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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.
You’re not alone
The Office for National Statistics released a report in 2018 that estimated there were 4.8 million self-employed workers here in the UK in 2017 - over 15% of the workforce. If you’re thinking of joining them by becoming self-employed, ask yourself these questions before committing to the freelance lifestyle.
Prefer to watch a video?
The debut episode of our jargon-free 'Take The Leap' video series provides a handy summary of the things you'll have to think about when going self-employed.
Now, let's get to the big questions...
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. See our article ‘Setting up a small business on the side’ for more information.
2. How can I find work when becoming self-employed?
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. We’ve also put together an ultimate checklist for generating leads which has plenty of handy tips on getting more eyes on your business.
3. Will becoming self-employed fit in with my lifestyle?
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.
4. Am I self-motivated enough?
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.
One of the leading studies on startups in the last 25 years was conducted by Jeffry A. Timmons and others via the world-famous Massachusetts Institute of Technology (MIT).
They found 14 traits of successful entrepreneurs:
- Drive / energy
- Self-confidence
- High initiative / personal responsibility
- Internal locus of control (the belief that people’s behaviour determines what happens to them and that they’re in control of their own behaviour)
- Tolerance of ambiguity (the ability to keep an open mind while receiving contradictory or unexpected evidence)
- Low fear of failure
- Moderate risk-taking
- Long-term involvement
- Money as a measure, not merely an end
- Use of feedback
- Continuous pragmatic problem-solving
- Use of resources
- Self-imposed standards
- Clear goal-setting
Timmons accepted that ticking all 14 boxes was a tall order, which is why he said that strengths in some areas could compensate for weaknesses in others. Count up how many you've got - is the number you end up with high enough?
5. Can I afford to become self-employed?
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.
Our day-rate calculator can help you see average day-rates over time for your location. But all that matters is what rate you can charge and how often you’ll have work. Because of this, freelancing is still a big financial risk because there’s no guaranteed income, holiday pay, or sick pay.
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.
6. Am I properly prepared to become self-employed?
There’s no point leaving a full-time job when you’ve only got a month's worth of freelancing in the calendar.
Consider what freelance work you have secured and how long it’s likely to go on for. Along with that, you need to figure out how you’re going to find more work. Get as much lined up as you possibly can.
Also, think about any future commitments or events that might be coming up in the not-so-distant future. Are you sure you’ll still be able to afford that holiday in six months time if you quit your office job now? Is your boiler about to pack in and need replacing?
7. Do I need insurance?
You protect your car, house, assets, or holidays - why not your business? Having the right type of business insurance can save you heartache and money in the long run, should anything go wrong. You may also be legally required to have certain insurance cover in place before you start work.
8. Sole Trader or Limited Company?
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 cash flow. 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 setting up a limited company (our Crunch Formations service lets you register a company in a few minutes for just £10!). 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.
9. Have an online presence
Knowing how to market yourself online is an important tool in the freelancer’s box. Depending on your line of work, you should think about creating social media accounts on the most popular platforms, such as Facebook, Twitter, Instagram, Snapchat, and LinkedIn.
Organise your social media presence wisely based on your industry. If you’re a freelancer who specialises in food photography, sign up to Instagram and Pinterest, but perhaps give LinkedIn less focus.
We have a handy downloadable guide to Social Media Marketing for Small Businesses which will help if you’re feeling out of your depth.
We’d also advise putting the time in and figuring out how to build a business website – even if you’re a one person show. Having your own website gives a professional aura and can be an easy way for clients to find you online, providing you’ve adhered to some search engine optimisation.
10. Can I avoid working for free?
A business might suss out that you’re new to the freelancing game and set out to exploit you. A tactic of getting freelancers to work for free is by offering them exposure. In other words, you work and the company doesn’t pay you. Should you do this? We’d usually recommend not.
