Every year thousands of Kiwis forgo the security of a nine-to-five job and go it alone as freelancers and contractors.

It can work in almost any career. There are freelance and contract midwives, marketing people, make-up artists, truck drivers, and many more.

Freelancing can be more lucrative for the right people than a nine-to-five job and provide the work/life balance that many employees lack.

It's not always easy, however, to take the leap. Some people need the security of one employer.


What's more, without good planning, the freelance life may turn to custard. That planning can start months or even years before people head out on their own and it's a good idea to seek advice from friends, family, colleagues and organisations such as the local economic development unit.

In Auckland that's Auckland Tourism, Events and Economic Development (Ateed).

There is a lot to think about, including:

* whether you'll be a sole trader or company

* company name

* tax and IRD numbers

* branding and trademarks

* cashflow forecasts

* business plan

* banking

* websites

* GST registration

* and more.

People decide to go freelance for all sorts of reasons. Some are made redundant and decide to create their own job. It can be for work/life balance, or to manage work around the children.

Sometimes, as in the case of ICT public-relations specialist Carmela Salisbury, it was because she had spotted a gap in the market.

After more than 20 years working in agency and in-house roles here and in Britain/Europe, Salisbury felt she had "earned her stripes" in the corporate world and was keen to take that expertise to the market as a freelancer.

"I knew that there was a shortage of skilled PR people with experience in the ICT sector in New Zealand, and that many organisations weren't looking for the full suite of agency services but still wanted a self-starter at a good price," she says.

"My goal is to provide clients with the flexibility to tap into my experience as and when needed, providing services that are a natural extension of their in-house teams."

Like many freelancers, she initially contracted back part-time to her former employer Telecom/Gen-i, whilst seeking out new clients.

At the same time she started developing her brand: Eat Cake.

In the planning stage Salisbury talked to friends and former colleagues who had taken the plunge. Some of the best advice came from a former boss who now owns his own UK-based marketing consultancy. His six rules have proved invaluable for her:

* Don't work with clients or partners you have any doubts about. They may not be a good fit, or it might not be possible to deliver what they want. "It's tough because money can be a key driving factor at the set-up stage, but there will be another bus along soon and it's better to work with people who respect you and what you do and trust you to deliver," says Salisbury.

* Charge what you are worth. "Be confident about your hourly rate." It might be tempting to discount, or even offer to work for free, she adds, but this doesn't pay off long term. You are setting an expectation that your rates are low and that you don't value your time. Freelancers should also not quote X then try to charge twice that after the event. "Just make sure you quote 2X next time and explain why," she says.

* Make service your most important thing. Focus on really adding value. Adding value is about being able to do what your client can't and exceeding expectations. "Of course quality in a service or product is not what you put into it. It's what the client gets out of it."

* Align yourself with people who have complementary skills and services. They can help you build your business. "In my case it is marketing companies, web companies, plus good writers."

* Cash is more important than top line and profit. Salisbury doesn't accept sub-contract work from agencies on the basis of "we'll pay you when we get paid". Track down the person in the accounts department responsible for payment, and chase invoices if they are late. Ask the client to sign a letter once a project has been agreed that contains the terms.

* Make sure you network. It's vital for a self-employed person as most work comes from existing relationships or word of mouth.

There are many questions freelancers must face. One of the big ones in the early days is how much to charge, says Bryan Simpson, chartered accountant at Boutique Financial.

There is no one-size-fits-all answer for this. However a good starting point is three times a person's hourly rate in employment.

Another issue is that freelancing comes with a lot of paperwork. If the record-keeping isn't good, it's easy to end up in an accounting pickle come tax time.

Often people have made simple mistakes such as assuming the money they've spent buying computers, software, and other equipment is "expensed" and deducted from their turnover, leaving little real "profit" on which to pay tax.

The reality is that items costing more than $500 need to be depreciated over a number of years.

Other mistakes include mixing personal expenses and business expenses, which results in a waste of time at the end of the financial year sorting it out, or worse, a bill from the accountant to untangle the mess.

Boutique Financial always recommends freelancers open a business bank account and use an Eftpos or other card linked to it to pay for business expenses.

Simpson says many a freelancer has walked through his door with a tax bill and no money to pay it.

Too many freelancers try to create their own accounting system in Microsoft Excel and it doesn't always work for them.

The company recommends freelancers use the Xero accounting system that automatically imports business account statements, making end of year profit and loss and balance sheets easy to prepare.

Simpson sends all new freelancers a copy of the IRD Smart Business Guide, which can be found at: http://tinyurl.com/smartbusiness guide