How to Manage a Freelance Business

Moderated by Raymond Lee, Founder, UXr Guild
This is an abridgment; view the full video presentation here.

In this final How to Freelance session, Raymond discussed completing a Request for Proposal (RFP) and the characteristics of a good UX project,  then jumped into the business side of freelancing. 

How to Respond to a Request for Proposal (RFP)

Some companies solicit bids for research projects by sending out requests for proposals. When responding to an RFP, it’s important to know your objective and target audience. If they are budget-conscious, you might want to be the low bidder. If they are seeking special expertise, you might demonstrate yours with a case study. Any questions provided by the client can give you clues to what they are looking for. 

While it is ideal to know the client’s budget ahead of time, frequently, you won’t. What should you do then? One strategy is to provide low, medium, and high-cost options and let them choose the one that best fits their budget.  If you want to see a basic template for services, you can view the Guild’s outline for usability testing services here:

Typically consultants generate a bid by estimating their hours and multiplying by their desired hourly rate. If you’re anxious for work, you’ll probably want to bid low. If you’ve worked for a client before, have ideal experience, or can handle a tight deadline, you might bid higher and still get the work.  Estimate a few extra hours in case some tasks were not spelled out upfront or work takes longer than expected.

Be prepared for some back-and-forth in reaching a final agreement. If you’re working with someone you don’t know, there may not be much discussion. If you know them, you might have more opportunities to ask additional questions and adjust your proposal accordingly. 

Here are some final tips for RFPs: 

  • RFPs take time but can pay off if you’re strategic. 
  • Bid if you know the client, have ideal experience, or a special advantage (such as being local and able to work onsite). 
  • For a repeat client, you can ask for an exclusive first-bid opportunity. If they like your bid, they may not need to reach out to other researchers.
  • Pass on an RFP if you know it has been sent out to dozens of researchers and you have no connection with the company.

What Makes a Good Freelance Project?

Is there a way to identify a good UX project before submitting a response to an RFP? Absolutely! Do some research by asking the following questions:

  • Does the company or UX team have a positive reputation in the industry? Are their products highly regarded?
  • How long is the project? Most consultants prefer longer engagements, so they are worth more effort to win.
  • Does the company have an established process with tools, support, and recruiting techniques?
  • Are you interested in the study? 
  • Is there sufficient time to complete the project?

Can Freelancers Charge for Travel?

When is it appropriate to charge for airfare, hotel, rental car, per diems, and travel time? All these items are negotiable, and most companies are willing to pay these expenses, but you will more than likely need to ask. Depending on where you live, where the client is, and if they want in-person meetings, clients are usually willing to pay for travel that is not considered commuting.

A per diem is a fixed amount, such as $75 per day for meals and transportation. Travel time is the most challenging expense to get reimbursed. You might ask for 50% of your normal hourly rate when travel is required to conduct interviews, attend meetings, or present findings. 

How to Hire Additional Freelance Help

After examining the scope of the project, you might find that it is bigger than anticipated, requiring more work than you can do in the allotted time. You may need a second moderator for a big study, a participant recruiter, a note taker, or an administrative assistant. It’s best to hire these individuals as independent contractors if possible. If you hire them as employees, you will face the complexities of payroll, tax withholding, government filings, etc., which can take a significant amount of time and expertise. 

What Records Do Freelancers Need to Keep?

Keeping good records is an absolute must for a freelancer. This may not be the most enjoyable part of being a freelancer, but without good records, it will make the business side of your work  much more difficult.

While this list is far from inclusive, at the minimum, you should keep:

  • Quotes and proposals
  • Contracts
  • Copies of your studies and reports
  • Client communications
  • Time and task tracking
  • Invoices and payment receipts
  • Expense receipts

Use an organizational system that works for you to have these documents easily accessible as needed.

Bookkeeping Basics for Freelancers

Bookkeeping may feel like a daunting task. If that’s the case, and you’re concerned about doing it right, consider hiring a bookkeeper and a CPA for your taxes. The important thing is to maintain a separation between your personal and business income and expenses. 

Create a separate business bank account (even if you’re a sole proprietor). This will help you track income and expenses for taxes. Having a business credit card for business expenses or using checks, Zelle, or Venmo will also aid in making these payments.

Do Freelancers Need Bookkeeping Software?

If you decide to take on the bookkeeping yourself, do you need software to track hours, issue invoices, and track income and expenses? While not mandatory, options are available, some at low or no cost. The most challenging part of bookkeeping is staying on top of your billable hours, invoices, and expenses. 

