With so many people seeking to become self-employed, it’s normal that they have questions about owning their own business. As contractor accountants, we want to help you succeed, so we’re answering some questions you may have about becoming a sole trader or contractor in this article.
Can You Start Freelancing Without Experience?
While it’s true that the only way to get self-employment experience is to take the leap, it’s crucial that you have previous experience when it comes to the work you do.
For example, in order to become a successful IT freelancer or contractor, it’s important that you already know how to program or offer the necessary IT support that companies are looking for. Learning on the job is not an option when you own a business, so make sure that you feel confident enough in your knowledge and skills before becoming self-employed.
How Many Clients Should You Have at Once?
This depends on how much work you have to do and how much you feel comfortable taking on. The more projects you take on, the more difficult it is to juggle them, especially when you take different deadlines into account.
While it can be tempting to say ‘yes’ to everyone, especially when you’re just starting out, you don’t want to end up with too much work on your plate either. Taking on a lot of clients can help you keep up a stream of revenue, but you may end up more stressed and may not be able to dedicate enough time to all projects.
This can lead to a decrease in the quality of work. So, this will also depend on what type of work you do. If you’re a designer, you may work on only one gig at a time, since they may be large projects and pay well. And, if you’re a tradesman, you can only take on so much work before you run out of hours in a day, for example.
If you’re still thinking about how many clients you should have at once, remember that each one will require communication, billing, feedback, etc., which can be time-consuming. And, if you have a smaller pool of clients, it doesn’t mean you’ll be earning less, as you can still set the rates that work for you.
Why Do Self-Employed People Sometimes Fail?
There are many reasons why a business might fail and keeping them in mind can help you to make the right decisions.
For instance, when you’re creating your business, you’ll want to have a USP – or unique selling point; there are countless businesses out there, and many more are set up every year, so you need to stand out from the competition, especially if you’re new to the game. If you don’t do this, then clients won’t know to choose you over other similar businesses.
So, take time to figure out what you can offer to clients and what makes your business different. This could be anything from better rates to a particular skill that not many companies offer.
Lack of flexibility is another issue. When you become self-employed, things are not as clear cut as when you’re in full time employment. It takes some adjusting and you may make some errors as well – being able to adapt to your new situation is crucial, so that you can continue growing as a business and offer clients what they’re looking for.
Other people don’t have the patience to carry on freelancing or contracting when the success they were looking for didn’t happen immediately. Being successful can take months and years, which means you need to be determined and not give up even when you feel like it. You’ll get rejected from gigs and will have to learn to deal with that and not let it get to you. It takes time to build a company or a sole trader business so, if you really want to be your own boss, you may want to keep at it until you’re happy with the results.
How to Identify and Avoid Difficult Clients?
Part of being self-employed is knowing how to choose the right clients. This means making sure you can complete the project, for instance, as well as knowing who you shouldn’t be working with. When discussing the project with the client, it’s important to find out as much as you can about them, including how happy they are to answer your questions and whether they seem open to suggestions, for example.
While a potential client is interviewing you for the job, you’re also interviewing them to see if they’re a good fit, so don’t hesitate to ask as many questions as you want.
This can help you to avoid working with rude clients or with clients that aren’t willing to compromise on deadlines, and to avoid rushing gigs and submitting work you’re not entirely happy with. Some clients may also not be clear enough in their instructions or are unable to answer all your questions, which can mean they don’t really know exactly what they want – something that can lead to problems down the line.
You also want to make sure that clients answer messages or emails promptly and that you’re not chasing them up on information you need to complete the project. Another thing to keep in mind is people who want very specific things and don’t allow for flexibility on your part; it’s important that you consider whether this is a dealbreaker for you because you may find it hard to match their expectations.
When negotiating a contract, make sure that you plan for all eventualities, including those that will consume all your time. For example, include a clause that prevents you from making several amendments for free and include deadlines for payment too.
Do You Need an Office?
A huge part of being self-employed is having the opportunity to work from anywhere in the world. From the library to the coffee shop, the sofa to the beach. So, you don’t exactly need an office. As long as you have a space that works for you, that can help you with motivation and self-discipline.
If you don’t want to work from home because you want to be around other professionals, you can consider a shared workspace. These types of spaces allow you to talk to other like-minded individuals, get ideas, ask for advice, etc.
Being self-employed, especially when working from home, can be isolating, so this is a good way to make connections and talk to people on your day-to-day.
How Much Does It Cost to Become Self-Employed?
It will depend on your business. If you want to be a freelancer writer, you’ll have fewer set-up costs than if you want to open a café, for example. There are always some costs, however, that you should keep in mind. With the digital world so important today, having an online presence is crucial. Creating a website costs money, as does marketing your business, so budgeting for this is one of the first things you should do.
Other things to consider include any equipment, software and stock you need to work, from computers if you’re a web developer to lawnmowers if you’re a landscaper. Don’t forget to account for your premises either, whether you’re working from home or renting office space somewhere.
It’s very likely that you need contractor insurance as well to keep your venture safe against third-party claims, damage and theft, for instance. In addition, you need to consider pension payments and any time off you want to take, since you’re not going to be earning during that time.
How Do You Deal with Self-Employment Stress?
Being self-employed has its own unique challenges so, if you’re thinking about becoming a sole trader or contractor, this is something to keep in mind.
For most people, the main cause of stress when they’re self-employed is money. Your income is not as stable as when you’re employed, since you don’t always have the same amount of work, and this instability can impact people mentally. It’s also an unavoidable part of being a freelancer or contractor, so it’s crucial that you learn to manage it instead.
For instance, you can work with several clients at once to have multiple sources of income, you can work on larger projects, and you can choose to raise your rates.
Another source of stress is loneliness. As we mentioned above, being self-employed can be isolating, which can take a mental toll. To prevent this, you can plan more activities with your family and friends, work from a public space, go out for a hike, etc.
Some freelancers and contractors also struggle with letting their clients know that they’re not available at all times. A huge benefit of being self-employed is the ability to set your own hours, so make sure that your clients know your working hours – this will help you to separate your personal from your professional life too.
If you’re always on call, you’re going to burn out soon enough and may even start disliking self-employment. To further prevent this, don’t answer work calls outside of your usual hours and don’t check your emails when you’re not working.
Not having enough work or having too much on can both be stressful as well. If you’re finding yourself with a lot of free time during your working hours, you may want to network more, check job boards, advertise your services on social media, and more. And, if you have too many ongoing projects, you can hit pause on accepting more work for a while, monitor how long it’s taking you to do certain tasks and make sure there are no distractions around you!
How Can You Stay on Top of Your Accounts?
There’s so much involved in being your own boss that it can be hard to keep up to date with all elements of your business, including your accounts. But you don’t have to do it all yourself – as both sole trader accountants and limited company accountants, we can help you submit your tax returns on time, set up a limited company, prepare your self-assessment, assist with HMRC records checks, remind you of key deadlines, prepare your Companies House Confirmation Statements, and so much more.
We offer 24/7 access to our FreeAgent accounting software as well, which allows you to manage your accounts from one place, even if you’re constantly on the go, and which provides you with real-time information about your business.
If you’d like to learn more about how we can help, don’t hesitate to get in touch with us today.