For many 9-5 employees, going it alone as a freelancer is a recurring daydream. But it’s one that’s now becoming a reality for thousands of people.
The jobs market has been changing rapidly over the last few years and increasing numbers of companies now use freelancers to cover specialist tasks, staff shortages and holiday periods instead of taking on full-time employees. If you’re thinking of freelancing, here’s what you need to know.
What is it?
“A freelancer is simply a self-employed person with a particular skill such as writing, teaching, IT, or public relations,” explains Avril Harper, a freelance copywriter for 11 years. “I’ll go in and do exactly the same job as an in-house employee would do, and be paid either an hourly rate whilst I’m doing the work or a fixed fee on completion.”
“The main difference from the employer’s viewpoint is that they use me on a short-term, as-needed basis to fill a gap. And because I’m self-employed they avoid all the hidden and expensive employment costs such as national insurance, pension contributions and sickness payments.”
“The big advantage for me is that I can charge around 15-20% more than the in-house employee for my expertise.” Harper also highlights other, often overlooked, benefits of freelancing. “I work for maybe five or six companies on a semi-regular basis, so the risk of unemployment is minimal. I also get a chance to do lots of different work – writing about finance one day, health on another. And that variety and breadth of experience looks great on my CV.”
Who is it suited to?
You have to be a good all-rounder, advises web site host, Pat Jones. “You can be the world’s greatest-ever web wizard. But you’ve still got to be able to market your services effectively, do the books and record-keeping properly, chase payments successfully, and do the 101 other things that keep you in business. And that’s all on top of the 50 hours a week you’re probably putting into the web side of things.”
Self-discipline is the key to success. You have to be able to schedule effectively, setting aside sufficient time for both your work and all those other business tasks as well. “You need to be a good time manager,” stresses Jones. “And when you’re doing the work that brings in the money, you have to make sure you’re not going to be interrupted even if that means putting on the answering machine and ignoring faxes and incoming emails for the next hour or so.”
Perhaps surprisingly, successful scheduling can even mean turning work away. “One of the greatest problems faced by freelancers is too much work, too soon. Everyone wants you to work for them right now! It’s very tempting to just take on everything that’s offered to you, but you’ve only got to miss a deadline or deliver sub-standard work once and you’ve got an unhappy client who’s going to go elsewhere next time around.
"It’s better to know what you can physically do in the time allowed and stick to that. Funnily enough, turning work away because you’ve so much on can actually make you even more in-demand with clients.”
* Image courtesy of headsclouds on flickr
How do I get started?
Many freelancers start by leaving their current job and then continuing to do it on a freelance basis. This is common practice in the dot com sector. It’s what happened to Brett Morris who worked as a sub-editor at Virgin Net. He volunteered for a redundancy package worth around £2,500 – and then went back to work in the same office on the same day as a freelance writer!
As a freelancer, he checks in at the beginning of each week to see how much work there is for him, and can take as many or as few hours as he likes. There has always been plenty of freelance work available for him – perhaps even too much. “It’s almost getting a little frustrating,” jokes Morris.
If you’re a freelancer, you’re going to be self-employed – so you need to adhere to all the usual rules and regulations of self employment. This means informing HM Revenue and Customs of your revised tax status, arranging to pay class 2 National Insurance contributions for the self employed and registering for VAT if you expect your turnover to exceed £73,000 a year.
The easiest way to attend to the formalities and set up properly is to call the Helpline for the Newly Self-employed on 08459 154515. You can register as self-employed straightaway, and get free one-on-one advice and a free Starting Up in Business guide.
How much does it cost to start?
Most freelancers work from home so the start-up costs are minimal – a bedroom converted to an office, with a desk, computer and internet access, a telephone and an answering machine plus a fax machine. You’ll also need business stationery and business cards for advertising yourself to clients. You may wish to produce brochures about your services too. Exchange & Mart is often the cheapest way of sourcing what you need.
“As a rule of thumb, you’re looking at £1,000-1,500 to set yourself up properly,” estimates Avril Harper. “A computer with internet access is essential these days. You need email to look professional to clients. It’s also important that you have separate lines for your phone, fax and internet access so you can be contacted easily at all times. Nothing looks more amateurish than having to switch your phone to a fax line whilst your client waits to send a fax to you.”
You may have some tools of your particular trade to buy as well. A freelance music teacher needs instruments and a freelance children’s entertainer requires costumes and props. For many freelancers such as PR consultants, writers and proofreaders, there are few other expenses. Sometimes, freelancers are asked to work on the client’s premises so that they are close to where the action is.
