Switching to freelance could be a smart finance move as the end of furlough scheme approaches’

Published On : 10/23/2020

By Paul Aveyard is Head of Digital at Markel Direct, experts in professional indemnity insurance.

As the end of government support schemes near, many employees will find their financial futures become uncertain. Freelancing is an attractive option for those who may find themselves out of work for a period of time – increased flexibility, the autonomy of ‘being your own boss’ and the freedom to work on only the projects you want to – but it’s important to fully understand the steps required to switch to freelance.

Markel Direct have outlined the key considerations for those who want to make the move:

1. Develop your business plan for the short and medium term
2. Plan your marketing to potential clients
3. Give yourself a financial buffer (where possible)
4. Decide on a business structure and accountant
5. Insure your freelance business
6. Take time to rest so you don’t burnout

Let’s run through each step in more detail.

Business plans

Developing a business plan for the short (12 months) and medium (3 years) should be the first step. Some basic considerations for your plan should include:

• What services will you offer?
• What will be your differentiator from the competition/unique selling point (USP)?
• What will you charge?
• How will you market to potential clients? (More on this below)
• How much do you expect to turnover?
• How much will you pay yourself?

You can find more help on writing a business plan on GOV.UK.

Marketing

Ensuring you have a pipeline of work is essential when freelancing – not just for staying busy, but also for managing cashflow.

To attract clients, raising awareness of your business through social media can be a cost-effective way to reach audiences that may be looking for your services. Make sure the content you are posting clearly illustrates your expertise in the space.

Useful guides, hints and tips articles and even free consultations that act as a hook to larger projects are great ways to attract clients. Invest time and money into a professional website that will pay dividends in the long run.

Financial Buffer

One of the main pain points for freelancers is cash flow. Clients don’t always pay on time, so if you have the funds available, it’s useful to have a pot of money to help you through months where you don’t get paid on time.

You should also think about seasonality – for example, workload can slow down over the summer and festive period whilst clients may not be in the office as much, and so work may be harder to come by. Having a cash reserve can help you weather those quieter periods.

Business structures

From a tax and legal perspective, freelancers are different to employees. Whilst there are many different ways you can structure your business, most freelancers choose to operate as:

• Sole trader – as a sole trader, you are the business and so all profits (after tax) are yours.
• Limited company – the business is a separate legal entity and you will be a shareholder. Assuming you will be a director of the company, you’ll be paid as an employee, and any profit the company makes will be subject to corporation tax.

Some clients prefer to work with you as a limited company, so you may find it helps to bring in new work – however, there are additional costs and responsibilities attached to this.

Talking to a specialist freelance or contractor accountant could help you better decide the best route to go down.

Insurance

Arranging freelancer insurance is a vital part of making the move into self-employment. This cover will help protect your business against a range of unexpected scenarios, including:

• Providing incorrect advice or inadequate services to clients (professional indemnity insurance)
• Causing injury to a third party, or damage to third party property (public liability insurance)
• Tax investigations and contract disputes (legal expenses insurance)
• Vital equipment you use in the course of your business, such as laptops and smartphones (business equipment insurance)
• Illness or injury suffered by employees of your business (employers’ liability insurance)

It can be easy to assume the above won’t affect you, but it’s invaluable to have the peace of mind that if something does go wrong, your policy could help.

Many prospective clients will require that you have insurance in place before you start working with them.

Time-out

Give yourself time to rest and refresh as it’s vital for success. Burnout can decrease productivity, and more importantly, impact your mental and physical health. Look after yourself by taking regular breaks throughout the day, join a freelance community on social media and schedule holidays well in advance to enjoy the fruits of your labour.

Wanda Rich

Wanda Rich has been the Editor-in-Chief of Global Banking & Finance Review since 2011, playing a pivotal role in shaping the publication’s content and direction. Under her leadership, the magazine has expanded its global reach and established itself as a trusted source of information and analysis across various financial sectors. She is known for conducting exclusive interviews with industry leaders and oversees the Global Banking & Finance Awards, which recognize innovation and leadership in finance. In addition to Global Banking & Finance Review, Wanda also serves as editor for numerous other platforms, including Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune.