The world of work is changing – many people are choosing to manage their work-life balance by starting their own business. And this is great thing to do – it gives you more control over your hours, your clients and the type of work you do. And it means you can concentrate on the things you love, building a business that matters to you. It’s important to get set up properly, though, which is where our virtual outsourcing guide can help.
Deciding on your business
The first thing to do is decide what your business will be and make sure there’s a market for it. Ideally, you should do some market research, talk to potential clients and even other people already in your business niche, just to make sure that this is a viable potential business. There are plenty of things you should do before you launch, and that will require an investment, so it’s important to be sure your new business has prospects.
If you are still working full time whilst you do this initial background work, it might be useful to use virtual support services to help. For a manageable budget, they can do some of this work for you, leaving you to concentrate on the day job, and giving you the valuable information you need to make your next decision.
Many new business decide to register as a sole trader. It’s easy to do on the HMRC website, it’s less complicated than registering as a Limited Company, and it gives you an opportunity to make sure this is a venture that’s going to work for you.
Becoming a sole trader or freelancer does mean that you carry all the responsibility of the business. Around 25% of new start-up business fail within the first year. That’s a sobering statistic, and it’s one that should give you the impetus to think and plan carefully before you go ahead. If you start your business and it fails, you will be solely responsible for any debts – so it’s a risk.
Where do you start?
There are some key steps to take before you start trading. You might decide that you need a virtual assistant to help with some of the admin, or you might take on all the tasks yourself and decide to bring in help at a later stage. Here are our top tasks:
Register as a sole trader – you can do this easily with HMRC and you don’t have to start trading straight away. Registering makes sure that HMRC are aware you will be running your own business and is a good psychological step for you too.
Do some market research – are people buying what you want to sell? How much competition is there for your product or service? Do you already have contacts who would be interested in working with you? What kind of prices could you charge? How can you ensure a good profit margin? All these things will help you to understand what you might be letting yourself in for.
Make a business plan – if you are going to the bank or other institution for a loan to get your business started, they will want to see a business plan. This should include information on your product, your market, your background and experience, and some key financial information. A financial institution will want to see that you’ve thought about how much money you will need to set up your business, and what you will need to keep it running – your working capital. You should also include details of how much you are expecting to pay yourself once money starts coming in. You can also include details of expenditure – so if you are going to use a virtual business service to help with bookkeeping, for example, you can make this clear.
Financing – how are you going to find the funds to start your business? As we’ve said above, you will need to have a pot of money to help you get started and help you keep going. Your money can come from one, or a combination of sources:
- Your own money – you might remortgage your home, take out a loan or use a redundancy payment or savings.
- An informal loan – you may have a partner, family or friends who can lend you the money you need.
- Crowdfunding – some businesses use a crowdfunding platform to help raise the money for a specific project.
- Business loan – you can apply for a business loan to help you get started. The type and amount of the loan will depend on your business plans and the institutions you apply to.
- Grants – you may be able to find funding or a grant to help push money into your business. It may be that you need to be up and running to apply, but take a look at what’s available for start-up businesses and take advantage of any advice or guidance available.
Sole traders often do everything themselves – the marketing, the accounts, the planning, the product testing, the customer service, the bill paying and much more. Often, sole traders become Limited Companies, once they are big enough, or want to employ staff, and that’s a journey that can be helped by having a startup virtual assistant on board – helping you to manage day-to-day tasks so that you can concentrate on strategy and growth.
Accounts and tax
If you are a sole trader or freelancer, you’ll need to pay tax and national insurance. Instead of paying on a PAYE basis, as you have as an employee, you pay on your business profits and payments are due in January and July every year. You may do your own tax return or hire an accountant and bookkeeper to manage your finances for you, but either way, you will need to make sure you have saved enough to pay your tax bill every six months.
Ask your accountant about the VAT registration threshold – if your turnover goes beyond this, you will need to register with HMRC for VAT and submit a quarterly return. Like other businesses, you will need to keep proper financial records and you might choose to use accountancy software to reduce the admin burden.
If you’re thinking about starting a business as a freelancer or sole trader, and you’d like some support from a virtual outsourcing company, feel free to call us on 0800 994 9016 or use our contact form in the menu above.