With redundancies and unemployment on the rise, growing numbers are turning to self-employment to try and earn an income.
Nearly half (46%) of all self-employed workers are over the age of 50, so there’s no doubt that more and more of us are considering it as a career pathway.
For some people, running their own business can offer a great sense of pride, achievement, and job flexibility, with many wishing they’d done it sooner. For others, however, it can prove costly, stressful, and energy-draining.
Before going down the self-employment route, it’s important to do plenty of research and calculations so you can consider whether it’s the right fit for you. Things to consider include how you’ll land clients, whether you can afford the unpredictability of income, and how you’ll be impacted by the loss of employee benefits.
While you’ll never be able to mitigate all the risks, it helps to go in prepared with your eyes wide open – and to give yourself the best chance of success, it helps to be as well-informed as possible.
This guide will help you to weigh up the pros and cons of becoming your own boss and give you the information and advice you need to get started. If you’re looking for ideas for different types of self-employment opportunities instead, you could take a look at our guide; 20 popular self employment ideas.
Contents
- Is self-employment right for me?
- The pros and cons of being self-employed
- Getting started – choosing your business structure
- Self-employment – can I afford it?
- Self-employment and insurance
- Once I’ve set up my business, how can I market my services?
- Hiring staff for the first time – where do I start?
- Monitoring and reviewing your business at regular intervals
- Self-employment ideas
Is self-employment right for me?
If you’re considering whether to work for yourself, you should first accept that your venture could take some time to get off the ground. It’s important that you’re prepared to work hard and put in extra hours where needed – particularly in the early days when you’re becoming established and building credibility.
Generally speaking, if you plan to work for yourself, it’s helpful to have skills such as:
Determination, focus, and self-belief. Being a small business owner isn’t easy and it’s a steep learning curve for many. You’ll need to be prepared to take risks, find and sign up clients, and take responsibility for all your decisions.
Knowledge about your product and target market. If you want to build up a loyal client base, you’ll need to be confident in what you’re selling and have a strong awareness of who you’re selling it to, so that you can adapt to their needs.
Realism and objectivity. Some people view self-employment through rose-tinted glasses, but this won’t prepare you for the highs and lows that often come along with it. Be realistic and think about the potential downsides as well as the benefits.
Confidence in your decisions. Running a business can be lonely with few places to turn to for support.
Creativity and adaptability. You’ll need to be innovative and brimming with ideas to help push your business forward. It’s important that if one idea fails, you’ll have a new one at the ready.
Organisation. You’ll have plenty to co-ordinate when you work for yourself, such as developing the product or service you’re selling, marketing it, and managing your finances. Ultimately, the buck stops with you, whatever the task, so the more organised you are, the less likely it is that something will slip through the net.
When you’re deciding whether or not to go self-employed, it’s also important to consider:
Whether you have the time and money to set up your business and can cope with having little or no income for periods of time. If you have a bad month or a slow start, then you aren’t guaranteed a salary, which can quickly start causing stress and anxiety.
Whether you have any life-changing events coming up that you’ll need to take into account, such as a new grandchild or a house move. If you know you’re going to be distracted in the near future, then it could be worth waiting until your new venture can have your full focus.
How you feel about losing employee benefits such as paid holiday, employer pension contributions, and sick pay, and how this will impact you financially.
Whether you have a space to work in and can afford to buy the relevant equipment.
How you feel about the idea of managing the less glamorous parts of your own business, such as completing tax returns, managing your budget, and finding clients.
The pros and cons of being self-employed
We all tend to know someone who’s taken the leap and decided to start working for themselves. But what does self-employment have to offer and what are the challenges?
The advantages of being self-employed
- You can explore something you’re passionate about whilst (hopefully) making a living from it.
- You’ll be able to set your own daily or hourly rates – which has the potential to earn you more money. If you set up a trading business that does particularly well, then this can offer significant financial rewards.
- You’ll have greater control over your own schedule, which can make it easier to fit your work around your other commitments, for example, looking after your children or grandchildren.
- Many self-employed people work locally or from home, so you should be able to cut down your commuting time – or possibly cut the commute altogether.
- It can be very satisfying to watch your hard work pay off – especially when you’ve done it all by yourself.
- Self-employment is rarely routine as you’ll have the option to work with a number of different clients and on a number of different projects. So, if you’re someone who enjoys variety, then self-employment can prove very rewarding.
