Starting a freelance business: A step-by-step guide to success

If you wait for the perfect moment to start a freelance business, you may never do it. Hand in your notice too soon, and you might be in for a crash course. But by approaching your change of career in stages, you can set yourself up for your dream job and lifestyle.

We've put together this guide to support you with transitioning from employee to successful freelancer. Where relevant, we've included input from advisers in our community, who are on hand to make your journey easier.

How to start a freelance business [VIDEO] | Andy Wilson, director of Dropbox UK, and Steve Folland, host of the Being Freelance podcast, provide tips on getting up and running as a freelancer.

Step 1: Adopt the right mindset

Moving from the security of a paid job to running your own business is daunting. Every decision rests with you. Some people find that liberating, while others take some time to adjust.

Believe in yourself

The most important thing is self-confidence. It's harder for us to recognise our strengths as we're often too focused on our weaknesses. But ultimately, as a freelancer, you aren't just selling your services, you're selling yourself. If you don't have confidence in the marketable skills you possess, chances are your customers won't either.

Karen Watkins, Enterprise Nation adviser and managing consultant at Rowan Consulting, says:

"If you've been through the process of working for yourself, it's an indication usually that you know your stuff. Yet so often we forget this and become like rabbits in headlights when we don't have anyone around to cheer us along."

Read more:

• Learn the psychology of success

Be flexible and open-minded

Not everything will go to plan, and the way we deal with failure often determines our success. As a full-time freelancer, you'll need to adopt a flexible and agile mindset.

Anne Beth Jordan helps people create happiness in their work and lifestyle. A business and personal development coach herself, she's always seeking new opportunities and ways to grow. She says:

"You have to be willing to take a risk. If you always want to play it safe, running a business is probably not for you. It isn't easy, and you just have to go for it sometimes, and you also have to be open to new ideas."

Read more:

• Small business owners: Wear the hat that suits you best

Step 2: Plan your finances

Building up a cash reserve before you start is not only smart but essential. You'll have business expenses and you don't know how long it will take before you turn a profit.

Martin Mellor is a chartered management accountant with over 20 years' experience. He works with businesses of all sizes to help them understand financial and accounting information. He says:

"Running out of cash is the biggest reason for why businesses fail. Yet many business owners don't understand why that might be and what factors affect it. Start with the cost of getting it wrong first, so you have a plan A, B and C. Plan in times of massive uncertainty. Once you do that, forecasting comes much easier."

Read more:

• Managing your finances and cash flow

Step 3: Define your niche and brand

Determine your niche

There's little point in starting a freelancing business to recreate a job you hate. This is your opportunity to decide what type of clients you want to work for and what kind of services you'll offer. The more niche your focus, the better you'll be able to serve your ideal target market.

Steve Folland is an Enterprise Nation adviser and host of the Being Freelance podcast. Steve joined a Lunch and Learn session to share his lessons in making the switch to freelancing.

"Think about where you would like to be in a year, two years or three years. Which target audience do you want to be serving? This will be coloured by people you've worked for, your background, experience and the sectors that you've enjoyed working in."

Find your USP

Once you've identified your potential clients and what you'll offer, you need to think about what sets you apart from everyone else. There are millions of freelancers, but none with your unique experience, skills and personality. Now's the time to toot your own horn.

Hate talking about yourself? That's something you'll need to get over. Why not ask someone you used to work with to give you a testimonial? That will help you see how other people see you and give you valuable content to include in your marketing messages.

Read more:

• Why a USP is essential for your business

• Personal branding tips for the self-employed

Step 4: Test your offer

It's a good idea to test your services on the side while you're still working. That way, you'll know if there's a demand for what you offer and whether people will pay for it.

Do a bit of market research by finding future clients who fit your ideal and ask them: if your services were available, would they buy them and how much would they pay?

You might even open new doors to freelance projects you can start now, which is a great way to generate a bit of that cash reserve. You can also use this experience to iron out some of the common mistakes freelancers make in the beginning.

There's no denying the hard work involved in working 9 to 5 and 5 to 9, but the preparation you put in now will make the switch easier down the road. Kathy Ennis, coach to micro-businesses and side hustlers, has created what she calls the One-Page Business Plan. She says:

"Running your business on the side is going to have to eat into your personal time. If you don't have a plan for how that's going to work, you'll end up doing everything piecemeal. And I can assure you that it'll take you 10 times longer than you thought it would."

Read more:

• Kathy Ennis's 13 steps from employee to entrepreneur

• How to do market research and test demand for your product

Step 5: Set your prices

When beginning a freelancing career, it's all too easy to overpromise to prospective clients and undervalue yourself. If you start low, you'll stay low. So it's essential to know your worth and set your freelance rate competitively.

