Making the decision to finally pursue that business idea that you’ve been rolling around in your head for years, or even expanding something you already do occasionally on the side of full time employment can certainly be intimidating.
Becoming a freelancer or sole trader means taking on an entirely new approach to business, to work, to finances, and can have a major effect on your personal life. Your business is entirely in your hands, often for better or worse.
But the benefits can far outweigh the risks if you have done your research, have set clear paths to your goals, and have the right tools to help you get there.
Gig economy to small business owners
There has been a lot of negative media surrounding the so-called ‘gig economy’. Essentially freelancers working on jobs as they appear and are offered, a type of employment that has been around for ages. While this can be a good source of getting started for some people, many who go freelance are looking for a bit more stability.
Gig based positions can in fact provide a level of security through, for example, longer term contracts with companies as a freelancer. With increased connectivity and online options, freelancers looking to get started might choose this route and build their business as they gain experience, connections, and reputation in the industry.
In the UK, the number of freelancers has increased drastically over the past decade, rising nearly 50% in those 10 years. Research has shown that this translates to approximately 2 million freelancers in the UK currently - a number that is only expected to grow.
If you’re on the fence about going freelance, whether concerned about the stress levels, competition, potential instability, there are clearly reasons why more and more individuals are turning to a freelance career.
The growth of freelancers
There’s no secret behind the rapid growth of freelancers in the last decade. The explanation behind the impressive increase has to do primarily with one main thing: that today, it’s easier than ever to start your own business.
Technology, access to knowledge and other resources, as well as governmental support in some cases, have lowered the barriers to getting started with a business by making it simpler, faster, and requiring a lot less capital.
Depending on your industry and work, sometimes all you need to get started with a business is a computer and a few tools such as software to help you get started and stay on track. While it’s possible to just jump into it and get started, it is worth taking some time to come up with a business plan and doing some market research to know where you’re going if you really want to transition to the self-employed lifestyle.
The draw of the freelance life
Arguably, one of the most appealing parts of becoming a freelancer is also what can be most intimidating: taking control of your future. Depending on your skills, work ethic, and dedication to making a freelance career work, there are some other very rewarding part of freelancing that are likely also contributors to your thoughts of going down this path in the first place:
- Set your own hours. Yes, you can stick with the typical working hours, especially if you plan to be available to larger companies. But maybe your work is better suited to later hours, or you’d rather have a day off during the week to spend with family. As a freelancer, being able to decide when you’ll work is a major plus.
- Stop the commute. Whether your commute as an employee is 15 minutes or 50, it’s rarely the favourite part of someone’s day. Commuting takes time and money and adds a level of stress to your day that freelancing can help you to avoid.
- Choose your projects. Another aspect of the freedom of freelancing comes in the work itself. Instead of being assigned projects or being expected to work on certain things, you have much more say in what projects you choose to take on and can select those that are the best use of your time.
- Choose your customers. Like the projects, you also have more say over the customers you get to work with, and often will have closer contact with them then if you were part of a larger company. This can build new opportunities and help you better understand your target audience and continue to improve your product or service.
Of course, you likely have your own reasons for transitioning to freelance and will discover other joys of freelancing.
Having the right tools for freelancing
While the benefits are many and the rewards potentially great, as mentioned before, there are things about going freelance that can cause you to second guess the decision to pursue it - mainly the financial uncertainty.
As an employee, you’re guaranteed a certain amount of money at regular intervals. You know when and how much you will be getting and can budget accordingly. As a freelancer, this can be arguably a lot more unpredictable, especially when you’re just starting out.
But as a freelancer you also have more control over what you earn and no cap on your earning potential (beyond the hours in a day!). When you start freelancing, the first step of healthy income is to stay on top of your income and expenses.
Here’s how you can make sure that you do not overlook what can be one of the more tedious parts of running a business, but one that is ultimately crucial to your success as a freelancer:
- Keep track of your cash flow. If you know exactly what is coming in and going out of your freelance business as far as cash, you’ll be better equipped to make changes when necessary as well as be prepared for any issues that might arise.
- Use the right tools. There are many options available when it comes to tools such as invoicing & accounting software, email marketing campaign software, customer relationship management software, etc. Determine what you need. While free options can be tempting, there is usually a reason they are free. Weigh the benefits of investing in paid software.
- Follow up on late payments. It’s an unfortunate inevitability for freelancers. You will encounter late payment for your products or service, and should always take measures to remind customers that payment is overdue. The right software makes this as easy as a few clicks.
- Record expenses as they happen. Don’t wait until the end of the week or even end of the month to sit down and go through old receipts. It’s inefficient and somewhat painful. Find software that lets you add expenses quickly, for example via a mobile app with OCR technology.
- Find an accountant. Starting out as a freelancer, an accountant can seem like an unnecessary expense. However, nothing can replace the knowledge and experience of a professional in the industry, especially if your work involves special tax rates or schemes, for example. They can also provide guidance in getting set up financially, not just around tax time.
Going freelance is a big move but there are some great benefits and some easy ways to help you prepare for managing your own business income and expenses. A little preparation and the right tools will go a long way to taking stress out of the picture and helping you lead a successful freelance career.