The downsides of self-employment
- Financial uncertainty – you may have little or no income at times, especially when you’re starting out and building a client base. Even when you do have an income, it may be irregular. This can be stressful when you’re trying to keep up with your business’s running costs, such as equipment, insurance, rent, and so on.
- You may be required to work long and irregular hours to get your business off the ground. Self-employed individuals have to work hard to build a client base and to build and maintain trust with their existing clients and this can take some time.
- You may miss working in a team, at least while you’re first setting yourself up. Being self-employed can be lonely.
- Starting from nothing can be a long and tiring process. It’s important that you can persevere even when progress is slower than you’d like.
- You’ll have a lot of responsibility as you’ll ultimately be in charge of everything from winning clients and marketing your services, right through to things like National Insurance payments and completing self-assessment tax returns.
Getting started - choosing your business structure
There are many different types of self-employment and the one you choose will depend on how you want your business to be structured. Every business must have a legal structure in order to operate. The two main options are setting yourself up as a sole trader, or as a limited company.
We discuss both of these structures in more detail below.
Setting yourself up as a sole trader
Last year, there were an estimated 3.5 million sole traders in the UK. Being a sole trader is the most simple business structure there is and it essentially means that you own and run your business as an individual.
There’s very little paperwork to fill out – just an annual self-assessment tax return and quarterly Value Added Tax (VAT) returns if your annual sales of taxable goods exceed the £85,000 VAT threshold – and you’ll have more privacy than incorporated businesses because you won’t be listed on Companies House (as you would if you were a limited company).
You’ll also retain all your own profits after tax, rather than sharing them across the business.
Many people like the idea of becoming a sole trader because it can be easier to change your mind and back out of the opportunity if you decide that self-employment isn’t for you. You can simply stop trading and don’t have to go through the rigmarole of formally closing your business down. Some people set themselves up as sole traders first and become a limited company later if things go well.
While being a sole trader is an attractive business structure for many people, it does come with disadvantages. For example, your business won’t be recognised as a separate legal entity, so you’re ultimately responsible for all debts and liabilities. This means that if the business fails and there are debts to be paid, you’ll have to pay these back from your income and assets – even those not related to the business, such as your home.
Sole traders also don’t tend to own the rights to their business name. So if someone else sets up a business with the same name, you could find yourself facing a legal battle to keep it.
It’s important to weigh up the pros and cons of becoming a sole trader before deciding whether this is the right business structure for you. To find out more, check out this guide from Gorilla Accounting.
If you do decide that you want to become a sole trader, then you’ll need to let HMRC know so that they can set you up to pay tax through the self-assessment system.
Starting a limited company
According to Companies House, there are currently more than four million limited companies in the UK.
A limited company is essentially a business and legal entity that’s separate from its owners and managers. Some people prefer this option because it means that if the business fails, they only stand to lose what they put into it and their personal assets remain completely separate.
Other advantages include:
- You may find it easier to attract customers, as some customers have more confidence trading with a limited company. This is often because limited companies are monitored more rigorously and have details and accounts published publicly – making them appear more transparent.
- You’ll have legal ownership of your business name, meaning that no one else can use it.
- You can sell shares to investors to raise capital and will usually find more opportunities to borrow money.Some banks will only lend money to limited companies and not sole traders.
- You’ll potentially pay less tax because you won’t pay 20-45% income tax as you would if you were a sole trader. Instead, you’ll pay Corporation Tax on your profits and then the company can pay your salary through dividends, which are taxed at a lower rate than salaried income. The amount of Corporation Tax you’ll pay depends on how much profit your company has made. If your company makes more than £250,000 profit, you’ll pay 25% of all profits, whereas if your company makes £50,000 or less, you’ll pay a lower rate of 19%. This rate applies to both rental yields and any profit when you come to sell the property.
Tax rules can be complicated and change often, however, so it’s worth seeking professional advice from an accountant before deciding how your company should be structured. You can find a chartered accountant here.
As you might expect, owning a limited company also has some disadvantages. These include:
- Being listed at Companies House – which means that details of your company’s earnings and directors will be publicly available. For some people, this may not be an issue, but not everyone likes having their details visible on the internet. You’ll also be charged an incorporation fee to register your business and file annual returns.
- There’s a lot of extra paperwork to get through, although, you can choose to outsource much of this to an accountant for a fee.
