Ep 301: What You Need for Contracting and Freelance Work

Contracting, freelancing, and running your own service business are on the rise, and are expected to grow. What are some of the basics you should know when shifting into this type of work? 

Transcript

SPEAKER_00 0:54

Welcome, low ego action heroes and phoenixes. I'm Debbie Levitch from Delta CX, and welcome to episode 301 here in June 2026. And I'm going to be talking about some of the things you're going to want to put in place if you are shifting into freelancing or contracting or trying to be your own agency, especially if it's the first time. There are things you're going to want to think about and get ready. And I don't have a slide for you. I'm just working from some notes. And so if you happen to be watching live and you have questions, put them in the chat. I'm happy to answer them. If you're watching this later on YouTube, please drop something in the comments and I will answer your questions. And if you're listening to this on uh audio only and the podcast platform, hello. Uh send in a question if you have one. Of course, you can always join our free Discord community. We've also got lots of events, all kinds of coaching that's going on, and uh also my new Phoenix Flight Collective program for people uh trying to start their own business or thinking about it or growing. So all the links are at dcx.to. Find everything there. Uh that is your link central. So uh I wanted to do this show because I find that uh it sounds like more and more people are moving into freelancing and contracting, sometimes by choice and sometimes not by choice, where they're looking at jobs in tech or corporate and they're finding that these jobs are not full-time employment with all the perks and the benefits and the usual stuff. These are freelance or usually contract jobs that are for a limited amount of time. And in order to get that in place, sometimes they expect you to have a real business set up. Even if you don't, it can be a good idea to set up a real business. Now, I'm not a lawyer or an accountant, so you might want to double check with uh at least an accountant in your region, possibly also a lawyer. Uh, and uh so I'm just going to be giving some general advice, but it can be a good idea to set up some sort of business entity so that you're not just Debbie Levitt for hire. Uh, because if in a bad case scenario, if you got sued, they sued Debbie Levitt. Whereas now that I have a C corporation of the state of Arizona, which I've had for many, many years, if I ever were to be sued, they would be suing Grassflowers Incorporated, which protects me a bit from that liability. Um, uh so again, that's optional. There's different types of business entities in different countries and regions. Some people look at LLC's S-corps. Here in Italy, we have the forfettario. So there's lots of options, and you'll want to get to know what the difference is, and especially look at what is going to shield you from liability if you were to be in the unfortunate situation where you are being sued. Uh, similarly, it is good to get at least some business liability insurance. Uh, my liability insurance in Italy is under 400 euros a year, and my liability insurance for my American company is about 800 a year. So these are not outrageous numbers, and you don't have to buy the insurance until you are uh until you have that first client. But there are some uh freelance and contract uh relationships that I've had where they would not consider me and they would not sign a deal with me if I did not have my own business and insurance. So sometimes that can be a deal breaker, which is why you're going to want to uh look into it and consider it. Um let's see, what else? Uh looking at my list, uh, another important thing you'll want to do is consider creating a budget for your personal life. What does it cost you to live month to month? Your rent, your gas in the car, your expenses, your phone bill, your internet bill, anything that it costs you to live on. It might be you and a partner, kids, dog, cat, no kids, no partner, mom, whoever it is. What do you need to make in order to pay your bills? Anything beyond that can be savings. But what do you need to pay your bills? What is that number per month? A thousand, two thousand, three thousand, five thousand, ten thousand, twenty thousand, we don't know. Maybe you know, I don't know. You don't have to tell me, but you should know. You should know what that number is because if your expenses are four thousand, let's say, American dollars a month, and a job is going to offer you something that pays three thousand American dollars a month, you can take the job, but just know you are not going to have enough to pay all of your bills, and you're going to want to look for uh other sources of of income. And you might also want to look at how to cut your expenses as well. Um, so and again, some of this you'll find in my life after tech book. Uh, you can also find we also talk about it in the Phoenix Flight Collective program, uh, which you can join as well. So also think about that per hour rate. Sometimes they say, oh, this is 30 per hour, 40 per hour, 100 per hour, whatever it is. Do the math and make sure that you uh, where possible, that you are able to pay your bills. However, do the math carefully because in most freelancing and contracting and agency and consulting arrangements, the company you're working for is not paying your taxes. So they're not taking your taxes out, they're not paying into social programs or withholding, uh, so they're not paying Social Security, Medicare, or here in Italy, they're not paying your imps. And so you want to make sure that you have done the math on what will you end up with once you pay for those things yourself, when you pay for your health care, when you give your contributions into the system. And so you want to make sure. So if someone says, oh, we're paying 40 an hour, it's not gonna be 40 an hour by the time you're done with it. Um, oh, great, hey, Scotch