Becoming Self-Employed – 13 Things To Consider Before Going Freelance
Deciding to resign from your employer to go freelance or become self-employed is probably one of the most liberating things to do. However, you should carefully examine whether becoming self-employed or going freelance is the best career move for you. You wouldn’t want to crawl back to your boss and ask to be re-employed.
Going freelance is probably something that has crossed the minds of most people. They can either choose to go permanent or as a contractor. There are a lot of options to choose from such as starting your own small business, work for yourself, work as a consultant by providing some advice to clients or work on the side.
You Are Not Alone
Based on the report released by the Office for National Statistics in 2018, approximately 4.8 million of the population in the UK are self-employed workers. This is more than 15% of the workforce. If you want to join them by becoming self-employed, then here are some important questions that you need to ask yourself.
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1. Am I Becoming Self-Employed For The Correct Reasons?
Deciding to become self-employed is not an easy decision. You should not enter the self-employment world just because you are not happy with your work or your boss. You should have the right reasons for going into freelancing.
These a lot of good reasons for joining the freelance world. For instance, you can spend more time with your family, you don’t have to commute, you can have more flexibility in your life, and most of all you can experience being your boss.
Also, it is important to note that you can always leave your job without actually leaving your job.
Employees can always request for more flexible hours regardless of what the reason is. So, assuming that your employer grants your wish then you could experience being a freelance without worrying about your salary.
Gradually minimizing your hours while building up your freelance business is an excellent way of leaving your job while reducing your money worries.
2. How Can I Find Work When Becoming Self-Employed?
Searching for work when you are a freelancer is crucial to your success. If you don’t have any work then you won’t have a steady income. Consequently, if you don’t have a steady income, then you will be struggling financially.
You can reach out to your social circle. Most probably, you know someone who has a friend of a friend that requires a photographer, writer, IT expert, or whatever expertise you have. Of course, it’s fine to ask your friends and peers. After all, what are friends for, anyway?
No matter what your industry is, there is always a good chance that there is an online recruitment platform or marketplace out there that can help you in finding work. If you are just starting, then there is a wide range of freelance job websites available for you.
It is recommended that you should attend networking events so you can develop your business and can potentially meet prospective clients.
3. Does The Lifestyle Of A Self-Employed Fit Me?
When it comes to freelancing, the schedules may differ from one person to another. Some prefer to work in the evening when the kids are sleeping. While others are working at the crack of dawn, spending a few hours on their business while everyone is still sleeping. Regardless of what your lifestyle is, just ensure that going freelancing will fit on how you work and operate.
There’s no point in leaving your nine-to-five job just to exchange it with nine-to-five at your kitchen table. You need to make the most of your freelance lifestyle. This means that you can work whenever you want to and stop working when you want to. Darren Murph, the Guinness World Record-holding blogger, expresses his idea behind the non-linear workday and you can read more about this in his book “Living the Remote Dream.”
According to Murph, perhaps the most disturbing thing about the regular “nine-to-five” mentality is the number of hours this leaves on the table. Most of the economies in the world are global at some level. Schedules that were resolved in the past did not have to take into account the time zones.
They are not dependent on the internet either. Also, they did not take into account inboxes, voicemail, mobility, and notifications. Perhaps now is the time that we should start accounting for all of these.
Essentially, if there is something that you want to do in the middle of the day, then nothing will stop you. All you have to do is just accept your lost earnings. The pursuit of freedom is the reason why a lot of freelancers choose to leave their jobs.
Being self-employed also means that you can spend a lot of time alone. This is perfect for those who are true introverts at heart. However, it is not so great for those who are extroverts since they always enjoy other people’s company.
Bear in mind that going freelance also means working alone, except if you are building a business partnership. If you feel lonely and isolated, then you could consider having a local co-working space. But you will be needing enough cashflow to make renting a desk work in your favour.
When you are working fulltime, you will always have a certain limitation on your travel each year. Except if you are working in an office that offers unlimited leave. However, if you choose to leave your job and join the freelancing world then you are not bound by these rules.
Due to the prevalence of worldwide WiFi and online work you can now accomplish your work just about anywhere. All you need to do is take your laptop with you and work wherever you want, even by the pool.
4. Am I Self-Motivated Enough?
If you are a freelancer, then no one else will be responsible for your success. No one will mentor or guide you. You don’t have a superior that can coach you and you don’t have any teammates that will encourage you. In case you are having a bad day, then you can only blame yourself. This is a great responsibility that you have to take, hence you should be emotionally and mentally prepared for it.
