In the difficult and uncertain times in which we are encapsulated at present with the Covid-19 pandemic, one wonders what steps one can take to ensure one’s financial stability and growth over the medium term ahead, at least. Our economy, and that of the world at large, has been brought to its knees, unemployment is rife, many people are losing their jobs, and businesses are shutting down daily while others are reducing their staff complement.
Being self-employed as a freelancer certainly is a valid option but take great care before racing full steam ahead. As is often the case, unfortunately, one comes up with what one believes is a great business idea, with visions of grandeur and dollar signs springing up, ultimately only to fail. This is often because new business owners or freelancers do not perform the very necessary research and a greatly needed feasibility study.
Business start-up planning has been extensively covered over the past twenty years and longer, and without understating its importance or re-inventing the wheel, perhaps it has been overplayed. Much training is available on the Internet, including templates and guidelines provided by banks and the SA Department of Trade and Industry. To start a freelancing business can be a challenge – and then some. Thus, following a business plan infrastructure with the use of a project planning tool is the best route to follow.
Why perform a feasibility study?
The feasibility study is a vitally important step in the well-known business planning process, not only pre start-up. In fact, it is the most important step because, if the business idea is not feasible, there is no point continuing with it. There are often more reasons for the business to fail than to succeed. Many renowned business analysts believe that only one in forty new businesses succeed and materialise in accordance with their original plan. Another good time for doing a feasibility study is when a business needs to be restructured to increase profitability, improve production, reduce production costs and overheads, increase sales/services income, expand the market reach, and many other valid reasons.
In the normal scheme of business planning, one deals with deciding on what type of business entity one wants to set up such as a Sole Trader, a Partnership, a Private Company, a Close Corporation, and then the drafting of various reports are needed in order to gauge the feasibility and to make the right decisions going forward.
What information do you need to prepare a feasibility study?
The list of matters to be decided and the necessary analyses needed follows, such as are usually covered in the typical business plan.
- The services or products to be offered.
- Establish the professional standards and qualifications required to operate as a freelancer in your field of expertise.
- The equipment and tools needed.
- Start-up expenses, including legal and business analysis services.
- Initial capital requirements.
- The target market to be accessed and establish whether there is space for you in it.
- The economy relating to that market, current demand, future growth opportunities.
- Determine what barriers exist at present which may hinder your success.
- How best to promote your products or services.
- Distribution channels and agencies.
- Operational plan.
- Legal environment and statutory requirements
- Establish a system of record keeping
- Bank services needed – a separate bank account for the business is strongly advised.
- If staff need to be employed, establish the Human Resource policies and SARS requirements.
- Do the costing of each product and service very accurately.
- Calculate selling prices based on all costs plus mark up.
- Establish the total you personally need to earn per month. When an hourly rate will be charged for your work, you will need to calculate your hourly rate.
- Compare your prices to those pertaining to the freelance industry of your services.
- Draft the projected financial plan, a detailed budget for twelve months.
- Draft the projected cash flow for twelve months.
- Draft a Break-Even analysis.
- Draft a starting balance sheet.
- Draft a SWOT Analyses – Strengths, Weaknesses, and Opportunities.
Some business plans have the feasibility study way down in a list similar to the above list, but perhaps a better view is that most of these tasks need to be done in order for the feasibility or viability of a business plan to be ascertained.
Assistance and collaboration
For an aspiring freelancer, these are all important steps to follow. It is also important to search for organisations and associations that provide vital services and advice for those in the various freelance fields. Let’s take as an example SAFREA (the Southern African Freelancer’s Association). They advocate for and support freelance workers in the communications fields. They also provide resources, tools, training, and networking to strengthen freelance careers. Their network includes hundreds of talented writers, editors, proof-readers, graphic designers, illustrators, researchers, translators, photographers, and other experts in media and communications. Another good example would be Project Management South Africa for freelance and professional project managers.
Membership associations like these are great for collaborating with fellow freelancers and professionals for professional advice, current industry standards relative to their professional fields, the current going rates for different work, up to date market research, training courses, and to finding available work.
As noted earlier in this article, the Internet is packed with valuable information such as from the DTI, SARS, the banks, and other websites through which one can glean the necessary information and assistance in one’s quest.
Freelancing is normally a challenging type of business to operate, but as business start-up and functionality are even more so during the pandemic and state of disaster, it is very important to ask your accountant for guidance and for help in drafting an accurate feasibility study and business plan. Wasting time and finances in going it alone would not be the preferred route to take