If you are thinking about going freelance or starting a small business you will find plenty of avenues from which you can get good advice – many from this site. As part of this, you’ll commonly hear about the need to perhaps put by 6 months worth of living expenses to tide you over, should work not come in as quickly as you might expect. You’ll also hear that having two much business tied up with too few clients is a bad idea. But, chances are, with this and many other areas of advice, circumstances will mean you’ll find it difficult to act on them.
So what advice can you act on? I always think the best advice has got to resonate personally – it’s got to make you think – ‘Yes, that makes sense!’ If it doesn’t, to try and follow it may be counter-productive. So, if I were giving advice to myself, I think I’d be listening to the following five things – each of which have been key to the two periods in my life where I’ve worked freelance or ran a small business.
### 1. Decide what your ‘get out’ point is.
You will undoubtedly be taking a risk when you start up on your own. I think it’s worth you thinking about what the limits of that risk are before you take the plunge, because once you have, it’s very easy to get caught up in the momentum of your new work life. Stuck between the headlights, and unable to see the wood for the trees, it’s easy to ramp up the risk way beyond the thresholds you first set once you get going.
As for setting that ‘get out’ point, your own circumstances and attitude to risk are the two things that will help you set this. For one person it might be, ‘I’ll risk my savings, but that’s it’, for another, ‘I will never let my overdraft/business loan exceed £5k’ – or it could be something lifestyle based, like ‘I will not let my new freelance life impact on the time I spend with my boyfriend/wife/kids/family etc’. Whatever it is, set it, and give it careful consideration if it’s ever breached.
### 2. Be proud of your price and your terms of service and stick to your guns – be consistent
You will have set yourself up in business because of your belief that you can offer a product or service in a way, and for a price, that offers customers benefits they will not easily get elsewhere. These are enshrined in your price, your terms of business and your service/product offering. You need to know these three things inside out, have confidence in them and be proud of them. They are the fundamentals of what your business or service is about, which, along with the quality of your work, you will build your reputation on. In all matters aim to apply these as consistently as you can across the board.
### 3. Managing that big client
The perceived wisdom is to never let one client amount for more than 60% of your turnover. There are good reasons for this, the main one being, concerns of HMRC aside, that if you lose that client you’ll lose most of your turnover.
However, it’s often very hard when you first set up to avoid a situation where one client doesn’t make up the lion’s share of your sales. So, until you can diversify and bring in new customers, you need a strategy to deal with your big fish. Try not to let them run up too much credit with you, be firm on how much of your time you can devote to their projects and don’t take on too much of a cost base on their behalf. If you can focus on these three areas then, should you find yourself without their income, you’ll hopefully not be so exposed that it means the instant end of your business.
Often, your biggest client will be an ex-employer – so you’ll know each other well. Try though not to let this mean that you treat them, or let them treat you, any different from how you would a new client that you don’t know from Adam. If they truly value what you do, they will be prepared to engage with you under the basis on which you have set yourself up.
### 4. Have a plan, define some goals and try and stick to these
You will be working freelance or managing your own business for a reason. Whatever that is, it’s an end point, the progression towards which needs a plan you can measure progress against.
These goals won’t always be financial. It could be that you’re working freelance to gain new skills, or to build up your CV, or to be able to spend time on other projects. Always be clear on why it is you are doing what you are doing. If your goals and aspiration can be broken down in to smaller steps, write down what these are. That will help you track progress.
Many freelancers and small businesses will tell you how much they hate doing the books – but keeping on top of your accounts, and comparing your monthly figures against a rolling monthly or quarterly cashflow forecast (contact me for a template) will help you in seeing where your business is against both your financial goals and at worst, your ‘get out’ point. Finally, if you only do your books once, at the end of the year, you will end up with some nasty shocks, because no matter how small your tax bill is, it’ll be a bill you hadn’t planned for. So do them monthly.
### 5. Employing staff and/or teaming up with mates
The chances are, if you make the move to running a small business, or if you need help from other people, you’ll start off with looking at those you know, who will be either family or friends. This is great, as you can probably count on the best support from the people you are closet to.
However, there is though a lot of mileage in the old adage of not mixing business with pleasure. From time to time, work you do with family and friends won’t pan out. In this situation, what you don’t want is close, long term relationships damaged or compromised by your work. So, the rule should be that you only work with people, or employ people, who you can look in the eye when you no longer need them (or can sustain using them) professionally and tell them so. In short, don’t hire someone you can’t fire!
### And finally
In 1995, I first went freelance, and within a year or so had hired two full time staff, as well as regularly used a number of contractors. I let my biggest client build up too much credit with me (see point 3), so when they went bust, I had to let my full timers go (see point 5). At that stage, at 27, I decided that I was too young to take those steps backwards within my own business. I’d breached my ‘get out’ threshold (see point 1 – my overdraft was thousands) but I had done enough to meet one of my goals, which was put a deposit on a flat and, over the time, make myself a lot more attractive to other businesses/employers (see point 4) – which was great – as when I’d gone freelance, it really was through having few other choices.
Ten years on, my ‘get out’ points are more lifestyle based and I’m better equipped to deal with the other four areas, but they still remain an effective yardstick to measure myself against.
#### By [Alick Mighall](/author/alick-mighall/), Internet Consultant and Developer
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