Working Freelance
Simon Juden, Chairman PCG
Self employment in the UK has increased
markedly in recent years, and since mid –
2002 has been growing faster than at any
time since the late 1980’s.
Labour Market Trends October 2004
“40% of the UK workforce will be
freelance by 2010”
Professor Richard Scase, University of Kent at Canterbury
Agenda
• Today’s freelance market
• Future directions
• Starting out: what you need to know
• Taxation
• Marketing yourself: finding work
• The PCG
Today’s freelance market
UK Working Population
August 2004(m)
218, 1%
6384, 22%
840, 3%
2774, 10%
18176, 64%
Full time employees
Full time self employed
Part time employees
Other
Part time self employed
Source LFS Aug 2004
Number of people self-employed
(UK 1985-2003)
Growth areas/sectors
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Finance
HR and change management
Leading IT
Construction
Engineering
Marketing
Public sector (though procurement issues)
– Health
– Education
– Transport
Motivations: economic
• Increase in house prices reduces credit constraints
• Recent research suggests that 1 in every 30 adults in
the UK (1.4 million) is actively trying to set up a new
business at any one time. (2001)
• Four in every 100 people start-up a business because of
an opportunity and 1 in every hundred does so because
they have no better choice for work (necessity
entrepreneurs)
• Respondents were positive about the climate for
entrepreneurship, although fear of failure would prevent
34.1% of people from starting up a business
Motivations: lifestyle
• Belief that self-employment offers greater responsibility,
more flexibility, more challenges and larger rewards,
plus more personal freedom and a better work-life
balance.
• 80% of self employed are satisfied or very satisfied with
work vs 64% of full time employees (Work Foundation)
• Research from the Working in Britain suggests that
whilst people are staying in their jobs slightly longer
than in 1992, work is not challenging or rewarding our
abilities (Work Foundation)
Employee Space
Not jobs for life
Market drivers
- life of jobs
No loyalty
Lack of challenge
and reward
Business Space
Space for self
A new generation
Self esteem
Work life balance
Freelance
Interim
Self employed
Consultant
Self determination
Increased competitiveness
Focus on strategic core, new models
Adaptive and flexible
Outsourcing trends
Low investment in human capital
Employer space
Focus on costs
and service
ICT –
anytime any place
Use of “freelancers”
Trust is diminished
Future directions
Potential pitfalls
• ca 4,500 More Laws and Regulations Since 1997
• Higher insurance and employer liability premiums
• Procurement Policies of Large Corporations
– Terms of Trade
– The Internet
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Planning regulations - businesses at home
Taxation
Poor training opportunities
Risk/insecurities and work/life balance
– Use of Home Resources
• Where do you go for regular up to date advice?
Areas of concern
Resources
2%
Managing your finances
4%
New technology
4%
Cash flow
5%
Taxation
20%
Marketing yourself
7%
Updating your skills
9%
Changes in legislation
20%
Economic environment
14%
Source PCG annual survey 2004, base 698
Finding new business
15%
Psychology of the freelancer
Freelance consultants
Non conformist
Individual
Self focused
Need recognition
Cynical and suspicious?
Creativity, innovation, expertise
Business solutions –
organisational change
Source: R Scase
Evolution of a trust relationship
BREADTH
OF
BUSINESS
ISSUES
TRUSTED
ADVISOR
VALUABLE
RESOURCE
SUBJECT +
RELATED
TOPICS
TECHNICAL
SUBJECT
MATTER
DEPTH OF PERSONAL RELATIONSHIP
Source: R Scase
What can you do to become
a long term successful consultant?
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•
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Experience counts
Avoid the pitfalls
Know where to get advice
Be adaptive/flexible and agile
Keep close to your clients and their needs
Recognise and use varied channels to work
Become a trusted advisor
Invest in building your skills and professional status
Develop trading networks and alliances
Know where to go for advice and support
Questions and Answers
Starting out: what you need
to know
Issues for freelancers
• Living outside “the corporate umbrella”
• Running your own business
• Managing finances
• Finding work
• Lifestyle implications
• Retaining your hard-won earnings
Setting up your business
• Choosing the right structure
– Limited company
– LLP
– Partnership/sole trader
– Umbrella and composites
– “Clever schemes”: too good to be true?
• Often the drivers are commercial (e.g. in IT)
Accounting,
banking and insurance
• Choosing an accountant
• Choosing a bank
• Insurances
– Employers and Public Liability
– Professional indemnity
– Tax investigation
– Permanent health
Tax matters
• IR35: myths and realities
• Section 660a
• VAT
• Taxation of limited companies, LLPs, sole traders
• Self assessment
• Professionals will do most of this for you
Getting paid
• Paying yourself
– Limited company
– Self-employed
– Managing cash flow
Work location
• Client work vs work for own business
– Travelling expenses
• Working from home
– Business rates
– Capital Gains Tax issues
– Lifestyle issues
• Rented offices
Accounting records
• Using a computer system
• Mixing personal and business finances
• Retention of records
Personal finances
• Savings, holidays and buffers
• Retirement and pension
• Funding your car
Finding work
• Sources of work
– Agencies
– Own network
– Others network
– Cold
– Jobserve
– PCG Exchange
Taxation
“Taxation with representation ain’t so hot either.”
