Clearview National October 2019 - Issue 215 | Page 80

INSTALLERSUPPORT
Welcome to the independent state
Every competent tradesperson has the choice of trying to go it alone.
Many do and even more think about it. Benjamin Dyer, CEO of Powered
Now, talks about some of the joys and issues of taking the plunge.
THE JOYS OF BEING
A SOLE TRADER
The joys of being a one-man (or sometimes
woman) band are firstly that you have no idiot
to tell you what to do. Secondly you can set
your own hours. This allows you to fit work
around your lifestyle, for instance picking the
kids up from school every day. Finally, you can
do pretty well financially – “the man” is no
longer taking a top slice off your income.
Unfortunately, this isn’t the whole story.
Against the benefits you have the headache of
paperwork, insurance and tax returns. You are
the bottom line on everything, if you don’t do
it, no-one else will.
Then you have to find work. If there is
no work coming in, you don’t eat. And I
can assure you that this can lead to sleepless
nights.
There is the general hassle of running the
business, getting the pricing right, dealing
with difficult customers, chasing invoices and
managing the cashflow. Mistakes here can
completely derail you, no matter how good
you are at doing the jobs.
Overall, though, life as a sole trader works
for many people. There are, after all, around
700,000 self employed working in the field
trade in the UK.
LIFESTYLE VERSUS GROWTH
Most sole traders won’t grow their
businesses. That’s a fact. Compared to 700,000
sole traders, there are only around 100,000
trade businesses with 2 – 10 employees. These
numbers tell us that the majority of self-
employed trade businesses will never grow
larger.
If you do want to grow, there is the
challenge of the first employee. Since the first
employee will overnight double the amount
of work you need to bring in, plus adds the
headache of the pay-as-you-earn (PAYE)
system, it’s a major hurdle to overcome. The
best way to deal with this is probably to use
sub-contractors. Then you can grow your
business until there is enough work to take
someone on permanently.
80 » OCT 2019 » CL EARVI E W- UK . C O M
BETTER VALUE
The problem with being a sole trader is
that you have to compete with the big boys.
However, there are some major advantages
that you have over them. For instance, you
can build a lifelong relationship with your
customers. As gas engineer John McLaughlan
says: “You grow old with your customers”.
Word of mouth controls 70% of all work in
the domestic market. When you get all of
your work from recommendation, there is no
marketing cost.
You also don’t have any expensive central
office cost and no over-paid directors to
support.
All of this means that you have the potential
to offer better value than bigger competitors,
even while taking home more than you would
if you were working for them.
However, the key thing to remember is that
you mustn’t under-price yourself.
QUALITY OF WORK
A few years ago, my daughter did a major
renovation on her house before she moved in.
As part of this, she used a plumber to do some
critical work. Unfortunately, you could always
tell when he had been there from the leak
(really, not an exaggeration) that accompanied
every visit. Not surprisingly, this led to threats
of non-payment and confrontations. Looking
at this from the plumber’s side, I’m sure it was
all very unpleasant.
And that is the lesson from this particular
example. If you are going to be a successful
sole-trader and enjoy the work, you must do
a quality job. It’s not just that this is what
results in being paid, it’s also what leads to
recommendations and the next job.
PRICING
Pricing is probably the single most
important new skill that someone moving
to self-employed status needs to master. The
mistake that can easily be made is to under-
estimate the effort that jobs will take. The
other mistake is to estimate the price with a
day-rate that isn’t sufficiently high enough.
This happens when people do not factor in
tax, national insurance, holidays, sickness and
time spent either waiting for work or doing
non fee-paying activities.
If there is one reason why sole traders move
back to employment, it is from consistently
getting their pricing wrong.
WHAT YOU NEED TO MASTER
Everybody who is a sole trader must register
as self-employed. That’s unless they create a
limited liability company which comes with
its own additional regulations that we won’t
cover here. The result of being a sole trader is
that you must complete an annual tax return.
You should typically set-aside 20% of your
earnings for the annual tax bill, or more to
be safe. At the very least you should get some
initial advice from an accountant. They will
usually save you more in tax savings than their
fee, all legally.
If you subcontract for other contractors in
the building trade you need to register for the
Construction Industry Scheme (CIS). You
will normally have 20% CIS deducted from
your invoices. You MUST keep track of this
as it can be offset against your tax liability at
the end of the year. The same applies to all
of your costs. The paperwork associated with
them should be treated as if it is bank notes –
because all cost invoices will save you on the
tax bill.
If you have sales in excess of the annual
VAT threshold, currently £85,000, then you
must register for and charge VAT. You also
must do quarterly VAT returns under Making
Tax Digital (MTD).
Theoretically you should also need to master
the intricacies of GDPR. This is the regulation
about storing other people’s personal
information either on paper or computer. In
practise, though, it is likely that unless you
start doing aggressive marketing this will not
be an issue.
Depending on which trade you operate
in, there are other regulations that you must
follow. The most demanding being gas
and electricity. It is your responsibility to