Episode 2 with Caitlin Pearce
How to Never Get Paid Late Again: Using Contracts and Agreements

Freelancers are typically losing $6,000 annually due to non-payment. In this episode, Caitlin Pearce, Executive Director at Freelancers Union, talks about what you can do to avoid this scenario, how to protect yourself and your income, and how you can earn more by presenting a professional image of your company.

How to Never Get Paid Late Again: Using Contracts and Agreements

Freelancers are typically losing $6,000 annually due to non-payment. In this episode, Caitlin Pearce, Executive Director at Freelancers Union, talks about what you can do to avoid this scenario, how to protect yourself and your income, and how you can earn more by presenting a professional image of your company.

Listen to the episode to learn:

  • Why you should always show up with your own freelance contract:

    Rather than relying on the contracts the client provides, Caitlin explains why you should have your own version too.

  • How to get taken more seriously and land bigger deals:

    Presenting your brand as professional through your proposals, contracts and invoices can all show your client that you’re serious about your work.

  • How having a contract can ensure you don’t lose out on payments:

    71% of freelancers have had trouble getting paid. Learn how to use your contract to protect yourself.

  • How scoping in the contract phase can help you earn more:

    Using your contract to scope out your project in detail, including how much value you’re providing for the client and what the restrictions are on your work, can help you avoid scope creep which can be a huge profitability killer.

  • How to get started with a contract if you don’t already have one:

    The Freelancer’s Union and AND CO created a template contract you can use to get started.

Full transcript

Juan

You're listening to the Six-Figure Freelancer audio course, brought to you by And Co from Fiverr. We interviewed top professionals who share their exact formulas for success in starting, growing, and maintaining a six-figure freelance career, and I'm your host, Juan Felipe Campos. Okay, freelance masterminds, remember: on every episode of the Audio Course, there's a giveaway of digital goods or resources from our partners that other people don't have access to. To get your audio course resources, subscribe to the audio course on iTunes and then visit and.co/resources. Again, that's a n, d dot c o slash resources to access your digital goods.

Juan

Caitlin, thank you so much for coming on the show.

Caitlin

Thank you for having me. Delighted to be here.

Juan

So Caitlin, you definitely know something about getting to six figure that most freelancers don't. You have a strong pulse on the freelancer ecosystem as a whole and that helps us kind of draw the, the atmosphere for what's going on in 2018 with freelancers. So can you kind of paint a picture at a high level, what the state, what the state of our going industry is and then let's dive into how we can actually make sure that we're making our money.

Caitlin

Sure. So, you know, Freelancers Union, has actually been around since 1995. Um, and so, you know, the organization has been around way back when freelancing was really thought of as being more of a euphemism for being unemployed or being, you know, between work or having to really think about what you're going to tell your parents on the holidays that you do for a living. These days, you know, freelancing has become a lot more mainstream. We do an annual study where we found that 57 million Americans are freelancing, so just over a third of the workforce and that has grown year over year for the past five years. Based on the research, what we predict is that within the next 10 years, the majority of the workforce is going to be freelancing. And what we find is that can be people that are doing freelancing full time as their sole means of earning income, people can be freelancing and mixing it with part time work or other business streams of income, or they can be moonlighting on top of work they already have either because they're freelancing around work they're really passionate about or they're figuring out a way to slowly break into freelancing.

Caitlin

But the thing that we've seen is that, um, you know, overall across all industries, freelancing is really growing across the economic spectrum. More people are choosing to do it full time as their primary source of income and the amount of people that are doing it in earning over $75,000 annually is also growing. So more people are finding ways to really earn a sustainable and comfortable income as a freelancer.

Juan

That's amazing. And are you finding this trend to be true around the world or is it typically just here in North America or what is that like?

Caitlin

Good question. Our research focuses on the US. Though we've certainly seen the growth of freelancing around the world. And that's really happened, I would say, sort of in a similar vein which is the spread of freelance work across across all industries.

Juan

Right. And I guess if we were to say like in the US, over $75K, just for perspective, you're, you're now in like middle class, upper middle class, like at that point, especially if you're like if you're living in the midwest and in some smaller markets that's like pretty good money. So I guess if we were to transfer this trend globally, whatever that may be in your local currency, this is still like basically people are making a pretty good living now off of freelancing is kind of like the trend. It may not be the exact same number across different countries, but it's essentially a viable way to make money. And then to your point about the fact that it's growing, it basically means you're not alone anymore, which I guess also means there's a lot of opportunities for us right? In banding together and finding frameworks to where we don't have to reinvent the wheel.

