BUSINESS
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 Lifestyle versus growth
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. 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.
‘There is the general
hassle of running the
business, getting the
pricing right, dealing
with difficult customers,
chasing invoices and
managing the cashflow’
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.
70
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.
NOV/DEC 2019
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