How to start a freelance business

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At any given point in someone’s life they are likely to want to start a business. Owning your own business is always met in a positive light. You tell someone you own your own business and they are immediately impressed.
Starting a freelance business has been one of the most rewarding aspects of my life. Sure it’s had its challenges but ultimately one year on I am wiser and more focused than ever. For me it was a combination of two years of long commuting and a lifestyle decision to lead a better, more fulfilled life. For you it may be that you want to be your own boss. Whatever the reason there are high level basics you need to know before starting such a business.

This article covers some basic tips and advice of how to go about setting up your freelance business. These are the areas I looked into before starting my Digital marketing consultancy business. It won’t delve specifically into getting clients, pricing or the day to day pitching for business but it will perhaps help you make the right decisions for you and your business.

Why?

Seems a simple question really but have you asked yourself why you want to go freelance?

Is it the label of owning your own business or is it because you want to be in control of your own finances and lifestyle?

The reason as to why really doesn’t matter but it needs to mirror the life you want to lead. Think clearly about the pros and cons. No more commuting is balanced out with an irregular paycheck. For every positive there is a negative so you need to decide whether the pros of freelance work for you and your long term goals. Map this out clearly and think it through.

What type of business?

Do you want to become a client hoarder and grow so much that you have to outsource some of the work or hire a team? Or do you want your business to be your own little haven full of individuality and your approach to business?

Choosing what type of business you would want to run is important from the beginning as it affects your company status (Sole/Ltd) and perhaps your company name.

My goal as a freelancer was to earn enough to fulfil my family needs and provide time for me to grow my side project. Once I hit a threshold of clients I stopped taking on new work and if I did take on new clients I would move on from an existing client.

I see growth as a freelancer in a different light to growing my client list. Honing my skills set, improving my offering, adding more value and in return charging more are growth strategies in my mind.

Decide what type of business you want to run and stick to it.

Ltd or Sole Trader?:

There’s typically three routes you can go down when starting a freelance business. They are; sole trader, ltd company and partnership. The majority either trade as a ltd company or as a sole trader.

Many trade as a Ltd company as there are tax savings if you earn over a certain threshold. That gap has since been closed given the government’s taxes on dividends and the reduction in tax free dividend payments.

This article explains the differences quite well. It’s essentially a decision you need to make as a freelancer and ties in nicely with what type of business you want to run.

The .Gov website also provides good advice on setting up as a sole trader or ltd company.

If you are likely to earn significant sums over the basic rate threshold then I would recommend a LTD company status however it really depends on your business goals. For flexibility with your freelance work I would recommend setting up as a sole trader. This is less rigid and essentially you pay tax on profits as a %.

There are also legal complexities when assessing Ltd vs Sole Trader. As a sole trader you and your property is liable, whereas as a Ltd company it is the company. Many test the water with sole trader status then move to a LTD company as they feel more comfortable with freelancing.

Choose a name:

Choosing a business name is always difficult. Aim to choose a name which is suitable for the short, medium and long term. Many businesses rebrand because they find this part of starting a freelance business challenging so you’re not alone here.

As a sole trader I went with my own name for the reason I that wanted to build myself as a skilled, single entity and not grow into a company. You may have different desires. I’ve highlighted some considerations below for you to ponder over.

Sole Trader:

• You will register as a sole trader under your own name but you can if you desire trade under a ‘Trading as’ name.
• Do you want to build a brand within your niche? Your own name can be good for this.
• Is your domain name available? If not…acquire it.
• Make sure your trading as name (if you choose this route) is unique and not registered as a Ltd company.
  

LTD Company Considerations:

• Is your desired LTD company name available? You can check this via Companies house utilising their web check tool.
• Don’t have an offensive name
• Be professional but not cheesy
• Is the domain name available?
• Memorable always works a charm

Branding:

Go with the basics. A logo at best, perhaps even some business cards (although I haven’t printed any since I started). Have branding which represents you right. Unless you’re a freelance graphics designer then a clean, clinical visual is just fine. Mine is my initials.

For certain businesses you may want to produce some letterheads for sending official quotes or estimates. This is also important when looking to set up an individual bank account for your business. Jot down what you need and make sure they are functional.