Start by asking people in your network who work as freelancers what they charge, or speak to freelancers working for your company. Don't be afraid to network with other freelancers and find out a bit more about the pricing structures they use.

Building relationships with 'competitors' is a great way to share advice and work. Many freelance consultants collaborate between themselves and are more than happy to give recommendations to their clients.

Avoid hourly rates, and instead try to price by project and set out your boundaries clearly before you start. Have a contract and specify exactly what the client should expect and make sure that you honour it.

And don't be afraid to drop a client who's not working for you, or to avoid one who you think will be a nightmare to work for. After all, that's one of the benefits of working for yourself.

Read more:

• Online masterclass: How to profitably price your products

Step 6: Know the business essentials

There are a few checklist items all freelance business owners need to consider when setting up.

• Pick a business name and brand. It’s fine to use your own name. You don't need to spend too much time on this, but make sure it expresses what you're about.

• Build a portfolio website that showcases your freelance services and past projects – although depending on your speciality, you may not need a website right away. If you have thousands of contacts on LinkedIn, it might make sense to start there. Website builders like Wix and Squarespace have nice templates if you want to do it yourself.

• Set up a business bank account so you can keep personal finances separate from business finances and expenses from the moment you set up. Enterprise Nation members (it's free to join!) can get discounted business bank accounts with Tide, TSB or Starling.

• Get an accountant or accounting software to save time and keep track of your invoices and expenses. Almost every freelancer will tell you it's a must. Read our guide to accounting software, find offers and discounts on certain software packages, or find a bookkeeper on Enterprise Nation.

• Have a system for managing tasks and files: Handling several clients at a time means keeping track of work is crucial. There are lots of online tools that make task management simple, while Dropbox's cloud storage feature allows you to share and store documents and files securely and easily.

• Be cyber-secure: Working on the move is part of the freelance lifestyle, and cyber crime is increasingly directed at mobile devices. Get an antivirus software package, protect passwords with a password manager (Dropbox has a useful one), and use electronic signatures for your paperwork.

Step 7: Build a client pipeline

Sourcing and bringing in clients should be your focus. One of the challenges when working for yourself is generating a steady income. The best way to avoid long dry spells is to nurture your client relationships.

Start with who you know

Reach out to contacts, previous employers or colleagues, as they know you and have seen the quality of your work. Have people moved roles? That further expands your opportunities.

There's so much potential to gain great work from existing contacts. While you may initially be constrained by non-compete clauses, staying in touch with people you know and have worked with before can be much more efficient and fruitful than focusing all your efforts on generating new leads from scratch.

Join platforms for freelancers in your industry

In the current times, online is your best source for finding work. There are hundreds of platforms, job boards and online groups where you can start engaging with your ideal clients and demonstrate your expertise.

If you're looking to work with start-ups, small businesses or fellow professionals, become an adviser member on Enterprise Nation. Here, you can connect with more than 70,000 users on the site and enjoy opportunities to publish content and join business networking events online and around the UK.

Step 8: Create a routine

If you're developing your freelance career on the side while working a full-time job, it might seem impossible to separate work and home life. But knowing what you want to achieve and having a plan can give you that discipline to put hard stops and avoid distractions.

Jarmila Yu, founder of YUnique Marketing, says:

"When I first set up, I wish I'd known the importance of routine, rhythm and calendar blocking. At the start, you wear many hats and it's an exciting juggling act. Everything seems to be priority number one, and you're critical to everything and need to figure a lot out and take business decisions based on the direction you need to set."

Starting these habits early on will help you achieve the lifestyle and balance you desire.

Read more:

• How to run a side-hustle start-up while you're working full-time

• How to balance your time when you're running a side hustle

Top tip: Don't do it alone

One of the biggest shocks to new freelancers is realising that you don't have all the support functions you would in an employed role. You're now responsible for marketing, finance, admin, sales, strategy and planning.

So ask yourself, what's taking you away from winning work or doing the work? What can you outsource or buy to make things easier? It's OK to ask for help, and the time you save or the increased efficiency will quickly pay itself back.

Read more:

• Small business owners: Wear the hat that suits you best

• Five steps to successful outsourcing

Get support with starting your successful freelance business

Visit the StartUp UK hub for resources that give you the education and inspiration to launch a successful freelancing business.

Relevant resources

• Tips for freelancers: How to manage clients and work productively

• Lunch and Learn: How to start a freelance business

• Freelancing ideas you can start right now