and Glory. Know what taxes you have to pay, how much and when. Yes, I was just getting that. Not only do you want to think about the uh regular stuff that's going to come out, like the contributions or health care or pensions, social security, but also any other taxes that might have to be paid. Some countries or regions expect you to pay uh your income tax or your estimated income tax every quarter or to twice a year or just at the end of the year or when you're doing your taxes. You will need to talk to uh probably an accountant to find out what is right for you and the type of business you have and how much you're making. Those are usually some of the factors. Even if your accountant says, Hey, don't worry, you only have to pay your taxes once a year when it's tax time. Don't make the mistake that many people do, which is that when $40 an hour comes in, they act like I've got $40 an hour, so I'm gonna spend it on this and I'm gonna pay these bills and I'm gonna pay for this. You must remember that eventually those taxes will come due. And whether you have to pay 10% or 40% or 60%, whatever are the taxes of your region, you want to make sure that money is put aside because you are likely to owe money when it's tax time, and you want to make sure you have that money to pay that tax bill. You don't want to be surprised and find out you didn't put enough money aside and you owe either more than you expected or more than you put aside. So, very important, you don't necessarily have to start a savings account. It can just be a ledger you keep, or if you're worried you're gonna touch it, sure, move it into another account. Um, but just make sure that uh that that is there. Another option you have based on how you set your company up, and again, talk to an accountant, is uh, for example, I uh pay myself as a salaried employee, and so I use a payroll system, and I have that, this is for America, I have that taking out all of the contributions and withholding. So by the time I'm doing my personal taxes, I have already paid into the system and I uh I have it designed so that I overpay into the system, and then the question will just be how much of a refund do I get? But I never, never owe taxes because I make sure they're being taken out uh as the year moves on. So, again, something to work on with your accountant and decide how you want to do it so that you are not surprised later. Very important to not be surprised later with what you owe in uh taxes. So, again, look at that budget. Also consider a budget for your business. What are you paying for insurance? What did you pay to start the business? We did budgeting a few episodes ago, so head over to Delta CX Hive on YouTube. I think it was episode 298 or 299, but you can search for Delta CX budget and uh you'll probably find that video. It's really important to know the business budget as well, both the one-time expenses like setting up the business entity, as well as the recurring expenses like insurance, which might be paid monthly or annually or twice a year. Um, you will also have other expenses for your business to exist as well. I pay roughly $50 a year to the state of Arizona just to keep my corporation in their database in good standing. But that amount of money is different by different regions. Uh, when my corporation was in California many years ago, it was over $800 a year just to exist and be in good standing. So these are expenses that come with creating your own business, whether you're using that business for freelancing and contracting and that type of work, or you're selling goods or other services. So uh the a lot of this advice stands whether you're uh moving into freelancing or more freelancing or moving into something else. Um, so let's see, we talked about uh think about how much yes, be careful because some people have done the math on what they used to make at an old job. Well, I was making uh $75,000 a year, and if you divide that by 52 weeks in a year and 40 hours a week, I was making X per hour. Oh, this new job is offering me X per hour as a contractor. Hey, that's about the same. I should be fine. No, not fine because you haven't taken into account all of the things that you have to pay for that your job used to pay for, from your health care or health insurance to all of the the withholding and the pension and the social things. So uh don't get fooled by that. I've seen people fooled by that one. So definitely do the math. Um, we also want to talk, uh, let's not forget to talk about contracts. I think I've been talking about contracts since episode eight. So we've been talking about contracts on this channel for a good seven years now. Uh, and I will not stop because those are important. Whether this is a small startup or the most famous company in the world, or your uncle, or your best friend, or whoever it is, make sure you have a contract. Make sure it's a contract that a lawyer wrote. Do not ask ChatGPT to write your contract. You might be surprised later to find that it didn't protect you or it doesn't stand up in your local court. Maybe it was written for some other region or no region, a made-up region, a hallucinated region. Now is the time to work with a real lawyer, even if it's just very rare. And yes, lawyers charge a lot of money, but it's important to have a good contract. If the company sends you their contract, okay, you don't need your own contract next, uh, yet, rather, but you still want to understand what they've sent you. And some people don't read these contracts and they sign them, and then they are crying to me later about what they agreed to, and now what are they going to do? Uh, some people ask Claude or ChatGPT or whatever to read the contract, but they're that's not a lawyer. And it can try to warn you about some things in the contract, but it might not warn you about the right things. So you cannot assume that an AI or an LLM is going to be the best lawyer you can find. It might be the cheapest, but it's uh it's not going to be the best. So