Website:

Have a website ready immediately. Buy some hosting and install WordPress the day you think about going freelance and put something together. Start with a minimal viable product and improve and refine as you progress.

Download a free or paid template and start writing your website copy. It’s your personal showcase. Never neglect it. Always add new content and improve. Don’t be embarrassed about your first version. Just get something together and go forward.

Keep adding new content. Write well and improve with every word irrespective of whether you’re fully booked or not. Always save time for your own website development and enhancements. Clients come and go. Your website doesn’t.

Email:

Get yourself a rock solid email client. Actually scratch that. Sign up for GSuite and run your business via it. Email, Drive storage, video calling, word processing, spreadsheets & calendar. It’s all you need. Google’s servers never go down and they have both Android & Apple apps. Here’s the link for more information.

Invoicing Tool:

Being organised and making sure you are paid on time is the single most important step when starting a freelance business. Whether you get paid and bill on time is down to you.

There are a ton of great tools on the market. FreeAgent covers all bases from an accounting perspective. FreshBooks is another in the FreeAgent realm. There’s also CushionApp which is quite nice for freelancers but feels geared towards designers for me.

I personally use Invoicely as it has a really nice feature where you can setup automated invoices on a monthly basis. I tend to invoice the same clients monthly so this works for me as I have to do nothing to manage my payment process. Once they are set up as a ‘recurring client’ I sit back and watch them fire out on the desired day every month. You can also set automatic reminder emails for those clients who miss your 30 day payment deadline.

Whatever you do make sure you utilise an online tool for safe invoice distribution and management of your business.

Insurance:

I know absolutely nothing about insurance. Fortunately my good friend Ashley built ‘Insurance by Jack’ which is business insurance for freelancers. Insurance basically safeguards you from getting sued and a bunch of other important business stuff. I now know that insurance as a freelancer is really important and I now feel safe knowing that I am covered if anything negative was to transpire.

I suggest you use Ashley’s What insurance? tool to identify what level of insurance you need. Get this before you start to eliminate any concerns you may have; especially when operating as a sole trader.

Own Bank vs Business Bank:

Whether you decide to set up a dedicated bank account for your business or not depends on the route you want to take with your business. I personally run a pretty lean operation. Just five core clients, little outgoings and a very simplistic sole trading business. Others may outsource work, have 30+ clients and make a number of transactions. If this is your type of business then it may be wise to set up separate bank account for the business.

Like anything to do with banking in the UK it’s not an easy process. They tend to want to see you in person. You will need ID, proof of address and a letterhead with the business logo and address. It’s all very old school. You also usually have to wait a while for an appointment too.

LTD company bank accounts require a little more information and a longer process. Again this largely depends who you bank with.

I still use my own bank account due to the simplistic nature of my business. Think about your plans and choose the bank route which is best for you. Like moving from Sole trader to a LTD company this can be looked at later.

Set Up A Tax Saver:

If you don’t save your tax it can hit you like a cold shower; especially as a sole trader. As an LTD company the business will be liable to corporation tax and potentially VAT dependent upon what you earn.

As a sole trader most UK banks now allow you to set up little online savers. These are virtual bank accounts you can use for savings. I tend to use one of these for my tax. When my freelance invoice is paid I pull out 40% and fire into the online saver. It’s easy to get lost in tax hell so over save as opposed to under saving. The UK has this weird ‘Paying on account’ system where you have to pay the equal to last year’s tax bill on account over two intervals. Saving extra is great for little forks in the road like this.

Other Considerations:

Other considerations when going freelance for you to look into. I will add to this as and when I find interesting articles.

Tax implications for Sole trader, Ltd company & Partnership – I’m not a Tax professional nor do I ever want to be one so this email explains tax implications very well.

If you are seriously considering starting your own freelance business then make sure you are comfortable with answering some of the points highlighted and are clear in your strategic direction.

In terms of red tape and complexities it’s really easy to get started and is potentially the most lean and profitable business you can run. Like any services business it relies on you being proactive, focused and actually good at what you do. Starting steady with the steps above will put you in the right neighbourhood for running a long-term, fruitful business.