The FreeAgent Blog
Posted on 25 May 2017 by Emily Coltman - Jump to comments
As a freelancer, knowing what to charge for your work in the beginning can be a struggle. Pitch it too low and you could damage your business’s profitability, too high and you risk being undercut by a competitor.
Your rate can be dependent on your industry, experience and location, among other factors, so everyone is different. Here’s some handy information around finding suitable prices for both you and your clients, including tips from fellow freelancers.
Work out your break-even point
Knowing how much money you need to earn for your business to survive is a great starting point. Andrew McSparran, a graphic and website designer, found this out the hard way when he found himself “charging next to nothing as I just wanted the business. I agreed the fee for the full job with a client, but it worked out to be less than £3 per hour.”
Your break-even point is the minimum amount you need to be earning, per day, in order to cover all your costs (without net loss or gain).
Here’s how to calculate your personal break-even point:
1. First, add up all the outgoings associated with your business per year: this could be rent/mortgage, insurance, subscriptions, web hosting, postage costs - anything that costs you money.
2. Next, add up the amount of billable days that you think you can work per year: out of the 365 days in a typical year there are 261 working days (Monday to Friday). From that 261, you should deduct the amount of holidays/days off you expect to take in that year. If you're not sure, go for around 28.
Don’t forget about setting aside time for your business development and admin too - tax, invoices and estimates all take time, although using an accounting software such as FreeAgent can really help you speed up these processes. FreeAgent customers report that switching to FreeAgent saves them a day a month on average, compared to their previous bookkeeping method*.
3. Finally, divide the sum of your yearly outgoings by the sum of your yearly billable days: this figure is your personal break-even point. Don’t forget, this is the bare minimum you need to earn, and you should always be aiming to charge a healthy amount over this figure to safeguard your business.
Example: how Lucy calculates her break-even point daily rate
Lucy is a photographer. She is looking at her profit and loss account to work out her break-even point.
It shows outgoings for the year of:
|Printing and mounting||£9,873|
|Business use of home||£450|
She works out that her billable days are 231 per year.
That means her break-even point is £20,772 ÷ 231 = £89.92.
Lucy must earn at least £89.92 per day in order to break even. Anything above this is profit.
Build in a financial buffer
The plus sides of freelancing are numerous, but unfortunately you aren’t entitled to the safety net of holiday pay, sick pay and similar benefits. You might also be faced with periods of downtime between jobs, which could cause your earnings to drop. Your rate needs to reflect this uncertainty and include a buffer that can cover you during your business’s quieter times.
As a starting point to work out a day rate that includes a buffer, the Association of Independent Professionals and the Self-Employed (IPSE) recommends that you take the salary that you would earn as an employee in a similar role and add a third, which accounts for the added costs that being a freelancer can entail.
So if you earned £30,000 as an employee in a similar role, then adding on a third of this takes you up to £40,000. You can then divide £40,000 by the number of days you would expect to work in a year (as discussed above under ‘Work out your break-even point’). This should give you an idea of a ideal minimum day rate.
No matter how new you are to freelancing and how flexible you want to be, you should never feel like you need to work for free to gain ‘exposure’ and build a good relationship with a client. The Freelancer Club, a group run by IPSE to support the creative community, asks both freelancers and companies to pledge not to apply or post unpaid work, while also providing listings of paid work and resources to help freelancers.
You don’t have to charge every client the same
The price you charge can depend on a variety of factors outside of the work you are being asked to do. It might be affected by the size and budget of the client, for example. Martin Bean, a developer and consultant, suggests that you “look into the client...if it’s a limited company, you can find its age and key financial statistics such as turnover and any debt for free online.”
Past experience with clients also matters. If you’ve worked with a client before and know that they’re great to work with and will pay you on time, you might want to give them a preferential rate. Conversely, for a first-time client who is more of an unknown quantity, you might want to quote a higher rate to cover yourself for the possibility of any unexpected problems.
At the end of the day, it’s your business, your rules. Camilla Grey, a strategist, sums it up like this: “If you love your client, charge what seems fair. If you know it’s going to be a nightmare, charge what makes it worth it to you.”
* Survey of FreeAgent customers conducted in January 2017 with 366 total respondents.
Posted on 19 May 2017 by Adrian Mather - Jump to comments
It’s National Work From Home Day today! If you’re lucky enough to regularly kick back at home while getting a tonne of work done (or just getting through a lot of snacks), how many of these WFH truths do you recognise?
1. The morning smugness is real
Bask in the warm glow of WFH smugness as you watch people trudge through the cold and rain to the bus stop. Then enjoy your cosy five second commute down the corridor.
2. Mealtimes blur into one
When the fridge is only a few steps away, your day can easily turn into a grazefest. Gotta keep your energy up, right?
3. A nap is perfectly permissible
Frowned upon the last time you tried it in an office, a cheeky midday nap (under your desk or perhaps somewhere slightly more comfy) is perfectly acceptable when you work from home. After all, research has shown that naps improve can thinking and memory skills, and even makes the brain perform as if it was five years younger!
