A sole trader's checklist - 13 top tips
Amidst all the doom and gloom, last week saw some good news – the number of sole traders in the UK has risen by 123,000 since the start of the year.
Running a business on your own is a tough job – but it can be hugely rewarding, and can allow you to start your new venture with a relatively low initial outlay.
Here are some top tips to help you succeed as a sole trader.
1. Understand your responsibilities
As a business owner it is vital that you understand what the law asks of you. Sole traders are required to carry out a range of tasks and fulfil a range of responsibilities – particularly with regard to Self Assessment tax. Make sure that you speak to an accountant or solicitor if you are in any doubt about those responsibilities.
2. Learn time management skills
Effective time management is amongst the most important skills available to a sole trader. You will have innumerable demands on your time, and it is important that you come up with efficient ways to get things done.
3. Learn when to outsource
You should recognise that you may not have the skills or time to do everything yourself. In these cases outsourcing or delegating may be the answer. Many business owners find it difficult to let go of tasks – but if you are to get everything done, you need to learn when to pass responsibility on to others.
4. Get to grips with Self Assessment
Self Assessment can seem like a daunting task – and, indeed, it is one of the most important legal responsibilities facing self-employed people. Read some tips to help you fill out your first Self Assessment tax return.
5. Remember VAT
Even as a sole trader, you will still be obliged to register for VAT if your turnover exceeds the VAT threshold. Alternatively, some business owners choose to register voluntarily for financial reasons. Read more about VAT registration.
6. Get insured
Insurance should be a priority for every business owner. A good business insurance policy can help protect you against some of the many risks you will face on a daily basis. Make sure that you read your policy carefully, and understand any relevant exclusions.
7. Consider an accountant
While many sole traders choose to handle their accounts themselves, others prefer to entrust this task to an accountant. This can help you to take some of the stress out of the Self Assessment process.
8. Get selling ASAP
As a sole trader your personal income is dependent on your business success. Unless you have big cash reserves (which you probably don’t want to use up paying the mortgage anyway), it is important that you get selling as soon as you can. Try to make yourself as visible as possible – and don’t get sidetracked by little issues that can be solved further down the line.
9. Invoice promptly…
Get into the habit of invoicing promptly. Make sure that you submit invoices as soon as is relevant – for example as soon as work is completed. Good bookkeeping software can help you to automate the invoicing process.
10. …and chase payment
Don’t bank on clients or customers settling their invoices promptly. Sadly, chasing payment takes up a big chunk of many self-employed people’s time. Make sure that you follow up as soon as an invoice becomes due, and at regular intervals thereafter. Read more on preventing late payment.
11. Don't forget development
It can be easy to get sidetracked by fire fighting as a business owner – and particularly as a sole trader. But it is important that you set aside some time for business development. Make sure that you give yourself the opportunity to think about ways to expand your business and find new clients.
12. Consider branding
There is no necessity for you to use your own name, even if you are a sole trader. Instead, you might want to consider developing a new corporate identity. This can be particularly useful if you are trying to give the impression of size to potential clients.
13. Don't write off incorporation
Finally, remember that you don’t have to stick with the sole trader format forever. As your circumstances change, and as your business expands, you might find that incorporation becomes a better option. Read more about choosing a legal structure.