Many people dream of having their own business, but actually taking the leap and making that happen is a different story. However, if you’re ready to take the leap from being employed to self-employed there are a few things to consider along the process.
Check your contract
Check your contract of employment – are you allowed to work on another business whilst employed? Some employment contracts stipulate that you are not permitted to work for another company or set up a business whilst employed. Always check your contract before setting up as you could be looking at damaging fines if you’re found to be in breach of your contract.
Speaking with your boss is also an option if you’re happy to open about your plans. If they know what you’re thinking, you could increase your support network as you begin.
Offset your income
If you are clear to start your business and you plan on doing it while you are still employed, it would be a good idea to start off as a sole trader because this will allow you to offset some of your expenses against your other income, your salary and/or income. This could even result in a tax refund if you have a lot of expenses to claim at the beginning.
However, you may choose to set up a limited company if you know that you want to go bigger, not stay as a sole trader for very long, which also comes with its own benefits too.
Always seek professional advice when not sure, especially when starting a business. It’s better to start with the right business set up and model than need to change or correct mistakes further down the line.
Make financial provisions
At the beginning, and while you’re still in employment, it’s time to save, save, save and gather as much income and capital behind you as possible. If you’ve decided that you’re ready to take the leap into self-employment, you want to have as much income as back up as possible. The uncertainty of finding clients and keeping funds rolling in can be daunting when starting a business and there may be times when there are no wages. Try to save as much money as possible at the beginning to cover for times in the future.
Keep good records
There is a legal obligation to keep full and accurate records for a business, this means keeping track of business income and expenditure. Although it is essential for business practise, it’s also good for keeping on top of everything and to help with submitting tax returns at the end of a year.
If you’re using good online accounting software, bookkeeping does not have to be a difficult task to stay on top of.
Planning for the future
As an employee, you’ll be set up with a workplace pension, however big or small the contributions, you have savings that are helping towards your retirement. When you take the leap into self-employment, starting a pension is something that you’ll need to consider to supplement the amount of provided by the state pension and to be financially prepared for the future.
Along with the financial implications of starting a business, having clients is also an important factor! Building a loyal customer base comes with building relationships. You may be eager to get clients rolling in as soon as possible but by bombarding potential clients with emails and phone-calls, you could potentially be putting them off. Instead, start to build a network around you of potential customers, people who you may want to work with in the future. LinkedIn is a great resource for this and allows you to network with industry professionals, business owners and other sole traders to gather information and get yourself known in the industry space.
Have a business plan
As with anything, something that has been planned out properly has more chance of success than something that is left to chance. If you’re serious about taking the leap from employment to self-employment, start everything with a clear business plan. Plan from where you are now, how to make the transition and what you hope to achieve in the year ahead.
If you’re looking for help with budgeting or putting a financial plan together for the bank or potential investors, we can help! If you’re looking to pass the financial side over to the experts so you can focus on growing the business, we can help!
Kara Accountants get to know and love your business, just like you do. We’re here to support and guide wherever you need us and we’re only a phone call away. Contact us today to start the conversation.