Start saving a financial buffer
Even if you’ve got clients lined up from day one, if you’re able to save and build up a financial buffer before becoming self-employed, it will make life easier. Especially if you’ve got existing financial commitments.
Recommendations vary, but between one and six months of income will give you a valuable safety net if clients or customers don’t materialise as expected. And when you’re starting out, there are always unexpected costs and expenses which are likely to crop up. Can you cover the cost of a new computer if your laptop suddenly fails? Or travel and accommodation for a last-minute meeting with a potentially huge client?
Start tracking and planning your personal budget to find expenses you may be able to do without. It’s easier than ever with a range of good free and low cost budgeting apps for both individual and business use.
Even if you’re forced to start self-employment without any savings, start building your financial buffer from day one by putting any excess client or customer revenue into a separate, higher income account. Just make sure you can get quick access to those funds when needed. And take time to regularly check if you can cut unnecessary costs and save money as a freelancer which can be better used to build up your finances.
Draft a business plan
Even if you’re intending to be a sole trader offering simple products or services to clients you already know, going through the process of drafting a business plan can be massively useful.
You might have already discovered unknown strengths and weaknesses by asking questions about yourself. Now you can do the same for your new self-employed business.
It allows you to set targets to measure your progress against. And provides a focus which will help you understand when to accept opportunities, and perhaps more importantly, when to turn them down.
Unless you intend on using it to secure financing, it won’t have to be a professional formatted document. And it should be flexible, allowing you to adapt and fine tune your plans as your experience grows, and situations may change. IPSE members can access a helpful business plan template to make it easier, along with a full Guide to Freelancing, but some useful questions to get you started include:
- What is your business objective? What will it offer? What’s your ‘elevator pitch?’
- Who are your target clients or customers?
- What products or services are you providing? Do they match with what your potential clients or customers may want or need?
- Who are your main competitors? Which existing businesses aim to solve the same problems for clients and customers?
- How is your business different?
- Your plan to attract new clients
- Ways you can keep clients
- Your goals, targets and timelines
- The budget and financial plans for your business
Once again, you don’t have to supply perfect answers for every question when you’re preparing to become self-employed. But it can highlight strengths and weaknesses before you start investing time and money into your idea.
The important thing is to be honest with yourself about your business plan. Your objective might be to earn a sustainable income and have more free time away from work, rather than raising millions to become the next global sensation. But having a basic framework for achieving your aims will help you to make it a reality.
Making the most of starting self-employment
Becoming self-employed is one of the most fun and exciting experiences in the careers of many people. Whether you’ve diligently prepared for months or jumped into working for yourself, it’s important to try and enjoy the new challenge as much as possible.
As our member stories show, everyone makes some mistakes in their early days. And even experienced freelancers or contractors will face new tests throughout their careers. But overcoming and learning from fresh obstacles is part of what keeps self-employment fresh and exciting after years and decades of building your business. And they’ll provide you with insight and anecdotes to share with others as you become established.
Understanding how to prepare for self-employment will make things easier, but it’s never too late to rectify anything that you missed. And you’ll benefit from revisiting your business plan and finances regularly throughout your career.
Have you ever had a business idea that needed significant capital to start? Angel investors offer an alternative to business loans or venture capital (VC) funding...
In this guide, we run through the key things you need to know about IR35 as a self-employed professional, including the difference between 'inside' and 'outside' ...
Even the most resilient self-employed professionals can be thrown by unexpected challenges, including power cuts, internet outages, office thefts and more. Find o...