If you do decide to invest in software, Quick Books has a self-employed edition, which is a scaled-down version of their full product and an easier option if you’re an independent contractor.  

The best bookkeeping options may be the freelancer specific apps, such as Moxie, and Fiverr Workspace. Wave Apps is free accounting/bookkeeping software that is especially good for invoicing., is good for time tracking. Moxie will help you send out proposals, manage a project, and do the bookkeeping at the same time.

Freelance Business Expenses

Shifting now to the expense side of freelancing, one of the advantages of being an independent contractor is that you can write off some expenses that you couldn’t as an employee. What are some of those things? 

  • Office supplies, laptop, phone, furniture
  • Website development, hosting, internet, email
  • Work-related software, programs, apps, fees
  • Memberships, training, prof. development
  • Design, marketing, accounting, legal, services
  • Work-related travel and mileage
  • Business insurance, advertising

A couple of other items are more complex, and you will want to check with a CPA to see if you qualify for these.

  • Home office rent deduction
  • Health insurance (individual premiums)

You will want to take advantage of these deductions if you are freelancing to reduce your overall income thus lowering your tax liability.

Preparing Freelancer Taxes

When preparing your taxes, make sure you have accurate records of your income, whether from freelancing (1099) or an employer (W-2), if you are freelancing on the side.

Acquire a business credit card as mentioned above, and use it for business expenses. This will simplify your record-keeping. If you need to pay via other means, such as cash, a personal card, or check, or when transferring funds from your business to your personal account, make sure you have detailed receipts and records to account for those transactions.  

This is where bookkeeping software, or at the very least, a spreadsheet, will come in handy and make the task of doing your taxes much easier for you and your CPA.

Quarterly Tax Deposits for Freelancers

If you work for an employer, your taxes are withheld from each paycheck and deposited for you. But what do you do as a freelancer when no taxes are automatically withheld? This is where filing and paying taxes quarterly can come into play, particularly if your freelance income is over $20,000 per year.

The IRS requires you to pay annual taxes in four different deposits, called Estimated Taxes, spread throughout the year. Note that the deadlines for these payments differ from regular filing dates. For information on payment schedules and other requirements, go to

You can also find online calculators where you can input your details to estimate these deposits. One such resource is  Again, check with your CPA to find out if you are required to pay these quarterly taxes.

Health Insurance for Freelancers

If you’re leaving your employment and need to get your own insurance, how do you do that? This is less of an issue than it’s been in the past.  Your first option is to keep your current coverage, as long as you can. This might be a viable route to go if you like the coverage and the rate is good. 

If that does not work for your particular situation, the changes that have recently been made to the Affordable Care Act in the United States allow for more options. These plans are now subsidized, making them accessible and affordable in most instances, and are worth looking into.

Here is a breakdown of these available options:

Medical Insurance:

  • COBRA-keep your employer plan
  • ACA marketplace plans:
  • Off-marketplace: UnitedHealth, Kaiser, Anthem BC/BS, Centene, Humana, Aetna/CVS, HCSC, Cigna, Molina
  • Short-term medical; DPC; Healthshare; MDSave; Cash.

Dental options include Delta Dental, MetLife, Aetna, Cigna, …

In Canada: Provincial Health Care.

Saving for Retirement as a Freelancer

A final consideration that needs to be addressed is retirement. As a freelancer, there are no employer 401k or pension plans. If you intend to freelance long-term, it is a good idea to set aside money for retirement.

There is an instrument called a Solo or One Participant 401(k) which can be either a Roth or a 401k or both, depending on whether you are putting money in pre-tax or post-tax. You do, however, have to use W-2 wages to go into the plan initially. Visit the IRS website to learn more. 

For freelancers making over $50,000 in 1099 income per year, it might make sense to pay yourself 35 to 40% of that total in wages each year. That would give you the W-2 wages to contribute to a plan (and can also be a good tax saving strategy). See Freelancers Can Save Taxes with an LLC, here:

The business side of freelancing may feel complex and confusing at times. But with an abundance of online and in-person resources available to help you navigate the process, it should not stop you. If you’re still feeling a bit nervous, take time to explore the Guild’s resources before taking the plunge. You might find that you really can do this after all and if not, there are services to handle it for you.


Raymond Lee is the Founder of the UX Researchers Guild. You can find him on LinkedIn. This presentation included guest speaker John Thompson, a New York-based freelance lawyer, who deals with freelance contracts and legal issues on a regular basis. You can view John’s full video appearance here.

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