Self-employed

What does it take to become your own boss and make a living as an independent contractor or freelancer?

We've gathered everything you need to know to get started, answer the stupid (and smart) questions, and prepare you to take the first step towards self-employment.

What is a self-employed person?

When it comes to self-employment, there are a few different aspects worth looking at. Because being self-employed - including freelancing - is more than just the opposite of being an employee.

In Denmark, we have a tradition of being salaried employees, and today there are more than 2,750,000 employees, but only around 200,000 self-employed people.

The official term for being self-employed is that you have founded a company and/or have a controlling interest in the company you work for. But when you're self-employed, you suddenly become your own, and sometimes other people's, boss.

And that's the part we think is a bit more fun to look at - because one thing is the dusty definition of what self-employment is, another thing is what reality on your own feet looks like.

As an employee, you're essentially helping to earn other people's money, but in return you get a lot of security in return. When you jump into self-employment, you also say goodbye to the security you could enjoy as an employee.

The big, and obviously very enticing, shift is how you're now the captain of the boat and can skim the cream yourself.

Below, we'll cover the different aspects of a life of freedom step by step, because there are of course both good and bad sides to being your own boss.

Start out as self-employed

What does it take to start your own business?

When you start the engine towards the free, independent life, there are of course some things you need to have in place and some things that are nice to have in place.

At the end of the day, the pendulum between nice to have and need to have also swings based on your own risk profile. Are there bills that need to be paid from day one or can you run for a period without paying customers?

First and foremost, life as a self-employed freelancer requires a certain amount of hustle.

Customers rarely walk through the door as soon as you put the "for hire" sign in your window. You have to chase them hard, and you have to be able to take no for an answer - and not take it personally.

If you're switching gears from being an employee, one thing many people underestimate is how many repetitions it takes to make an impact.

As an employee, you often have tasks and goals dictated from above, and you don't have to go door to door asking if there's anything you can help with.

However, as your own boss, you have to, and many freelancers put off the cold calls in exchange for busy-work on their own business.

As a self-employed person, you need to harness your perfectionist gene and dare to ship before you feel ready to do so.

What you need to have in place as self-employed:

When you start out, there is a foundation that needs to be in place.

The basics include:

• Legal foundation: here you have the option to register your own CVR number or you can be smart and run your business through Factofly.
• A defined niche: especially when you're starting out, you can't be everything to everyone. A well-defined niche will help you land customers.
• A product package: Give your customers something to say yes to. The more specific you are, the easier you make it.
• A portfolio: Clients often need a little help to see why you're the right fit. A portfolio can be a polished website, but it can also be a collection of your work on a Notion page or Google Drive for starters.

Pros and cons of being self-employed

Self-employment isn't always big boats off the coast of Capri, hanging lazily in the water while the chef prepares lunch below deck.

Of course, being self-employed has its advantages, but before you jump into the free life, you should also consider whether you can swallow the less glamorous aspects of that life.

Economy as a self-employed person

The financial aspect of independent living is what determines whether you fly or fall.

The market is (for better or worse) relentless, and you'll quickly get signals about whether you can exchange your service for dollars or go home empty-handed.

When you're in the honeymoon phase, especially as a first-time freelancer, you can tend to be a bit naive about how easily the money will flow.

You don't need to sign up with big accounting solutions from day one, but make sure you keep a close eye on your finances: what does a new customer actually cost, how much is going in and out of the till, and what's left in cool cash?

If you are starting out on your own full-time, we recommend a financial buffer that can cover your expenses for between 3 and 9 months. Of course, the actual period depends on your risk appetite.

Invoicing

When there are customers online, you need to be able to charge them, and especially if you work with business customers, you don't need to think about seamlessly integrated payment solutions from the start.

A good old-fashioned invoice does the job here, and when you're just starting out, you also have the option to invoice without a VAT number.

(By the way, you can grab a free invoice template right here.)

When you're invoicing as a self-employed person for the first time, there are some rules you need to be aware of to ensure everything is done by the book:

1. VAT registration: If your turnover exceeds DKK 50,000 in a year, you need to register for VAT. This means that you need to charge VAT to your customers and of course report it. 🔥Protip: Instead of hassling with a VAT number and VAT reporting, you can easily and conveniently invoice through Factofly.
2. Invoice content: An invoice must contain at least: invoice number, invoice date, seller's name/address/CVR number, buyer's name/address, a description of the product or service sold, the price excluding VAT, VAT and the total price including VAT.
3. Payment terms: It's important to clearly state the payment terms, such as the payment deadline. According to the Interest Act, the customer has 30 days to pay an invoice unless otherwise agreed.
4. Keep copies: It is important to keep copies of all issued invoices for at least 5 years in accordance with the Bookkeeping Act.
5. Invoicing abroad: If you invoice customers outside of Denmark, you need to be aware of the rules for VAT within the EU and in third countries. Depending on your customer and the work you have delivered, there may be specific rules on how and if VAT should be charged.
6. Follow up on unpaid invoices: Make sure you have a procedure for following up on unpaid invoices. This can include reminders and ultimately recovery through debt collection.
7. Updating information: If your business information changes (e.g. address or bank details), make sure you also update your invoices.

Of course, you can also save yourself all the hassle by creating a free profile at Factoflyand send your invoices that way.

We take care of the headaches for you so you can focus on doing what you do best.

Budgeting

You don't need an accounting degree to run a tight budget, but do yourself a big favor by learning the basics. In fact, budgeting is a pretty essential exercise to have a full overview of your business and helps you keep track of your income and expenses.

There are, of course, different software you can buy. If you're just a little savvy, a basic Google Sheet can do the trick, giving you an overview of future revenue, fixed and variable costs, and a strategy for managing surpluses and deficits in your business.