Five tips for first-time freelancers
There are over 4.7m self-employed workers in the UK and moving from full time employment to freelancing is becoming an increasingly attractive option for those who are looking for a career change, particularly as October redundancies loom.
The benefits of becoming a freelancer can be hugely rewarding – increased flexibility, the autonomy of ‘being your own boss’ and the freedom to work on only the projects you want to – but it’s important to fully understand the steps required to switch to freelance. In this simple guide, Markel Direct outlines the key considerations when making the move.
Develop your business plan for the short and medium term
The first step of making the move into freelance is developing a business plan for the short term (12 months) as well as medium term (3 years). It can be difficult to know where to start, but some basic considerations include:
- What services will you offer?
- What will be your differentiator from the competition/unique selling point (USP)?
- What will you charge?
- How will you market to potential clients? (More on this below)
- How much do you expect to turnover?
- How much will you pay yourself?
You can find more help on writing a business plan on GOV.UK.
Many freelancers choose to start their business as a ‘side hustle’, doing it in their spare time whilst continuing to work full-time for their employer. Whilst it’s hard work juggling two jobs, there are many benefits to this, as it removes some of the risks of making the leap overnight. If you don’t have the opportunity to start small and build up, don’t worry - provided you’ve got the right skills and attitude, there’s no reason you can’t start work as a freelancer straight after leaving a job (e.g. due to redundancy).
Plan your marketing to potential clients
Developing a pipeline of constant work is essential when freelancing, not just for staying busy, but also for managing cashflow. Raising awareness of your business through social media can be a cost effective way of reaching a wide audience looking for your services; at the centre of your strategy should be providing potential clients with useful content that illustrates your expertise in the space. This could be useful guides, hints and tips articles and even free consultations that act as a hook to larger projects. Search engine marketing (SEO and PPC) is also a great way to attract new clients, so investing time and money in a professional, easy-to-use and optimised website will pay dividends in the long run.
Give yourself a financial buffer (where possible)
One of the main pain points for freelancers is cash flow. Clients don’t always pay on time (and could be experiencing cash flow issues themselves), so if you have the funds available, it’s useful to have a pot of money to help you through months where you don’t get paid on time. You should also think about seasonality – for example, workload can slow down over the summer and festive period whilst clients may not be in the office as much, and so work may be harder to come by. Having a cash reserve can help you weather the quieter periods.
Decide on a business structure and accountant
From a tax and legal perspective, working in a freelance or self-employed capacity is completely different from being an employee, and there many considerations in how you structure your business. Most freelancers choose to operate as either a:
- Sole trader – as a sole trader, you are the business and so all profits (after tax) are yours.
- Limited company – if you structure your business as a limited company, the business is a separate legal entity and you will be a shareholder. Assuming you will be a director of the company, you’ll be paid as an employee, and any profit the company makes will be subject to corporation tax.
Whilst there are additional costs and responsibilities in operating as a limited company, some clients prefer to work with you as a limited company rather than a sole trader, so you may find it helps you win new work.
It’s worth choosing a specialist freelance or contractor accountant to help you decide the best route to go down when structuring your business. They’ll talk you through the tax implications of each option and, once you’ve launched your freelance venture, handle time-consuming financial admin.
Insure your freelance business
Sometimes working on client projects just doesn’t go to plan, and when you’re your own boss, it’s down to you to put right any mistakes. But what happens if a mistake is so serious that it could cost you thousands to put it right?
Arranging freelancer insurance is a vital part of making the move into self-employment. Wide ranging cover is available to help protect your business against a range of unexpected scenarios, including:
- Providing incorrect advice or inadequate services to clients (professional indemnity insurance)
- Causing injury to a third party, or damage to third party property (public liability insurance)
- Tax investigations and contract disputes (legal expenses insurance)
- Vital equipment you use in the course of your business, such as laptops and smartphones (business equipment insurance)
- Illness or injury suffered by employees of your business (employers’ liability insurance)
Whilst it can be easy to think ‘it won’t happen to me’, it’s invaluable to have the peace of mind that if something goes wrong, your insurance policy could help you.
Additionally, having freelancer insurance in place is also a key enabler of work. Many prospective clients require freelancers to prove they have insurance in place (professional indemnity and public liability in particular) before they will start working with them, as it gives your client confidence there is a route of recourse if a problem arises.
Take time to rest so that you don’t burnout
Freelancers and small business owners are at particular risk of burnout, particularly in the early days of launching a business. Giving yourself time to rest and refresh is vital for success; burnout can decrease productivity, lower job satisfaction and – most importantly – impact your mental and physical health. Look after yourself by taking regular breaks throughout the day, joining a freelancer community on social media (to minimise any feelings of isolation you may experience) and scheduling holidays well in advance so that you can enjoy the fruits of working as a freelancer.
This was posted in Bdaily's Members' News section by Fatima Banglawala .