As a freelancer beginning a new project, two important questions are likely to be on your mind: “Am I going to get paid?” and “Will this job go according to plan?”
These questions sum up the two main categories of risk faced by a freelance professional: financial risks and operational risks. Failing to address financial risks could result in you ploughing time and resources into jobs and not being rewarded for them. Operational risk is concerned with your ability to complete projects effectively. Consequences of a failure here may include loss of individual projects, a blow to your reputation and possibly even claims for negligence and/or breach of contract.
From ensuring your business has a steady flow of work, through to keeping your clients satisfied, here is a selection of tips for managing specific risks:
1. Build a pipeline
If you find yourself faced with prolonged periods of inactivity, the financial viability of your entire freelance business is at risk and a project pipeline approach helps protect you against this. If you only ever have one big project on the go at any one time, the process should be relatively simple; i.e. as the project comes to a close but before final completion, you schedule in a reasonable amount of time to line up new work.
It becomes more complicated if you’re juggling multiple projects – especially if they vary in value and complexity. Here, you should maintain a ‘big picture’ plan, listing all of your projects and where you are at with each one. As individual projects move through this pipeline, you should have an early warning of when it’s the right time to source new work.
Your aim is to feed new work into the pipeline at an appropriate rate to reduce the risk of your revenue stream running dry.
2. Vet your new clients
With a new business relationship comes new risks, and chief among these is the risk of not being paid. The pitching process inevitably involves finding out everything you need to know about the potential new client to impress them at your presentation. When doing your homework, be sure to find out as much as you can about the creditworthiness of this particular business.
The big credit agencies all offer company credit check services. But not all credit-related problems appear on paper. For instance, does this particular business have a reputation for late payment – and could this put your cash flow at risk? Make enquiries with your professional contacts to see whether there is anything you should know about this organisation before you commit.
3. Add reasonable contingency time to each project plan
Your operational risks are concerned mostly with your ability to deliver work in line with client expectations. Risk management and expectation management are therefore closely linked.
Timescales for completion can be especially problematic. The client will have its own requirements here, but you must resist the temptation to accept the proposed timetable blindly just to secure the contract. Draw up a detailed timetable – and be sure to factor in a reasonable amount of contingency time. Think not just about what could happen to put the contract off-track but also about the severity of the consequences if you fail to deliver on time. The more severe the consequences, the more contingency time you should allow.
Clients have high expectations and whether you’re at fault or not, they may take issue with the work you’ve provided and seek compensation. As a freelancer, the legal costs and expenses involved in defending a claim can be crippling, and it’s therefore vital to have a professional indemnity insurance policy in place to ease the financial burden. Consult an expert such as Bluefin Professions to discuss your individual requirements and ensure you have the right cover in place.
4. Be clear on scope
Linked to management of expectations comes a further risk: that your client alleges that you have failed to complete the work according to the brief.
One cause of this is a lack of communication and clarity before the brief is agreed. To avoid this, present your client with a full list of the tasks that you consider to be included in the brief. It may also be necessary to include a list of items and tasks that are specifically excluded.
Get your client to agree to these before the contract is signed, then incorporate this into your contract.
5. Keep up to date with continuing professional development (CPD)
For their in-house staff, firms tend to have procedures in place to ensure training is provided. As a freelancer this is your responsibility – and should be taken seriously.
From a risk management perspective, it’s very important to keep up to date with best practice in your profession. For each job you enter into, the specific requirements should be set out in the contract. More broadly, when carrying out this work, you are expected to adhere to the standards of a reasonably competent professional, having regard to the standards normally expected in your profession.
Working in a bubble and failing to keep up with current developments puts you at risk of following outdated ways of working. CPD keeps you in the loop and the knowledge you pick up helps you demonstrate to new clients that they’re in safe hands.
Risk management for freelancers shouldn’t be seen as a box-ticking exercise. Take it seriously and it can help you secure your revenue flow, keep clients satisfied and ultimately, keep your business on a firm footing.
