32 | OCTOBER 2019
Installer Support
Installer Support is
sponsored by Kayflow
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 al-
lows 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 bene-
fits 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 diffi-
cult customers, chasing invoices
and managing the cashflow. Mis-
takes 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 peo-
ple. 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 num-
bers 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 em-
ployee. 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.
Better value
The problem with being a sole
trader is that you have to com-
pete with the big boys. However,
there are some major advantag-
es that you have over them. For
instance, you can build a lifelong
relationship with your customers.
As gas engineer John McLaugh-
lan 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 recommen-
dation, there is no marketing
cost.
You also don’t have any expen-
sive central office cost and no
over-paid directors to support.
All of this means that you have
the potential to offer better val-
ue 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. Unfor-
tunately, you could always tell
when he had been there from
the leak (really, not an exagger-
ation) 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-em-
ployed 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 employ-
ment, 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 Con-
struction 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).