This article is written by
Tim Forsyth of Amber River Midlands has been advising the self-employed for more than 40 years. Here, he shares some of his favourite tips that should help anyone who’s self-employed sleep a little easier at night.
Tip 1: Make sure you get paid what you deserve
When you’ve chosen to be self-employed, you’ll likely be getting paid for the services you provide to others. The freedom to decide what to charge for your services may sound fantastic, but it’s much harder than it sounds.
The truth is that, especially in the early days, most people fall into the trap of competing with themselves, and believe that lowering their prices is the best way to secure clients. It’s very common for self-employed people to struggle finding the right price in those first few years, and they can end up feeling underpaid, overworked and resentful. That’s never a good combination.
To ensure this doesn’t happen, I always remind my clients about the importance of setting boundaries, and making sure they’re getting paid enough to avoid feeling like they’re being taken advantage of.
The best way to do this is to stay firm on the price of the service you provide. Your prices should reflect your value to the client, not your cost. My favourite analogy is the one about Picasso, and here’s how I tell it:
Picasso spent most of his life in France, and one day a woman approached Picasso by the banks of the River Seine. She asked him to draw something for her, and she would pay whatever it was worth. Picasso drew a quick sketch and handed it to the lady, telling her it would cost 10,000 francs. The lady was astonished and said: “But it only took you 30 seconds to do that”. Picasso’s response? “No madam, it took me a lifetime to do that.”
Whether this is a true story or not, it’s a great way to remind people of the difference between price and value. In the words of Warren Buffett, “price is what you pay; value is what you get”.
You are your company’s most important, and expensive, asset
Tip 2: Protect what you have
When you’re self-employed, you are your company’s most important, and expensive, asset. So, if something happens to you, it puts your business at real risk of being unable to continue. The coronavirus pandemic was a wake-up call to many self-employed people who found themselves out of work, with no back-up plan to maintain an income.
The good news is there are lots of different protection options to consider.
For example, income protection will pay out a tax-free replacement income should you have to stop work for any medical reason – including through mental health or stress-related illness.
Critical illness cover is an insurance policy that will pay you a lump sum if you are diagnosed with a serious illness or certain types of cancer, or if you have a heart attack or stroke. Although it won’t pay you a regular income, a lump sum could help you to pay off a mortgage or clear any outstanding debts.
And finally, if you have a family or other dependents, then it’s always a good idea to consider life insurance. This will pay out a specified lump sum on the event of your death, and can provide peace of mind that those left behind will be taken care of financially.
Tip 3: Always be looking to expand your client base
Ask people what it’s like to be self-employed, and most will tell you that the hardest part is finding clients. Knowing your own worth is all well and good, but it’s meaningless if no one wants to buy from you.
Another of the ‘traps’ that the newly-self-employed often fall into is thinking the best way to find clients is to cast their net as widely as possible. You might find lots of ‘jobs’ this way, but they may not pay that well, because the relationship is purely transactional.
I always tell self-employed clients that they’re much better off looking for clients instead of jobs. Clients are essential to any business, because they are the best source of recurring revenue. Clients choose you because they see you as an expert in your chosen area. And if they like what you do, they’ll keep coming back.
In my experience, the best self-employed people know what they’re good at, and are comfortable working within this ‘niche’, because enough people will regularly rely on them for their services. This might mean fewer people get to hear about you, but those that do will come to you for your skills, and are likely to pay more for the privilege.
Delegating important tasks, such as your accounting, or marketing, to professionals is likely to save you time, money and hassle
Tip 4: Know what you’re good at – and outsource the rest
Being self-employed sometimes means you have to do most things yourself. It can be easy to fall into the mindset that you should be in control of everything. But a favourite piece of advice I like to give to the self-employed is this: unless you enjoy doing it, get someone else to do it.
Because, let’s face it, everyone will come up against the limits of their knowledge at some point. Delegating important tasks, such as your accounting, or your marketing, to professionals is likely to save you time, money and hassle in the long run.
Time is one of the most precious commodities we all have, so there’s no point wasting it on the things you don’t enjoy or have the skillset for. Handing it over to someone else will give you more time to focus on the parts of being a business owner that you do enjoy. Usually, the price you pay is worth it for the time you’ve earned back, and the peace of mind that goes with it.
Tip 5: Make sure you enjoy the journey
Being your own boss can be immensely rewarding, but it can also come with lots of pressure too. Everyone makes mistakes when they are starting out, which is why everyone can use a bit of friendly advice now and again.
Amber River can help you get the most from your self-employed status
Not only helping you with financial issues such as tax planning, but also helping to make sure your business and your personal ambitions are firmly on track. At the end of the day, work is always a means to an end, and wealth planning advice can help ensure that all the hard work you put into your business pays off, both now and well into the future.
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Disclaimer
The information within this article was correct at the time of publishing, but laws and tax rules are subject to change. Your circumstances and where you live in the UK may also have an impact on your tax treatment.
To learn about the government’s most recently-announced changes, please read our latest budget roundup: 2024 Autumn Budget Update