- Your level of responsibility will be greater. Everyone who runs a limited company must comply with what is known as the Director’s Fiduciary Responsibilities. These outline what a limited company director is legally obliged to do. For example, they must exercise independent judgement and avoid or manage conflicts of interest that may affect their objectivity.
The government provides a helpful seven-step guide on how to set up a limited company, which can be found here.
Before deciding which business structure is right for you, it’s important to spend time weighing up the pros and cons of each. While you may be in a hurry to get started, the structure that you choose can have a significant impact on the success of your business.
You may want to consider speaking to an accountant or a financial advisor who will be able to explain the pros and cons of each structure in greater detail.
Self-employment - can I afford it?
One of the biggest questions people often ask themselves when considering whether to go self-employed is ‘can I afford it?’ Below, we answer some of the most frequently asked questions regarding finance and self-employment.
How much tax will I pay if I’m self-employed?
The self-employment tax system is often a source of confusion for many – so it’s a good idea to try and get to grips with it prior to going it alone.
You’ll need to complete a self-assessment tax return after the end of every tax year (5 April) and you’ll have until 31 January the following year to submit this. When you fill your tax return in, there will be various expenses and allowances you’ll need to factor in to calculate how much tax you’ll pay.
There are also business-related expenses that you’ll be able to deduct from your income amount when you’re calculating your taxable profit. Business-related expenses usually refer to all the basic things that are required to run a business, such as equipment, rent, and telephone costs.
Some people decide to file their tax return themselves, while others pay an accountant to do it for them. This can help to free-up time and ensure you don’t make any common tax-return mistakes. If you decide to hire an accountant, then be sure to go with someone reputable as, although it’s rare, there are scammers out there.
Whether you’re employed or self-employed, the tax bands and tax-free personal allowance remain the same. This means that in 2023/24, you can earn up to £12,570 before you pay tax. After this, you will then pay 20% income tax on income up to £50,270, 40% on all earnings between £50,271 and £125,140, and 45% on any earnings over £125,140,.
Can I be employed and self-employed at the same time?
It’s possible that you may want to go self-employed on a part-time basis to test out your idea, whilst continuing to work for a company. In this situation, you’ll be both employed and self-employed and will be required to pay tax via self-assessment and PAYE.
Some people also set up a limited company, however, provide their services to just one single company. In this instance, HMRC may want to check that you aren’t actually an employee that is using a separate company for tax reasons. It mostly only affects consultancy businesses that have one single customer or client for long periods of time.
For more information, you can read the government’s guidelines on how to work out whether you’re employed or self-employed. It’s a complex area of legislation called IR35 that HMRC has been focusing on recently, so if you’re not clear on whether it might impact your activities, you might want to speak to your accountant to get more clarity.
Applying for financial help when you’re self-employed - what’s available?
When you register as self-employed, you may be eligible to apply for a number of benefits. It’s worth finding out whether you could be entitled to any of the financial support listed below.
Allowable expenses for the self-employed
When you start running your own business, you’ll be able to claim back the costs of the basic things that you need to run a business, such as rent on an office or retail space, as well as internet and utility bills.
These costs will be deducted from your overall profit every year, meaning that they aren’t taxable. For example, if you made £35,000 last year, but you spent £5,000 on running costs, then you will only be taxed on the £30,000 (known as your taxable profit) – not on the money you’ve spent.
If you’re not sure which allowances are deductible, or how much tax you need to pay, it’s worth seeking advice from an accountant. You can find a chartered accountant via the Institute for Chartered Accountants in England and Wales (ICAEW) here.
Universal Credit for the self-employed
Universal Credit is a government benefit designed to support people who are on a low income or out of work, and it may be able to help you while you grow your business.
In order to receive Universal Credit, you must be able to show that self-employment is your main job/source of income, that the work is regular and organised, and that you expect to make a profit. These factors will classify you as “gainfully employed.”
Once you’re classed as ‘gainfully employed’, you’ll be able to receive Universal Credit to top-up your income without having to prove that you’re looking for or available for other work. You can earn more about how Universal Credit works in our article; Universal Credit explained.
Find out more about Self-employment and Universal Credit on GOV.UK
Working Tax Credits for the self-employed
It’s possible that you may be eligible for Working Tax Credit (WTC) when you’re self-employed, but you must meet some strict criteria in order to qualify. Your eligibility will depend on your earnings, your working hours, and several other factors.