Gerald Barzan
Some taxes to be aware of
• IR35
• S660A
• Non-Corporate Distribution Rate
• Pre-Budget Report
IR35
"I really do prefer naivety or even foolishness in politicians
to hypocrisy and deception. Dawn Primarolo seemed to
be very pleasant, and clearly fell within the first pair
rather than the second. I was particularly amused by
the way in which she sincerely believed that the Budget
measures would simplify matters and lead to a fairer
and more efficient tax system. While I might have
thought that someone with the several years experience
in the job that she had would have realised the silliness
of such statements, she seemed entirely at ease with
her conscience in making them."
Graham Aaronson, QC, on IR35
IR35: scenarios
• May apply to work through limited company
• Different pieces of work can be inside/outside
• Relies on the Self Employment Status tests
• Involves an imaginary contract
• Punitive levels of tax (more than half of 95%
of turnover)
IR35: factors
• Three key elements:
– Requirement for personal service
– Control
– Mutuality of Obligation
• Case law clarifying boundary
• Extremely complex to assess status
• You may not be able to see all relevant
contracts
IR35: what can you do?
• Educate yourself
• Make sure your accountant understands freelancing
• Get your contracts reviewed (leverage agency regs to
help negotiate if you need to)
• Use top-notch professional advisors
• PAYE visits are often IR35 trawls
• Be aware that the Revenue often gets it wrong
IR35: the future
• Repeal extremely unlikely
• Work on implementation ongoing
• Any re-examination of the self employment
tests should help
S660A – potted history
• Settlements legislation
• Around since 1930s
• Tax Bulletin 64 (April 2003) brought new
interpretation
• PCG taking test case (Arctic Systems) through
the courts
S660A: who is at risk?
• Limited company or partnership
• Ownership shared with spouse (or other)
• Profits shared with spouse (or other)
• Revenue seek to go back six years, though it’s
not clear that they can do this
• Revenue will attack where there’s most to gain
S660A: what can you do?
• Educate yourself
• Very little can be done about earlier years
• Document input to business of spouse
• Consult your tax advisor for advice going
forward
• Don’t panic
S660A: the future
• A huge amount depends on the Arctic Case
• Implementation discussions: CIOT et al
• Tax Bulletin 64 was issued April 2003: strong
moral argument for not assessing before this
• Apparent conflicts with: self-assessment,
independent taxation of spouses, company
law, divorce law...
Non-Corporate Distribution Rate
• “The right amount of tax”
• Effectively reverses the introduction of a 0%
Corporation Tax band
• Least-worst option for freelancers at the time
• Fundamental re-think may be on the way: this
year’s Pre Budget Report will include a
discussion document
Questions and Answers
Marketing yourself:
finding work
Sales and marketing
- important for my business?
“For many freelancers, the biggest obstacle to success is
that so many look upon themselves as technical or
creative people first and business people last. They like
to think that a professional doesn’t need to resort to the
dirty world of marketing or selling.”
Roy Sheppard, leading expert on networking and referral marketing
www.royspeaks.com
Top tips - number 1
• Develop and demonstrate a positive attitude
– Believe in yourself and acknowledge that you are good at
what you do
– Act successful – people prefer winners to losers
– Cultivate a “can do” mentality
Top tips - number 2
• Get organised
– Create a proper contact management system
• Every person and organisation capable of giving you business
• Everyone you know who might know someone you can
• Every person or organisation that you want to work with or for
– Use it meticulously, every day
– Create a folder for every client and potential client
Top tips – number 3
• Define your offering
– Clearly define your product and service offerings
– Work out your pricing model
– Identify your strengths and weaknesses (SWOT analysis)
– Identify your main competitors
– Identify what is special about your product and service
offerings
– Review this on an ongoing basis
Top tips – number 4
• Specify your targets
– Identify your target audience and market segments
– Analyse existing clients by market sector to assess whether
there are niche opportunities you can exploit
– Create a “most wanted list” of companies that you want to
do business with – research them and add them to your
contacts database
Top tips - number 5
• Create your brand image
– Basic logo
– Business cards, letterheads
– Website, email address
– Response materials and marketing collateral
– The way you dress, conduct yourself, talk, answer the
phone and write business letters
Top tips - number 6
• Invest in a decent website
– Proper domain name - .co.uk or .com, for example
– Content-rich and dynamic
– Easy to navigate, quick to load
– Optimised for a good search engine ranking
– List in one or more of the major directories
– Don’t forget a response mechanism and email opt-in
Top tips - number 7
• Use email for cost-effective direct marketing
– Mail only those people who have agreed to receive email
from you
– Please do NOT send unsolicited email
– Send newsletters and white papers with interesting articles
– Offer advice, tips and offers
– Make sure that you have an unsubscribe option
Top tips - number 8
• Learn to network
– Develop and practice delivering a focused 60-second pitch
– Spend time developing your networking skills
– Join a local business networking group, such as BNI
– Go to PCG “Real Life Meetings”
– Build up a list of associates offering complementary goods
and services
Top tips - number 9
• Grow your business by nurturing your pipeline
–
Hot
• Existing and previous customers
• Previous contacts
–
Warm
• Referrals from good contacts
