With an ever-growing percentage of the labour market dreaming of a change to contracting and freelance work it is clear that contracting appeals to people for a number of reasons. With the decline of jobs for life, the advantages offered by the freelance lifestyle are obvious, from more flexibility and freedom to choose your own working hours to shaping the direction of your career and taking on clients and contracts that interest you; as well as the ability to work from home, be your own boss and most importantly, the increased financial rewards.
But in order to achieve all these advantages, there are a number of obstacles to overcome and a number of disadvantages to consider. Freelancers should brace themselves for the possibility of weeks on end without any work (particularly at the beginning when trying to establish themselves). They should be certain that they have the self-discipline which is a pre-requisite of being a freelance or contracting worker and the ability to shut themselves off from friends and family when a contract needs completing (particularly important when working from home).
This perhaps is the first piece of advice for freelancers then. Be disciplined. Find a way of organizing your work and working hours that suits your particular working style. Some people use the calendars on their personal computers, others use personal organizers (printed or electronic) to make sure they have a system in place to finish contracts by deadline. Equally important, particularly for those contractors who have set up an office near to or even in their family home, is the ability to close yourself off away from family or friends. Though freelancing offers you the chance to spend more time with your family, it also means you’re nearby when the kids want to play, or when the dishwasher floods the kitchen or the cat needs to go to the vet. This is why it is important to set boundaries and let your family know there are certain hours in the day when you cannot be disturbed except for an emergency.
The reason for all this discipline leads to the next tip. Be aware that you will only be as successful as the reputation you build. The advantage of having no boss and no co-workers also means that the buck stops with you. You are the only one liable for the contract, and the only one doing the work. Your reputation as a freelancer and the reputation of the company your are building depends 100% on the quality of your work. So never try and ‘coast’ like you may have done in the office. Every job requires your best work.
Thirdly, you need to consider the effort that goes into getting that work. Freelancing, particularly when you first start out, requires a great deal of self-promotion. Unless you’ve got a vast marketing and advertising budget, which is unlikely, you need to make networking second nature. As a freelancer you need to be constantly forming new relationships with people in the business world and particularly with potential clients. In the new era of internet employment a presence online is just as important as in the real world. So you need to consider networking online via social networking sites such as Myspace and Facebook, business networking sites such as LinkedIn as well as forums specifically related to your particular area of expertise. Equally, in the real world you should join groups such as the FSB (Federation of Small Businesses) or the Institute of Directors, both of which organize important networking get-togethers both nationally and locally in the UK where you can chat with potential clients. Of equal importance to contractors is the PCG (the Professional Contractors Group) which has more than 20,000 members, all freelancers and contractors, and is dedicated to the promotion of freelancing and contracting to the business community at large.
Fourthly, you need to be disciplined when it comes to your finances. As a contractor you should make sure you always put aside some savings for a rainy day. All freelancers will experience lean periods where work is thin on the ground. This is why you should try and take a small amount from each contract you work and put it into a fund for those weeks where you don’t have a contract, or are in between contract dates.
Next, freelancers should make sure they’re up to date with all the latest tax and legal issues when it comes to finances. With the possibility of higher rewards from the contracting sector also comes the necessity for better tax planning. It is perhaps best to let your accountant take care of this, but it is worth bearing in mind the availability of tax deductions and write-offs available to contractors, from rent or mortgage costs if you work at home to bills such as electricity, gas, phone and internet, as well as any business related purchases such as stationery, computer equipment, printers etc. Moreover a good accountant will also explore claiming for travel costs, insurances, pension or retirement plans, business loans and even accountant fees!
A final financial tip is to look into different types of company formation specifically open to the contracting sector. In the UK there are a number of options from Limited Companies to Managed or Umbrella Companies to Umbrella Company Alternatives such as the new to market Employee Benefit Trusts.
As with all the other tips, the best advice for freelancers financially, is to do the research and to use all the tools available by law to maximize earnings and get the most out of freelancing!