8 Startup Expenses You Need To Consider Before Going Freelance
To many, working from home seems like a dream job. The comfort of your own space, no noisy co-workers to distract you, no hellish commute, and the best part – pants are optional!
But while freelancing might seem like a breeze, there are a lot of hidden costs and startup expenses most people don’t consider. Luckily, there are lots of ways to keep those costs down.
1. Location, location, location
The first thing freelancers need to think about when creating a startup is where they’re going to work. Working from home might seem easy at first, but you need to consider all the things you’ll need to get your work done.
Does your home have a fast and reliable internet connection? What about a printer, scanner, or an ergonomic desk and chair? These are expensive items that are essential to working for yourself. On top of this, lots of freelancers find their homes too distracting to be an effective work environment. Why do your work when you could surf the internet, watch Netflix, or read a book, with no-one to stop you?
You also need to consider if you need to meet with clients. While many cafes have decent Wi-Fi and don’t mind hosting a meeting or two, they’re not always the best atmosphere to conduct business. Plus, you might overstay your welcome and get yourself kicked out!
So, what are your alternative to working from home? You could rent an office, but that can get pricey, and you’ll need to provide your own furniture and equipment. Your best bet is a coworking space, they’re a great way to keep those initial startup expenses down. These are spaces set up like traditional offices, but you pay a subscription and use it as much as you need.
Coworking spaces run offices with space for freelancers to work uninterrupted, network, and even hold meetings. They supply fast internet access, equipment and furniture, even coffee and tea, so all you need to bring is yourself. Plus, with prices ranging from around $50 a week, it can scale with the size of your business better than a dedicated office.
2. Equipment and Supplies
We touched on this one above, but don’t forget to factor in the cost of your equipment. Even if you’re using a coworking space for those expensive equipment needs, there are still a lot of hidden costs in this area.
The biggest cost, and one of the initial startup expenses for most freelancers is their computer. While nearly everyone owns a computer of some sort these days, you need to make sure yours is up to spec for what you want to do with it. Also consider the cost of software you’ll need, such as Microsoft Office, G Suite, or creative software like the Adobe product range.
If you’re freelancing, a laptop is generally your best choice of computer, being very portable. The problem with a laptop is using it for an extended period can get quite uncomfortable, so you may want to invest in a riser, plus a wireless keyboard and mouse. Make sure to keep track of your receipts to claim these expenses at tax time.
If you’re in a coworking space, you may need to pay for printing, or bring your own paper. You’ll also need your own stationary like pens, folders, files, paperclips – even the small things add up! Keep all these receipts too, no matter how small.
When you’re working for yourself, you’re the one responsible for getting yourself to meetings, making deliveries, or presenting to new clients. That means your transport costs will be a lot higher than they were as a salaried employee. Luckily, we have some expertise in this area!
If you don’t own your own car, having to get one just to run your business is a major financial strain. Even if you do own a car, using it for business can cost more than you bargained for. It’s great if you’re using public transport, but it won’t suit every trip.
GoGet for business is an excellent option for freelancers looking to keep their startup expenses down, as you’ll still get our low business rates. Having access to a range of vehicles means you can get the right vehicle for any job without the financial outlay of buying a new car. Whether you need a van to make deliveries, want to impress clients with a convertible, or need a cheap hatch to get to a meeting or site visit, GoGet has you covered.
This is probably the most commonly missed hidden cost of working for yourself. Australian employers are required to pay 9.5% of their employee’s salary into their superannuation account – you don’t get this as a freelancer. Most of us don’t consider this, because super was deliberately set up so that people don’t have to think about it!
While automatic contributions help most people amass a strong super without even knowing, that doesn’t apply to freelancers. Instead, you’ll need to pay your own superannuation if you want to maximise your tax benefits and build wealth for retirement. This means you’ll need to earn around 10% more than your old salary, just to break even!
You’ll also want to check the fees and charges on your existing super accounts, to make sure that money won’t disappear if you stop making contributions. The ATO makes it simple to consolidate accounts too, if that’s an issue for you. You’ll be able to use your existing account as a freelancer.
5. Worker’s comp and insurance
While we’re on the subject of benefits, another you might overlook when going freelance is what will happen if you’re injured and can’t work, especially if you’re injured while ‘on the job’.
If you were to be injured in the course of normal employment, you’d be eligible for worker’s compensation, which is essentially a group insurance policy to help replace your income and get you back to work. Freelancers don’t get this, so if you’re injured – on or off the job – you’ll have to dip into your savings to get by.
Your best approach to reducing this risk is to pick up an insurance policy. As an individual, an income replacement policy will go some of the way toward covering you – you can normally get covered for this through your superannuation fund.