As with Universal Credit, you’ll need to be able to prove that your self-employed work is regular, organised, and ongoing, and that you’re trading on a commercial basis with the aim of making a profit.
You can read more about the criteria on the government website.
Pension Credit
If you’re self-employed and above State Pension age, then you may be able to receive Pension Credit payments. These payments are split into two types – Guarantee Credit and Savings Credit.
Guarantee Credit is designed to help you top-up your weekly income if it’s below a certain threshold, and Savings Credit is an amount paid to people who have saved some money towards their retirement (for example, a pension).
Note: If you’ve reached the State Pension age on or after 6 April 2016, then you probably won’t be eligible for Savings Credit. You can use the simple calculator on GOV.UK to check your State Pension age.
Find out more about Pension Credit in our article Pension Credit explained.
Housing benefit for the self-employed
Housing Benefit is generally being replaced by Universal Credit. However, you may still be able to make a claim if you’ve reached State Pension age, live in temporary or supported accommodation, or you’re entitled to (or receiving) severe disability premium either now or within the last month.
If none of these criteria apply to you, then you can apply for Universal Credit instead. If the criteria above do apply to you, then there will be some additional factors that will be considered when deciding on your eligibility for Housing Benefit, such as whether you live in the home or whether you have savings over £16,000.
The government will make a full assessment of your individual circumstances before making a final decision. As with all the benefits above, you can learn more about the eligibility criteria for Housing Benefit on GOV.UK.
Other self-employment benefits
There may be additional benefits that you can claim in addition to those listed here, such as Income Support. However, this (and several other benefits) are now being replaced by Universal Credit.
Should I consider finding an investor for my business?
If you have a great business idea and a plan on how to execute it, but you will need a larger sum of money to get your idea off the ground, then it could be worth looking for an individual or company who would be willing to invest in your business. Businesses that are scalable or have a large market potential are most likely to appeal to investors.
Finding an investor isn’t usually easy and can take a fair bit of work. You may need to speak to a wide range of investors before you find the right one for your particular situation.
Before pitching to any investor, you should make sure that you’re established in some way, for example, that you have a name, a following, and that there’s room for your business in the current market. Your business plan should also be currently operating – even if it’s in the early stages.
Finding an investor can take months, so you’ll need to make sure you can meet your own personal financial needs during this time. You should also consider that an investor will come with terms and conditions and may want to be involved in some of the key business decisions going forward, so you may have to relinquish some control.
Before seeking an investor, you should first ask yourself whether you really need the money, or whether you can manage on your own. For example, you might be able to do this by keeping your costs really low for a while and selling more whilst you’re establishing yourself as a credible business.
You may also have friends or family that could help you out financially if you’re really struggling – but it’s up to you (and them) to decide whether this is an option that you’re comfortable with and what terms and conditions it would come attached with.
If you exhaust all your options, or if you need a large amount of money to buy equipment, for example, and decide that you’d still like to find someone to invest in your business, then start by considering whether there’s anyone in your network who would be interested in the opportunity.
You could also try signing up to the Angel Investment Network, which brings investors and business owners together. You can create a basic account for free.
SEIS and EIS
It’s also worth taking the time to understand the various government incentives set up to help encourage investment into small businesses.
For example, the Seed Enterprise Investment Scheme (SEIS) allows small, young companies to raise up to £150,000 whilst investors receive 50% of their investment back as a reduction to their tax bill. They also offer further tax rebates should the company go bust to minimise an investor’s losses.
These incentives offer a powerful reason for investors to consider making an investment into a small business. For larger companies, there’s the Enterprise Incentive Scheme (EIS) which operates in a similar way, but with a reduced 30% tax refund for investors, allowing companies to raise up to £5 million pounds in any 12 month period.
As you might expect, there are various restrictions and qualifying criteria that must be met, but the schemes are hugely attractive and widely used as a way to encourage much-needed investment into small companies.
You can find out more about using the SEIS on the government website.
Self-employment and insurance
When you decide to set yourself up as self-employed, you’ll need to make sure that you have the right insurance in place to protect your business if anything goes wrong – for example, if your business premises become damaged or a client tries to sue you.
The type(s) of insurance that you choose will depend on factors like the services you provide and whether you have employees and/or equipment or property belonging to the business. Some of the most common types of business insurance are explained below.
