Self-employment, small businesses and entrepreneurship are just a few of the current buzzwords bandied about by the government and many Chambers of Commerce. Sadly, 50% of small to medium enterprises, SMEs, fail within their first year; however, many of the reasons behind these failures can be overcome.
Many people believe that their business idea is so good that just converting it into a product will be enough to sustain them and result in healthy profit margins, but this is most definitely not the case. The term SME covers any company that employs fewer than 250 people; in the UK around 97% of these are sole trader companies. The first task when setting up a small business is to make a plan, which should include capital investments; projected loan repayments, where required; basic running costs, including rent; product development; employment costs and marketing and a target timeline. It is at this stage of development that some budding entrepreneurs seek the services of a business coach. This profession helps identify targets and will advise whether the business is potentially viable. Many small business owners run into problems because their plans are simply unrealistic.
Another essential part of helping ensure commercial success is to get the accounts in order, right from the start. It is advisable to visit the local HMRC office or go online to register as being liable for Self Assessment rather than PAYE and ask for their guidance and advice. Some companies pass their accounts over to a professional accountant, but this can prove expensive; another alternative is to use the services of an umbrella company. These firms take away much of the strain of business accounting procedures and will assist in declaring expenses for tax, for example. Some also offer insurance and pension provision and while they do charge a small commission fee, such services prove much cheaper than having to pay HMRC penalties for a delayed tax return.
Whether the company is a small single person concern or a larger enterprise with several employees, local Chambers of Commerce and Trade Associations can offer plenty of very useful advice. These organisations will have been through the same process with dozens of newly formed companies and will have navigated the pitfalls they have had to overcome. The LinkedIn website is free and increasingly businesses are signing up to this network in order to connect with like-minded people and to join one of the professional groups on the website. The UK government also has constructive websites that should be read before starting to trade.
The dream of independence is one of the most compelling when it comes to setting up on one’s own, but it is important to remember that self employment means no holiday pay, responsibility for both tax and National Insurance and no sick pay. There are many insurance schemes for the self employed and small business owners and it is imperative to obtain cover. Keep the local bank manager informed about the company activities, they may be able to help should any unexpected financial problems appear from over the horizon.
Once all these measures are in place the business should be ready to commence trading.