Going self-employed is a big step and it’s more likely to be successful if you think it through before you make your decision. From having the initial idea, you will need to have a vision and a plan in place before you start. By doing this you will be able to take a step-by-step approach rather than leaping straight in!
However, it can all seem a scary thing to do and there seems to be so much to work out. Here, I have given you 10 key things to think about when you are considering going self employed. These will help you with your thought process.
Here are the 10 areas to consider:
1. Status and name
There are many ways you can set up in business, but the most common ones are by becoming a sole trader or limited company.
A soletrader works on their own, makes their own money and is personally responsible for their debts.
A limited company is a separate entity and therefore you are not liable for any debts above your share capital. You can only take money out of your business by salary or dividends.
I know this is an area that can be confusing so you may find my guide, Sole trader Vs Limited Company useful.
Choose your name wisely – I would suggest having a name that is easy to understand and spell. Over the years I’ve come across so many people who choose a name that’s memorable to them but confusing to everyone else!
From having the initial idea and setting out your vision to getting started, it’s important to follow through. It’s so easy to keep working on the idea and thinking about it without actually doing anything!
It’s likely that initially you will be continuing with employed work. Ask yourself how this will work so that you don’t neglect your employed work but also have enough time to set up your own business. Getting this juggling right is a skill in itself! Procrastination can be your worst enemy and sometimes there never seems the right time to start. What I will say is that, however scary it is, you do have to start moving away from the safety of employed work otherwise nothing will ever happen.
The amount of finances you need to set up your business varies greatly depending on many factors, therefore you need to do your homework. Two key questions to ask yourself are:
- Do you need any capital to set up?
- Do you have savings, or do you need to build some before you start?
- How will you ensure you have the finances required to start your business?
4. Market research
It’s all well and good having an idea but is there a market out there for your product/service? This is an area which frequently gets overlooked as people go straight from the original idea to making a start, caught up in the excitement. Also, I think a lot of people don’t understand what they need to do to find out the answer to the question As a starting point, research how to market research and bring in experts if you are not confident to do it yourself. Think about who you are aiming at, and be as specific as possible. Are you going to have a niche?
5. IT and equipment
Money can be tight when you set up in business but there are some things that it’s not worth skimping on. You need:
- Good, reliable broadband.
- A PC and an efficient printer and scanner.
- Easy to understand and use bookkeeping package – unless your business is going to be small, then Excel will do.
- A professionally set up website. I don’t think it’s worth doing this yourself unless this is your expertise. It will take up a lot of your time and won’t look as good.
- Consider to subscribing to Zoom, LinkedIn, etc.
Of course, there may be other things specific to your business which you also need to purchase.
6. Selling your product/service
So this is the big question – how are you going to sell your product/service?
- Who are you trying to reach? Go back to your market research.
- Will you be selling the product online primarily or will you have a shop?
- Will the service take place remotely or will you be meeting people face to face?
- What is your social media presence like?
- Are Facebook/Google ads a good idea for you?
- Are there any networking groups you can attend, either online or face to face? A note of caution – I wouldn’t join any of these straight way; see if they work for you first. Try different types in different areas. There are so many out there and they all work differently. See which one is right for you.
I can’t emphasise this enough – it’s a crucial tool. It surprises me when I ask people if they have a budget, how many say no! How is it possible to run a business without one?
Make sure you include all of your costs, including your set up costs.
There is a resistance to start a budget because income isn’t certain. It will never be, I’m afraid! Just have a good guestimate of what you think it will be.
I wrote Your Business Your Numbers because I know that finance is one of the areas people struggle with. There is a chapter in this book on budgeting.
When you work for yourself, tax is your responsibility and for many, managing their own tax is scary!
Firstly, you need to register with HMRC. Annually you’ll need to file a self-assessment return and pay any tax you owe if you are a sole trader. As a director of a limited company, you’ll pay tax on your salary monthly, but any dividends will need to be declared on a self-assessment return.
Everyone must pay income tax on income above £12,750.
9. Protect yourself with insurance
There are many positives when you work for yourself – flexibility being one of them. But you don’t want to be caught out if things go wrong. There are a number of different types of insurance:
Income protection pays out a percentage of your estimated monthly salary if you’re unable to work because of an illness or accident.
Public liability covers the cost of third-party compensation claims made against you if you damage someone’s property or cause an injury.
Professional liability covers legal fees or damages if an unhappy client takes you to court.
Employer’s liability is needed if you employ other people. It covers claims made by employees who are injured or become ill as a result of their work for you.
Remember, becoming self employed is a big step but the great thing is you’re not on your own! My mentoring has helped many people who have questions when setting up for themselves or need someone to brainstorm with.
If you’re looking for funding, then the UK Government offers venture capital schemes to help companies grow by attracting investment. The Association of Independent Professionals and the Self-Employed (IPSE) offers early-stage support.
If you’re stuck and you need support with completing your tax return, HMRC’s website has information and step by step guides.
As you can see, there is a lot to consider! But if this is something you’ve always wanted to do, I would encourage you to go for it but put the work in before you launch!
Anna Goodwin @2023 All Rights Reserved.