The entrepreneurial dream is alive and well in the UK reveals new research collated by Direct Line for Business. Some 5.3 million people (10 per cent) dream of becoming their own boss in the future, embracing a career as a freelancer. This is in addition to the 8.6 million (16 per cent) who currently freelance and are either fulltime self-employed or carry out contract work alongside their main jobs. A further one in eight (12 per cent) Brits have previously freelanced.
Breaking into freelance work is something many people will only consider if they have a nest egg saved up, especially if an initial contract or client hasn’t been secured. Overall, 71 per cent of self-employed workers saved up money before going freelance, leaving a plucky 29 per cent who admitted that they had nothing saved before starting their business.
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The average freelancer saves up £16,000 before setting up their own enterprise, a significant chunk of money and the equivalent of 70 per cent of the annual salary in the UK2. Most do this to allow for potential shortfalls in monthly income (43 per cent), to ensure they have funds to purchase essential business goods (34 per cent) and to build up a fund for holidays or sick leave (16 per cent). For more than two thirds (69 per cent) of the self-employed people who saved up money before going freelance, this money was enough to meet their needs. This should all be encouraging news for the one in 10 Brits (5.3 million people) who have never been self-employed but dream of one day setting up their own business.
It isn’t just money that needs to be considered by prospective freelancers before leaving full time employment, as they will be taking sole responsibility for tax and legal issues. On average, self-employed workers spend seven months and three weeks preparing to go freelance. The majority (73 per cent) spend time preparing to become self-employed, whether that is by reading up on tax implications (27 per cent) or identifying target markets and audiences (25 per cent). However, nearly one in three (30 per cent) spend less than a month getting ready to go it alone.
Jazz Gakhal, Managing Director at Direct Line for Business said: “Going freelance is an exciting prospect, with the idea of becoming your own boss extremely tempting. There are pros and cons, of course, as independent contractors can often earn more by charging day rates, but don’t benefit from paid holiday, pensions and sick leave. Any budding entrepreneur should consider the value of these additional benefits as well as any change in salary before making the leap.”
Dealing with tax issues is one of the biggest concerns for freelancers before setting up shop, with a third (33 per cent) seeing this as a major hurdle for going it alone. Other issues include not getting paid when on holiday and being able to meet existing financial commitments (both 26 per cent). One in five (20 per cent) worries about marketing and bringing in new clients and the same amount again about not being able to save for a pension (19 per cent).