Despite the best efforts of programmes like The Apprentice and Dragon’s Den, starting a business remains a dream for many. Although not totally without its drawbacks, starting your own business can bring great satisfaction and a new-found sense of freedom.
If you’re looking to join 4.77 million people in the UK by taking the leap into self-employment, you’re probably wondering how to get started. With that in mind, here are all the i’s you’ll have to dot, and all the t’s you’ll have to cross to get that business going.
This article is arranged as follows:
- Get a plan in place
- Sole trader or limited company?
- Do what you do best
- Choose your legal structure
- Register your business
- Think about insurance
- Create a website
- Connect with peers
- Build a presence
- Boost your rankings
- Enhance your reputation
- Get the ball rolling
- Get paid
Get a plan in place
Ever heard the saying “by failing to prepare, you’re preparing to fail”?
Putting a solid business plan together can help you work out whether your idea is a sensible one.
Once you’re confident you’ve answered all the questions that need answering, you can use your business plan to convince investors, partners, and employees that you’re likely to become profitable.
Sole trader or limited company?
You need to notify HMRC as soon as you’ve decided to start working for yourself because it will affect your tax situation. Once you've chosen your legal structure and you've started trading, you'll be able to utilise our helpful tax calculators to get an idea of how much you'll pay based on your projected earnings, and your company set-up. If you take the limited company route, you'll be able to use our resources to calculate dividend tax and work out your capital gains tax, once it's time to file your first return.
Once you’ve decided to set up a limited company, you have to choose which type you wish to form. The two main choices are:
• Private Limited Companies
• Public Limited Companies (PLCs).
Most freelancers, contractors, start-ups and small businesses will opt for a Private Limited Company, as PLCs must have a minimum share capital of £50,000, at least two shareholders, two directors and a qualified company secretary.
With Crunch, you can go online and set up your limited company yourself in about ten minutes, and all for the cost of a takeaway pizza, we’ll even refund the fee if you take out another service through Crunch. You just have to supply certain personal details to help Companies House identify you as a company director, and you’re good to go. Companies House will often have your limited company formed in a few hours.
If you’re going to be working as a sole trader, there are two options available.
The first is to register online by going to the Gov.uk site. The whole thing is pretty straightforward, just follow the process and you’ll be registered as self-employed in no time, we explain it further in our helpful “how to register as self-employed” article. You’ll now be registered up until the point you de-register (if you ever need to). You won’t need to re-register each tax year.
You can also, if you’re willing to face HMRC’s call centres, complete your registration by calling 0300 200 3500. They’ll take you through everything and get you set-up straight away.
Do what you do best
You want to go self-employed so you can make a living doing what you love, right? Well, now it’s time to do it. Show people what you can do, get creative, and enjoy the new-found freedom that comes with running your own business.
It can be a tough life, and it won’t always be easy, but if you love what you’re doing, you’ll never be without a spring in your step. Our article on how to turn your hobby into a career could help you find a more enjoyable way to make a living.
Choose a name for your business
This is a big step and one that can be fun, you don’t have to be boring and simply use your name - your business name can be anything, within reason. You’ll only have to come up with an official name for your company if you’ve decided to operate as a limited company, but either way, you might want to operate under a trade name.
When choosing a name, it’s especially important to think about your online presence. Is the name something people will search for and be able to spell? Iis there a website domain available for the name?
There are a few rules you need to be aware of and your chosen business name may already be taken, so our article ‘How to come up with a great company name’ is a good place to start. It’s worth checking Companies House to see if any other business has the same name. Making sure that nobody else has the same name is vital for trademark reasons and you also don’t want to confuse your customers.
Choose your legal structure
We’re constantly asked to explain the differences between sole traders and limited companies, and as an aspiring startup business or freelancer - these are among the choices available to you as a legal structure.
There can be a number of advantages in forming a limited company, but it does come with more responsibilities.
Generally, sole trader or limited company business structures are the most popular amongst freelancers and contractors, but there’s also the possibility of operating as a Partnership or Limited Liability Partnership, should these structures suit you better.
Each of these structures come with their respective pros and cons, so explore our article ‘sole trader vs limited company - what’s best?’ thoroughly before making your choice.
Register your business
Your choice of how to structure your business will have an impact here since each legal structure requires a slightly different registration process.
Registering as a sole trader is the simplest route, which only requires you to choose a business name and register with HMRC as self-employed for your annual Self Assessment (which is how you’ll pay your tax). Once this is done, you’re all set. Registering and setting up as a limited company is a little more complex, as there are a few more hoops to jump through.