Caitlin

Yeah, absolutely. I mean, one of the major things we do at Freelancers Union is we bring freelancers who are often working alone, sometimes working at home, physically alone during the day into a community both locally and you know, and at a national scale, and that community is really important for freelancers in terms of having resources, having people to bounce ideas off of and troubleshoot and also just, you know, for your mental wellbeing. It's not, it's not good to be working alone and having to figure everything else out on your own. I'd say the other thing that we see now that freelancing has become so mainstream is that there's a lot more services available to help freelancers where there really weren't any before. You know, coworking spaces are now really abundant in most large and medium sized cities, where that really wasn't the case just 10 years ago. And there's a lot more financial tools, a lot more, a lot more private sector companies are realizing that freelancers need a lot of help managing their business and they're developing a lot of different services to support them.

Juan

Right. Okay. This is great. So can you walk us a little bit through the different resources that are available for us in the Freelancer's Union?

Caitlin

Sure. Well, I'll start with one that we worked on with that And Co, which we're very proud of, which is that we partnered with And Co to create a freelance-friendly contract. So having a good contract is one of the foundations for earning income and protecting your work as a freelancer. And so we really set out to have a template where a freelancer could really just customize it for the way they earn income and the way they want to structure their agreement and sign it and rest assured that it was going to be provided the basic protections for their work. You know, clearly freelancers will often work with a number of different contracts. This is just meant to be a basic template, but we have a lot of those types of resources on our website. So tools to help you get started. Resources to help you understand, uh, what type of insurance you need. Freelancers offers a health, dental life, disability, liability and retirement. And then we offer a lot of educational resources, so, you know, how should I, should I incorporate my business, how should I market myself? We offer workshops every month on things like those questions, branding... So we're really here to help people get started as a freelancer

Juan

And you can find the contract that Caitlin is referring to on and.co/the-freelance-contract, and it is a free service agreement so you can kind of set yourself up for success, like Caitlin was saying, with a basic template to protect yourself at just a really high level. I mean this is something that is really, really impacting a lot of freelancers. Caitlin, do you remember the number? I think it's something like a Freelancers Union did a study, I think it was something like 75 percent of freelancers had reported that they hadn't been paid on time for at least one contract, right? For at least one gig... it was well over half.

Caitlin

It was 71 percent of freelancers have had trouble getting paid. Whether that meant they were either paid late, paid only a partial payment, or just flat out stiffed. So we found freelancers on average, were losing $6,000 annually due to nonpayment and that was, we looked across industries and whether you work in construction, marketing, healthcare, graphic design, this is a big problem and it's one of the top problems that we've set out to solve for our members. We, uh, ran a policy campaign and got the laws passed in New York City, which now say that if you're hiring a freelancer, you have to have a contract and you have to pay your freelancer within 30 days or otherwise you face a lot of new penalties and we're really hoping that's a model legislation that will be picked up by other states and cities that have a lot of freelancers. But the, the nonpayment issue is really, really a huge one. And you know, when you're already having unpredictable income, it makes it a lot harder to save and to plan when you're not sure when your paycheck's coming.

Juan

Right. Okay. So a contract like this might be best served if, let's say you met your client on like craigslist or it was like a word of mouth referral or maybe through social media was an inbound lead or someone referred you to a client - they were like, they tagged you on a post or maybe even on like Angel List or something like that. But what happens Caitlin, if, if once you sign the contract with the client, they typically also have their own contract that they want you to sign. You know? It's like, here's our NDA, here's our, like I dunno, like they have a scope of work. Do you recommend that freelancers also show up with the freelance contract created by And Co and the Freelancers Union, or like is this a replacement of contracts that your client might have in place or would this be an addition to the contracts they have in place? Even if they're already covering some payment terms, you want to show up with your own contract. What do you recommend there?

Caitlin

I always recommend to freelancers that they have their own contract and you know, whether that's our contract template or one that's more tailored to the way that they're working, you're always going to be on a better playing ground for yourself if you're starting with your agreement. And you know, our research shows that only about 23 percent of freelancers say they always use a contract. So a lot of this work is happening either by verbally agreement, by confirming something in an email, you know, can that suffice in court as, as a written agreement? Yes it can, but you don't want to end up there. And one of the sad parts we found in looking into a lot of these payment issues is a lot of them happen not from, you know, someone that you found randomly on the Internet, but many freelancers are finding work through their friends and their personal connections.