You have to motivate yourself, for instance, force yourself to wake up at 7 AM daily even if you know that you could choose to stay in bed until 10 AM or force yourself to keep on going even when things are getting tough. It is important that you have to push yourself out of your comfort zone so you can obtain new clients. So, whether you don’t like wearing a suit to a ball or you hate speaking on the phone, it is important that you have to motivate yourself since you are the only driving force that can keep it all going.
In the last 25 years, one of the leading studies on startups was led by Jeffry A. Timmons and others. It was done on the world-famous Massachusetts Institute of Technology (MIT). Based on their studies, they discovered 14 qualities of successful entrepreneurs. These are self-confidence, driving force or energy, self-imposed standards, use of resources, use of feedback, less fear of failure, extreme initiative or personal responsibility, constant logical problem-solving, long-term involvement, moderate risk-taking, susceptibility to ambiguity or to have an open mind while acquiring conflicting or surprising evidence, money used as a measure and not only an end, clear goal-setting and finally, the internal locus of control or the idea that the person’s behaviour determines what will happen to them and that they are the ones who are in control of their behaviour.
Timmons believes that having all of these traits can be very challenging. That is why he reveals that the strengths in some sectors could compensate for the weaknesses in others. Can you count how many of these qualities you’ve got? Do you think that this number is high enough?
5. Can I Afford To Become Self-Employed?
When launching your own business, the startup costs could vary depending on the type of industry that you have chosen. For instance, if you want to put up a freelance photography business, then most likely you will have higher upfront costs for the latest equipment compared to a journalist or an editor.
There are times that money feels too tight most especially since you are just starting. When this happens, you will feel stressed about it. Don’t worry, this is just normal, the most important thing is you know how to handle stress.
Always remember that when setting your hourly rate or daily rate, you will have to consider that as a freelancer you won’t get paid on holidays and on days when you are sick. You must also compute the days where you won’t have any earnings such as bank holidays, weekends, etc.
In 2018, one of the biggest news in the financial world is the decline of the UK wage. In fact, within six months, it had experienced its lowest rate. However, these figures do not include the self-employed since it is difficult to compute trends in self-employed earnings.
However, all that matters is how often you will have to work and how much will you charge. This is the reason why freelancing can be a huge financial risk since you won’t have any guaranteed income, sick pay, or holiday pay.
You need to understand that there will be some months that you will be prosperous. At the same time, there are also some months where you are not earning much. Are you okay with this? That is why it is highly recommended that you should have some savings in the bank before you decide to become a freelance. In this way, you still have some money to pay for your bills, rent, etc.
6. Am I Properly Prepared To Become Self-Employed?
It does not make sense if you leave your full-time job and work only for a month in freelancing for the whole year.
You must consider the freelance work that you have obtained and for how long it will take. Aside from this, you also need to determine how are you going to find more work. As much as possible you have to get as much lined up.
Furthermore, you also need to consider any future commitments or circumstances that might come up soon. Do you think you can still afford that holiday in six months after quitting your office job? What if your boiler got damaged and needs to be replaced?
7. Do I Need Insurance?
You acquire protection for your house, car, assets, or holidays but what about your business? By having the proper type of business insurance, you can save more money in the long run, in case something might go wrong.
Also, you might be required by law to obtain specific insurance cover before you start working.
8. Sole Trader or Limited Company?
Have you already decided whether you want to be a sole trader or a limited company? Keep in mind that this is a crucial part of starting a business.
As a sole trader, you will be in charge of all the elements of your business. This includes invoicing, bookkeeping, as well as the cash flow. You will answer to no one except for yourself. You are free to make your own business decisions.
Nevertheless, being a sole trader also has a downside. Your business and personal finances are combined into one. Hence, if you have financial trouble in your company, then so are you.
On the other hand, if you want to separate your personal and business finances, then you should consider setting up your own limited company. A limited company operates separately from your personal finances.
Limited companies might be more tax-efficient, however, they have more complicated reporting requirements. Hence, the key is to look for an accountancy service that fits your business. They can provide you with the best advise.
Most freelancers would choose to start out as a sole trader then allow themselves to learn more about the different aspects of freelancing including searching for clients and understanding what expenses to claim. Afterwards when business is going well, then you can move on to create your own company. You must learn more about Income Tax, VAT, Corporation Tax, and National Insurance.
9. Have An Online Presence
Another important tool for a freelancer is knowing how they can market themselves online. However, it will depend on your line of work. You should consider creating social media accounts on different popular platforms, including Instagram, Twitter, Facebook, Snapchat, and LinkedIn.
You must know how to organise your social media presence effectively depending on your industry. For instance, if you are a freelancer and your expertise is in food photography, then you should create an account in Pinterest and Instagram but maybe less priority for LinkedIn.
