September 18, 2015 Be Your Own Boss and Make Money at Home as a Freelancer Do you want to be your own boss and take control of your life? If you believe the figures we’re on a fast track to becoming a nation of freelancers as a growing number of people in the UK want to make money at home. According to a 2014 survey by the Professional Contractors’ Group, there are 1.4 million freelancers across all sectors in Britain. That figure has grown 14 per cent since 2004, and the pace of change is accelerating, partly thanks to remote working tools and a thirst for a better work-life balance. But working as a freelancer isn’t all it’s cracked up to be, it’s great to be your own boss but some people struggle to fend for themselves. We already know that 55 per cent of businesses close within their first five years, according to the RSA, and there are many other reasons why freelancing is not a career move that everyone will relish. How do you get the balance right? Here’s our bird’s eye view to a successful freelance career, including some tips that will help you avoid the pitfalls. How about setting up as a freelancer? If you’ve got a mortgage, a credit card and bills to pay, the idea of quitting your job may sound like madness. Equally, it may sound like the best opportunity you’ll ever get. Your gut reaction to the point will give you some clue as to whether you’re cut out to be freelancer. Freelance working gives you the luxury of choice – something many employees crave when enduring the 9 to 5. You can choose your clients, decide when you’ll work, and define the number of hours you’ll put in. This granular control allows you to take back some spare time, potentially fitting work around other commitments. While many people freelance through a limited company, others work as sole traders. You should discuss your circumstances with an accountant to see which is best for you. When freelancing, you can often choose where to work, too. If you make money at home, commuting becomes a distant memory, and you’ll gain precious hours in the evening for socialising and leisure activities. You may also choose to do some on-site work, picking the times and dates when you’re in the office, and working from your villa in the South of France the rest of the time. At least – that’s the theory. In truth, freelancing is not all peaches and cream, particularly in the first year. You’ll probably put in far more hours than you ever did when you worked for someone else, at least until you’re established. It’s not unusual for a new freelancer to work a 60-hour week, often at very low rates of pay. Tips for the first year: Safeguard your cash flow from day one, to avoid running out of cash before you have a solid client base Write a contract, and use it for every single client, so everyone knows where they stand Have strict terms and conditions, and publicise them, so your clients always understand what they’ve agreed to Save a cash reserve for quiet months, and work hard when the work is plentiful Don’t agree to do things that fall outside of your specialisms Go on holiday when your clients are away; save the 6-week safaris until you’re more established in your niche Drop your rate if you need to: don’t be too proud, to start with it’s about getting your name out there and getting some traction, it’s not going to be plain sailing setting up as a freelancer Will You Miss the Office? Earn money from Home Starting out on your own is exciting, and you might expect to fall into a routine of coffee shop meetings and business trips to sunny Spain. But for every pro, there’s a con, and isolation is a big con for many. Freelancing is inevitably going to be more solitary than working in an office. For some, this is ideal; the peace and quiet of an empty house gives them time to focus and think. Solitude gives them focus; they can shut out chores and distractions and get on with the task at hand. For others, the idea of shutting themselves in a room for days sounds like a prison sentence. Even if you enjoy working alone, there are career implications. You may find yourself picking up less new knowledge than you did when you worked in a team. You might gravitate towards communal places to get work done, but just end up getting distracted all day. If you crave conversation, social media may become a distraction, rather than a necessity for brand building. Tips For the Lonely Freelancer: Join networking groups to keep yourself abreast of industry changes Invest in crucial training that your ex-employer would have given you on the job Control your urge to procrastinate; the Pomodoro Technique is a good way to curb unhelpful distractions Make the most of free events and online resources to keep your skillset up to date Even if you miss company, you need to work. Close the office door, switch off your phone, and don’t be tempted to put the TV on – you need to be focussed if you want to make money at home The Price of Financial Independence When you settle into freelancing full-time, you’ll get a feel for the rates your clients want to pay. At first, you probably won’t be able to charge your full rate, but your prices will climb once you build a reputation. Inevitably, there are costs involved in building a business, and while freelancing is lightweight, it pays not to cut corners for some essentials. We’ve detailed those in the Tips, below. Another risk is the temptation to splash out, particularly if you’ve just received an advance for a brand new contract. As a rule of thumb, don’t purchase more than you need, and avoid buying gadgets and services that don’t directly contribute to your income. Remember, it’s great to be your own boss but you need to maintain discipline. Tips for Priority Spending: Money to keep the lights on; you may be able to claim some of your home running costs as a tax allowable expense Materials, IT equipment and other essentials should be the focus of your spend Invest in a good quality, reliable internet connection Save money for your Tax bills, which must be paid on time Economise on travel, and work online where it’s practical do to so Review IR35 legislation and see if it applies to you as a freelancer (if you are a limited company) Get advice on financial matters, don’t guess your way to disaster: HMRC won’t see ignorance as a defence How to Be Your Own Boss In terms of personal development, being a freelancer could be the greatest career move you’ve ever made. Freelancing gives you the opportunity to be a decision maker, operating independently and choosing the right path for your career. But there’s a downside to being your own boss: nobody else is there to help you. Your job security is entirely your concern, and there’s no guaranteed salary cheque if you don’t put in the hours. Your take home pay could vary by thousands of pounds each month, and there are rules stating what you can take out as a dividend, if you have a limited company. Freelancers are also responsible for the same admin and paperwork as any small business, and this burden can quickly spiral out of control, sapping time and energy from the work you should be doing for clients. Invoicing, marketing and advertising are all your responsibility – and there’s nobody else there to answer the phone. Another aspect is discipline, which we touched on earlier. If you’re in control of your own destiny, you may find it extremely liberating. Equally, it can be very scary. Once you’re freelancing, your income depends entirely on your productivity, and there’s nobody to poke you with a stick when your rate of production falls. Tips for better management: Hire service providers to help lighten the load; don’t try to do everything yourself Know when to save money and when to pay a professional to help Paying an expert is never a waste of money if it frees you up to do what you’re best at Review your admin tasks monthly and see if there’s anything you can drop Automate tasks using cloud software; FreeAgent or Xero can send out payment reminders on your behalf If you can’t focus on your work, find an admin task to do: don’t twiddle your thumbs Summary Being a freelancer may be risky. It may be solitary, and – initially – low paid. But the control you will get over your own life and direction of your work could make it all worthwhile. If you want to make money at home and be your own boss then freelancing might just be for you.