What are the pros and cons of freelancing?

Making the decision to go freelance is not one to take lightly, but it is one you can take gradually. Depending upon the nature of the freelance work, many people who make the move to self employment often build up a freelance income alongside their ‘day job’.

With the advent of remote working and a globalised workforce, it’s easier than ever to be flexible about the hours you work and where you work, so building up some work ‘on the side’ is much more achievable than ever.

However, before stepping out solo it’s sensible to become familiar with the pitfalls as well as the possibilities that freelancing offers.

Freelance vs employee

There’s a lot to be said for being an employee: you have the security of a contract with the protections that supplies, the predictability of the income, the statutory holidays, maternity/paternity cover and sickness allowances, the provision of the required equipment and resources, and, if you’re lucky, a team of colleagues with whom to collaborate.

As an employee in receipt of PAYE, tax, National Insurance and other payments like pension payments or student loan repayments are taken out by the payroll from your gross pay. As a freelancer you’ll need to be responsible for meeting all your financial obligations as well as all your usual business expenses before you award yourself the pay.

The main benefits of freelancing

According to IPSE, there are almost 2 million freelancers in the UK working in professions from the creative, scientific and technical to the managerial and professional. So what is it that draws so many people to freelancing? The benefits of freelancing are many and here are a few of them.

The option to choose your work

If you’ve worked for an employer for a while, even if you generally enjoy your work, there may be aspects of the job that you could happily live without. If you are a freelancer then you can, in time, select the kind of work that interests you the most, for example, a graphic designer who works in advertising might have a preference for working on fun, youthful brands over more formal, corporate entities.

When you first get started, however, it’s possible that you need to take the work that brings in the income while you build your portfolio to attract the kind of clients you are most drawn to while you carve a niche for yourself.

The freedom to organise your time

In general, when you work for an employer you work ‘on the clock’. Unless your employer is super-relaxed and informal, the chances are there will be dedicated periods for breaks and lunch and established clocking in and out times. One of the benefits of working for yourself is that you can organise your time around what suits you. At the beginning you may find yourself working whatever hours you can, particularly if you are making the transition from another job, but eventually the idea is to organise your work around your life, and this is certainly within the realms of possibility.

Be your own boss

As someone who is self-employed, you can be whatever kind of boss you like. When you’re starting out you may have to be the boss that makes you work long hours, but the groundwork is necessary if you want to become the boss that disappears to play golf later on. To a large extent you are now in charge of the shape and direction of your business, which allows you to have the freedom and sovereignty to make your own decisions, but to wear the responsibility for them too.

Better paid

As an employee, unless the business you work for has a very well structured career ladder that enables you to progress it can be very difficult to attain the income you feel your skills deserve – especially in smaller organisations in which upward mobility is limited. As a freelancer there is far more scope to earn more, especially if you are your sole employee, you can keep a careful eye on your financial management and you are good at making the most of opportunities for your business’ development.

Location

Most freelancers start out by working from home and there are many modern options for creating a comfortable working space. All over the country, savvy freelancers are converting lofts, sheds, garden buildings, conservatories, spare rooms – even hall spaces, into nooks and offices from which to work. The key is to ensure you can distinguish a working space from your living space and establish distinct boundaries between them – if not physical, then time-restrained. Let family members know when they can interrupt you and when not – it will make a big difference to your productivity and to their expectations of you.

The main pitfalls of freelancing

Of course, there are disadvantages to freelancing too. Thankfully there are also ways to manage them, which we’ll explore.

Unpredictable payment

Possibly one of the things you’ll miss first as a self employed worker is the predictability of the pay. It can take a while to get the ball rolling, so be sure to have some savings reserved before you jump ship from your old job completely. This financial buffer can cover you while you’re getting started and during fallow times. Some freelancers recommend saving a minimum of 3-6 months’ pay to keep solvent during leaner periods and while you’re waiting for invoices to be paid.

Lack of security

Obviously as you are your own boss it’s in your interests to ensure your business becomes established and successful as quickly as possible, and no one is going to be more motivated than you to ensure this. However, one of the advantages of working for a large company or organisation is that if there are staff changes, quite often staff can be redeployed internally rather than lose their jobs. This is not so straightforward for the self-employed worker, however. Your job security is informed by your clients so you have to ensure you have enough of the right clients to keep your income ticking over nicely. To avoid uncertainty get the balance right between keeping busy and promoting your business during quiet periods, and not taking on too much at other times. If you are worried about saying no to work and risk losing a client when you are busy, consider whether you can subcontract work to a peer if the work is not something only you are specialised in delivering.

Work-home separation

Although you might have carved out a decent office space in your home, one of the challenges is to differentiate between ‘work time’ and ‘down time’. In any home there are countless DIY tasks and domestic chores that demand attention. There’s the allure of the fridge, or the irritatingly grimy window you’re looking out of. Don’t allow yourself to be distracted by these things during your allotted working hours. If you’re not busy, remember that you could be using your working day to drum up new business rather than popping in another basket of washing.

Budgeting and managing your cashflow

Chasing payments is the bane of a freelancer’s existence and one of the most oft-cited downsides. Small businesses can spend an inordinate amount of time – around 1.2 days per month, in fact – chasing up payments from clients. According to The Federation of Small Business, one in three payments to small business suppliers are late. Exasperating though late payments may be, don’t burn your bridges or harm your reputation by firing off an angry email, rather maintain respectful communication with reminder emails and follow ups on the phone if needs be. There are debt collection agencies you can use, but these should be a last resort if you want to maintain a good relationship with your client.

Of course, late payments do have an impact on your cashflow , so make sure you factor this in when writing your cashflow forecast and allow contingencies for such eventualities – you don’t want your business to go under on account of just one or two tardy invoice payers.

Looking after your freelance business

As we’ve seen, there are many pros and cons of freelancing, and setting up solo requires a significant amount of energy, enthusiasm, organisation and hard work. Obviously you will want to protect the investment you’ve made in going it alone. Any business owner will tell you that things do not always run smoothly, with deadlines, clients or suppliers.

One of the ways you can help ensure your business does not suffer the impact of a costly claim against you is to take out the right level of small business insurance . Contact us for a quote today.

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