5 Reasons Why You Must Reinvest

As a freelancer it is a daunting prospect to reinvest my hard earned cash back into my business. However, it is also vital to my success. Reinvesting profits is an aggressive and intimidating form of marketing, yet it is highly effective.

I will illustrate this point using my analogy of two freelance web designers: Sally and John.

Reinvest Your Hard Earned MoneyBoth Sally and John launch their websites at the same time, and both see an initial trickle of traffic and revenue. Sally wisely reinvests every penny she earns back into promoting and marketing her business. She researches paid advertising for her niche and begins a campaign. As a result of the advertising Sally receives 2 leads for website redesigns. She collects 50% deposit from both clients and begins work on their designs.

She considers how the leads never would have arisen if it wasn’t for her clever advertising, and she now has enough money from the deposits to repeat the campaign on a larger scale. John received initial revenue similar to Sally and was equally delighted. He takes his girlfriend out to celebrate his newfound earning abilities and they enjoy a relaxed dinner at a moderately priced restaurant. Come the end of the night most of John’s revenue has been spent, but he is happy and feeling content in the security of his newfound earning potential.

Meanwhile Sally is working hard for her two clients and her designs are coming along nicely. She has received yet another lead from her advertising campaign and is happy for the work + 50% deposit. Despite things in her offline life being a little rough financially she takes the time to budget and realizes that she can make do with just 25% of this deposit for a few weeks. She is tempted to splash out on something for herself, but determined, reinvests the remaining 25% back into her ad campaign.

During this time John has acquired 2 leads himself. After accepting both client’s deposits he begins work on their designs and at the end of the day informs his girlfriend of his success. He goes out for another great meal, and has enough spare cash left to invest in a new Ipod! He feels great working as a freelancer and is convinced that this is where the money is!

A few weeks later and Sally has been paid in full by all three clients. She no longer has financial worries, yet still makes an effort to budget and reinvests nearly all of her profit back into her business. She hires an expert in SEO and marketing and pays a few high profile bloggers to review her services. As a result of her hard work she has received 3 more leads, and is hard at work designing for these new clients.

She is also building a steady reputation for herself, as her portfolio is growing stronger by the week and her clients are telling their friends. John has only received 1 more lead, yet remains happy in his freelancing efforts. Despite earning considerably less than Sally you wouldn’t know it, he is celebrating his moderate wealth and sports a new mobile phone. John is still earning a decent income despite a lack of effort promoting his business and a limited number of clients.

Several more weeks pass and Sally’s business is going great. The SEO and paid reviews really worked and she gained several new leads. To her disbelief she actually has too many leads to handle! She is forced to drop a few of her potential clients who don’t appear 100% trustworthy and outsources for a couple of her other projects. Despite her huge success she still lives in pretty much the same condition as when she started out, although she did permit herself to invest in a much needed laptop. She is continuing with her promotional efforts and each week is able to advertise on a larger scale. She has built up a great reputation within the design community and is loving what she does.

John on the other hand has had a rough couple of weeks. After his initial success he has not received any new leads for some time. To add to his woes one of his clients refused to pay up at the end of their project, leaving him with barely enough money to pay his rent. He feels that he has the talent to offer, but nobody is hearing his voice. Despite tireless hours trying to promote himself for free he receives very little exposure. Regretfully he must return to his previous day job and be satisfied with the security of a 9 to 5.

To sum up the key points of this analogy and why you should reinvest your profits:

  1. It is easier to make money when you are successful – Sounds like a no brainer, but this is the key concept to reinvesting your money. People love to see success, and by increasing your success in terms of revenue, traffic or reputation (the three usually go hand in hand) you can concentrate on doing what you love, the money will come naturally.
  2. It is revenue that counts, not profit. This may not be true for most businesses but in the world of freelancing overheads are generally much smaller than in other industries. By focusing on achieving the greatest revenue and the smallest profits you possibly can you will achieve long term success much faster.
  3. It is important to get out of the sea of small-timers. When starting out you will have infinitely more competitors than more successful freelancers, simply because everyone is trying to make a quick buck online. You may have the talent, but more often than not people won’t be able to find you to see it. This is why it is important to become successful sooner rather than later, and also why most businesses fail within the first 3 months online. Once you reach a certain point in your websites growth competition will start to decline at a rapid rate, taking pressure off of you.
  4. If you become successful quicker you will be able to have more control over your earnings. Small-time freelancers generally take whatever work they can when starting out, and this can prove risky. Once successful you can not only carefully select your clients but also have more control over raising your prices (often resulting in a better quality of client).
  5. Try to focus on overall value of your expenditure. When spending money consider the value of your investment not just in terms of revenue but also reputation, an improved portfolio, potential client referrals and networking. Often these factors prove more valuable in the long term than early revenue.

I hope that you have found these freelancing tips useful, and I wish you the best of luck for your business!

Till next time,
Tom

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About the author: Tom Ross is a website designer and entrepreneur with over 8 years experience. He writes passionately about his online experiences and ventures at his blog: Push Standards.

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Comments

  1. says

    In my opinion this is an advantage of beginning as a freelancer part-time. With a steady income from a full time job it is easier to reinvest. Of course, there are down sides to the part-time thing too.

  2. says

    I think you guys missed the real point of the story. She hired an SEO. That was the most important part…lol…j/k…but really…

    I couldn’t agree with this more. With my first (actually my first 7) payments as a freelancer, I used all the moneys received to get the LLC stuff taken care of, a lawyer to write up contracts, business cards, a small PPC campaign, a logo design, I could really go on and on. It took most of the money I had to get all the marketing materials and services, but now I don’t have to worry about all that stuff.

    It’s tough at first. Freelancing full time for the first time can be daunting. It’s best to bite as many bullets in the beginning as you can. That way, you can learn what works and doesn’t, and re-invest appropriately in the future.

  3. says

    Great article Tom, thanks. It is easy to get caught up in the first wave of work and not keep up on your own marketing. I’m going to go buy an ad right now!

  4. says

    I loved this article and it really inspired me where to put future income however I don’t have a clue where to start an advertising campaign. Would anyone have any suggestions on where to start?

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