Caitlin

And it can be really sad when that's happening with, with someone that, that, you know, and, and consider a friend. So I would say always bring your own contract. And always make sure that, you know, you are taking yourself seriously as a professional. And so don't accept just, you know, oh, well we'll just use our word because that's the way that, you know, it really protects both parties to have a contract. It clarifies your expectations, the clients, and they, you know, they may have other things for you to sign, like a confidentiality and NDA, you know, review those really carefully, take time to read them and think through the scenarios that they might pertain to the best of your ability. I know hiring a lawyer can be quite expensive for reviewing those contracts, but, but trying to really think through those documents as you receive them.

Juan

I feel like this really addresses the kind of your self awareness into where you want to go as a professional. Like you can't on the one hand say that you want to be a six figure freelancer making over $100,000 a year. And then on the other hand to be closing deals with like Paypal, Venmo, and email, like verbal agreements. So if you do take yourself seriously as you're going through this audio course and you actually have a declared over your career, like you've set the direction forward that you want to make $150,000 a year, this is a step in the right direction to say, I'm going to take myself seriously. I'm doing contracts from now on. I'm showing up with my own contracts to every relationship and I'm making sure that I stick to the budget and the and the deadline. Do you find Caitlin, that the, just by sake of having the contract, it actually increases the, I guess probability that a client will pay on time. Is it just a matter of because they signed it then they typically tend to stick with it better? Or do we actually need to get literate about how do we actually enforce the contract? Like it'll probably still get violated. So we need to understand how to protect ourselves there.

Caitlin

Yeah, and I would say just to build on your comment, like you know, we think about the way our website looks, and you know, how we pitch. We think about how we physically look when we show up to meetings... Like your contract, your invoices, these are all an extension of your brand and your proposals. You want to make sure they're really buttoned up, because it's ultimately going to lead to bigger deals for you, and it's gonna lead to you being taken more seriously by your clients. And so, never be afraid to be assertive, and to really put your most polished, professional foot forward when it comes to those things. Although you can certainly use Venmo to accept payment if it's more convenient.

Juan

Or And Co!

Caitlin

Precisely!

Juan

So to the point of enforcing it. Like, do you find that then just signing the contract, they'll actually follow through with it? Or do we actually need to get literate about how do we actually enforce it?

Caitlin

Well, there's a few issues that happen. One of them is, yeah, you might be dealing with a client that's not prioritizing paying you on time and that can be really hard. You can, you know, there's things that you can put into your contract to help mitigate those risks. One of them is negotiating, getting some money paid upfront. As much as possible, actually. If you're, even, if you're working on an hourly basis, you could negotiate some, some set of money to get you started. The other one is you can put in late payment fees. You can put in kill fees at different milestones if the project seems to be stalled out, but you have to think through how you're structuring the payment so that you're not doing a month's worth of work and then you hand in an invoice and you're just sitting there waiting, right? Wondering when you're going to get paid in full for the work that you've done. Um, so that's one of the ways the contract can help make sure you get paid more quickly.

Juan

The tool that And Co has created around this, this is just a perfect setup for it. It's and.co/williams-harricks. So the tool is Williams and Harricks and it makes sure that And Co will send a letter, an actual physical letter will get shipped to your client, telling them and reminding them to pay your outstanding invoice. So this is basically, created in a way that looks as if you had a law firm send it out though. It doesn't actually say like, Hey, this is a law firm, but it's just a very professional physical letter that gets sent out to them and you can pick kind of different tones that you want for it, whether it's very urgent or just you know, just reminding them and you can do that through Williams and Harricks, or of course you can avoid all of this altogether by first of all, obviously having the contract and then secondly using And Co to send the automatic reminders so people actually make sure to pay you on time and let the platform be the bad guy for you, which not to give And Co too big of a shout out here, but it actually is very, very relevant to this point of how do you actually make sure you're getting paid on time.

Caitlin

One nice thing about automating those types of services is that you can also just maintain your existing conversational relationship with your client while someone else is doing the dirty work of following up on payments. So that you don't have to. That's so true.

Juan

That's so true.

Caitlin

And so that, that's another nice piece about that.

Juan

Oh, I have definitely like gotten perfection paralysis before on follow up emails because I'm wondering if the tone, because I actually am frustrated and I'm wondering if the tone can like be read through that email because I'm actually like, Hey, you know, it's like a week late, or two weeks, and I'm really trying to tone it down and this, because it's on autopilot, then the client is going to get the reminder anyways. So it's not even, like you were saying, it's not even harming the relationship of it coming directly from you. You can just say, Oh hey, it was the platform that was sending you the seven day notice and the 14 day notice.

