In Part I of his interview, Chris talked about his rough start as a creative freelancer and shared how newcomers to the industry can cut their teeth and land a first client.
Now, Chris reveals the essential business skills every freelancer needs and why creating your invoices in Photoshop might not be the best idea.
"Don't let Cash Flow kill you and Learn about Payment Terms": Getting Started as a creative entrepreneur
Chris, are there any skills relevant to a freelancer that school absolutely did not prepare you for?
My business knowledge and (limited) understanding of finance is an area that I’ve had to cover all on my own through my own learning and experience, which often meant trial and error. I find that a lot of fresh graduates are immensely talented but don’t really have an understanding of these vital areas and it makes their life much more difficult.
What is the main area each new freelancer should learn about?
To me, the concept of cash flow is the number one area that every freelancer needs to understand. It’s something everyone talks about and may think they know, but I’m not sure that they really do. Cash flow, for a freelancer, is so key.
Let me give you an example. Say you’re out there, looking for work and knocking on doors. It might take you two weeks to get a job. Then, the client takes another two weeks to get the final green light from their boss on this project. You may then have another week or two of pre-production and development before they’ve signed the dotted line. At this point, you are a month and a half into the project and not a penny has come your way yet. Eventually, after a month of graft, the client gets the first draft, it takes them two weeks to agree on feed back for final revisions and after another week of tweaks and re-renders, at last you can send them the final invoice. They get the invoice and go, “90-day payment terms, didn’t you read the contract?”
Oh. So that’s another 3 months waiting before you see any money for your work. Typically, the payment terms are 30 days, but the bigger the company, the more likely they are to push. So from the point that you set out to get the job, you could be looking at 6 months of surviving on nothing and having to cover your own costs and expenses.
That is what cash flow is about and why it can be destructive if you have no other sources of income or a cushion to tide you over. After all, it’s pretty hard to create compelling CG when you’re homeless and starving!
How can I mitigate this risk and protect myself against such a long wait to get paid?
If you’re smart, you will negotiate a deposit and other milestone payments. I tend to request a deposit from my clients. Particularly the first time working with a client who I don’t know, I always request 50% upfront. If they have a problem with that without having a very good reason, then I feel that you’re probably better off not working with them.
It’s not that I don’t trust people, but I know that bad things can happen. If you want to read some scary stories, go to Clients From Hell to read about the worst kind of experiences designers have had with clients. It’s a comedy site, but it does show real stories.
So, by all means, go out there and be trusting, but also take precautionary measures.
Also, you need to have jobs that overlap each other. While you’re in production of one gig, you have to be simultaneously looking for more work and courting other clients. This is a cycle that you have to keep going and maintain that momentum, because if you don’t, you could find yourself without any payment at all for months.
This can be devastating and if you don’t get it right, it could bankrupt you. I’ve been bankrupt. It’s not the worst thing that can happen but it is officially rubbish. I don’t mean to tell you horror stories, but this is the truth and people need to be aware what they are getting into before they take a leap - and do it the smart way.
What other specific steps do you take related to money management?
Now, I have access to credit, I put money aside and plan for stuff like this, but I’ve had to learn the hard way, living off beans and toast for quite a while. The reason is that I didn’t understand cash flow and I didn’t know how to invoice people.
So another piece of advice I would give to people who are just starting out is to keep a mini job on the side if you can. If it’s relevant to your industry, all the better, as you might get perks like product discounts and exposure to your client base, but most importantly you will have a small income to fall back on when things don’t go so well.
What resources would you recommend to make life easier to new freelancers in the area of finance?
Billings, FreshBooks and many other cloud accounting softwares out there are great. They help you get organized, bill people and not spend an awful lot of time figuring out how to go about it.
When I first started as a photographer over 10 years ago, I was using Photoshop to make invoices, it took me at least half an hour to create each one!
Don’t make that mistake, make sure you have an invoice template when starting your business, it is one of the first things you will need when you get your first client.
You might also want to consider educating yourself about terms and conditions and disclaimers in contracts, and train yourself a little on how to read legal documents. Don’t miss the fine print about payment terms.
Do you use any other documents during the process of landing a job?
I use Letters of Engagement; it’s like a contract, but a much milder version. Instead of binding the two parties to do something, it summarizes the existing agreement and formalizes what has been agreed upon.
It basically states what the job is about, when it should be completed and how much the client has agreed to pay. This way, the client can’t come back to you later and say, “Oh, but we’ve agreed something else!”.
The Letter of Engagement ensures that you are on the same page going into the project and makes sure that there will be no confusion moving forward.
All in all, what are the biggest rewards you personally see from being a freelancer and working for yourself?
First and foremost, it's easier to be a great dad when you don’t need to worry about being fired whenever you need to take family time. The flip side is having to invest more time in your work to run your own business.
But the great thing is that you call the shots, choose the clients and make all sorts of interesting decisions.
What projects do you have lined up in the near future?
I am excited for my series on Animation Fundamentals to be released on CG Cookie. Also, there are a few jobs doing mechanics training videos for a major train operation firm, a gig creating a CG rehabilitation wheelchair adverts and a handful of medical product videos. It’s an exciting time!
Want more? Here ar a few must-reads, selected by Chris:
"The Illusion of Life: Disney Animation" is a timeless classic. It has long been out of print, but collector's items are still available online.
"Understanding Comics: The Invisible Art" by Scott McCloud is a must-read, because we should understand all creative mediums...and because I’m a nerd.
"Secret Knowledge: Rediscovering the lost techniques of the Old Masters"
by David Hockney is known as "the book that turned the art world on its head." It explores old painting techniques but is as relevant today as ever. I wrote my undergrad dissertation on this, to discover one simple truth: in art, there is no such thing as cheating!
"It's Not How Good You Are, It's How Good You Want to Be"
by Paul Arden is a little book of ideas on succeding creatively, useful for short bursts of motivation.
Podcasts and audio resources...just go ahead and listen while you work, there is amazing stuff out there!
The Allan McKay Podcast
is a VFX podcast with lots of great job-seeker advice and industry insight.
iAnimate.net is a podcast with animation-related interviews and great industry insight.
And a few more, to listen to for fun after your work is done...
Radiolab offers curious and wonderful shows on a wide variety of fascinating topics.
Songexploder pulls apart the creativity behind music and songwriting.
99 percent invisible for those who are fascinated by design and architecture.
The Comedian's Comedian is simply invaluable if you love comedians and writing comedy.
ScriptNotes gives you an amazing insight into Hollywood scriptwriting. Simply amazing!
Dana Gould Hour is possibly the funniest podcast out there. He makes me wee a little every other sentence. SO FUNNY.
Plumbing the Death Star brings uber-nerdy conversations that are basically hilarious.