Start freelancing: becoming an entrepreneur
First of all, start by drawing up a business plan. You can begin setting goals with a clear idea of who your clients are, your revenue model, and your unique selling point(s) (USP). Consider where you want to be in a year and how much turnover you have made.
You need to take several practical steps before getting started as a freelancer. First, choose a company name. You can check this in the Chamber of Commerce register to avoid selecting an existing name.
Next, you choose a legal form. For freelancers, a sole proprietorship is the most common. After all, this is the least complicated legal form we know. But also look carefully at other legal forms and, if necessary, engage an accountant or tax expert to advise you. Finally, register as an entrepreneur in the Chamber of Commerce trade register. You will then immediately receive a CoC number. Now you are an entrepreneur.
Taxation for freelancers
Once the tax authorities see you as an entrepreneur, you will have to deal with specific tax rules. Do you want to benefit from deductions like the self-employed and starter deductions? Then you must meet these conditions, among others:
- Per year, you must spend 1225 hours working for your own business. You may also include working hours that are not billable, like your administration or your website.
- Make sure you make enough profit. You are not a business if you make little profit or a structural loss.
- According to the tax authorities, you need several clients to be an entrepreneur. This way, you reduce payment and continuity risks.
- Promote your company sufficiently. You can do this, for example, by having a social media presence or setting up a website.
Also read: 'Taxation for IT freelancers: tips and benefits'.
Managing your administration, pension and insurance
It helps to actively manage your pension, insurance, and financial administration as a freelancer. You can outsource some of these activities, but some are convenient to take care of yourself.
You can choose to outsource your administration or use online tools. This way, you won't have to worry about it. However, you could also do it yourself. Keep track of your income and expenses. Also, keep all business receipts you use because the tax authorities can always request your records.
When you are employed, you still get your salary during illness. This is different if you are a freelancer. If you want to get paid during illness as a freelancer, you can solve this with insurance. Keep in mind that these insurances are expensive. Consider whether it would be wiser to put money aside every month instead of taking out expensive insurance for this. After all, this type of insurance is not compulsory.
Company liability insurance, however, is essential to have. Since the introduction of the Employment Relationships Deregulation Act (DBA law), you need this insurance to work for a client. The cost of this insurance is about 120 euros per year.
Besides this insurance, you can take out liability insurance, legal expenses insurance or health insurance. You can also consider taking out disability and pension insurance.
Building up a pension as a freelancer can be done in various ways. If you don't use these ways, you will only have a state pension by retirement. There are many helpful websites to determine how much you must save each month before retiring. Then you can decide how to save for your retirement. There are plenty of options. For instance, you can take out annuity insurance or save a fixed amount every month.
How do you determine your hourly rate?
Your hourly rate depends on several factors. Some of these factors are your sector, type of client, service, and unique selling point(s) (USP). You can determine your hourly rate in several ways. For instance, you can look at what your competitors with the same skills charge for similar work. But also check what the average hourly rate is in your sector. Brokerage firms such as Computer Futures can help you with this. They have market information available that can help you determine your hourly rate.
Especially if you are starting freelancing, determining your hourly rate can be a challenge. Remember that not only too high a price but also too low a price can scare off a prospect.
Have you already done some assignments? Then you could choose to take an average of those assignments. In the end, it is your negotiating skills and sales skills that can make the difference.
Finding the right assignments
The demand for good IT talent is high. But even as an IT freelancer, you must actively search for an assignment. Your network is essential in finding your first assignment. You can use your direct network, but you can also visit networking events, for example. Think of workshops and events for entrepreneurs. You can also use coworking spaces. These are shared flex-work spaces where you often find different entrepreneurs. Here you can build valuable contacts as well.
Also read: 'How to find freelance assignments in IT'.
Keep developing yourself
As a freelancer, you are responsible for your personal and professional development. The market changes quickly, and it is helpful to keep your skills up-to-date, especially within IT. It is, therefore, good to constantly expand your skills. You can opt for regular training or become part of an IT community.