By Remi Harris
There is SO MUCH to say about going freelance. There is a bit of an art to doing it well, and each year of my self-employment I certainly feel that I’ve learnt something new about how to make my work more enjoyable, more rewarding and a better fit with my life outside work.
I’ve coached several people who were looking to make the leap away from employment and contracting into full self-employment. The three things I get asked most often are how to find clients, if you need to set up a limited company and how much to charge. So here goes:
1. How do I find clients?
Your network. You’ll probably find that your first clients will come from close to ‘home’ so the company you are leaving could be your first freelance client, then the companies your friends work for and so on. As you build up a portfolio of work you have done on your own account you can talk about the work you are doing, and people will understand better what you are offering. Initially you may need to go out of your way to do a lot of emails, phone calls, coffees and conferences to connect with your network and let them know about your business. Then once you have done this, keep in touch with them regularly; find out what they are up to and how you could help them. Think about setting up a website and at least regularly updating your social media channels with your latest work, or perhaps setting up a newsletter.
You probably won’t be going into ‘cold calling’ or pitching from day one, this organic approach is more natural and more likely to win you your first clients.
2. Do I need to set up a limited company?
Maybe. You can just operate as an individual called a ‘sole trader’. You can even use a trading name e.g. Jane Smith T/A J.S. Public Relations (T/A stands for Trading As). As long as you make it clear that you are a sole trader you can set up a bank account, invoice, make contracts and set up your marketing material using your brand name or trading name. You can register for VAT, employ people and have an office without setting up a limited company.
You will need to register with HMRC to tell them you are self employed, and keep proper records of your income and expenses so that you can do a ‘self assessment’ tax return and pay your tax and national insurance. But you don’t need to register before you start, you can just start trading and do the registration later.
There are a number of reasons to set up a limited company, but in my view the most important is that a Limited Liability Company reduces your risk as the company owner and director of losing financially if anything goes wrong. So for example if you are involved in an activity like putting on events for members of the public, employing lots of staff or manufacturing a product then there is a greater chance of you being sued or getting into financial difficulties. If you were a sole trader then you personally would be liable, and all that you own would be considered an asset with which your business debts could be paid. Operating through the separate entity of a limited company protects the business owners and directors from that risk.
With a limited company you are likely to need an accountant to make up and file your accounts which can run to £500-£2000 per year, so that is one of the main reasons many people choose not to incorporate – sole trader accounts are usually simpler and cheaper to produce, you may be able to do them yourself.
3. How much do I charge?
Not too much, or too little. Sorry. That’s not helpful. You need to make sure that what you are charging includes the following:
What you want to pay yourself as ‘take-home’ pay, which needs to be enough to cover all your living costs.
Your tax and NI
Your pension and student loan repayments
An allowance for management time such as admin time, marketing time, planning time, training time – none of which can be billed to clients.
An allowance for holidays, time off sick, maternity leave or any other time off you may need.
An amount to cover your business expenses such as laptop, musical equipment, marketing, training, travel costs, phone, membership subscriptions.
So yeah, how long is a piece of string. I don't know what all these amounts are in your situation. Let’s say you currently have a day job that pays you the national UK average of £27,000 per year. Divide that by the number of working days in the year Monday – Friday (260 days), less 8 bank holidays and 20 days holiday, 2 sick days (230 working days). That’s £117 per day. You need to save for tax, national insurance, pension and student loan from that. But in reality you probably won’t work every day, its very hard to schedule work evenly across the year – you may work 12 hour days one week and have no bookings the next. I would recommend to try and charge between 2 and 3 times your ‘day rate’ that you charge to clients so that you can afford to smooth over these bumps in demand and cover your business expenses and management time. If you are charging by the hour, likewise, your rates need to be higher to cover the risk of not being ‘fully booked’.
So that's the 10 minute guide! There's a lot more to say about being self-employed, of course. But before you leave employment you can:
Choose your business name (could just be your name) and write up a hit list of contacts that you could get work from.
Decide if you need to set up a limited company or not, and set up a way of invoicing and collecting money (hint, try a separate current account or business bank account from the start).
Work out what you need to charge, even if you work for less at times as you are getting started you’ll have your pricing worked out in your mind.
Remi Harris MBE is founder of Remi Harris Consulting and trains, coaches and advises creatives and creative organisations.
Remi is taking part in the event YGN x Youth Music Presents Build a Portfolio Music Career on 25 June 2019, tickets available now via Eventbrite.