There’s been some interesting discussions lately amongst freelance colleagues about whether some organisations understand the value of work they’re after and by extension what goes into people’s rates. It got me thinking about the costs of being self-employed, and how little I understood before I went freelance myself. I was definitely one of those people who saw a rate and thought “how much?!”  and it’s interesting to reflect on how much I’ve learnt nearly a year in.

So to capture some of this learning, here’s a quick brainstorm of just some of things that go on behind the scenes of almost every freelancer, all of which have a cost attached that that day rate needs to account for:

  • Accountancy – a qualified person to your self-assessment and/or potentially an accountancy software to track everything unless you’re a tax/national insurance guru yourself
  • Biscuits – or any other tasty snacks since you now have no office kitchen to snaffle from. Equally, coffee/tea/milk, you’re on your own
  • Coaching – or mentoring, as you’re running your own business there’s no colleagues or manager to help steer your development so an option many go down is paying for coaching/mentoring
  • Downtime – as a freelancer you can never guarantee the work and there will naturally be periods where you’re between work, or simply don’t have enough to cover your outgoings
  • Events – from conferences to networking breakfasts, anything you attend as a freelancer needs to be paid from your own pocket
  • Footrest – or any other ergonomic support to help you work comfortably, you can’t just pick from a catalogue now, or least you can, you just also foot the bill. Equally your desk and all other office furniture
  • Ghosts – the times you put together a proposal or have a discovery call and the work doesn’t go anywhere (most the time you hear back but occasionally, it’ll be a total ghost..)
  • Highlighters – pens, paper, ink cartridges, poly pockets, there’s no magic cupboard of dreams anymore
  • Insurance – professional indemnity is often the minimum you need, depending on the work you do. Public liability is another big one, and specialist ones like income protection can also be worth considering as a freelancer.
  • Jury service – if you get called up, it’s vital time out of paid work and you’re unlikely to get the full amount back
  • Kids – childcare falls into the general camp for many of all the bills you need to cover but what I’ve also found working part-time while my kids are little is that, occasionally, to fit my availability with an organisation’s I need to pay for an extra day’s nursery fee – and that’s currently 1/5 of my day rate alone.
  • Laptop – one of the first investments I made and has proved fundamental to everything
  • Marketing – the only way you’re getting work is via you, you’re now your own marketing division whether that’s sales emails, LinkedIn posts, blogs or networking
  • National Insurance – another critical payment to make sure you’re covering yourself
  • Office 365 – to get the domain-linked email, storage, security and all the programmes, you’re looking at a monthly fee for your IT needs
  • Pension – gone are the days of a decent pension contribution match from an employer and instead of your side coming automatically off your gross wage, you need to decide the amount and pay it in
  • Qualifications – or any kind of CPD you want to do
  • Relationships – it takes time to develop a network of people you want to work with, learn from and grow with
  • Space – mortgage/rent if you’re working from home, or co-working space if you’re out and about
  • Tax – don’t get on the wrong side of HMRC, you need to do an annual self-assessment (either yourself or pay someone to do it for you) and pay the tax owed on income earned
  • Utilities – gas, electricity, water, it didn’t seem such a big deal but over winter with the price increases having to have your home heating on all day while you work was suddenly a big decision
  • Vacation – there’s no holiday pay in self-employment so your rates need to be able to cover any periods of downtime because you’ll usually have no income during that time
  • Website – see earlier about being your own marketing team and often that includes paying for your website domain name and website hosting, you may even need to pay regular IT support costs for it
  • X-rays – or other ill-health (since we don’t pay for x-rays in the UK) because you also don’t have sick pay for self-employment either
  • Yourself – on the most basic level, your day rate needs to cover your essentials, as well as any time out you need for life’s “stuff”, whether it’s a doctor’s appointment, taking the cat to the vet, getting the car to the garage, caring responsibilities etc all the things that take you away from your work aren’t quite as flexible when you’re paid by the day
  • Zoom – or any other apps or platforms you use for work like Miro etc, as soon as you start using them professionally, the subscriptions add up

And there’s a whole host of things I couldn’t squeeze in – invoicing, cashflow, discovery calls, job hunting, filing, blogging, travel, CV-updating, wifi, printer, template contracts, keeping up-to-date with industry standards and new ideas to name just a few. In fact, what a client sees as delivery outputs is only a slice of what you get up to in order to run your own business.

The biggest lesson for me has been the uncertainty. As a freelancer your day rate isn’t just about the value of your time on that day, and the costs that go on behind the scenes. It’s also about trying to create some financial continuity against a backdrop of risk. What if I’m ill and suddenly can’t work? What if I need to factor in some downtime? What if a contract suddenly falls through, or there’s an unexpected gap with no work?

Right now feels like a particularly expensive period of life with a mortgage (so long low-rate fixed term!) and childcare for two small people, let alone a house that needs doing up, a cat that can’t stay out of the vets, and attempting to pay for some fun every now and then. And so the stakes feel high. I knew freelancing wasn’t for the feint-hearted and the costs are arguably a lot higher than I initially appreciated. It really puts into perspective the need to love what you do and I’m grateful that with a specialism of non-profits the returns have been worth it.

Photo by Sven Brandsma on Unsplash