NatWest - Helpful Banking

How I did it – freelancing and consulting

IT Consultant: ‘I work via an umbrella company’
Mark Harris is a test analyst, analysing software functionality
‘My typical clients are investment banks, local authorities and telecoms companies – basically any business that has software codes that need to be tested to make sure they do what they should. I search for contracts using a recruitment website named Jobserve (www.jobserve.co.uk), where agencies advertise contracts that can vary from one month to one year in length. Top agencies will also keep my CV on file, and ring me to see if I’m interested in applying for a job. They may also use networking sites such as LinkedIn to keep up contacts.

‘Once I’ve seen a job I like the look of, I send my CV to the agent, who will then hopefully pass it on to the company searching for a contractor. There are usually five preferred agencies that submit CVs to a particular company, and the company may see only two CVs from each agency, so even getting your information on to the desk of a potential employer is tough.

‘If the employer likes my CV, I’ll usually be asked to do either a face-to-face or a phone interview. As an example, I currently work for a secondary private equity group. To secure the position, I had one phone interview, one intelligence test, and then three more interviews before I found out I had got the job.

‘I could operate as a limited company, paying tax and VAT and employing an accountant at a cost of around £50 per month to keep my books and file tax returns, etc. However, in my business I’ve found it works best to use an umbrella company. Any contract is agreed between the agency, umbrella company and myself. The umbrella company takes a fee of typically 10% and pays me a wage and dividends based on what I charge for my fees.

‘As a contractor I agree a daily rate with the agency and it charges an extra 12% or so to the company employing me. I invoice monthly based on the number of days I have worked. As a Test Analyst, fees range from around £300 per day for insurance companies and the public sector, to around £500+ per day for City firms. However, the current financial crisis has sent rates tumbling – this profession is very market driven. Contracting can take a lot of nerve, as it’s possible to go a long time between contracts without earning a wage. But the higher fees make up for this. Using an umbrella company essentially takes the burden of financial management away from me and leaves me free to do my work.’

Virtual Assistant: ‘I expanded my business through sub-contracting’
Justine Curtis is founder of the UK Association of Virtual Assistants
‘I began working as a Virtual Assistant (VA) in 2003, using my years of experience as a Personal Assistant to establish my own business working from home.

VAs offer a full administrative package to companies or individuals – anything, basically, that isn’t the core, moneymaking business. That can include services such as bookkeeping, administration, marketing, and managing emails and diaries. My clients include a surgeon who works in four different hospitals and needs me to manage his work diary; financial advisors; life coaches; and other sole traders. Since the recession, VAs are also increasingly hired on a project-by-project basis by small companies. VAs manage five ongoing clients at a time, on average, plus two or three others on a project basis.

The cost of setting up as a VA will be around £5,000 in the first year. Many VAs work from home, so don’t have to pay office rental. The start-up costs include buying IT and equipment (computer, printer, scanner, copier, telephone, internet access), plus marketing. Getting the word out about your business is essential to success as a VA, and internet advertising, networking groups and subscription to the UK Association of Virtual Assistants (UKAVA), which I founded in 2004, is a necessary outlay – a subscription to UKAVA costs from £24.95 per year, and includes member discounts and listing on our VA directory.

At £97, paying for online VA training is also a good investment – UKAVA offers it through an organisation called the VA Success Group. The training provides business advice on topics such as invoicing, income tax and marketing, to complement VAs’ existing personal assistant skills.

Many VAs start their business on a part-time basis, while working in a permanent job, as they gain experience and establish a client basis – this is fine for jobs such as transcription services, which don’t need you to be available during office hours. Once up and running, VAs tend to work during office hours, so they are free to deal with their clients and their client’s clients. However, as you are your own boss, there’s a degree of flexibility in the times you work – not all jobs need you to be at your desk from nine to five.

I charge my clients £30 per hour. Generally, clients will book a block of time that they pay for upfront – a bit like a pay-as-you-go phone. I give them a breakdown of how the time was spent, and alert them when they need to pay for another block. A common mistake for new VAs is to start working before they’ve been paid for their time – that’s why I insist on being paid in advance. New VAs also tend to underestimate the amount of time they will spend on marketing before they will actually earn any money, and therefore neglect to set aside cash to promote their business.

The main advantage of being a VA compared with being an in-house personal assistant is that your wages aren’t capped. Full-time VAs can expect to earn between £30,000 and £40,000 per annum. However, it’s possible to expand your business and multiply your earnings by taking on associates to complete work for you. I have nine associates that I pay slightly less than the hourly rate I charge my clients. I subcontract them to manage my client’s work on my behalf, and in return I deal with all their invoicing. I’m also in the process of franchising my company, so I receive income from franchise fees. In fact, I deal directly with only one client now; the rest of my time is spent managing my associates and licensees. My earnings have risen in response to how my business has grown.’

