Making the decision to go out on your own and become self-employed is an exciting moment. There are many perks to running your own business, including independence and the flexibility to decide your own business hours and days. Simultaneously, there’s so much that you need to consider, from funding to legal structure and insurance.
To make your self-employment a success, it’s critical that you understand the proper steps that need to be taken. For that reason, we’ve made this guide to self-employment to help you to get on your feet when starting your own business.
Have a business plan
Jumping straight into self-employment without a business plan in place isn’t wise so getting an idea of what you want from your business and where you want it to go is a vital first step. Your business plan should be a good guide to your business direction and objectives but be prepared for it to change as you get more experience in the market.
There are many sections that should be included in a business plan but some of the most important include the products and services offered and your ideal target client. As it grows and expands, this will act as a checklist so that you can stay on top of what targets you need to be hitting.
Remember to register
There are some legal requirements that you need to square away when it comes to running your own business, including registering as self-employed with HMRC. This is so that HMRC can issue you with a notice to complete a self-assessment tax return and calculate the tax that you should be paying.
If you fail to register, then you could be liable to pay a penalty worth up to double the tax that you owe, which can negatively impact both your business reputation and bank account. There’s a £1,000 tax-free allowance but, once you earn more than that, it’s important that you register.
In any business, there are some things that are simply out of your hands but, when you’re self-employed, there’s no one to support you in the case of emergencies. Researching the best type of business insurance for your company could help you to identify possible risks and protect against them. Insurance varies based on how many people you employ and the assets that need protecting.
The type of business that you run will affect the kind of insurance that you get and whether you’re legally required to have it. For example, employers’ liability cover is a legal requirement for most businesses with staff and, while often not legally compulsory, professional indemnity insurance is likely to be mandated by regulatory bodies for those giving advice to the public.
Maintain accurate financial records
Being organised and maintaining accurate financial records makes it easier to keep on top of your business income and expenses. Knowing where you’re overspending and making a profit means that you’ll have a better overview of your company and where you can hope to expand in the future. These financial records include all sales, business expenses, bank statements and invoices.
Keeping records of these means that nothing is overlooked, and you can apply for tax relief with everything in order. While maybe not the most exciting part of running your own business, learning effective bookkeeping practices for small businesses is essential and can make the challenging task of keeping organised that much easier.
Secure funding and finance
Knowing how much money you need to run a business is important and you’ll need to think about this before you start your venture. This will depend on the product or service that you’re offering so calculating a budget that has identified all the upcoming costs will help you to identify how you’re going to fund your project.
Are you going to apply for a small business loan or are you going to use your savings? Government and bank loans are popular sources of funding but can have high interest rates and specific requirements. There are plenty of alternative ways to find the money that you need including crowdfunding and personal loans but it can take research to identify the financial structure that best suits your business plan.