Over the past few months, many people have gotten a taste of working from home. For some, this will have sparked an interest in working for themselves, and taking their current set up and knowledge and turning it into an enterprise of their own.

There are many benefits to working for yourself. When describing why they love what they do, contractors and business owners often cite things like:

  • Choosing their own hours

  • Doing something that they enjoy doing and feel passionate about

  • Being able to control their income and the work that they do

  • Flexibility to work around children and other interests

It is often these ideas that make people decide to take the plunge and become self employed or set up their own limited company.

However, it is important to remember that there are downsides to starting a business, including:

  • Working long hours and weekends, particularly at the beginning

  • Having an unstable income for some time

  • Limited access to employment benefits (such as paid holiday, medical insurance and so on)

  • Having to stay on top of accounts and filing tax returns

Knowing the downsides shouldn’t put you off of exploring the world of working for yourself, but it is important that you know what barriers you might come up against, so that you can plan your business carefully and avoid problems down the line.

Making The Decision

There are many questions you should ask yourself before committing to starting a business of your own. These questions are designed to help you to understand the position that you are in, and better plan your business.

  1. What is your core reason for wanting to start a business? This will affect the type of business you set up and how you go about it. If you are looking for more flexibility, for example, you might decide to work as a contractor for other companies.

  2. What are your skills? Not only do you want to do something you can do well, but also something you enjoy and can imagine sinking many hours of your own time into happily.

  3. Do you want to provide a product or service? This will drastically change the type of business you decide to do. Selling products brings you firmly into the world of ecommerce, whereas for services such as plumbing or hairdressing you can work as a consultant, contractor or freelancer.

  4. How much money of your own do you have to put towards this venture? The scope of your intended business will depend very much on how much money you have to get started.

 

Research Your Sector 

Deciding which industry you want to work in is only the beginning of your journey. The next stage is to investigate your industry, looking for gaps in the market and deciding on a unique selling point (USP) that will help you to find work and beat your competitors.

A simple online search for your target industry is a good place to start, especially if you pay attention to local results to note your competitors and how they are operating. You could also try reading industry specific books and speaking with others in the sector.

 

Set Your Budget

A budget is crucial to getting any business started, even if you are just working as a freelancer/contractor. If you are starting from scratch with a business then you will probably find that you don’t require physical premises straight away, so leave these costs out of your budget until later on when you do wish to scale up.

Think of everything you can so that you aren’t taken by surprise down the line by an unexpected bill.

Almost every business or contractor will need to think about setting up a website or putting some money into marketing themselves, and there may be materials, tools and other necessary costs to get set up.

You also need to take into account your personal costs, such as rent, utilities and transport. If you aren’t making money in the first few months, how will you pay for these things? All of this should be included in your budget so you can work out how much investment or the size of the business loan that you require.

 

Set Up Your Business

All of the preliminaries out of the way, you should finally be in the right position to set up your business. There are several options for those looking to register themselves as a business entity, and different options are more suitable for different types of business.

The three main types of business are:

  1. Sole trader. This is a self employed person working alone as the sole owner of their business, and is the simplest and thus most common type of business structure.

  2. Partnership. A partnership works in the same way as a sole trader except two or more people form the business together and become jointly responsible for the business.

  3. Limited company. This is a business that serves as a legal entity of its own, meaning that it is separate from its shareholders and directors.

It may be useful to work with an accountant on deciding which type of business to form, and actually setting it up, as there are various business licenses and requirements that it is important to get right.

You will also want to decide on a business name, and then use the Companies House tool to make sure that your business name isn’t taken.

 

Create A Business Plan

A business plan is important for two main reasons:

  1. To help you to plan for the future of your business and set small achievable goals that allow you to develop the business over time

  2. To present to lenders and potential investors to convince them that you have a realistic and achievable plan for making money and thus paying back their money.

A business plan needs to look professional and include all of the information that outside parties expect to see, in order to take you seriously. The Government website has a useful business plans section which includes examples and templates to help you to write a polished and persuasive strategy.

 

Obtain Funding

If you are working as a contractor or funding your business yourself then you won’t need to think about this immediately, but it is always helpful to know what options are available with regards to financing a business.

There are plenty of different options for small business financing, including:

  • Loans from friends and family

  • Business credit cards and overdrafts

  • Bank loans

  • Venture capital

  • Angel investors

The best way to obtain any form of funding is to have a great business plan, and a credible pitch.

To formulate the bare bones of a pitch that investors are likely to go for, ask yourself:

  • Who is your target market? Be as specific as possible.

  • What demand is there for whatever you are offering? Who is already doing it? How can you offer something that is different to or better than what is already available?

  • How much capital will you need to begin? A contractor can get started straight away with very minimal outlay (just a workstation and computer/tools/materials etc), whereas an ecommerce enterprise will require significant upfront investment before they can begin. What is the investment paying for, and what will be the return for the investor?

  • How long do you foresee it taking to have your business up and running, and how long will it stay relevant for? Whilst it is a savvy move for an existing accessories brand to bring in a line of face masks at the current time, setting up a face mask business right now doesn’t have much scope for future growth.

 

Get Started with An Accounting Gem! 

Once you have your business plan and finances in order you are ready to go. Set a launch date and be ready for all the highs and lows of being your own boss entails. Remember it is a marathon not a sprint and success will take persistence and patience, but if you have the desire and determination there is no reason you cannot achieve your dreams.

An Accounting Gem can help you to secure funding for your business, write up a business plan and understand the accounting process involved with setting up a business. Just call us on 01473 744 700 or email us at contactus@aag-accountants.co.uk to discuss your options and we can help you every step of the way!