionally, nationally, and internationally in, and does editing and proofreading for, publications, websites, service firms, and businesses. She sold her first freelance articles when she was still in high school. Renowned as a skilled networker, Ruth is a newsletter editor, publication author, speaker/presenter, blogger, program host or planner, and chapter leader. In 2006, Ruth launched the Communication Central “Be a Better Freelancer”® annual conference to help aspiring and established freelancers find greater success and connections with colleagues. Ruth received the Philip M. Stern Award of Washington (DC) Independent Writers for service to freelancers; the Writers and Books Big Pencil Award for teaching adults and contributions to the literary community; EFfie awards for writing, editing, and newsletters; and the APEX award for feature writing. Ruth was also the IABC/DC Communicator of the Year.

 

Categories: Business, Ruth Thaler-Carter

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