It is also advisable that you should put some time in figuring out how to make your own business website regardless if you are the only one running your company. By having your own website, you can look more professional, hence, it will be easier for the clients to find you online provided that you are using search engine optimisation.
10. Can I Avoid Working For Free?
Sometimes there are businesses out there who will intentionally exploit new freelancers. Basically, they will entice freelancers to work for free in exchange for giving them exposure. This means that you will be working, however, the company will not pay you. Should you accept this offer? It is greatly recommended that you should not accept this offer.
In case the business does not value your talent, skills, and creativity, then it is not worthy to work for them. Freelancers should be paid for their works. It is fine to send a thoughtful letter explaining that you don’t want to accept unpaid work to any business. This can make you look professional and at the same time, you can maintain some dignity.
If a certain business can’t afford to pay you in cash, then perhaps they can pay you in another way? For instance, you could try negotiating a skills trade by letting them build you a website in exchange for your work. Or perhaps you could ask for a free photo session. Making negotiations and bartering are very valuable when you are freelancing.
11. Do I Have Time To Chase Clients For Payment?
Unfortunately, last financial year, small businesses have suffered a massive amount of £6 billion in unpaid invoices which they have written off. According to the article published by the Federation of Small Businesses, small businesses are owed approximately £14.9 billion in late payments. Take note that this can have a huge implication on you if you’re going to become a freelancer.
If you have completed a certain project for a client at the start or in the middle of a month, then you can invoice them during the last day of the month. Additionally, you would probably have to wait for another month before you can receive your cheque. For new freelancers, this is important money since they will probably use them in putting food on the table.
That is why it is advisable that you should send your invoice right after you have completed your work. If you will wait until the end of the month or until such time that the client will tell you to invoice, then you won’t have any control over your credit and cash flow anymore.
Sadly, freelancers have less priority when it comes to being paid on time. In fact, these self-employed people are at the bottom list.
12. Will I Be Eligible For A Mortgage?
Getting a mortgage is something that you should be happy about since you will become a homeowner. However, when you’re self-employed owning a house can be a bit more complicated compared to a regular employee.
Regardless of what business model you have chosen, whether you are a limited company, a sole trader, or involved in a partnership, you are required to have a minimum of one year’s finalised accounts, otherwise known as Form SA302 from HMRC. Be sure that its date should be less than 18 months old.
In case, during the time that you’ve applied for a mortgage you are contracting, then most likely, you must prove that you have already obtained 12 months of experience. Consequently, it is a must that you have at least six months remaining on your present working contract.
13. Will I Have To Get A New Hobby?
Most freelancers started out by means of moonlighting. This means that while you are working on your full-time job, you are also freelancing on the side. With moonlighting, you can gain experience, build contacts easily, and most of all earn some extra income without necessarily leaving your full-time job.
Most often, people join moonlighting because they feel that they are passionate about something. For instance, you love to write, design, bake, knit, or perhaps play an instrument. Ultimately, your hobby will constantly evolve until such time that it will become your full-time freelancing job. Furthermore, you will have to think of something that you can do during your leisure time and use this as a replacement for what was once your hobby.
A couple of things to consider.
The Tax Stuff Is Getting Easier
Essentially, your tax scheme will be getting easier. Also, the annual Self Assessment season, which you should not do until the last minute, might cause you some stress. Anyway, the government is planning to eliminate this and replace it with new Digital Tax Accounts. This will be used as a central hub for all taxpayers where they will be able to handle their payments. However, it seems that it has gone rather quiet lately.
Previously, filing your own tax return and saving some money to pay your tax bill can be very intimidating. This is also one of the reasons why some people decided to leave their jobs and choose to become a freelancer. But if the new Tax Accounts will be properly implemented, then it can definitely help in eliminating stress and uncertainty.
The “Perfect Moment” Never Arrives
Most skilled professionals who are dreaming of having a freelance lifestyle would tell themselves that they are willing to leave their job and set up their own business when the right time comes. However, if you’ll get the chance to talk to a seasoned business owner, then you will learn that the right time never comes along.
Instead of waiting for that perfect moment, try to find a moment that is good enough. If you’ll get the chance to work in a big freelance contract or work on a part-time basis with your present employer, then you will have some free time to put up your own business.
Hence, if you are filled with enthusiasm and entrepreneurial fervour, then why not go for it? Write that resignation letter right away and hand it over to your boss. Finally, you can now join the ever-growing population of happy, high-earning, remote, healthy freelancers who decided to leave their nine-to-five jobs behind.
Becoming Self-Employed – Is Now The Right Time For You?
If you are thinking of joining the freelancing world, then go for it!