What types of self-employment insurance are there?
Protecting against liabilities – protection from legal action or compensation claims.
Public liability insurance
This can be useful in protecting you if a client becomes injured or unwell as a result of one of your services or whilst visiting your business premises. For example, this could include things like a client experiencing a reaction to some hair dye at your hair salon or someone getting food poisoning at your restaurant.
If something like this happens, they may try to take legal action against you. Public liability insurance will cover the cost of any legal fees or compensation claims made against your business.
Employer liability insurance
If you employ one or more individuals to work for you, then by law, you’re required to have employer’s liability insurance. Without it, you could have to pay a hefty fine. This type of insurance covers you against work-related injury or illness claims made by an employee.
Professional indemnity insurance
There are certain services that may require professional liability insurance. People who tend to need this insurance usually provide advice services and are professionals such as financial advisors, coaches, lawyers, and accountants.
Professional indemnity insurance will cover you in the event that a client is dissatisfied with your service, for example, because they’ve been left out of pocket after taking your financial advice.
Protecting your assets - protect your business as you would your home
Buildings and contents insurance
If your business is your livelihood, then it’s important to protect it as best you can from loss or damage – in the same way you would your home. Damage can occur as a result of natural causes such as flood or fire, criminal damage, or theft. Buildings and contents insurance will help you pay to replace or restore your business premises and/or its contents if things go wrong.
Personal insurance - what happens if a key member of my business dies or becomes seriously ill?
Shareholder protection
If you aren’t the sole owner of your company and it’s split between a number of shareholders, then it might be worth taking out shareholder protection to protect your business in the event that a shareholder dies. If this does happen, then shareholder protection will allow you and the remaining shareholders to buy back shares from the beneficiaries of the shareholder who has died.
Keyman insurance
Keyman insurance is designed to protect your business in the event that a key member of the team dies or becomes seriously ill. If the business cannot function without the skills and know-how of that person, then keyman insurance will pay out to lessen the financial impact of them not being there. This money could help you to hire a replacement or make up for any loss in revenue.
Protecting your money
Credit Insurance
Credit Insurance can protect your business if a client misses a payment – either because they can’t pay at all or just can’t pay on time. It means that your business can still continue without being affected too much by the missing payment.
Other types of insurance
As well as some of the more general types of business insurance above, it can also be useful to purchase insurance that is specifically tailored to your business type and covers everything in one policy. For example, specialist insurance for professional dog walkers or beauty therapists.
If you’re looking for somewhere to start when you’re looking to purchase insurance, then Simply Business * has a wide range of cover types – including the option to search for insurance by trade.
Once I’ve set up my business, how can I market my services?
First, consider who you're targeting
It’s important that you think about who you’re marketing your services to before thinking about how you’re going to market them.
It can help to consider the following factors when you’re trying to work out who your target audience is:
- Where do they live? Is it a specific region or are you targeting people nationwide?
- Which demographic(s) are you targeting?(age/gender/occupation/income/education)
- What kind of personality does your target market tend to have? What personal values do they adhere to?
- What sort of lifestyle does your target market lead?
- Is your target market likely to be regular customers or do you offer a one-off service that clients are unlikely to need again?
Identify your Unique Selling Proposition (USP)
Before setting up your business, you should think about what makes your service different from those offered by your competitors. You need to find a way to stand out from the crowd by making your service as unique as possible.
To do this, it can help to start by thinking about what specialist skills and knowledge you have that your competitors may not and what you personally love most about your own products and services.
In a highly competitive market, this could be innovative product features or specialist knowledge – for other businesses, a key differentiation could simply be that you’re the only shop for miles around. When you’re advertising your services, you should highlight these unique selling points as much as possible.
Develop your business brand
No matter what the nature of your business is, it’s likely to need a brand. Having a brand allows a business to connect and build trust in clients because the good service you provide becomes associated with your brand. This means that clients are a) more likely to stay loyal to your brand and b) they’re more likely to use a range of different services offered by your brand.
A brand isn’t simply about having a logo or a tagline – it’s about having values and an emotional connection with clients that allows them to understand exactly who you are, what you stand for, and what you’re promising to deliver.
Set up a Facebook page
Before you set up your business, it’s helpful to work out how you plan to start landing clients. One of the most common ways to start letting people know about your business is to advertise it on social media.
