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Going Self-Employed – Things To Consider

09/01/19 | Advice & Guidance, Careers, Limited Company

Handing in your resignation letter to your employer and becoming self-employed or going freelance can be the most liberating feeling in the world – as long as you’ve carefully analysed whether becoming self-employed is the right career move for you. Nobody wants to have to go crawling back to their boss, asking to be re-employed.

Going freelance is something that crosses a lot of people’s minds, whether it’s going from permanent to contractor, advising multiple clients as a consultant, starting your own small business, working on the side, or just plain old handing in your notice and working for yourself

1. Am I becoming self-employed for the right reasons?

Becoming self-employed isn’t a decision that should be taken lightly. If you’re choosing to enter the world of self-employment because you hate your boss or you feel unhappy in your current work situation, stop and think about whether you’re going freelance for the right reasons.

There are many good reasons for going freelance: to be your own boss, to ditch the commute and spend more time with your family, or simply to have greater flexibility in your life.

Remember, you can leave your job without really leaving your job.

Every employee has the right to request more flexible working hours for any reason. This means – presuming your employer grants your request – you can dip your toes in the freelance waters while maintaining the safety net of a salary. Slowly reducing your hours while you build up your freelance business is a great way to leave your job while minimising money worries.

 

Finding work when you’re a freelancer is imperative to your success. Without work there’s no steady income, and without any steady income you’ll find yourself struggling financially.

Put some shout-outs to your social circle. Chances are someone will have a friend of a friend that needs a writer, photographer, IT consultant, or whatever your specialisation is. It doesn’t hurt to ask your pals and peers – what are friends for, anyway?

Whatever your industry, there’s a good chance there’s an online marketplace or recruitment platform out there to help you find work. There’s a great range of freelance job websites available if you’re starting out. We recommend attending networking events to grow your business and to meet prospective clients.

 

Freelancing can mean different schedules for different people. Some get their work done when the kids are asleep in the evening, some are up at the crack of dawn putting in a few hours of business before anyone else is awake. Whatever your lifestyle, make sure going freelance can fit in with how you operate and work.

There’s little point leaving the nine-to-five behind if you’re just exchanging it for a nine-to-five at your kitchen table. Making the most of a freelance lifestyle means working when you want to, and stopping work when you want to. Guinness World Record-holding blogger Darren Murph explains the thinking behind the non-linear workday in his book ‘Living the Remote Dream‘:

“What’s most galling about the typical ‘nine-to-five’ mentality is just how many hours this leaves on the table. There aren’t many economies left in the world that aren’t global on some level. Schedules that were determined scores ago didn’t take time zones into account.”

“They didn’t take the internet into account. They didn’t take voicemail and inboxes and notifications and mobility into account. It’s time we started accounting for all of that.”

Basically, if you want to do something in the middle of the day there’s nothing stopping you. You can make those hours up later, or just accept the lost earnings. The pursuit of this freedom is what leads many freelancers to leave their jobs in the first place.

Becoming self-employed can also mean you’ll spend a great deal of time alone. Perfect if you’re a true introvert at heart, but not so great if you’re even slightly extroverted and enjoy being around other people. Going freelance – unless you form a business partnership – often means working solo.

To counteract feelings of isolation and loneliness, you could consider a local co-working space. However, you’ll need to have enough positive cashflow to make renting a desk somewhere truly work in your favour.

Full-timers will always be limited to a certain amount of travel every year by their holiday allowance (unless they’re one of the lucky few working in an office with unlimited leave), but those who choose to leave their job and embrace the freelance lifestyle aren’t bound by any such rules.

In fact, the prevalence of online work and worldwide WiFi means work can be accomplished just about anywhere – take your laptop with you and you can be doing client work by the pool with ease.

 

When you’re a freelancer, nobody else is responsible for your success. There isn’t any guidance, mentoring, or coaching from a superior and you certainly don’t receive any encouragement from teammates. If you have a bad day, you only have yourself to blame, and that can be a lot of responsibility to take on both emotionally and mentally.

You need to be able to motivate yourself – whether that’s forcing yourself out of bed at 7am every day (even though you know you could get away with staying there until 10am) or keeping yourself going even when things get tough.

You’ll need to push yourself out of your comfort zone to get new clients, so whether you hate speaking on the telephone or wearing a suit to a pitch, you’ll have to keep making yourself plug away at your business because you’re the single driving force that keeps it all going

 

The startup costs of launching your own business can vary greatly depending on what type of industry you’re in. For example, if you were a looking to start a freelance photography business, your upfront costs for the latest equipment may be higher than that of say, an editor or journalist.

Money will feel tight at times and when you’re starting out, you’ll feel stressed about it. That’s totally normal, and it’s fine as long as you know how to deal with the stress.

It’s worth remembering that when you set your day rate or hourly rate, you’ll need to factor in that as a freelancer you don’t get paid for days when you’re sick or on holiday. Remember to calculate for weekends, bank holidays, and other times where you won’t be earning any money.

One of the big financial stories in 2018 was the news that UK wage growth had slumped to its lowest rate in six months, these figures don’t really cover the self-employed though as it can be hard to measure trends in self-employed earnings.

Some months might be more flush than others, and in your months where you’re not earning much, will you be okay with that? We recommend having some savings in the bank before going freelance, so in the leaner months you’re able to keep yourself afloat by paying bills, rent, etc.

 

Deciding whether to be a sole trader or a limited company is a vital part of starting a business.

A sole trader is in charge of every element of their business, including bookkeeping, invoicing, and cashflow. They answer to nobody except themselves and have free reign over any business decisions.

The downside of being a sole trader is that both your business and personal finances are rolled into one, so if your business is in financial trouble, so are you.

If you’d rather keep a clear distinction between your personal and business finances, consider forming a limited company. A limited company operates as a completely separate legal entity from your personal finances.

Limited companies can be much more tax efficient, but they also bring with them more complex reporting requirements. Finding an accountancy service that suits you is therefore key – they’ll be able to advise what’s best for you.

Many freelancers prefer to start out as a sole trader and allow themselves time to get their head around other aspects of freelancing, such as finding clients and knowing what expenses to claim and then move on to form a company when business is going well.

Do you know how Corporation Tax, VAT, Income Tax, and National Insurance works, and who pays them? We’ve put together a short article on small business taxes highlighting what you’re expected to pay as a freelancer, contractor, or small business owner, and what happens if you don’t.

 

If you’ve considered becoming Self-Employed and don’t know where to start, look to Sidekick for support and guidance on what is best for you on the path to becoming your own boss.

 

 

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