From tax and sourcing clients to insurance and structure, here’s our top advice on how to become a freelancer.
Becoming a freelancer (and a successful first year)
Whether you’re experienced in your field or a graduate fresh out of training, becoming a freelancer could be the most rewarding thing you’ll ever do. Like so many of the small businesses we help to insure, you’re hopefully passionate about your craft. And if you understand how to market it, becoming a freelance writer, photographer, or whatever you choose lets you make a living from that passion. It’s getting paid to do what you love, and who wouldn’t want that?
The difficulty, of course, lies in how to make the decision, get the ball rolling, and maintain that passion when you’re six months (or six years) in. Here’s our checklist for how to go freelance, focused as usual on the current watch points for UK businesses. Pin it to your fridge and make becoming a freelancer a reality in 2017.
If you’re looking for tips on how to become a freelancer, these articles might also help:
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- 6 successful small business ideas to get you started in 2017
- What type of business insurance do I need?
Give yourself a reality check
If you’re leaving a job to start your own business, or even as a student mulling over next steps, you need to prepare for a shift in perspective. Think about the responsibilities, commitments, and personal ‘non-negotiables’ that, when combined, map out your lifestyle and circumstances.
The obvious things are family commitments and financial responsibilities. With a regular paycheque you have income, and often as a result of that secure income you start building up liabilities - things like rent or a mortgage, plus all those direct debits you know are going to go out each month, usually as soon as you’ve been paid.
Some of these might be more trivial, for example a gym membership or Netflix account, but what would happen if you missed a car payment? Are you in the middle of any building work? Paying childcare fees or getting a credit card under control? If you’re giving up a regular salary, make sure you have a complete picture of your in and outgoings, and minimise the risk of missed payments.
Check out our guide to how to become a freelancer: the costs to keep in mind.
Becoming your own boss literally means ‘being boss’. If you’re largely based from home, there’s no manager to report into, no sick leave record, and definitely no work dress code for your kitchen table. It’s important to work out how to go freelance and stick to a productive routine, in the process.
For some people freedom is great, especially if you’re a good self-motivator. But for many, complete flexibility can take a while to get used to. Before you hit day one of freelance life, create a plan. Give yourself a firm goal for billable hours to clock up in the first quarter, or a target for how much you need to invoice. Even if you tweak these once you get going, the goal itself can be enough to keep you on the straight and narrow.
If nothing else, try to stick to your routine, minus the commute. There may be lots of lovely photos of freelancers in their pyjamas working from bed, but is this going to work in reality? Set the alarm, have a decent breakfast, and get dressed. You could even consider arranging with a client to work from their office once a week, to add a bit of expectation and structure.
Work out how much you’re going to charge
This is possibly the most important part of becoming a freelancer: you need to work out how much you’re going to charge, either as a flat project-based fee, or as a daily (or hourly) rate.
Do some basic research and get a sense of the going rate for your services or skillset. Of course, it’s going to depend on your level of experience, but there’s no sense charging a lot more for a service that can easily be procured for a better rate.
Remember the importance here of building up a good reputation and referrals. Earn the respect and trust of a group of solid clients with reasonably-charged work, executed to brief, on time and to a high standard. They’ll be far more likely to agree to paying a bit more when you review your prices a year in.
Working out how to become a freelancer who’s indispensable to your clients is far more valuable than charging a sky-high price straight off the bat, not to mention less pressure.
Sole trader or limited company?
First things first, check out our in-depth article, covering how to go freelance as a sole trader or limited company. It sets out the essential differences between the two, along with some pros and cons.
You’ll need to decide on this point before registering with Her Majesty’s Revenue and Customs (HMRC). Typically, sole traders have less paperwork and more privacy than limited companies (although don’t underestimate the work you’ll be putting into your annual tax return). They do however carry all of the risk, for example debt and other financial liabilities.
Read up on what makes sense for your business, and don’t rush into a decision. Ask around your industry contacts and see what’s worked for them in their first few years of trading. Advice from people already in business can be invaluable, especially if you’re getting conflicting guidance online.
Line up your first clients
Learning how to sell your skills is all part of becoming a freelancer. Be realistic about how much work you can take on as one person, but before you take the plunge and become your own boss, it’s important to have some idea of who your first clients might be, or where to find them.
Get to know your target market and do some research. For example, if you’re working out how to become a freelance designer, enquire with a few local businesses about who they employ to create their publicity flyers, posters, or even website. If they’re doing it themselves then consider offering a low introductory rate and showing them how good you are. Repeat business is the least of it, as they might well recommend you to other local contacts.
Check out our article on how to become a freelancer or small business, and the section on knowing your pipeline. Marketing plays its part too, but word of mouth, smart networking, and a few meetings while still employed (in your own time, of course) can really help to get things moving.
Register for tax with HMRC
It’s a non-negotiable and it pays to understand your responsibilities early on: register with HMRC as soon as you’re up and running. This is an essential step regardless of your business structure, and something you can manage mostly online.
One top tip here: make sure you have an easy-to-locate email folder, as well as a paper-based one, for all your early communications with HMRC. As you connect with them to pay tax across the year, you’ll need to provide certain details and login codes, and it can be tricky to locate everything as very little will be saved for you to an online account. If you’re full steam ahead for becoming a freelancer, getting organised now will pay off down the line, and prevent lengthy call-waiting times with the HMRC helpdesk.
First things first, if you’re largely working from home, a typical home and contents insurance policy might not cover you for your business activities. So it makes sense to look at tailored business insurance that’ll give your fledgling freelance business things like professional indemnity insurance (if a client claims for a financial loss caused by your error, etc.), business equipment insurance, and other covers associated with your specific trade.
We’ve answered lots of the most common questions around insurance for freelancers in our FAQ section. Make it a key part of your how-to-become-a-freelancer checklist.
Got a burning how-to-go-freelance question? Ask away in the comments.