–
Luke warm
• Networking activities
• Web sites often list key officials (this is a good source)
• Look out for press releases and company news in the press
–
Cold
• Your “most wanted list”
• Contacts harvested at shows and events
Top tips - number 9
ALL CONTACTS
Areas of relevance
Communication
General enquiry
Specific contact
Face to face meeting
Invitation to tender
Proposals
Contracts
Top tips - number 10
• Manage your client relationships
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Invest time in building the relationship
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Understand each other’s expectations and needs
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Work to build trust and become a “trusted adviser”
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Listen and communicate
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Agree the guiding principles
Convey commitment and ability
Operate to the principles you have agreed
Never forget to communicate
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Take care of the little things
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Ask for feedback and – if need be - rescue early
Top tips - number 11
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Manage your agency
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Be flexible with regard tailoring your CV
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Keep in contact and remember the various relationships
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Do not break your contract - bad news does travel
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Befriend your agent - he or she is doing a job
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Be aware that agents often get paid on results
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Be open about other things you have on the go
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Have written references with your CV
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Dress and talk for the job you want, and have a strong handshake
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Be professional and credible, and do not smoke before an interview
Top tips – number 12
• Indulge in some public relations (PR)
– Look for press opportunities in relevant trade journals
– Write white papers and technical articles
– Write sales stories
– Issue short press releases on recent successes
– Make yourself available for interviews
Top tips – number 13
• Don’t be afraid to ask for help
– Outsource the things you really cannot handle
– PCG has various resources:
• Forums
• Real life meetings
• Fellow freelancers who offer website design, stationery
printing and various other goods and services
– Develop your network of freelancers
– Find a mentor “buddy” to support you
Top tips – number 14
• Enjoy what you are doing
– Belief and passion are contagious
– If you are enthusiastic about what you do, your clients will
share that with you
– It’s not just about making money – the real bonus comes
from enjoying what you do and knowing that you can add
value to your clients’ businesses
Conclusion
• And finally……..
– Remember that having a positive attitude and believing in
yourself are key to your success
– Planning, organisation and persistence will pay dividends
– People buy from people
– Having a proper marketing strategy and expenditure is a
pointer for being in business on your own account
Getting help
• Sources of advice:
– Other freelancers
– PCG members
– PCG forum
– PCG office
– Accountant
‘You have brains in your head.
You have feet in your shoes
You can steer yourself any direction
you choose
You’re on your own
And you know what you know
And YOU are the guy
Who’ll decide where to go.’
‘Oh the Places You’ll Go!’ Dr Seuss
Questions and Answers
The PCG
PCG – the vision
• The voice of freelancers
– working with Government and industry to protect
and promote freelancing and freelancers, on a local,
national and European level
• The heart of the freelance community
– supporting and nurturing its members through all
parts of the freelance life cycle, as well as offering
commercial support, fostering peer support and
encouraging new ways of working
History of PCG
• Formed in March 1999
• Initial aim to lobby against the Government’s
IR35 proposals
• In May 2000 members voted to become the
representative body that PCG is today
• 12,000+ members
• Run by freelancers for freelancers
PCG objectives
• Protect the business interests of its members
• Liaise with Government, NGOs and relevant
EU bodies
• Promote the value of freelancers
• Encourage development of the freelance
community
• Help members to develop themselves and
their businesses
• Offer lifestyle support and guidance
Recent achievements
• Continued to support members’ cases –
current status 500+ cases won, versus 2 lost
• Appointed Government representatives at ILO
• Successfully lobbied for the opt-out clause for
incorporated freelancers in DTI’s new Agency
Regulations
• All IT skills removed from Skills Shortage List
• Achieved ISO9001
Current activity: some highlights
• Arctic Systems
• PCGQS – an ISO9001 for freelancers
• Lobbying
• Range of publications
• Approved contracts/terms and conditions
• Regional work
Benefits of membership
• Professional Expenses Insurance
• Support and help drive focus for lobbying
• Sample contracts drafted by experts
• Access to free tax and legal helplines
• IR35 and S660A analysis and manuals
• Discounted hotels, insurance, travel and
software
• Entry to the freelancers’ online community
Value of PCG membership
Standard
contract
templates,
£300.00
Regus Gold
Membership,
£50.00
IR35 analysis
and manuals,
£100.00
Total value £975
Professional
Expenses
Insurance ,
£288.00
Acces to free tax
and legal help
lines, £238.00
Questions and Answers
Questions and Answers