Management consultant: ‘I work as a limited company’
Robin Ryde is director of Robin Ryde Consulting, a management consultancy specialising in organisational change and leadership development.

‘I set up the business in December 2008. I wrote two books on leadership while an employee but didn’t really have a vehicle for getting my message out and bringing them to bear on organisations and leaders. Setting up my own business seemed the perfect solution.

‘Although the business didn’t need much capital to set up, there were some priorities. Above all, I wanted some “just in case” collateral to protect me during the first few months of trading. The money I used to start was taken from savings and was equivalent to about six months’ salary. My start-up shopping list included professional, fully serviced office space, four laptops, Blackberries, printers, a website, professional indemnity insurance, and the cost of establishing myself and the business as an Associate of other larger firms.

‘Initially I wanted to keep things simple, so I established myself as a sole trader. But within a few months I engaged the services of an accountant, then set up as a limited company and became VAT registered. I selected the business model principally to be more tax-efficient, but also because it has slightly more weight and credibility than being seen as a sole trader. Another benefit of being a limited company is that it encourages discipline in handling the financials and management of the business. I have now brought in a business partner, which has also created more discipline in how we do business.

‘Charging for jobs is based on a daily rate and is consistently applied to all clients. There are a few variations to the standard charge where projects/contracts extend over a longer period of time. My starting rate has proved to be right for the market, although it inevitably took a lot of research and soul-searching to decide what I/the business was worth.

‘Most of the financial challenges in the early days concerned how best to manage money that will need to be paid out either in VAT or Corporation Tax, and making sure that we keep that money intact. In short, we have been close on finances from the beginning, always billing promptly and helping clients (who then deal with their own finance departments) to make processing payments to us as easy as possible. The area we initially neglected was, ironically, recording our payments as a business, which of course is nettable against VAT and Corporation Tax, so we lost a few thousand pounds unnecessarily in the early days.’

Freelance photographer: ‘I’m a sole trader’
Robert Griffin is a freelance photographer, specialising in travel, editorial and event photography.

‘I launched my photography business in 2009, after completing a training course in commercial photography at London College of Communication. After the cost of training, my biggest start-up costs were equipment – there’s a level of quality demanded by commercial photography that can only be supplied by professional equipment. An entry-level full-format professional camera body costs the best part of £2,000, with three companion lenses adding at least another £3,000, although you could spend considerably more than that. A photographer intending to shoot fashion or advertising work would need to invest in a medium-format camera that could cost anything between £10,000 and £40,000. Studio costs, rental of lighting rigs, etc, are also massive investments, but these chaps can bill out at £3,000 per day!

A powerful computer is another significant expense – an Apple MacBook Pro computer can cost between £900 and £1,200, and most photographers will probably want to invest in a second, larger screen for post-production work on their images. The Photoshop CS4 computer package needed for post-production is priced at around £300.

‘A website is essential for promoting myself as a photographer, as it’s my shop window for clients. So far, I’ve invested relatively little money in this. I subscribed to a template provider and server, and did the rest myself – this can cost as little as £60 per annum, but you have to adapt it to your purposes, upload images and subsequently manage the content yourself. The alternative is to splash out on a bespoke site from a website designer. This won’t cost less than £1,000 and could be considerably more, but it’s a more impressive result for visitors.

‘I funded my start-up costs from savings and earnings from a previous business. I’ve chosen to operate as a sole trader, as at my current level of turnover there are no tax advantages to setting up a limited company to compensate for the additional expense. The relative simplicity of the sole proprietorship model also suits me at the moment. Contacts have been a huge factor in attracting business – responsible for nearly every commission I’ve received. It’s my responsibility to execute each job perfectly, hoping that they’ll recommend my services in turn. Commercial photography is an extremely competitive business and it’s difficult to draw attention to yourself in an open, saturated marketplace. Contacts and networking can make the difference between success and failure.

‘Charging can be a tricky area, and balancing a client’s expectations with my overheads and profit margins has been my biggest financial challenge during this start-up phase. I base my work on a standard day rate, although I’m prepared to offer a discount for several days’ work or a complete project. The Association of Photographers suggests £420 as a minimum day rate. This figure can increase, particularly in advertising and editorial, if usage rights for the pictures are negotiated. Top-end fashion and advertising photographers may charge up to £4,000 per day, with additional monies for usage rights, expenses, payment for assistants and studio fees.’