Clients often prefer the person-to-person interaction that they get from social media business pages, rather than the business-to-person interaction that they may receive when they email a company or use their website.
Facebook is a great place to start advertising your services because it gives you the option to create a free business page that clients can easily interact with and share with others. However, the easy part is creating the page – the harder part is to start drawing attention to it and help it stand out from the crowd.
Facebook is a busy platform, so you’ll need to work hard at publicising your page to make sure that people know it’s there.
Here are a few suggestions that could help your page establish a presence:
- Invite people to like your Facebook page – as many as possible!
How do I invite people to my page?
- Add engaging posts on a daily basis that promote your services. You can encourage clients to respond to your posts by asking them questions. This is a good way to get a discussion going on your page and will also help you to find out more about your target audience.
Learn to create engaging posts on your Facebook page
- Facebook will give you the option to pay to boost your posts – so that they reach a wider Facebook audience. You don’t need to do this with every post, but it can help to boost key posts that are proving particularly popular.
Find out more about how to boost your posts
- Consider creating some business-related content that you can share on your Facebook page, for example, a blog. If you want customers to keep coming back to your page and using your services, then you need to stick in their minds as much as possible.
If customers become a fan of your regular content postings, then they’re more likely to keep coming back to your Facebook page and will, in turn, think of your business when they’re in need of the service you offer.
Set up a website
Having a Facebook page is great for connecting with clients on a social level, but for credibility and professionalism, it can also help to have your own website. Once a person finds out about a company, it’s highly likely that they’ll then go to find the website to find out how legitimate and established they are.
Your website should include details about your services and may also include information about pricing, as well as examples of your work and testimonies from satisfied clients. It can be a great place to essentially create a portfolio of some of your best work. Clients will be much more likely to pay for your services if they can see evidence that others have been happy with the results.
If you’ve never built a website before, then websites such as Wix and WordPress can be great places to start. Both offer you the chance to set up a basic website for free. You can decide whether you want to pay for premium features once you’re more comfortable with how it all works. It’s also a good idea to eventually purchase your own domain name, as this will also help improve your credibility.
Print brochures, leaflets, and/or business cards
If you plan to predominantly offer your business services locally, then it can be worth creating some brochures, leaflets, and/or business cards to put through people’s doors or post on community notice boards.
Not everyone uses Facebook or social media, so there are clients that you might be able to land from using this traditional method that perhaps wouldn’t have otherwise known about your services.
There are plenty of websites like Vistaprint and Digital Printing that will allow you to create and order leaflets and brochures in bulk, with prices starting from as little as 6p a leaflet.
Industry networking
As well as directly appealing to clients by advertising your services, it can also be useful to attend networking events that are relevant to the industry that you’ve chosen to work in. You can also reach out to relevant individuals/businesses via email or social media.
Having strong connections in the industry that you’ve chosen to work in (or in related industries) can help you land clients in a few different ways:
- If you or a contact in your network find yourself with too much work (or with work that is perhaps too far out of the business’ catchment area), then you can make mutual client referrals.
- If you’re new to an industry, then you can learn a lot from individuals who have been doing it a long time.
- You may be able to collaborate with other people in the industry and share clients.
For more networking ideas, you might want to have a read of our article here.
Word of mouth
Friends and family can be a great place to start if you’re looking for customers for a few reasons:
- Providing your service to friends and family can give you a chance to practise. If you’re particularly nervous about delivering a service well, it can also help you to build confidence before you start working with people you don’t know.
- Friends and family can help spread the word about your business. Even if your own personal network is small, you’ll be surprised how quickly news can travel and reach new networks.
When you’re starting out, it’s important to nurture your first few customers as much as possible. The more they believe in you and what you’re doing, the more likely they’ll be to tell others about it.
Marketing - the importance of setting goals and a budget
When it comes to marketing your services, it’s a good idea to establish goals and a budget. This way, you’ll be able to gain a clear idea about how much you’ll need to spend to land ‘X’ customers. Then, if you increase your budget, you can work out how many extra customers you’re likely to attract, so you can plan accordingly.
Having a marketing budget can also help you to work out how much of your overall budget you are likely to have left for other running costs.
Hiring staff for the first time - where do I start?
Becoming self-employed doesn’t necessarily mean that you have to hire staff, as many people decide to work alone. However, if you are planning to build a team, then you may be wondering where to start.
