Ditch a normal 9-to-5 by embracing the freelance life

When Shane Ruprecht was busy at his job assembling metal parts into finished items, he often listened to entrepreneurial podcasts and thought about doing something more creative.

And working for himself.

“When I was at the machine shop, I spent my time wondering, ‘Why am I not working on something that is my own,’” said Ruprecht, 34, of Plymouth, “‘with a little bit more freedom in my schedule and the sense of accomplishment from working on projects that I can be proud of?’”

He had made short videos of fellow competitors in pro snowboarding competitions around the Midwest. And once he finished a two-year marketing and design degree at St. Cloud Technical and Community College, years after he started, he launched Streamline Creatives.

That small agency side gig eventually turned into Ruprecht’s main occupation after a November 2023 layoff. In addition to design and website services, he photographs commercial and residential real estate, including by drone, all as a freelancer.

Becoming a freelancer, Ruprecht joined the growing ranks of Minnesota’s self-employed: from independent contractors to solo entrepreneurs and fractional (also known as seasonal or part-time) executives. The number of self-employed Minnesotans surged to nearly 445,000 in 2022, an increase of 17.4% since 2006, the state Department of Employment and Economic Development (DEED) reported in March, citing census figures. Traditional employment, meanwhile, grew 6.7% in the same period.

The pandemic accelerated the shift to self-employment or freelance work and the greater flexibility and independence it offers. As attractive as working for yourself might sound, it comes with tax, legal and liability implications that deserve careful thought and professional advice. Social considerations, such as the potential for a sense of isolation in going from a corporate tower to a home office, can also come into play.

Experts recommend building up savings to cover three to six months of living expenses before leaving a job to begin freelancing. Starting a side business while still working in a full-time job enables you to explore your idea without taking on the financial risk of giving up a steady paycheck.

Free, confidential advice on starting a small business or freelance venture is available from volunteer coaches at nonprofit SCORE. SCORE, which initially stood for Service Corps of Retired Executives, has a Startup Roadmap with a dozen modules. Those can help determine if you’re ready to start a business, create a business plan, market your business and price your products or services.

J.L. Try, a volunteer SCORE mentor, said her best advice for someone starting in freelancing is to work with a business coach who can hold you accountable.

“A coach can help you stay on track and provide guidance on when to say no,” said Try, a fractional marketing consultant based in Richmond, Va. “It’s not about agreeing with every idea but providing the support and structure needed to succeed.”

When working a side hustle — like as a ride-sharing driver or e-commerce deliverer — or a full-time gig, liability should be a key consideration.

An LLC “helps to ensure that just because you’re out there providing services ... your house isn’t on the line or family cabin or things like that,” Eisler said.

After establishing your LLC, Eisler said make sure your contracts and liability insurance are in the name of the company. That’s true even if you’re doing business under your name.

Speak with a tax adviser early on, too.

“It’s a different tax landscape than being a W-2 employee,” Eisler said.

When you work for yourself, you have to pay income tax, of course. But you also must pay self-employment taxes for Social Security and Medicare since an employer isn’t withholding those for you. That means paying state and federal estimated tax payments each quarter, online or by mail.

You also might be able to deduct the cost of office furniture, computers, printers and office supplies you use in your home office as well as a portion of your internet service bill. Same for certain work vehicles. And you could claim mileage reimbursements or tax deductions for work-related driving if your home is your principal place of business.

“There are certain expenses that can offset some of the income you’re making, so you’ll have a bit less of a tax impact,” Eisler said, adding business records kept in good order will help when tax season comes. “Big companies are doing that all the time. So a solo practitioner should also be getting the advantage of those.”

One risk of self-employment: no payment.

Three-quarters of freelancers reported going unpaid at least once a year, losing $6,000 on average, said Rafael Espinal, executive director of the Freelancers Union. The union has advocated for “Freelance Isn’t Free Laws,” like the city of Minneapolis’ Freelance Worker Protections ordinance, which took effect in 2021.

The ordinance requires businesses to enter into written contracts with freelancers or independent contractors who perform $600 or more in services in a calendar year. If not, the freelancer might be able to recover compensatory damages in the amount of the unpaid sum and liquidated damages up to double that amount. New York City, Seattle and Los Angeles have similar protections on the books, as do Illinois and New York state.

Freelancers can buy life insurance and other benefits through the union “at a fraction of the cost than if they were to go out and do that on their own,” Espinal said.

“We saw a lot of traditional workers take that leap of faith into the freelance journey,” he said of pandemic-related layoffs. “With the discussion around the Great Resignation, a lot of workers — once they were exposed to the flexibility of working from home, spending more time with their families and then being forced to go back to the office full time — they saw freelancing as a viable option.”

Midcareer designer and art director Marie Zimmerman hadn’t considered becoming a freelancer until the pandemic. She had worked at ad agencies for a decade and was feeling burned out from the workload and going into the office every day.

“I was craving more freedom and flexibility in my life and schedule,” Zimmerman said. “I had built up a big network, and it seemed like places were more open to hiring freelancers.”

Zimmerman is working with Room & Board and the Minnesota Twins, clients she obtained through the Hunt Agency. The Minneapolis firm connects marketing and advertising freelancers, individually or in teams, to businesses with staffing gaps in those areas.

Plenty of work is available for freelancers, Berg said, but they should vary their assignments to keep learning and gaining experience.

“Freelancers say they want to freelance, and then they jump into a 40-hour-a-week position for six months to a year,” Berg said. “We hear about the burnout. It’s just another full-time position with a different title.”

Berg instead recommends her “20-10-10 Rule.” Twenty hours a week of steady work that fits your strengths, 10 hours for a stretch project or new discipline and 10 hours on a side passion. That last part could be writing a book, spending more time with family, volunteering or taking classes.

Berg advises senior-level managers who are switching to freelance or fractional roles to prepare for leading and contributing.

“Those people often are asked to roll up their sleeves and be the doer as well,” Berg said. “Especially starting out, don’t limit yourself. Be the player and the coach.”

“The adjustment can be jarring for some, so it’s essential to be deliberate about how you will replace these interactions to maintain your day-to-day satisfaction and happiness,” Try said.

Twin Cities networking and leadership consultant Cathy Paper recognized the need to stay connected after launching her freelance venture RockPaperStar in the wake of a layoff from Best Buy. She joins organizations where she will meet other solo entrepreneurs or small-business owners and sets up peer-to-peer mentoring groups for talking shop.

“One of the hardest things about being independent is you get lonely,” Paper said. “It’s finding your right people for both support and professional referrals.”

After years of long days and high-pressure jobs in politics and state government, Valerie Martin started Alpha Agency, her communications consulting business. Running a home-based business enabled her to balance work with her responsibilities as a single parent of now adult children.

Prospective solo entrepreneurs and freelancers, Martin said, should focus on working with clients and on projects they enjoy. Be easy to work with yourself, manage client expectations and over-deliver.

“It might have been spite,” Martin said. “One too many people told me I couldn’t do it. I just thought, ‘I’m going to see if I can, and if it fails, at least I know that I tried.’ So, why not?”