The days of the “job for life” are long gone. There are still some industries which will take on graduates and nurture them throughout their career but not that many. For the most part, people are changing roles every 18 – 24 months. Alongside this, those with an entrepreneurial spirit are launching side businesses or freelancing.
When you are an employee at a firm, everything is pretty straightforward. Your pay check goes into your account on a set date and your taxes and other deductions are taken automatically. As long as you can make sense of your payslip, you are fine.
If, however, you want to freelance to gain experience, or launch a business of your own there are some very important things you need to understand. This is especially true if you plan to freelance on a more long-term basis, or have ambitions of scaling up your side business and turning into a full-time venture.
The most important thing to figure out, if you decide to freelance, is how you plan to do this. Some freelancers have full-time jobs but freelance in their own time. With that in mind, before accepting a freelancing role;
- Determine your status. Freelancers can be classed as casual employees, or self-employed. Get clarity, as this determines how tax will be paid.
- Clarify how you will be paid. Once you are clear on your status, you will need to get clarity on what will be required of you and how you will be paid. Will there be a contract or will you need to bill the company for your time?
If, however you have a passion which you want to pursue as a side hustle, or have identified an issue that needs solving, you are officially an entrepreneur. As such, here are a few things to get your head round;
- Separating business and personal finances. You will initially need to invest some of your own cash to get your venture started, for materials or services, but don’t get carried away. Don’t put everything in and leave yourself with nothing. While taking risks is good, in the current economic climate risking everything might not be such a good idea. Invest enough to get started, but when the venture brings in money allocate the majority of that to the business. Save some in a business account and invest some in the business (for example, materials or advertising). If you are to take money out of the business to pay yourself. make sure this is documented. The aim here is to maintain a healthy amount of cash for the business, which will be crucial if you plan to expand because you won’t have to contemplate loans or investors.
- Business Accounts. Crucially you need to open a separate bank account specifically for your venture. There’re so many offerings, so be sure to shop around and ask questions to fully understand what you are committing to.
- How will you be paid? Depending on your offering will you be sending out invoices, taking Paypal or credit card payments or cash? Before you commit to the card or Paypal option, check the charges and make sure you fully understand them. Whichever method you choose, make sure you keep up-to-date records as this will be crucial when paying taxes.
- Suppliers. Will you be working with suppliers? If so, how will you be negotiating with them and paying them?
- Expansion. As your side business starts to succeed, start planning for the future. Decide whether your business will be expanding or whether it will remain as small and specialised. Take the time to familiarise yourself with how business properties and leases work. Think about how staff will be paid; will you be hiring employees and providing for them, paying taxes and making pension contributions, or will any staff be classed as self employed?
I hope that you have found this informative and leave with some food for thought. The good news is that many colleges and adult education establishments offer training on the above, so if there are elements you can’t learn from others or discover online, there is plenty of help available.
Whatever journey you may be on, I wish you success and happiness