That said, it can still be done quickly and easily – you can form a company online at Companies House, or save yourself some money by using our Crunch Formations service to see if your company name is available and then getting your new company set up in just a matter of hours (for less than the price of doing it through Companies House).
Think about insurance
While not necessarily a legal requirement (although it is in some industries – something else you’ll need to check out), it’s probably worthwhile exploring the different business insurance options available as - despite involving an initial outlay - some investment here can save you considerable cash.
Business insurance comes in many shapes and sizes - you can’t just buy “business insurance” and be done with it. You’ll need to pick and choose what policies are a good fit for you and your business. Professional Indemnity, Public Liability and Employers’ Liability are just some examples of covers that you might want to consider.
Professional Indemnity Insurance
This covers you if a client suffers financial loss as a result of your professional advice or service. For example, it could protect you against a compensation claim from a client for negligence or mistakes, covering the potentially expensive legal costs.
It’s not required by law but is recommended for more risky professions, as it will basically cover you for any mistakes you might make.
Public Liability Insurance
Although not required by law, this kind of insurance is essential if members of the public will be interacting with your company in some way - from customers receiving deliveries, to clients visiting your office or work premises. If you work from home and meet clients at your home office then you should also consider getting this insurance. A policy will cover you if someone is injured in some way by your business, or if you damage third party property when carrying out work.
Employers’ Liability Insurance
You’ll need to get this if you’re employing staff, as it will cover your legal liability for injury or death to employees, including claimants’ costs and expenses. Employer’s Liability Insurance, for instance, is compulsory for any business that has one or more employees, whether they are permanent, part-time or temporary.
Aside from these common policies, there’s also things like tax liability cover, legal expenses, and contractor sickness cover that might appeal depending on your circumstances.
You might also want to consider lIfe cover to protect yourself or your loved ones should the worst happen.
If you think you might need cover, we've got a great partner, Qdos, who offers a range of bespoke insurance packages designed to protect your business against any accidents or unpredicted circumstances. They also offer a 15% discount to all Crunch clients.
Create a website
Now that you’re officially a business, you need to think about creating a website. Even if it’s just one or two free WordPress pages, it’s vital to have an online presence, somewhere you can send potential customers and a way for them to find out about your business and do a bit of research on you. You need to ensure your website sells your products or services perfectly and converts site visitors into customers. It’s such a quick, cheap and easy way to get your business more attention that every business should have a presence online.
There are a whole host of services to help you build your site, the most popular being Wordpress, Wix, and Squarespace. Domains are pretty cheap these days too, and depending on your choice could cost you as little as £10 a year.
We have an article with some handy tips for setting up a small business website.
Connect with peers
The next step is to connect with businesses that complement your products or services but aren’t in direct competition. You can build up connections on social media websites or through local networking events. The more people you meet the more chance you’ll have of gaining those all-important leads in the first few weeks.
Our Crunch Chorus self-employed community has a popular Facebook group with over 2,000 members and is a friendly, helpful place to find people to connect with.
Build a presence
Building a presence online is a little different to offline since you have so many more channels to focus your energies on. You also need to be mindful of keeping your private and professional life separate online - friends might be interested in knowing you’re starting your own business, but your clients won’t be interested in the parties you’ve attended or how much you enjoyed that movie over the weekend.
That’s why it’s a good idea to start from scratch; use the ‘pages’ facility to get a business page on Facebook and create a business Twitter and LInkedin account - just remember to keep the personal stuff personal, and the public stuff public.
It only takes a few minutes a day to post an update on Facebook, send out a few tweets or connect with someone on LinkedIn - a small price to pay for the extra exposure. Each platform is different and should be approached in its own way.
It costs you nothing to tell your friends, family, and ex-colleagues to spread the word that you’re in business, either. Just make some calls, share your Facebook page and send a few emails – whatever you have to do to get the word out. If your business appeals to them, they may, in turn, use their personal and professional circles to refer it to a much bigger audience
Boost your rankings
You probably know that appearing at the top of search engines for certain terms can be extremely lucrative in terms of traffic and sales since you’re what people see when they’ve already made the decision to hire or buy.
To get there you need to ensure your content is rich, engaging and informative while connecting with peers to ensure you have links on other websites too. You can regularly update your blog, add your business to Google Places, or invest a little more money and enlist a freelance SEO expert to help.
Enhance your reputation
When people search for a product or service online, they utilise the wealth of information at their fingertips and delve a little deeper than if they were shopping on the high street. They’ll research you and your brand, see if you deliver what you promise and have knowledge on the area you’re trading in.
