Starting a Business From Home
Starting a Business From Home
If you are considering becoming self-employed and starting this business from home, it can be an exciting if not also a slightly daunting prospect at the same time too. However, becoming self-employed is an increasingly popular route for people in the UK to go down, with the TUC reporting that there has been consistent growth in numbers for the last 15 years, with this growth expected to rise over the next coming years. Overall, statistics released by the Office of National Statistics showed that there are at least 4.2 million self-employed workers in the country. If you are one of them, or if you are wanting to start a business from home, we explore some of the things you need to consider to run a successful company from the comfort of your home, be it selling African baskets online, content writing and everything in between.
Carefully consider your business strategy
Before taking the leap of starting your own business from home, you should spend time carefully considering your business strategy to ensure that it is both plausible and profitable. For example, some of the questions you should be asking yourself include:
- Do you know how you would gain new clients?
- Do you have any potential clients that may be already interested from previous employment?
- Is there a demand for the product/service you want to provide?
- Have you completed enough research to know for certain there is the demand?
Having the right insurance
If you are going to run a business from home, you will need to have insurance in place to cover you in the event of legal action or an accident. The type of insurance you will need will be dependent on the exact company you are running. For example, if you will be having staff that will be working for you, it is a legal requirement for you to have employer’s liability insurance. The insurance policy covers range from £5 million to £10 million.
You may also need self-employed public liability insurance if you run a business from home. Having this kind of cover means that you will not have to pay compensation costs if someone were to take legal action against you, as unfortunately being self-employed doesn’t mean it isn’t possible for you to be sued. You are still liable for potential damages should an individual that has visited your home in relation to work is injured as a result of going to your home, s0 this type of insurance is particularly suited to those working as a tutor or therapist or those who are plumbers or handymen, where their line of work means that that is feasible for a member of the public to end up getting an injury. Public liability insurance means that the cost of compensation and damages will be covered.
Can you maintain good cash flow?
Having good cash flow management is essential for the longevity of your business. In this guide, we explain the ways in which you can maintain cash flow and why it is so vital to your company, therefore you must take into serious consideration whether or not you are going to be able to afford all the outgoings involved with managing your own business?
When we talk about cash flow, this refers to the total amount of money that is going into a business and the money coming out. Having good cash flow management is vital in order to sustain your business, whether it’s at home or in an office. There are different ways you can maintain good cash flow in your business, for example:
- Give customers incentives for paying invoice payment on time (it has previously been reported that nearly half of all invoices aren’t paid promptly)
- Regularly monitor your inventory
- Organise upfront deposits
Consider Signing Up With an Umbrella Company
If you are self-employed and running your own business, particularly as a sole trader, you may naturally and excitingly expand, increasing your income. As this happens, it is important you stay on top of your finances, tax obligations and tax efficiency and structure. Some people may set up their own Limited [personal service] company. However, most people do not necessarily want the increased costs and responsibilities that come with running a company. Hence, signing up to an umbrella company may be a more desirable option.
Umbrella companies employ the person in question and then take care of tax obligations, invoicing clients as well as legislative compliance (such as IR35 and others.) Employed by an umbrella company, you will no longer need to worry about many of the more stressful and mundane tasks of running a business such as submitting tax returns and chasing clients for unpaid invoices (source: Transparent Umbrella Company).
Are you prepared for an emergency?
No one wants to be hugely negative about starting a new business from home, however, it is important you are prepared for the worst case scenario if something unexpected happens which means the business struggles financially, or you have certain months of the year where the business dips. You should be asking yourself if you have the savings available to help you through difficult times like this. It is important, especially if you are the one who is running the business to prepare for emergencies that could leave your business in financial difficulty and therefore could affect its longevity. We thoroughly recommend that you set up a savings account (if you haven’t already) that you pay into regularly to prepare for such an eventuality:
In terms of the amount you should be aiming to save, we recommend considering the following:
- Review your cash flow
- Calculate a reserves estimate based on this information
- Estimate on this average how much you would need to cover for different periods of time, from three months to a year