4. Working in your nightwear happens
Some people like the structure that getting properly dressed in a morning gives them, others not so much. If you’re more of a creature of comfort, WFH gives you the perfect opportunity to keep it as casual as you like.
5. Chores aren’t a chore
Weekends are for fun, not catching up on laundry. WFH means you get the drudge work done around the real work. #win
6. Your pet thinks it’s Christmas every day
You’ve become a master of working with a wriggling, snoozing, or generally ecstatic pet somehow attached to you. Even if you work at home all the time, it never gets old for your furry friend(s).
7. Work can happen in weird positions
Do you think better sprawled out on the sofa? Lying on the ground? Propped up in bed with with your laptop held above your head? When your whole home is your office, every surface is a potential desk.
8. Working outdoors ain’t as great as it sounds
You make sure you post a sundrenched Instagram snap of your outdoor laptop and lemonade combo every time the weather hits double figures. In reality though, wasps, sunburn and the annoying glare on your screen usually makes you pack up and head back indoors pretty sharpish.
9. Technology develops a devious sixth sense
Important Skype call with a client looming? On a deadline and need to email a document RIGHT THIS MINUTE? Your internet connection will choose that very moment to start playing up.
10. You do actually get work done!
Despite what some might think, your home can give you a focused, interruption-free, creative environment that means you’re at optimum productivity - a survey found that nearly six in 10 workers believe they get more done working from home than in an office. Now you just have to convince those office-dwelling sceptics!
Posted on 17 May 2017 by Adrian Mather - Jump to comments
As summer draws ever nearer, the thought of working in a stuffy room as the sun beats against the window is far from appealing. Luckily, the days of being chained to hulking Windows 95 desktops are over. Just pop your phone in your pocket and go wherever the wind may take you, safe in the knowledge that you’re not leaving your business behind.
So take a break from your laptop, and find out how FreeAgent Mobile can help you stay on top of your small business on a day away from the desk.
9am ☕ Power Up!
Wherever you’re off to, there’s nothing like treating yourself to a cup of coffee to get your day off to a strong start. If you run into a client and would like to treat them too, make sure to hold onto that receipt. Simply snap a photo of it in FreeAgent Mobile to record the expense. You’ll never have to squirrel away piles of paper receipts for tax time ever again.
10am Are you hearing invoices..? ✏
There’s nothing worse than wasting a sunny day indoors, so continue your stroll outside and top up those vitamin D levels. While you’re out there, use FreeAgent Mobile to catch up on any invoices you haven’t sent out yet. When you have your contacts saved in FreeAgent, creating and sending an HMRC-compliant invoice literally takes seconds. Done!
11am Time = money ⏰
If you’re getting loads of work done on the move, don’t forget to record your time so that you can accurately bill clients without having to rely on memory. Starting a timeslip in FreeAgent Mobile takes mere seconds, so there’s no excuse not to charge accurately for your hard-earned hours ever again. You can even start a timer in FreeAgent Mobile, and stop it on your laptop (or vice versa).
1pm Take a break 🍔
Lunch time! While you’re chillin’, why not use your mobile to check in with colleagues or clients. Or alternatively, you could explore the wonders of FaceApp (no judgement here).
2pm Get into the flow 💰
No-one likes to be out of the loop, especially when it comes to something as important as your cash flow. Luckily, FreeAgent Mobile lets you see your incomings and outgoings at a glance. Just head to ‘Cash flow’ in the ‘Insights’ tab, and you can toggle between the current month, or the last 3 or 6 months.
3pm Tax attacks! 😨
Gulp! Forgotten to check when that looming tax deadline is? With FreeAgent Mobile there’s no need to panic: you can view all your upcoming deadlines at a glance. You can also enable notifications for upcoming tax reminders with ease.
5pm Clocking off time 😴
Phew! What a day. Now that you’ve broken free from your desk and stayed on top of your finances, it’s time to put your feet up for some well deserved rest.
Would you like the option to work on the go? See how FreeAgent Mobile can help you manage your business on the move.
Download the FreeAgent Mobile app here:
If you work in the construction industry then you’ve probably heard of the Construction Industry Scheme. If you haven’t, you can safely ignore this article and enjoy those two minutes of your life back.
Still with me? OK, so CIS affects both contractors and subcontractors working in the construction industry. With this release, FreeAgent supports the obligations for subcontractors.
In practice this means:
- Raising CIS invoices with the appropriate deductions
- Automatically filing CIS deductions through payroll
- Knowing how much you're owed from your contractor customers
- Reconciling payments received with CIS deductions
To get started read our detailed guide on how FreeAgent supports CIS for subcontractors.
Until next time,
Roan and the team at FreeAgent
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- Video: VAT accounting schemes explained by HMRC
- Cough up! A practical guide to getting paid on time
- Hello FreeAgent, goodbye bank holiday envy!
- Team FreeAgent runs for Mind
- Business basics: how to price your freelance work