Earlier this year I was asked by a magazine for five tips for people considering setting up business and becoming self-employed. As is so often the case the deadline was along the lines of “the next half hour”. What I came up with was off the top of my head. (I don’t know if they were ever used in the final article as I do not subscribe to the publication). I’ve recently had a few people ask me about going freelance so I thought I’d reproduce the tips here. I might have changed a couple of them if I’d had more time to think about it but I’ve left the five as I originally wrote them.
- It’s feast or famine. Clients don’t spread their custom neatly throughout the year. They are like buses: you wait for one for ages and then half a dozen come at once! There will be “quiet” periods when you will not be earning (for me they are August, end of December and beginning of January) and times when you have to be here, there and everywhere. Make sure you have a cash buffer or reserves to cover the quiet times so that you can continue to pay the bills.
- You can say no. It is tempting to say yes to everything especially as you never really know when the next job or project will be, but be realistic. Can you really travel from Reading to Cardiff to Edinburgh to Huddersfield to Canterbury and then on to Aberystwyth in one week? And if something is outside your main area of expertise think twice about taking it on. It is good to stretch yourself and expand your knowledge and the services that you can offer, but if it is going to be a one-off and take you a week or two to get up to speed – DON’T DO IT!
- Be realistic in your estimates of billable work and time and fix your fees accordingly. If you are lucky, you will be working for six months of the year. The rest of the time will be taken up by the “quiet” periods ( see 1 above), travelling, marketing, social media, preparing proposals, keeping yourself up to date, admin, invoicing, chasing payments… you get the idea. Holidays? No holiday pay. Not feeling too good? No sick pay.
- Use social media to the full. Get yourself on Twitter, Facebook, LinkedIn, Slideshare, Flickr etc. Write a blog. It all takes time to set up and establish a presence but it really is worth it. Google, Bing and Yahoo all include social media in their search results so it makes sense to exploit every opportunity to reach as many people as possible. As well as a marketing tool it is a great way to keep in contact with other self employed people, share experiences and – sometimes – clients.
- Don’t be afraid to admit it is not for you. Being self employed does not suit everyone. It can be difficult keeping yourself motivated if you are working on your own and some find it difficult to cope with the uncertain cash flow. If it becomes too stressful, walk away. At least you will have a better idea of what is involved in running a business and, hopefully, appreciate freelancers a little more.
After an attempted hack overnight on this blog I have had a clean backup of the database loaded on to the site (as well as changing all passwords, security keys etc!). The clean backup did not have the four comments to this posting but I did have them in a text/html backup. I am reposting them myself manually rather than risk an import from a potentially compromised database.
Apologies to Mary and Phil as they will all appear to come from me but I thought that your comments were worth preserving
Comment from Mary mary.robinson@gla-rrnav.org reposted by Karen Blakeman:
Thanks for this Karen.
Regarding point 3. How do you decide how much to charge for work?
Is there some guideline/rule of thumb as to how much a freelancer should charge for work. I.e. if an employee did the work it would cost £X in time/salary. Should a freelancer charge 1.5 x £X
Many thanks,
Mary
Hi Mary,
It all depends on the type of work involved and how unique your skills are. I was told when I started out the true cost of an employee is twice their salary so charging 2 x £X for your services is a good place to start. You also have to take into account what other freelancers are charging and we are not always willing to disclose that to our competitors 😉
I’ve just Googled true cost of an employee and there are some interesting calculations on “Tuesday Q &A: What’s the True Cost of an Employee” http://numberspeople.posterous.com/tuesday-qanda-whats-the-true-cost-of-an-emplo and “IT Centa – IT Support – Employee True Cost Calculator” http://www.itcenta.co.uk/it-support/employee-cost-calculator
Comment from Phil Bradley reposted by Karen Blakeman:
Really good tips Karen – agree with all of them. I’d also add that you want to get a good accountant, who can advise you on what you can charge against tax – it’s an investment that will save you money in the long run.
On the ‘how much to charge front’ I was told to work out how much you want to earn per year (taking into account what you’ll pay in tax, office and other sundry expenses and rainy day money), how many days a week you expect to be in paid employment and divide one into the other. That’ll give you a useful starting point.
Thanks Phil.
A good accountant didn’t immediately spring to mind when I wrote the tips, although I do have one! Having worked for an SME before I went freelance and been responsible for a budget I was taught the ins and outs of VAT, how to manage accounts, and what could be claimed against tax etc. If I’d had time to consider what a total newbie to being self-employed ought to think about I would have recommended attending a local business support group or HMRC seminar on tax/VAT for freelancers/self-employed peeps.
As you say, knowing what you can charge against tax can save you money and keep you out of trouble should HMRC decide to carry out an inspection