The number of Britons taking advantage of the burgeoning market for contractors and freelancers is growing. It’s the result of people wishing to break away from corporate life to be their own boss, earn more and strike a better work-life balance, all from the comfort of their own home.
For most people, becoming a contractor follows an epiphany moment – either a life-changing event such as the birth of a child, or the realisation that they could train for a triathlon during the week, sustain a high income and still have time for family and friends at the weekend.
But stepping away from a steady job is daunting and when you are getting your name out there it’s very easy to say yes to every piece of work. And if you are not careful you can quickly find yourself swamped and stressed with simultaneous deadlines.
It’s at this point that it’s easy to start to question if you’ll ever achieve your ambition. But it’s simple to avoid if you follow five rules from week one.
Rule 1. Work out your thresholds. That’s the number of hours you want to spend working, dedicate to family and friends, and set aside to pursue a pastime. This will help you see clearly what you need to earn per hour or day to make the dream a reality. Don’t forget that you need to make sure your version of a working week allows for new business, networking, and admin.
Rule 2. Billable time trackers. When you know your capacity it becomes far easier to schedule your work and see when you have gaps available. I’d recommend creating a spreadsheet that calculates your hours and rates against actual contracts so you can see your income at a glance too. The other great thing about this approach is that it tracks the invoices you need to raise and keeps your pipeline visible month to month.
Above all, saying yes can be done on your terms. Contrary to what first timers think, you won’t be letting people down – if you are good then people will wait. In fact, in the long term, it can be a boost to your brand to tell people you are busy this month but you could complete the work the following month as it says a lot about your quality of work.
Rule 3. Charge what you are worth. Now you know when you will work and what you want to earn you need to make it happen. But it can be hard to talk rates when you first start out and often people feel apologetic for charging market rates. Don’t be, as you’ll only live to regret it. It’s all about the psychology – putting value on what you do is an indicator to your clients of your value to them.
If you find it difficult then create a bill of fare for daily, hourly rates, and flat fees for specific pieces of work you’ll do regularly. It takes the sting out of the conversation and helps you to achieve consistency.
Rule 4. Get your set up right. For most contractors and freelances the financial side of the business is the headache. Limited or sole trader, VAT or not? Question 1 is straightforward to answer: generally it’s best to go limited because of the tax breaks it will afford you.
To answer question 2 you need to think about where your work is likely to come from. Lots of contractors work for big businesses and as they are all VAT registered it’s worth going VAT registered too, because of what you can claim back. When you’ve got these details sorted you can then work out the wording for your payment terms and contracts. A good accountant can guide you through.
Rule 5. Use the cloud. Time is money and there are so many tools now that can help you keep on top of things. From time sheets so you can track how you spend your time and ensure your clients get what they pay for, to document sharing tools to improve collaboration, online market places to find work, through online accounting, the cloud can help you keep your admin down and your work to life ratios where you want them. Ask for recommendations, take advantage of the tools that give you a free month’s trial and put them through their paces. If it’s difficult to get started and run without seeking help, or you find there would be hidden costs, then it’s probably not the right option for you.
These five rules are born from the experiences of the thousands of contractors we have worked with over the last ten years. Get this part of your set up right and you can join the huge number successful contractors who have gone on to create thriving consultancies and agencies from home AND achieved the much talked about work-life balance.
By James Poyser, co-founder of inniAccounts