So you’re nearly ready, you know you want the freedom of working for yourself but you’re nervous, you’ve always been employed. Today we’re sharing our top 7 things you should know before you take the leap into the contracting world to help you to have the confidence to follow your dream career path.
1) Find Out If There Is Demand
Firstly, if you were to start out as a contractor, is there any work out there for you. Seems a sensible place to start, hey? But so many new contractors don’t spend some real time looking at their industry to see if moving into a contract role is sensible.
As well as finding out if there’s current contract demand for your skills, you’ll want to be aware of trends in the industry to ensure that there’s likely to be contract work for you 1 year from now, or even 10 years from now.
To do this you can try a couple of our suggestions.
- Cultivate a working relationship with specialist contract recruiters, follow them on LinkedIn, request a meeting to discuss your contractor CV and keep in touch with them over the phone regularly
- Browse contractor-specific job boards, like this one, to gauge the availability of contract work in your chosen location/s
- Read up on industry-specific trend reports, like this one from PwC
- Be well informed of political and economical changes
2) Sort out your CV
A contractor CV isn’t the same as a CV you would use to apply for a full-time vacancy.
Recruiters can take as little as 20 seconds to scan your CV before discarding it. An important point to remember about recruiters is, they’re often not highly experienced in your specialist area. So it’s a good idea to tailor your CV to their job ad. You don’t need to be dishonest, but you do need to usher the parts they’re looking for to the top!
Try to keep your CV to 2 A4 pages, remove any work experience that is not completely relevant, nobody needs to know about your work at the local pub when you were a student.
Your contractor CV will likely hold a different structure to your previous CVs. You certainly don’t need work history, education or hobbies anywhere near your front page. Start by summarising your professionals skills which fit the job description, then list your achievements. Take a look at this great guide from Contractor Calculator.
And when you’re happy with your new contractor CV, consider having a professional CV writer take a look and edit where necessary.
In addition to your new contractor CV, you may want to spruce up your LinkedIn profile – update it, join a few industry-specific groups and participate by writing LinkedIn articles and commenting on relevant posts – you want to show that you’re active and passionate about what you do.
A simple website is often a good idea too, think of it as an online CV where you can say a little more about yourself, show off your knowledge and experience in blogs and provide testimonials relating to your work.
3) Test The Waters
One of the biggest obstacles new contractors face is having made the move before they’re ready, and when we say ready – we mean highly experienced. There are very few contract roles that are not specialised and even fewer that don’t require at least 5 years experience under your belt.
Companies tend to hire contract workers because they have a specialist, temporary requirement. Hiring the best contractor they can find for their budget is of upmost importance, so they’re going to opt for the experienced contractor.
Even though as a contractor you essentially work for yourself, you’ll be going on a lot of interviews and competing for work more frequently than those progressing through a typical employed career path.
Before you leave your employed roll, there’s no harm in applying for contract roles, going to interviews and testing the waters. If you apply for 10 contract roles, and are invited to a few interviews, that’s a good sign. An even better sign is if you’re offered a few roles. You don’t have to accept an offer if you receive one, so going through the process a few times will certainly indicate whether or not you’re career-ready for the roles you want to compete for.
4) Work out your rate
Working out your daily or hourly rate can be tricky, and most new contractors find they have not allowed for necessary expenses.
Here is our advice.
- Work out how much you need every month for your bills
- Add on your usual monthly spend on non-essentials
- Add on the monthly fees you expect to pay for accountancy and legal cover
- Add on how much you’d like to save per month
- Add on the amount you’d like to put away into your pension each month
- Now take that monthly value and double it – allowing for the possibility of being out of work for as long as you’re in work.
- Multiply this figure by 1.25 allowing for basic tax
- Divide your final figure by 20 giving you a baseline day rate.
Never work for less than your baseline day rate. If the contracts you’re looking for pay less than this amount, then contracting is probably not a good move for you.
Now that you have your baseline, you can compare it to the average day rate offered for contracts you’re interested in applying for. When considering a contract, do take into account the location and expense involved in travel, as often contractors travel further for their work.
This is a rough guide to working out your day rate, there are other factors involved, so it’s best to consult a good accountant to ensure you can work out a more accurate day rate based on your lifestyle, experience and expectations.
5) Learn About Limited Companies
Working as a contractor often means running your own business. Unlike a freelancer or sole trader, contractors tend to find they benefit from operating via a Limited Company suits them best financially.
Setting up a Limited Company isn’t completely straightforward, you’ll be responsible for running a business and working for that business as a director. Why not download our free guide to setting up a limited company on this link?
6) Benefits, Liability, Mortgages & Banks
Once you’re a contractor working for your own Limited Company, a few things change that you wouldn’t expect to change. As a contractor you’re often restricted due to the flexible nature of your work, which seems crazy as no full-time employee’s job is safer than a contractor working short contracts anyway. You could be made redundant at any time, you’re only ever as secure as your notice period.
Obviously you won’t receive benefits such as sick pay, holiday leave or pension. So you need to plan these things into your strategy and account for them when working out your daily rate.
You’ll now be liable for your work, so you’ll want to take out an insurance policy to ensure you’re covered in case of any problems arising down the line.
Mortgages, or even approval for rental properties, can be affected by your contracting status. Until you have a full 2 years of self employment under your belt, you’re seen as ‘risky’, though there are mortgage lenders who specialise in contractor mortgages, this may be a point to consider ahead of your move into contracting.
Similarly banks will potentially see you as ‘risky’ when it comes to loans, overdrafts, new accounts and credit cards – especially for the first 2 years. So ensure your personal finances are in good shape ahead of your move into a self employed role.
7) Hire A Good Accountant
Yes, we know we’re biased here, but the advice is sound. A good accountant is essential to your business’ smooth running. Trust us, we’ve picked up the pieces when it’s gone wrong on multiple occasions.
Not only will a good accountant help you avoid penalties incurred from missed administrative deadlines or miscommunication. They’ll also offer you advice on how to run and grow your business, reduce tax liability and protect yourself and the business from legal threats.
How do you recognise a good accountant? This one can be tricky, a lot of people rely on referrals. Those who don’t receive a referral from a friend, family member or colleague tend to get sucked into the very large contractor service firms. Some large contractor specialist firms lack personal the touch, they get the job done but probably won’t care for your business or know your name. So it’s worth spending a little time looking for an accountancy firm who specialise in contractors and who feel like a good fit for you and your business.
If you’re thinking of starting out as a contractor and you’d like our advice, we now have a free guide to ‘Starting In Contracting’, simply register here and we’ll email you a selection of free guides and tools to help get you started. In addition, we also offer free no-obligation consultations with our experienced team, call today on Stockport: 0161 477 6789 or London: 020 3174 1436 to arrange yours.