Freelancing for beginners – what you need to know

With more than 2 million freelancers in the UK and the number set to increase considerably over the next five years more and more people are becoming part of the gig economy. Economists estimate that freelancers contributed £120 billion pounds to the UK economy and 65% of UK businesses have used the services of freelancers.

Giving up a regular salary to become a freelancer can be seen as a big risk to take, but the reward definitely outweighs this. To minimise the risk, you can keep your day job and start freelancing on a part-time basis. This ensures you have the added security to allow you to meet your financial obligations and is a method favoured by 250,000 freelancers in the UK. This is also a great way of raising awareness, developing your brand and building your client base.

If you work from home it is important to have a designated workspace, whether this is a home office or just a spare room. Being disciplined, focussed and organised are three of the traits required to succeed as a freelancer and a dedicated workspace will reduce the distractions that many homeworkers face. When working from home you need to check with your mortgage provider or landlord to make sure you are allowed to do this.

It is imperative you get your pricing strategy correct because a mistake many new freelancers, especially part-time ones, make is to undercharge for their products or services. By starting off too low you give the perception that your service is inferior to others and you will find it difficult later to increase your fees. You may be surprised to know that there is a subtle difference between pricing yourself out of the market and charging enough to cover your overheads whilst making a healthy margin.

But where do you start to work out your rates, after all nothing is set in stone? Begin by researching the competition to see what they charge and then calculate your overheads. You need to be less expensive than the competition to begin with just to attract your first clients. Your pricing strategy can be based on the time spent working on a project or you can charge a set fee per job. Either way you need to be flexible, especially when starting out because your freelancing business is in its infancy and only when you are established can you start increasing your prices and even become selective on who you work with.

Thoroughly researching your target market and the competition is an essential starting point for any freelancer. The growth in the number of freelancers mentioned earlier means the markets in all sectors are getting more competitive, so it is vital that you differentiate yourself from others.

This can be through pricing, the quality of the service or product you provide or by adding value to what you offer. Another way is to focus on a niche and becoming a specialist in that field. By doing this you will be able to command higher fees than if you generalised across several different areas. Your expertise in your chosen specialism will set you apart from many competitors and as your reputation grows so will your market share.

You need to register with HMRC from the moment you start trading as a freelancer and don’t forget to obtain insurance as well. The two main types are public liability and professional indemnity but depending on your type of business there are several others to consider.

As a freelancer, especially a part-time one, you should set up a business bank account. By keeping your two incomes separate it is a great way to see the comparison in revenues as your freelance business develops.

This leads to the next question: If you have started as a part-time freelancer, at what stage should you give up your employment to commit fully to your dream? Well, as a guide, most part-time freelancers leave paid employment when their income from freelancing reaches 50% to 60% of their employed position. You may decide to leave employment earlier depending on your personal circumstances, but whenever you decide to make that final step, the exhilaration you feel is difficult to put into words.

If you would like some advice about becoming a freelancer, we have experienced professionals who would love to help you, to find out more about the exciting venture that lies ahead, please click here.