uh very important to work with a lawyer there. Let me give you an example of some of the problems that I've seen from people in my community who came to me privately when they had a problem with a contract uh or a lack of a contract. And sometimes like, oh, well, it's my mother's friend, and you know, I've known him for years. Does not matter because remember, if you start fighting or disagreeing or the other person is abusive and you have no contract, then what will you do? How do you get out of that? Do you have to give any of the money back? The contract can cover simple things, and again, we've done many shows on contracts. Go to YouTube, write Delta CX contracts. Um, there's got to be at least two or three videos on that, some of them quite old, but still true. So you want a contract that's going to protect what work are you doing? So, what's the scope? Because that's an area where people love to take advantage. Hey, you know, the scope's not very clear. So you also have to do this, this, and this for me. Um, because I'm asking for it, and the contract doesn't say you're not doing it. I got that one in 1998, and ever since then, I've been very clear about what I'm doing and what I'm not doing, and that if you want more work outside of this, I will quote that and you can say yes or no, but it's not included. It will take more time and it will cost more money. Magically, the clients don't want it once it costs more money. They only wanted it when they thought they could get it out of you for free. So the contract needs to cover what work are you doing, what are the boundaries or scope of that work, how do you get paid, and when do you get paid? Again, some people make the mistake of doing a multi-month contract and getting paid at the end. And then by the time they've done all the work and the people disappear and they don't get paid, and now what are you going to do? The contract also covers that as well. Can you sue that person? What country do you have to sue them in? What state do you have to sue them in? Uh, can you sue them at all? So the contract covers that as well. But I also recommend that, especially if you're going to have an ongoing relationship with someone or a multi-month project, see if you can get paid every two weeks or every month. And that way, in a bad case scenario where the person isn't paying you on time, you'll know that within a month. You'll do a month's worth of work. Let's say you can negotiate that they pay you within two or three weeks of the invoice. You do the first month of work, you invoice them, you'll know in two or three weeks if they pay on time. If not, my contract says I have the right to stop working until you catch up on paying me. Now, my contract says that. If your contract doesn't say that, you might not have the right to stop working and wait to get paid. So again, important stuff. And we've done a whole show where I read my entire contract to you, uh, like episode eight or fifteen. It's something really old, uh, back over on the other Delta CX channel, but you'll find it in YouTube search. So very important to cover that. Cover how do you end the relationship? What if they don't want to work with you anymore? What if you don't want to work with them anymore? Does anybody get a refund? Uh, how uh is the money paid? Um, who owns the work? Um uh a very sneaky one I see sometimes in contracts is you'll see it'll say that they own the work you do, but they also own all the ideas that you have in the period of time in which you work for them. Now, at first you might say, well, that doesn't sound so bad. I mean, if they're paying me and I work for them and I give them ideas, I guess I would expect them to own those ideas. Okay, but look at the language again. Sometimes the language in those contract clauses will literally or basically say that they own all of the ideas that you have during the period of time you work for them, and then it's not clear if those ideas have to happen during your work hours. So you might have a great idea at 10 at night while drinking a decaf. Hypothetically, they own that idea. So you want to be very careful about what they own and how they get that ownership of it, and is that ownership exclusive or non-exclusive? And again, you're thinking exclusive, non-exclusive, Debbie, I you're not even making sense right now. And that's why you need a real lawyer to look at this stuff. Because especially if the things I'm saying are weird or confusing or um seem a little bit out of your league, that's fine. This is what we pay lawyers to do. And uh, as I was saying on LinkedIn the other day, AI is still not a lawyer. Somebody was complaining about having to red line a contract themselves. That's when you take a contract and cross out what you think should be removed or changed. And they were like, I said I had Chat GPT make them a list of what I wanted to change, why can't they just work from that? That's not the way it works. When you are dealing with contracts, when in Rome, do as the lawyers do. Uh, if someone expects a redlined contract, you redline a contract. If they want Chat GPT's list of changes, okay, but then you have to check later to see if they they did all that. So there's so, so many things that need to go in a contract, either yours or the other parties, just to make sure that everybody's on the same page. Sometimes it says uh you can you can't work for anybody in this industry for the next five years. You still want to sign that contract? What is the industry? If it's a SAS system, is that all of SAS? Is this clear? Again, these are the details that lawyers look at and can talk to you about and can help you express to the other party or company what needs to be changed in the uh document. And then from there you have to decide and think about this ahead of time. If they give me a crappy, unfair contract that has ridiculous exclusivity and they own every thought I ever have, and so on and so forth, and they won't change the contract when you ask them for changes, are you still