The transition from working for an employer to being self-employed does not happen over night. I took the leap at the start of 2009 and the experience has been both amazing and enlightening. Over the last four months, I’ve worked on some incredible projects with very talented people and learned a lot of lessons along the way. Here is my top 10 list:

1. Set a routine. Anxious to start bringing in paid work and getting personal projects off the ground, I quickly overbooked my first few weeks of being self-employed. The more, the better, I had thought. Mornings gradually started later while I continued to work long nights. The fix was to incorporate some kind of daily routine. Having a set schedule has helped productivity and ensures that I’m available for e-mails, conference calls, or other client needs throughout regular work hours.

2. Archive everything. Maintaining a well organized work history is essential. I store client discussions, contact lists, project notes, estimates, invoices, expenses, inspiration, and many other work related items so that I can easily reference them in the future. There are a number of applications and services I use to help me keep everything in order but the main ones are: Things for project to-do lists and notes, Coda for development and site organization, Billings for time tracking, estimates, and invoices, Netvibes for following web news, Apple Mail for checking multiple e-mail accounts, and Time Machine to back everything up.

Out of all the different bits of info I keep, project hours is one of the most important. My previous jobs led me to believe that time sheets served little more purpose than to prove I was working. However, since being self-employed, I’ve found it critical to log all of my hours in order to monitor current project budgets as well as create estimates for upcoming work. I use Billings to make new slips for each project task and jot down what was completed and how long it took. I also break the slips down by categories so I can see how much time was spent between research, account management, design, development, and so on.  At the end of a large project, it’s not uncommon to have a PDF upwards of 20 pages long with all of my task notes. Not only do clients appreciate seeing exactly where my time was spent but each completed project gives me a very clear and detailed outline for comparing future estimates with.

3. Find the work/life balance. This is probably the most important, and difficult, lesson to learn. I also don’t believe this is something you can ever perfect; it takes constant effort to stay balanced. There is a fine line between being dedicated and being obsessed. When working for an employer, it’s much easier to put in your hours and then not worry about the job after quitting time. When self-employed, you have a huge amount of responsibilities and it becomes very easy to justify spending any spare time on your work, whether that means getting ahead on a project or lining up future jobs. Personally, this is part of why I love being self-employed; I enjoy the satisfaction of knowing my success, or failure, is a result of my own doing. However, the danger is when working too much begins to interfere with seeing family, friends, or taking a little break. It all comes down to finding your own balance and keeping everything in moderation.

I’ve also learned that my mood is often tied directly to my work and that can be both a good and bad thing. On the one hand, the pressure to continually make progress has been a strong motivator and, as long as I have met my goals that day, I can go to bed with an accomplished feeling. On the other hand, inevitable slow patches or days that simply don’t go well can weigh heavily on me that evening or, worse yet, all weekend if it is Friday. Finding your “shut off” switch can really be valuable to both your personal and professional life. Go for a bike ride. Play a video game. Do anything that will shift your mind away from work at the end of the day.

4. Communicate as often as possible. Always keep clients informed about of your progress and how you plan to meet the next milestone. Frequent discussions will bring up any questions you or the client may have throughout the project and will help reduce client surprises and revisions. It is also a good idea get to any kind of feedback documented in writing. For example, say a client gives the ok on a design but later decides he or she doesn’t like the look once development begins. By having the previous design approval in writing, it’ll be much easier to steer the project back to the original agreement or justifying added costs if the client insists on new changes. Projecturf is a great tool for managing these types of discussions. I’ve tried Basecamp, activeCollab, and a many similar services but Projecturf is, by far, my favorite.

5. Pay is not everything. When considering a new project, also think about what you can learn from the job and what the client relationship is like. Will the work be an exciting challenge or boringly simple? Does the client seem easy or difficult to deal with? These questions are just as important as what the project will pay. Burnout is usually the cause of overly easy projects and/or doing work for nightmare clients. Taking on enjoyable, meaningful projects for people who appreciate your work will keep you and your clients happy.

6. Dedicate a few hours each week to self-promotion. Write a new blog entry, check in with past clients, join in online web discussions or local meetings, spread the word and let people know you’re available for hire. Doing the work is only half the battle; you need to line up your next projects and keep your calendar booked in advance. Clients want to see life in the people they hire and regularly updating your site with fresh content is an easy way to do that. Posting tutorials or code examples is also a great way to substantiate your work knowledge.

7. Find your zone. One of the many benefits I’ve found in being self-employed is that I feel like I am working toward my own goals rather than someone else’s now. To remind me of life dreams and things I want to achieve, I have family photos and motivational art decorating the walls. Having a creative, inspiring work environment can be a wonderful aid to productivity. I’ve also learned that music can play an important role. It is much easier for me to work (especially when coding) with some kind of background beat instead of listening to the clacking of keys and mouse clicks. Everyone has their own preference but I like songs with no lyrical content, or in a different language. Movie soundtracks, for example, can be very inspirational without the distraction of voices.

8. Separate business finances from personal. Setup a business-only bank account and credit card to help divide business income and expenses from personal. Take the time to record all business costs throughout the year to save yourself from digging through receipts come next April. Usually, a good first step is to meet with a local CPA to find out exactly what you can and can’t write off. It’s worth the effort to figure out how to properly deduct as many expenses as possible, otherwise taxes will quickly decimate your income. I’ve been used to having federal taxes taken out of my paychecks before receiving them so it was rather painful to send out both my 2008 taxes and this year’s quarterly estimated taxes this month. The good news is there are many expenses you can deduct when self-employed like health care, hardware and software, office rent and supplies, and other work related items. Of course, these deductions need to be directly tied to your job but you’d be surprised how quickly they can add up.

9. Passive income can help stabilize cash flow. Most of my work is charged based on the project, not hourly, with 50% up front and the remaining 50% upon completion. Obviously, there are often gaps with no pay at all and that can be worrisome with monthly bills such as housing, health insurance, etc. Passive income can be a great complement to your main sources of revenue because it often follows a consistent pay schedule (i.e. affiliate advertising) and continues to work around the clock.

10. Be professional. Don’t write e-mails like you’re texting from a phone. Don’t post wild weekend photos on your work blog. Don’t spend all day on Facebook (or don’t create an account and eliminate the urge altogether!). Use common sense and present yourself and your work in a professional manner. If you end up working with a client for a long time and become good friends, there’s usually room to be a little more informal, but first impressions are everything.