If a business doesn’t value your skill set, talent, creativity, and freelancing awesomeness, they’re not worthy of having you work for them. Freelancing should always be a paid gig. Don’t be afraid to send a polite email explaining you don’t undertake unpaid work to any business. You’ll come across as professional and maintain some dignity.
If a business genuinely can’t afford to pay you in cash, can they pay you in another way? You could negotiate a skills trade, for example exchanging your work for them building you a website or giving you a free photo session. Bartering and negotiating are valuable skills to practice when it comes to going freelance.
11. Do I have time to chase clients for payment?
Last financial year, small businesses wrote off £6 billion in unpaid invoices, and the Federation of Small Businesses recently published an article claiming that small business are owed as much as £14.9billion in late payments. This can have major implications if you’re going freelance.
If you complete a project for a client at the start of the month and wait until the last day of the month to invoice them, you could be waiting yet another month for your cheque to come through. For a new freelancer, that’s important cash that will be better off putting food on the table.
It’s recommended that you send your invoice the day that works have been completed. Waiting until the end of the month or when the client would like you to invoice holds back your credit control and cashflow.
It’s sadly very common that self-employed people are at the bottom of the list when it comes to being paid on time. If you have a client who isn’t paying up, grab one of our late payment reminder templates to get things moving. And if that doesn’t work, you can always enlist the help of a professional debt collection service.
12. Will I be eligible for a mortgage?
Getting a mortgage should be a time to celebrate and rejoice in the fact you’re now a homeowner. However, when you’re self-employed the road to house-ownership can be slightly more complex than that of a regular employed person.
Depending on your business model (sole trader, partnership or limited company) you’ll need to have a minimum of one year’s finalised accounts, or a Form SA302 from HMRC that is dated less than 18 months old.
If you’re contracting at the time you apply for a mortgage, it’s likely you’ll also need to prove you have 12 months of experience and at least six months remaining on your current working contract. Check out our article ‘Can I get a mortgage if I’m self-employed?’ for the low-down.
13. Will I have to get a new hobby?
Many freelancers start out by moonlighting, which in simple terms is working a full-time job and freelancing on the side. Moonlighting is a great way to build contacts, gain experience, and earn some additional income without having to leave your full-time job.
Often, people start off moonlighting because they’re passionate about something – for example knitting, baking, writing, design, or playing an instrument. Eventually, your hobby evolves into becoming your full-time freelancing job and you’ll need to think about what you’ll do in your leisure time to replace what was your hobby.
A couple of extra points for you to consider:
The tax stuff is getting easier
The annual Self Assessment season (don't leave it to the last minute!) still causes headaches for many, and the government’s plans to phase them out and replace with new Digital Tax Accounts, which will provide a central hub for all taxpayers to manage their contributions, have gone rather quiet recently.
Previously, the perceived hassle of having to file your own tax return and set aside money to pay your tax bill has put many people off leaving their jobs and going freelance, but if correctly implemented, the new Tax Accounts could remove a lot of the stress and uncertainty.
Until then, of course, staying on top of your business finances needn’t be hard with services like Crunch. We’ve got an article about the benefits of a sophisticated online accounting service.
The “perfect moment” never arrives
Lots of skilled professionals who dream of a freelance lifestyle tell themselves they’ll leave their job and start a business when the time is right – but speak to any seasoned business owner and you’ll discover the right time never comes along.
Rather than waiting for the perfect moment, look for a moment that’s good enough. The chance to dive right into a big freelance contract, or moving to a part-time role with your current employer, giving you some free time to build up your business.
So, if you’re brimming with enthusiasm and entrepreneurial zeal, why not just go for it? Print off that resignation letter, give it to your boss and join the growing ranks of high-earning, mobile, happy, healthy freelancers who have left their nine-to-five jobs behind.
Becoming self-employed - is now the time for you?
If you’re thinking of taking the leap our freelancing for beginners guide to becoming a freelancer has practical advice and tips on how to succeed as a freelancer. We're also helping you to make the first step by having one of our freelance invoice templates on file, download a format that suits you and customise it with the details of your new business.
