Dealing with freelancers: five common mistakes

If you're an entrepreneur or run a small business, chances are you've hired a freelancer or considered hiring a freelancer. And for good reason: when you don't need or can't afford an employee, freelance labor gives you access to talented workers who can take care of a specific set of tasks.

But getting the most out of freelance labor is not always easy because freelancers work differently than employees and many entrepreneurs and small businesses don't understand that. To ensure a successful relationship with a freelancer, here are five common mistakes to avoid.

Mistake #1: Not signing an agreement.

Many entrepreneurs and businesses fail to reduce their agreements with freelancers to writing. This is a huge mistake for reasons that are probably obvious.

Mistake #2: Not securing your rights to the work product.

A written agreement is a good start but after spending the last 10 years working primarily on a freelance basis, I'm still amazed at the number of poorly-written agreements I'm presented with that don't require me to assign the rights to work product.

Making sure you obtain the rights to work product is extremely important because in many places, intellectual property rights automatically vest with the creators. Hypothetical example: you're a US-based company and you hire a graphic designer on a freelance basis to design a new website for your company. Unless your agreement with the designer contains a valid work for hire clause or provides for the assignment of rights, you don't have the rights to the work product that you probably think you do. In other words, you may not own the website that your paid for.

Mistake #3: Getting lazy with specs.

The old adage "you get out what you put in" is applicable to your relationship with a freelancer. If you need something built but leave all of the important blanks to the freelancer to fill in, chances are you're going to get a result that differs from what you really wanted. To boot, you'll find that you spend more time and money.

By investing in developing clear and detailed specs up front, you can help ensure that you get the work product you need on time and on budget.

Mistake #4: Not paying on time.

Being a successful freelancer is not as much about acquiring enough business to stay afloat as it is about managing cash flow. If you're owed $10,000 for a project but you aren't paid before your bills come due, $10,000 in accounts receivable doesn't do much for you. And so it goes that many freelancers eventually go back to being full-time employees not because they can't get clients but because they can't seem to get money from clients before they have to pay bills.

Many companies that work with freelancers don't appreciate that freelancers have the same cash flow issues many businesses do. They'll pay late and not give it a second thought. This is a bad move for two reasons. First, it puts the successful completion of projects at risk in the immediate term. After all, if your freelancer has to take on another project that will get the bills paid, he'll put you on hold. And second, it sours the relationship, sometimes to the point where a great freelancer won't work with you or gives you economy-class service going forward.

Mistake #5: Micromanaging.

The differences between freelancers (independent contractors) and employees are not merely legal or semantic in nature. Most freelancers think, act and work much differently than employees. As such, they should be treated differently. Yet many times, companies that hire freelancers expect them to function as employees. From expecting the freelancer to be available 24/7 to directing the freelancer's work, there are plenty of ways that companies can treat freelancers like employees. Generally, this can lead to varying levels of micromanagement as the company tries to overcompensate for a lack of control that it isn't used to.