Here are some of the things you’ll need to think about:
- How many employees you’ll need and in what functions, with what skills? Ideally, you should only hire staff that the business couldn’t function without to start with. You can always hire other employees later.
- How much you’re going to pay staff (this must be at least the National Minimum Wage).
You’ll then need to think about where you might be able to find staff. The most common way is to advertise vacancies on job boards – or you may be able to reach out to people in your own network who you already know have the relevant skills and experience.
Before anyone can become an employee of your company, you must:
- Check whether they have a legal right to work in the UK.
- Check whether they need to apply for a DBS check, for example, if the work involves working with children or vulnerable people.
- Make sure that you have employers’ liability insurance.
- Register as an employer for payroll with HMRC – you must do this four weeks before you pay new staff.
- Send details of the job offer and role to the person you’re offering it to, along with a written statement/contract of employment (this only applies if they will be working for you for more than one month).
- Check whether you need to automatically enrol your employees into a workplace pension scheme.
Monitoring and reviewing your business at regular intervals
For many people, becoming self-employed can be a steep learning curve, so it helps to stop and review how things are going at regular intervals. This includes looking at how much you’re spending, what you’ve achieved, and how you could make improvements to your service, whilst keeping within your budget.
It helps if you can be as flexible as possible and come up with new innovative ideas whenever a current idea isn’t working.
You should also pay close attention to feedback – both good and bad – and work out how you can use this to drive the business forward. Often, the most helpful insight into how to grow your business can come from customers who have taken the time to give you honest, sometimes painful, but constructive feedback.
Self-employment ideas
If you’re considering self-employment, then you may already have an idea about what kind of services you’d offer. However, if you’re looking for some inspiration, our article 20 self-employment ideas for over 50s could be a helpful place to start. From gardening to consulting, there are plenty of different ways you might be able to make self-employment work for you.
Consider buying into a franchise
If you’re keen to become self-employed, but you’re struggling to come up with a business idea that excites you, then you could consider franchising. This is where an existing company (known as a franchisor) grants you (the franchisee) the right to use its trademark, systems, and business model in exchange for upfront payments and a percentage of your revenue.
Popular franchise businesses in the UK include Costa Coffee, Home Instead, RED Driving School, and many more. The type of work you do will depend on what type of franchise you decide to buy into.
For example, as a Driving Instructor who has bought into a franchise, you’ll usually work independently and will be given pupils to teach (and often a car too!) by the company that the franchise opportunity is with. Whereas if you decide to buy into a Costa Coffee franchise, a great deal of your time may be spent hiring staff and overseeing the everyday running of the coffee shop.
The main benefit of buying into a franchise is that you’ll have the independence associated with running a small business while having the support of a big business network with an established reputation and image.
The best way to choose a franchise if you’re unsure about the type of work you’d like to do is to consider which franchises are available and, out of these, which ones would attract the most customers in your local area.
It’s also unlikely that franchisers will allow multiple franchises to crop up in the same area – so it’s always best to check what’s already out there to avoid disappointment.
If you decide that you’d like to become a franchise owner, then it’s worth looking into two or three that you’re interested in buying into. You can then contact the companies and find out more about the terms they offer alongside the initial upfront costs.
Franchising isn’t often a cheap option when it comes to setting up your own business as, on top of these initial investment costs, you may also have to put money into hiring staff and equipment. With that being said, many people still find franchising an attractive prospect because of the peace of mind that comes with buying into an already successful brand.
On this note, make sure that you always stick to franchises that are able to provide evidence of their success if you want to avoid getting involved in any scams. It’s really important to conduct thorough research before you consider parting with any cash!
To find out more about franchising and search reputable opportunities, why not visit the Quality Franchising Association website (a not-for-profit organisation that promotes ethical franchising), or visit our page on self-employment and franchising opportunities?
A final note…
Making the decision to become self-employed can be a huge step for many people, so it’s important that you’re realistic about what to expect and are honest with yourself about whether it’s something that’ll be a good fit for you based on your current circumstances. Not all of the information in this guide will apply to everyone – it’ll depend largely on the size and structure of your business.
Setting up your own business can give you a great deal of freedom and flexibility, but it can also be challenging, often with long hours and an irregular income, especially during the first year.
If you’re unsure whether self-employment is the right choice for you, then it’s important to take your time and make sure that all decisions are fully thought through and considered. This way, you’ll be more likely to enjoy the journey, wherever the destination may be.