Caitlin

One other connection, I think, that's really clear between, you know, having a good contract and earning more income is really around your project scoping and letting your, setting up a contract with the client, be an entry point to really hone in on the project, the work you're doing, the value you're providing for the rate that you're proposing and specifically what's going to be included in that and what isn't. You know, it's really hard. It comes to mind, an example of a member who was doing these flat fee websites, you know, where they had negotiated an agreement where you know, the developer is getting paid upon delivery of website. Well, there was no discussion about maintenance. There was no discussion about if the client had a number of different revisions. So you can end up looking at a proposal at face value and thinking, wow, this is going to be a great, a great project for me that's actually going to turn out to be something that you're losing money on based on the amount of work that you could end up putting into it. And so going back to the contract is a great technique to use with a client who suddenly asking for all this stuff that's out of scope and saying this is the work we've already agreed on.

Juan

One of the most successful six figure freelancers that I've worked with pulled, like physically pulled out the contract in every single meeting and just kind of had it there and no matter what, like anything that was talked about, she would just kind of like point at it. And, I mean, it was weird like in the first, you know, first or second meeting... After like the third or fourth time, it was really cool because it really kept the project ticking like a clock. Like it was so simple to look at it. And it was just a success checklist. It was very simple, green light or red light. Like are we on track with this feature? Yes or no? Are we on track with this promise? Yes or no? Are we on track with this promise? And the other thing that I thought she did was really smart is she actually had prices for the most commonly requested, like, additional services, so she could just, like you were saying, basically upsell you into it. Like I'd be happy to do it. It's not 'no', it's 'yes, of course, and it costs this amount', because she was just prepared. She knew that people wanted, like in that case it could be maintenance, or SEO, or additional revisions. Sure. It's $297 for each additional revision as you can see on this, like menu of services or however it's presented, but it's kind of like being smarter than the problems that are for sure going to be coming your way, especially as we start scaling our businesses and having answers for those moving forward. Caitlin, is there another resource that you can point us to at freelancersunion.org or should I just be shouting out the homepage directly?

Caitlin

Sure. Well, if you visit the homepage, you know, one of the things that we have that's a great resource for freelancers who, you know, are either starting out or just want to build their network is we have these monthly member meetups that are now in 30 cities across the US called Spark. And they're free to attend, they're organized by other freelancers who are volunteers, who are more seasoned freelancers. It's the first Wednesday of every month, and they're always around topics related to the nuts and bolts of growing your business, earning more income, um, uh, you know, around how to brand your work, how to market yourself, how to manage your finances, these sorts of things. It's called Spark. If you go to freelancersunion.org/spark, you can find a listing of all the events, um, and it's a great way to just meet other people. It's, it's a cooperative environment where you can, you know, bring your true self and all of your questions, anxieties and things you're proud of, and share them with other people that are going all the same things.

Juan

Excellent. There you have it, freelance masterminds, whether you're reading the number one blog for freelancers on freelancersunion.org, or checking out the tax and insurance guides that have been shared publicly here, or you're attending the Spark events in 30 cities across the U.S., Freelancers Union is a great resource for you to get plugged in into the community and realize that you don't have to reinvent the wheel. There's tons of people and there's tons of resources available for you as our industry keeps growing. We also talked about that And Co website and the resources we've shared there is such as the freelancer contract and the Williams & Harricks invoice reminder to make sure that you're getting paid on time.

Juan

Okay, freelance masterminds. Do not forget to pick up your digital resources from this episode. It's very simple. You just subscribe to the show on iTunes and then once you've done that, visit and.co/resources. Subscribe on iTunes and then visit a n, d dot c dot o slash resources to get your digital goods. See on the next one.

Juan

Caitlin, as you continue to grow and take your business forward, where's the best place for people to stay in touch with you and everything that you're doing?

Caitlin

Sure. Well, you should follow Freelancers Union, freelancersu on Twitter and FreelancersUnion on Facebook and become a member because joining is free and you just have to sign up and it's open to all comers so you can join at freelancersunion.org.

Juan

Excellent. Caitlin, thanks so much for coming on the show and sharing all of this with us.

Juan Felipe Campos
About your host

Juan Felipe Campos

Juan Felipe Campos serves as VP of Technology at Manos Accelerator in partnership with Google Launchpad. As a freelancer, Juan has worked on growth and customer acquisition for VC-funded startups including Ease, Admix, Timeular, and AND CO from Fiverr. He hosts the Six Figure Freelancer audio course/YouTube channel, leads the Freelance Masterminds Facebook Group, and is passionate about helping remote workers make more money and live life on their own terms. His companies have been featured in major publications including Entrepreneur, Huffington Post, Inc. Magazine, and Forbes.

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