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Working Freelance Simon Juden, Chairman PCG

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

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Working Freelance Simon Juden, Chairman PCG

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  1. Working FreelanceSimon Juden, Chairman PCG

  2. 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

  3. Agenda • Today’s freelance market • Future directions • Starting out: what you need to know • Taxation • Marketing yourself: finding work • The PCG

  4. Today’s freelance market

  5. UK Working Population August 2004(m) Source LFS Aug 2004

  6. Number of people self-employed (UK 1985-2003)

  7. Growth areas/sectors • Finance • HR and change management • Leading IT • Construction • Engineering • Marketing • Public sector (though procurement issues) • Health • Education • Transport

  8. 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

  9. 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)

  10. Market drivers Employee Space Not jobs for life - life of jobs No loyalty Lack of challenge and reward Business Space Increased competitiveness Focus on strategic core, new models Adaptive and flexible Outsourcing trends Low investment in human capital Trust is diminished Space for self A new generation Self esteem Work life balance Self determination Freelance Interim Self employed Consultant Employer space Focus on costs and service ICT – anytime any place Use of “freelancers”

  11. Future directions

  12. 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 • 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?

  13. Areas of concern Source PCG annual survey 2004, base 698

  14. 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

  15. 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

  16. What can you do to become a long term successful consultant? • 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

  17. Questions and Answers Starting out: what you need to know

  18. Issues for freelancers • Living outside “the corporate umbrella” • Running your own business • Managing finances • Finding work • Lifestyle implications • Retaining your hard-won earnings

  19. 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)

  20. Accounting, banking and insurance • Choosing an accountant • Choosing a bank • Insurances • Employers and Public Liability • Professional indemnity • Tax investigation • Permanent health

  21. 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

  22. Getting paid • Paying yourself • Limited company • Self-employed • Managing cash flow

  23. Work location • Client work vs work for own business • Travelling expenses • Working from home • Business rates • Capital Gains Tax issues • Lifestyle issues • Rented offices

  24. Accounting records • Using a computer system • Mixing personal and business finances • Retention of records

  25. Personal finances • Savings, holidays and buffers • Retirement and pension • Funding your car

  26. Finding work • Sources of work • Agencies • Own network • Others network • Cold • Jobserve • PCG Exchange

  27. Taxation

  28. “Taxation with representation ain’t so hot either.” Gerald Barzan

  29. Some taxes to be aware of • IR35 • S660A • Non-Corporate Distribution Rate • Pre-Budget Report

  30. 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

  31. 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)

  32. 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

  33. 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

  34. IR35: the future • Repeal extremely unlikely • Work on implementation ongoing • Any re-examination of the self employment tests should help

  35. 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

  36. 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

  37. 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

  38. 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...

  39. 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

  40. Questions and Answers Marketing yourself: finding work

  41. 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

  42. 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

  43. 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

  44. 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

  45. 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

  46. 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

  47. 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

  48. 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

  49. 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

  50. 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

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