Okay, so the freelance market in the UK might be dwarfed by its American counterpart. This does not, however, mean that the recent rise of independent contracting in Britain has not been impressive, with a staggering 1.4 million citizens now freelancing across all sectors nationwide. This number has also grown by 14 per cent in the last 10 years alone, as the demands of the 9-to-5 grind become increasingly unappealing in the digital age.
Before you throw yourself like a mindless lemming into the depths of the freelance market, however, you may want to consider the financial practicalities of working for yourself. After all, freelancing lacks any of the security afforded by 9-to-5 work, while you must assume sole responsibility for monetising your skills and securing a regular pay-check at the end of each and every month.
These are sobering thoughts and the kind that many fail to consider before plunging head-long into a world of late hours, endless networking and copious amounts of work. Financial planning is arguably the most important part of becoming a successful freelancer, however, particularly as you look to bridge the sometime cavernous gap between full-time work and self-employment.
The simple truth is that every single freelance market is becoming increasingly competitive, both in terms of the number of service providers available and the range of skills that they offer. This means that aspiring freelancers will need to charge a competitive rate for their services when they first enter the market, which may well result in an initial decline in earnings as they develop their personal brand and reputation.
With this in mind, the importance of making a smooth, financial transition between full-time work and freelancing is obvious. Actually achieving this is far more challenging, however, so here are some steps that can help you on your way.
#1 Become a Miser and Embrace a More Frugal Lifestyle
Be honest: you knew this was coming, didn't you? No matter how unpalatable it may be, every prosperous freelancing career begins with a period of careful planning and penny-pinching as you prepare for a potential dip in your earnings when you first acquire contracts.
It is important to start this process as soon as is humanly possible but, ideally, at least three months before you plan to leave your full-time job. This will allow you to make initial cuts to your living expenses while also affording you time to experience these and ensure that they are practical. So, by the time you have taken the plunge and left your full-time role, you will have a sustainable lifestyle that can support your new career.
So, where should you focus your efforts? Initially, it is better to reduce all recurring living costs such as energy bills and groceries as these are the changes that will have a cumulative impact over a period of three to six months and longer.
With this and a willingness to eliminate all unnecessary spending (including holidays abroad and costly dining experiences) as you prepare to leave full-time work, you can prepare yourself for a challenging financial transition without compromising your ability to place a competitive value on your marketable skills.
#2 Increase your Savings and Build an Interim Income Stream through Freelancing
Now, depending on how much you earn from your full-time job, the cultivation of a more frugal lifestyle may deliver an additional benefit. Let's say that you set a goal of reducing your living costs by 10 per cent to prepare for freelancing, for example, but actually make savings in the region of 20 per cent (well done, you).
In this case, it makes perfect sense to commit the other 10 per cent into savings as this creates additional financial security and a safety net when you first begin to market your skills as a freelancer.
Now we come to the elephant in the room, as we consider building on this and creating additional income streams while you remain in work. The most obvious option, of course, is to begin your freelancing career on a part-time basis while still in work but this is an option that requires careful consideration.
While there is no legislation that prohibits 'double-dipping' (and it remains unusual for this practice to be expressly forbidden by the terms of a standard employment contract), employees will not tolerate you using company resources to complete external projects for your own financial gain. So, if you do pursue this path, be sure to separate the two entities and retain freelance work for your own time.
Similarly (and on a final note), we recommend adopting a similar approach when starting to undertake freelance work at home. It is crucial that you create a distinction between your personal and professional activities, so ensure that your home office is located in a spare room and not used for any other activity. This will enhance your productivity and allow you to earn more before you become a fully-fledged freelancer!
#3 Use Competitive Pricing to Secure Your Initial Contracts
Now there are a wealth of tips that educate freelancers and entrepreneurs on how to retain clients, from the delivery of a consistent service to the finer points of relationship building. While these steps are crucial to long-term growth and success, however, freelancers must have a narrower, near-term focus as they look to acquire contracts for the first time.
Without a history or a body of work behind you (not withstanding your market experience as a 9-to-5 employee), you cannot necessarily wow potential clients with a stunning portfolio or the recommendation of a mutual friend. Instead, you must create a simpler but no less compelling value proposition, and one which offers your services for an extremely competitive price.
There are two key considerations here. The first is that, regardless of the service that you offer, you should create a transparent hourly rate that includes all of the tasks that are required to deliver a project. This is far easier for the client to comprehend while it ensures that you are paid for every aspect of your service.
Secondly, and most importantly, you should also strive to go beyond fairness when setting your pricing structure. This is particularly true in the most popular freelance markets where intense levels of competition have created an army of similarly skilled contractors with few discerning features.
By charging a lower price that benefits employers and allows you to win regular contracts, you can secure a competitive edge over your rivals. This at least enables you to create an initial source of income, helping you to make a more seamless transition as you establish yourself as a freelancer.
Just don't forget to review your pricing as your career develops, as you look to scale this in line with your experience, reputation and increased diversity of skills.
With these tips in mind, you can hopefully go some way towards bridging the financial shortfall that ensues when you move from a full-time to a freelance career. This is crucial to your long-term growth and success as a freelancer, as the failure to manage even a temporary period of struggle can undermine even the best-laid career plans and send your dreams up in smoke.
What are your experiences as a freelancer? Let us know in the comments section below – we would love to hear your thoughts.