The payment will often be the same whether you work on-site or off. You need to budget carefully though. You may minimise some of your working costs (calls, use of computers etc) by using the client’s facilities. But you need to budget for your travelling time and expenses to see whether it is as profitable to work on-site. Often, you can negotiate a compromise – one day on site and one day at home, for example.
How much can I earn?
Your earnings will depend on what you charge, how fast you work, and how many hours you put into the business. For example, a reasonably successful freelance writer would typically charge £200-300 per thousand words and would expect to research, interview and write up at least one 1,000 word feature per day. So they could earn around £1,000 or more a week.
From this, they’d deduct various costs – say, telephone, fax and computer use at £20 for the week, research materials such as magazines and reports at £10 per week, stationery, postage etc at £10 a week, plus an allowance of £30 a week for travel costs for meeting people, getting new commissions etc. They’d look to clear around £930 a week.
Remember to take your holidays into account when calculating your potential income for the year. If you plan to take five weeks’ holiday in the first year, this will cut nearly 10% off your annual income. Bear in mind too that you may not be fully employed, week-in and week out, especially when starting off.
Freelance copywriting work, as an example, often falls away in the summer and at Christmas when fewer marketing campaigns are run. Freelance children’s entertainers tend to have less work in the summer too, but more in the run-up to Christmas!
One way of generating income during holiday periods and business lulls is to pitch for some sort of royalty deal. Avril Harper explains, “Part of my work involves writing home-study courses for which I negotiate a slightly-reduced, flat fee based on the number of words written plus a small royalty based on the number of copies of the course that are sold.
The flat fee is roughly in line with what I like to earn each day, and the royalty is a bit of a bonus that brings in some extra income now and then which I use to cover holiday times.”
What are the risks?
Most freelancers face the major worry of getting enough work. “Work-wise, it can be feast or famine, especially when you start off,” cautions Harper. “You can almost guarantee that you’ll have twice as much work as you can handle one month and absolutely nothing the next.” Planning ahead is essential. “You’ve always got to be looking forward three months at a time. In the summer, I’m pitching for work to start in October and November.
"I’m also working out what money will be coming in and when, and planning to set aside some of my income from the autumn to cover December and January. Contract work is great – if you know you’ve got a certain amount of work and money coming in at set times, it helps you budget more easily. But remember to keep looking beyond that contract and line up replacement work two to three months before it finishes.”
Getting paid on time is another common problem for freelancers. “Many government-related organisations are still chock-full of red tape. I remember one particular client where any invoice that I submitted at the beginning of a month would never be paid until the 20th day of the following month, which meant I was waiting up to seven weeks for payment.
Some other businesses can be even worse – it has taken me three months to get what’s owed to me on occasions.” You need to agree payment terms in advance, invoice promptly, and then chase politely. Ultimately, you also have to decide whether late-paying clients are worth the hassle involved.
Harper stresses the importance of having more than one or two clients using your services. “If your work comes mainly from, say, two clients, you are very vulnerable. You’ve only got to have one go under, take your work in-house or play silly beggars with your invoices and you’ve suddenly gone from a success to a failure overnight.
"It’s far better to work towards a spread of clients – say, five or six – so that you’ll still have got plenty of work to go round if one client disappears.”
Tips for success
There are three key steps to becoming a successful freelancer, tips Pat Jones. “First, you need to have what marketing people call a ‘unique selling point’, a distinctive feature that a client simply doesn’t have in-house. This can be something as simple as being able to work through the night to email copy to Canada at 4.00am in the morning.
Or it could be some sort of specialist know-how. “There’s a British Standard for quality control,” adds Jones. “Many organisations would love to have that BS recognition for their goods and services, but they don’t have the in-house knowledge. A freelancer who does can almost set their own price for these consultancy services.”
Armed with your USP, your second step is to uncover clients who will use your freelance services on a regular basis. The secret of success here is networking, advises Jones. Most freelance work is obtained via word-of-mouth recommendation.
So you need to let everyone you’ve ever met know about your freelance work. “It’s important that you look beyond your existing contacts too – ask them to tell their contacts, and their contacts’ contacts. You’ve got to spread that message out as far and as wide as you possibly can.”
You also need to give prospective clients a great reason to employ you. “That means selling them a ‘what’s in it for me?’ benefit,” adds Jones. “It’s not enough to just tell your clients all about the great things you can do.
"You need to actually show how these transform into bottom-line benefits for the client – money saved, money made, more sales, an improved reputation, or whatever. Think ‘benefits’ not ‘features’ – so the benefit of that BS recognition, for example, is increased sales and profits.”