The biggest challenges
of being a freelancer

Despite all the benefits of freelancing, self-employed professionals face obstacles that employees do not have. In the following, we will go through some of the biggest challenges – and how you can overcome them.

Deciding on your hourly rate

When you first start out as a freelancer or self-employed consultant, it can be difficult to put a monetary value to your services. While we’d love to consult you on the customary rate in your industry, the truth is that it varies greatly from project to project, and company to company – and you should also decide the fee based on the specific project; you may be willing to take a lower fee on a freelance job which you find super interesting or which can really help you develop professionally, likewise you may expect a higher fee on a project where you have niche knowledge.

However, you should definitely invest some time in researching the general market prices – and remember to utilise your network. As a contractor you should get comfortable discussing rates with both customers, colleagues and recruiters. You may also be able to find pricing guides or rules-of-thumb within your industry, but be careful to follow these blindly, as no two projects are the same – and similarly, your competencies and experience may not be comparable to other freelancers within your industry.

Furthermore, if you work in an industry or area (e.g., information technology) where Danish or specific knowledge of the Danish market is not usually a requirement, you may compete with freelancers all over Europe for the same projects – and most countries have a lower cost of living, and thereby may ask for a lower hourly rate than you. Hence, you have to find something which differentiates you and your skillset from the ‘competition’.

Finally, it’s important to not get blinded by a seemingly high hourly rate when you’re first starting out – this rate does not equal your hourly take-home pay. As opposed to a regular employee, you’re responsible for your own taxes, holiday pay, insurance, bookkeeping, etc.

Furthermore, you need to factor in that you will sometimes have downtime between projects – no contractor should expect to sell all their available time. This also includes non-billable hours. The hours which you invoice need to cover the hours you do not, but instead spend on running your freelance business: Project acquisition, project management, bookkeeping, etc. Otherwise you will end up with a workload far exceeding a regular work week.

It’s difficult to say how many billable hours per year you will have, but a good rule of thumb is that 75% of your work week can be invoiced (and remember to exclude vacation- and sick days).

A quick calculation of your hourly rate could look like this:
Your desired yearly salary (remember to factor in VAT) + expenses + pension / amount of invoiceable hours per year = hourly rate.

Bookkeeping

While there are a bunch of tools, programmes and resources to help you with bookkeeping, you need to develop a basic understanding of bookkeeping and long-term structure of how you invoice, keep records of expenses and payments, etc.

A good idea is to have an administrative calendar, where you divide administrative tasks into weekly, monthly, quarterly, biannual and annual to-dos.

Furthermore, you need to understand the VAT and tax rules when being self-employed. We advise that you utilise SKATs resources for one-man businesses – these include great webinars, videos and even personal consultation. 

Lastly, you may consider investing in an accountant or bookkeeper, depending on how confident you are in your own ability to perform these tasks yourself. While it can be expensive, you may conversely save a lot of money on incorrect taxes.

Difficult clients

Just as complications and disagreements may arise between an employee and their employer, you may find yourself in a situation where you and your client do not see eye to eye. Or you may even experience disagreements regarding your invoices, payments or contract.

This is why we always advise working with an agency, such as Hays. We can help you with aligning expectations on the scope of activities, as well as advise you on legal matters regarding your contract. Furthermore, we work with reputable companies, ensuring you receive your payment.

Project acquisition

Finally, many self-employed professionals say that project acquisition and finding clients are their greatest challenges. It goes without saying that we advise you to use Hays’ job and project portal to look for suitable projects, keep your LinkedIn updated and upload your CV to our database, to ensure that our consultants can present you suitable and interesting projects.

However, it should also be recognized that finding the projects may not be the most difficult part of project acquisition – it should not be underestimated the amount of time you have to put into searching for projects, planning your availability, updating your CV, LinkedIn and/or portfolio, interviewing and negotiating with potential clients.
This is why, as previously mentioned, you need to include this time in your hourly rate.

In conclusion, it is definitely challenging to become a freelancer. However, we do hope this has not scared you off, as it also comes with a lot of great opportunities and benefits. And if you prepare accordingly, you will quickly learn how to overcome the above challenges – and any other you may meet when you start a business. If you haven’t already, we suggest you read our step-by-step guide to becoming a freelancer right here.