Start your own business and become self employed. The prospect is exciting, and you can succeed if you plan carefully and work hard. Eight new businesses per 10,000 people started up in the UK in the year ended January 1, 2009, according to the UHY Hacker Young website. Educated, motivated professionals stand the best prospect of success, as they have better access to capital from savings or property sales. Personal qualities such as commitment and drive, plus support from family and friends, boost your chances of doing well. Check your commitment to self employment by considering the risks. These include financial insecurity, including the loss of sick pay and paid annual leave, the personal input of time and energy and possible feelings of isolation.
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Decide on your business activity. Will you manufacture goods or provide services? Make sure you have a good business idea that fills a gap in the market, suggests Business Link. Carry out market research to ensure people will want to buy what you offer. Assess the competition to be sure your business will survive.
Prepare a business plan. Essential if you need to borrow start-up money, writing your plan ensures you research every aspect of your business. It should describe what your business will produce, who will buy it and how you plan to market it. Set out how many people you plan to employ and how their skills will add to your success. Explain how you will operate. Include information on your premises; manufacturing and delivery logistics, and financial, management and IT systems. Complete a financial forecast to include the cost of all these items, the income you expect to achieve, your expected turnover and a profit and loss prediction.
Choose a legal structure for your business. As a sole trader, you shoulder all risk yourself. In a partnership, you share your gains and losses. If you set up a more complicated limited company, your personal liability is limited. Rules on each structure affect your tax position, record keeping and decision making, according to Business Link.
Decide on your business name. A limited company must register a unique name with Companies House. Names ending with “Limited”, “Ltd”, “Public Limited Company” or “plc”, are restricted to limited companies. Make sure your business name is attractive to your targeted customers.
Register as self-employed with Revenue & Customs. You will need to complete an income-tax self assessment each year and pay self-employed national insurance contributions for yourself and, if you employ others, employer contributions. Register for VAT if your business turnover is likely to exceed the annual threshold, set at £70,000 for 2010.
Tips and warnings
- Consider buying a franchise to invest in a proven business idea. Buying a licence to trade from a successful franchisor allows you use their name. According to the British Franchise Association, many franchisors offer extensive training in all aspects of the business.
- According to the Chartered Institute of Management Accountants, cash flow is vital to all businesses. Keep accounts to show payments in and money owed, ensuring you maintain enough cash to pay bills, to avoid business failure and bankruptcy.
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