taking that job? Knowing these are these legal limitations. Knowing what you're giving up, it might not be worth it. You might not be glad you did. There are times where I just could not work out a contract with another. Company and I said I'm sorry, I can't do business if the contract is going to say that because that that doesn't work for how I work. And uh that was the end of that. And okay, you know, uh, I'm sorry I've missed out on some work, but I also feel like the contract is a bit of a hint at what it will be like to work with these people. And if the contract is missing things, if it's vague, if it tries to own every pore on your body, then that tells me this might be what it's like to work with these people. They might be unreasonable. Not gonna do it. So again, that's up to you. Um, another thing I want to remind people to have, and I'll start winding uh this down because I have a short list. Because again, we've done so many shows already on uh how to write proposals and estimate your time. We've done shows on how to have a good contract, we've done shows on how to make a great portfolio and case study so you can try to win business. We've got so many shows on these things. This is episode 301. So there's 300 other ones that you could be watching, or or maybe fewer than that. We took down a couple for bad guests. But you can go to YouTube and type Delta CX and then whatever topic is on your mind and see what comes up from either of our channels. I don't broadcast on the Delta CX channel anymore, but again, you can still watch the videos. Look those things up, those those things can help you, even if they're old videos. Most or all of what I'm talking about is still true and relevant. Um and finally, I want to remind everybody to have patience. Many companies have purposefully awful contractor and invoicing procedures. Many companies want to pay you in 30 days, 45 days, 60 days. That means you're waiting two months to get paid. Try to get a deposit or first payment whenever you can, so that you are starting out with some money and then you are invoicing for other money, and at least you know these people pay something. I usually require uh new clients to pay a third or a half up front, and then I might build them monthly as the project goes on. But be careful because these awful invoicing procedures are there to mess with you. Um, I did a project in February. I was told it would be 45 days payment terms, but they kept rejecting my paperwork and they kept messing things up in their invoicing system. It was the worst one ever. SAP is the worst invoicing system. They didn't accept my paperwork until May 8th, and then they paid me about a week or two ago. 45 days from like May 8th. But I finished the work in mid-February. What can you do? And it's not like I'm gonna sue these people, wasn't a big enough amount of money, and I trusted that they would eventually pay me, but it was definitely not vendor-friendly. So have patience. There are times that these things will be slow, there are times where you will have to chase people about payments. Um, I found that most people, when reminded, will get on top of it and get you paid over the next few days or week. Many companies do require a reminder, so make sure you have something set up in your calendar or wherever you track this to say, Did I get paid? If not, you know, follow up with these people. Um we had a client a few years ago who uh ultimately did not pay one of our invoices. It wasn't that big, it was about $400, but he never paid it. And we sent many reminders, and then he appeared about a year or so later wanting some work on his website, and I invoked my usual clause, and I just said, um, due to the issues we had with you paying last time, we will do the work for you on the condition that you pay for the work up front with no right to a refund. You know, sign this addendum to our old contract that says, okay, you know, you're you're gonna pay the $400 you owe us, and you're gonna pay the $500 or whatever it was for the additional work you wanted to do, and then we will do your work. And um, and he did, and that went fine. And I would probably continue doing that with him in the future. I would take at least a half or two-thirds, or maybe even the whole bill up front, uh, especially if I'm concerned that this person uh is still uh likely to not pay me. Remember, uh the people who don't deserve your trust shouldn't be trusted. It's okay to start out trusting people if you believe they deserve it, but if they end up not deserving your trust, you do not have to do anything special for them. You don't have to give them extra work, you don't have to say yes to things, you don't have to say yes to unreasonable deadlines, you're allowed to charge people for last minute or rushed work. You this is your business and you write the rules. So uh let's start wrapping up. Let me know if you have any other questions or comments. I'll play some of our wrap-up music. Uh, let me know if you have any other questions or comments uh about this. Uh next, let's see, in about an hour I'll be going live on my vocal coach Debbie channels, and I will be talking about Zebrato and uh why you may or may not want to use it. So I hope you'll jump over there in about an hour. Tomorrow I'll be back on Delta CX Hive doing Ask Me Anything. So if you have any questions about anything, I'm happy to take them. And then I'll be taking next week off. So uh there won't be any shows uh next week. There will be Phoenix Flight Collective, but there won't be uh shows. So that is what's coming up. So good luck to everybody. If a contract comes in or freelance work comes in, consider taking it. I don't think anything is particularly stable right now, and you might as well take something that pays and keeps you working and keeps you moving forward. Um, so good luck. Don't forget to jump on to dcx.to and explore other things we offer, and I'll catch you soon. Oops. That is the wrong button. Okay, sorry everybody, I'll just end the screen.