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Working out your finances as a freelancer

More and more people in the hair and beauty industry are going freelance and one of the keys to sustainable success is knowing what’s happening with and how to manage your finances. Here we break down our top tips to get your started.

Ask yourself: how do you want to work?
The easiest way to go freelance is to rent a chair or space in an existing hair or beauty salon. You can pay a fixed monthly fee for unlimited use of the chair or it could be worked out as a daily rate. Or you could agree on a split of your business income. For example, 60/40 in your favour, or the salon could say they need a guaranteed minimum amount per week/month.

What do you want to earn?
If you’d rather be a mobile or home-based freelancer, then you need to consider the figure that you’re happy to have in your personal bank account at the end of each month. To do this you need to consider what your monthly expenses might be, such as:

· Wifi
· Water/Utilities
· Phone
· Products – link to website for products
· PPE Equipment – Link to PPE Equipment on websites
· Retail Stock – Link to retail stock ideas on website
· Virtual Office/Assistant
· Advertising
· Insurance/Licences (Public Lability/Legal Fees
· Accountancy Fees
· Booking/Accountancy Apps
· Petrol/Travel costs

Don’t forget to consider any set up costs to get you started. You may need a travel kit if you are mobile or furniture if setting up a home salon – check out this blog on setting up your home salon.

Once you have a good idea on what your monthly cost will be, simply add them all together and then multiply them by 12. Then add on your desired annual salary and divide that entire amount by 12. This is the amount you need to take in each month.

Once you have a clearer idea on what you need to earn each month, you will need to consider how many clients you need to service within the hours you wish to work, to meet that amount. This will help you get to your final cost per service.

Try: Using an online calculator, like calconic.com that allows you to input your expenses, including your salary.

Top Tip: Are you able to provide any add on treatments/services to help maximise the time a with a client, which in turn increases your earning potential.

Time to review
From time to time you will need to review your prices; this should first be based on your own costs. Have your costs gone up in the past year? Have things become a little tighter?

Find out where and why your costs have increased and if you are able to pass this on to your clientele. Also, look at the rise in inflation; most businesses increase their prices by 10 percent year upon year to reflect this so don’t feel like you can’t!

Top Tip: Keep track of your monthly outgoings by adding them a spread sheet or accountancy app. Then each month, update any increases or decreases so you can keep on top of any changes.

For further reading on how to set your prices, check out this blog: How to price your services as a freelancer.

Keep up with your finances
While it’s vital to have goals, cashflow plans and revenue aims when you’re starting out, you must not avoid handling your outgoings and taxes.

The easiest way to keep on top of your finances is to hire an accountant/tax consultant for a monthly fee. They will handle everything from Income Tax to VAT returns. Or, if you want to save some money, you can use online software such as QuickBooks, which offers a simple package from as little as €4.50 per month. A good in-between option? Do your own recording and invoicing via QuickBooks, then hire an accountant when it’s time for tax returns.

There are some other great accounting apps out there, such as Xero, which has desktop and phone apps that allow you to record your expenses as you go, making Self-Assessment time less of a stress!

For further tips and advice, check out the blogs on our Freelancer Focus webpage or download our Freelance Focus Guide.