This is why it’s not only important to blog on your website (or guest blog on other websites) with informative articles and advice, but also to encourage feedback and reviews online to confirm your position as a leader in your industry.
Get the ball rolling
Once you have a website, a social media presence, and a presence online you can start making waves to bring visitors and customers to your business. There are many ways to encourage a flurry of interest such as competitions, press releases, and guest blogs, and targeted email campaigns.
You’ll also need to think about organising your accounting. Keeping track of income and expenses is a necessary part of working for yourself. As your business grows, you’ll be able to get some help - but there are a few rules you need to follow when you’re just starting out.
Anyone can be investigated by HMRC. Depending on what you’ve done, you could face anything from penalties and fines to jail time. Transparency isn’t just best practice for your taxes, it’s best for your business, too. It forces you to keep track of all the money that’s coming in and going out. You can then use this information in helpful ways, like planning business strategies or reducing the amount of tax you need to pay.
Keep records updated
Set aside an amount of time each week to do your books - maybe even set yourself an alarm on your phone or a recurring calendar booking. Remember, as soon as you let your accounts get out of hand, a backlog will begin to form that could deteriorate into a massive (and potentially very expensive) headache.
Learn more about finance for the self-employed
Bookkeeping isn’t just about tracking your cash flow. There are various ways to analyse your income and expenses to find ways to cut back on costs and make more money. If you’re not quite sure what you’re doing, there’s a lot of online support.
If you need help managing your business finances, Crunch can help - we’re experts in supporting freelancers, contractors, and small business owners..
One of the biggest challenges you’ll face working for yourself is balancing your income and outgoings - what’s known in the business world as “cash flow”. Clients, especially more high-profile ones, are renowned for not paying up on time.
The first step is to make sure you send out a proper invoice. We’ve got some handy invoice-templates for you to download for free. Or our free invoice software is great for sole traders, you can send and save invoices and client details to make your invoicing quick and hassle-free.
At Crunch we offer great value accountancy packages for limited companies or for sole traders, coupled with all the advice and support you need from our expert client managers and accountants. Our software makes it easy to issue invoices anytime anywhere and set up automatic payment reminders, plus much, much more.
The key to getting paid on time is to be proactive in handling your outstanding invoices.
By following the simple points below you will ensure your payments arrive on time, and you’ll also more easily spot early warning signs that indicate a problem.
1: Approximately one week after issuing the invoice and prior to the expected payment date, make contact with the client by telephone or email. Confirm the invoice has been received and that there are no issues with the services provided so far.
2: On the due date, ensure you send a statement if no funds have been received. Remember a statement is just that - a statement of the account, it’s not a request for payment.
3: At seven days overdue, send a reminder letter or email to the client requesting payment.
4: Between seven and 14 days overdue, a call should be placed to query why no payment has yet been received. Make a note of any promise of payment.
5: At 14 days overdue a second stronger letter requesting payment and warning of further late payment charges should be sent to the client.
6: From day 15 to day 30 you should make regular contact with the client by telephone to ascertain the reason for the delay. If you have provision for the cessation of work due to non-payment this must be illustrated to the client.
7: Keep notes of any calls or emails sent to or received from the client regarding payment.This will help should a promised payment not arrive, as you will have the record of the broken promise.
8: If no payment is received by day 30 your company must carefully weigh up the risks involved in continuing to supply services that have yet to be paid for. Can your organisation survive should the next invoice be unpaid?
If you have an account unpaid at 30 days overdue, do not hesitate to stop supplying services to the client. Whilst you may have built up a strong personal relationship with the client, above all else, this is business and must be treated as such.
To help you out, here are some handy late payment reminder letter templates you can send out to your tardy clients.
Please note, however, that these letters are a basic guide and your company may have other procedures to deal with defaulting customers. If so, include these in your requests for payment. If your contract includes provisions relating to the transfer of assets or intellectual property these should also be included.
Stop reading this and get on with it!
In terms of the initial paperwork that’s about it – at this point, the only thing left to do is to get out there, generate some leads, and start building your business. Starting a business can be daunting, but you’re on the right track by getting stuck into some research.
Belief and hard work will go a long way in this endeavour. Just remember that Rome wasn’t built in a day - starting a business from scratch is a tricky old task, but completely worthwhile when you start to build up some steam.
Don’t forget, our Knowledge section contains even more handy articles, downloadable guides, and free tools and resources to help you and your business thrive. If you need some support from like-minded people who took the self-employed plunge, you can find them in our free-to-join self-employed community, Crunch Chorus.