The decision to become a freelance consultant is often long thought out. Slow job markets, high redundancy figures, flexible working hours and more freedom are all reasons people give for deciding to go it alone. Plus of course, the icing on the cake, it often (appears) to pay more money.
So how do you work out if freelance is for you?
First of all, let’s talk about the money.
We all know, or have heard of, the lady who got a 3 month freelance contract, on an almost-good-enough-to-sell-your-own-children day rate, that then extended… and extended… and extended… she’s been there nine years and lives like royalty (without the scandal).
I also know of people who took a similar sounding 3 month contract, that got terminated after two weeks and six months later went back into permanent work.
The norm is, as usual, somewhere in the middle and can be counter-balanced with some really easy maths.
Calculate the amount of working days in the year. In the UK this number is 220.
Now use tried and tested consulting ratios and assume you will only work 75% of the time – the other 25% will be used up finding new contracts, waiting for the next job to start, attending meetings to scope out roles and negotiate rates, etc.
In the UK, that brings your expected number of billable days down to 165. That’s the number of days you can expect to be paid every year as a freelance consultant.
Now take your necessary / desired / acceptable / expected annual income and divide by the 165 days you have to earn this money and you have your own personal, base line day rate.
For example, if your employed salary was £65,000 and that’s what you’re looking to maintain, you need a minimum of £394 per day.
The other option, if you see a role advertised, is to multiply the day rate by 165 to estimate your salary equivalent. Advertised rate £250 per day. Salary equivalent £41,250.
Of course, if you become that woman, whose contract runs for nine years with no interruptions, you will be better off. But if you’re not, you have the best possible chance of keeping your desired income year on year.
Remember – contracts are not guaranteed. Of course, neither are salaried jobs, but that’s another article. You are taking the risk – hence the seemingly higher day rate, when salaried colleagues multiply your day rate by 365 ahem – where are the weekends!. You have no pension, no paid holiday and you have to pay your own tax and insurance contributions – don’t forget that one. It’s a biggie.
When all is said and done, life as a freelancer can be good. Really good. But you need to be happy with that degree of uncertainty and be ok with the fact that three month contracts might be the norm for a while. If they do renew, you might not know until the last week.
You also need to be comfortable going into new companies, new environments, new teams and to just get on with it. New employees are given a settling in time, but the nature of the short-term freelance contract means you will be expected to hit the ground running. You’ll meet lots of new people, rarely know where the toilets are and may have to travel to get the best roles.
Remember – as a freelancer, it’s your business and your reputation. Own your work. Blow your own trumpet. Own your successes. Collect testimonials and LinkedIn recommendations everywhere, to build the likelihood of new and ongoing contracts finding you.
Lastly, be firm on your minimum day rate. You know what your number is now. Make sure you get it and you’ll stand the best chance of making your business work for you.