The pitfalls include less security, uncertainty, hassle in running your own business with forms and legislation, working on your own and being 100% accountable.
One thing that is certain is that as a freelancer you will be faced with some new challenges. Having set up and chosen the right structure that works for you – you will hopefully have your accounting, banking and insurance issues as well as tax matters in place – you can focus on your core business, securing the work and handling clients.
Devising a plan
You need to research your market – understand where you fit in that marketplace, how many freelancers already work in your area, who’s the competition, how much do they charge? You can then position yourself accordingly and decide what you can offer in terms of price, customer service and terms of business.
Stephen Sharp has been self-employed for 16 years. After ten years working for BAe Military Aircraft as an engineer, Stephen wanted to expand his experience. He has certainly achieved that and his work has taken him all over the world. Stephen is keen to stress that Rome wasn’t built in a day and perseverance, enthusiasm and a positive outlook is key if you want to be successful, even when things are not going to plan.
Marketing yourself is important. As you move from role to role, your portfolio will become your strongest selling tool. It can demonstrate your successes and highlight your experience and expertise, giving your prospective clients confidence in your work. Look on yourself as a product that is continually developing and evolving. You may want to invest in some PR, advertising or a website, all sound marketing communications tools which, if executed properly, should bring rewards in the form of new business.
Stephen believes that preparation is crucial: “It is worth honing your presentation skills and identifying your unique selling points so that you can convince potential clients that they really do need your services. You need to differentiate yourself by demonstrating a good track record, solid experience and impressive references that show where you have added real value to a project.”
Managing good client relations are vital and building an open and honest relationship with the client is the foundation of any assignment. It is important to show that you understand the assignment’s objectives, needs, challenges and constraints and discuss how you will work with the client. It is important that time is taken to review and provide feedback on the project itself which presents a good opportunity to build the client-consultant relationship. This can be done at any stage of the assignment and helps to prevent any misunderstandings.
The importance of contracts is an essential part of every freelancer’s toolkit and should not be underestimated. Not only do they outline the expectations of both parties, but they also provide a legal framework within which these will be achieved, and a back up should legal intervention be required. Contracts provide a formal definition of the business relationship between the freelancer and agency or direct client.
You need to agree with your client whether you are being taken on as a temporary employee or a contractor. If your client will control you closely, guarantee to pay you whether or not there is work to do and not allow you to send a substitute if you are ill or unable to come in to work, then you will be probably be hired as an employee on a fixed or short-term contract of employment. You can then accrue employment rights from day one.
However, if you are allowed to use your professional judgement to work out how to perform tasks, can go home if there is no work to do or can send a suitable alternative if you are unavailable then you are a contractor with no employment rights.
Just as importantly, agree the objectives and outcomes of the project you are undertaking – define deliverables, set timescales, agree a start date and negotiate costs.
Most freelance consultants use time as the basis for determining fees, because it can flex according to the variations in the scope and delivery of a project. The time is usually sold on a daily rate, weekly rate or an hourly rate. Most common is a day rate and prepare to set it according to the market rate.
Some freelancers choose to charge a fixed price to complete a specific project. This option is arguably only viable if you have control over the scope of the project and the process involved. Without control, you could run the risk of undercharging and short-changing yourself as the brief often changes and the business environment shifts.
As a freelancer, you will quickly come to realise that cash flow is extremely important. Every year businesses become insolvent because of cash flow problems. One of the best ways to improve cash flow is to get clients to pay their bills more quickly. Some tactics to adopt include – don’t assume you have to offer 30 day payment terms, try 14 days; you could offer early discount settling, send out invoices promptly with clear and detailed information so that the client has no reason to query the invoice and delay payment. Chase payment tenaciously.
Facing the Competition
Consultants can sometimes find themselves in a difficult situation – when their expertise wants to be used by two companies competing in the same marketplace. Richard Robson believes the issue is an ethical one. As director of Project Pilots and a former director of PCG, he played an important role in designing PCG (QS), a UKAS-approved ISO9001 certification tailor-made for small businesses. He would advise any consultant to get their contract reviewed by a professional so that it doesn’t restrain you from trading with others. If the contract is not explicit it is not contractually binding and a consultant is free to work for any client.
If client A is not happy, then he may terminate your contract. As a matter of delicate commercial sensitivity, it should be handled accordingly. A consultant should weigh up the losses if faced with this situation – both financially and professionally. If taking the second contract will cost you the first, can you afford to damage your reputation? Under no circumstances should you start a contract with client B until you’ve told client A and made a responsible decision. Don’t be greedy and rush for the increased rewards. Such a short-sighted decision could cost you dearly!
Without an explicit contract a consultant is free to seek further engagements with any client he chooses but as a matter of professional ethics, bring it to client A’s attention – it gives them an opportunity to convince you not to but it also allows you to highlight the benefits because you’re developing your sector skills.
Paul Worrall runs Interition and has been a freelance IT consultant for sixteen years. He said: “Interition won a contract to implement a content management system for an online mapping company. In the contract they inserted a clause that prevented us from working with almost all direct and indirect competitors for a significant period of time after our engagement had finished. We already had a client in the pipeline so we had a conflict of interest.
“We brought it to the client’s attention quickly and explained that the exclusivity would mean that they would have to compensate us for any loss of opportunity – through a combination of higher rates or a longer contractual agreement. We were objective about it and worked with them to identify what they wanted to protect from their competition. We ring fenced the work that fell under the clause and explained to all parties how to handle it. We explained the situation to the new client who, whilst they had not considered there may be a conflict of interest, was impressed that we were taking the initiative.
“At first, the client that wanted the exclusivity clause was dogmatic but when presented with a choice between extra cost or taking the time to break down the clause more specifically, they conceded.”
Paul believes it is important to give clients choices and act as a facilitator. He is keen to point out that whilst you can never completely avoid a conflict of interest you should have quality management processes in place that serve to identify potential problems before they arise. Paul added: “The client could have gone to another contractor who may have ignored the clause in the hope that the issue never arose. Fortunately, we were able to negotiate a solution.”
Freelancers are part of a growing trend towards “the alternative to the status quo” – neither employer nor employee – that is increasingly being recognised as an immensely important, contributing sector by major organisations and crucial to the success of UK plc. Businesses are scaling back on their expensive benefit-heavy workforce more and more, recognising the benefits of tapping into an alternative and knowledgeable workforce when they need to. Those freelancers with the skills and tools to run and develop their businesses will find themselves in a win win situation.