Pain points for Self-Employed Individuals
The problems faced by self-employed businesses and how to face those challenges
Entrepreneurship has gradually become the most trendy employment fashion in the business world over the last decade. Statistics by the Office of National Statistics reveal that there has been an unprecedented rise in the number of self-employed individuals over the past decade in the UK.
The trend should not surprise you, as it is the digital age which has brought with it tremendous ease of doing business. Another reason might be the multiple benefits, self-employed individuals get to enjoy in terms of taxation and accounting whilst on the journey of being their own boss, but one thing is for sure, that self-employment definitely goes a very long way in terms of both, money and growth, if done properly.
Individuals working as self-employed face numerous complications and will have to cope up with nerve-wracking stress and crippling anxiety in order to become successful entrepreneurs. In this article, we intend to shed light on numerous issues that self-employed individuals might come across in their business journey and address how the entrepreneurs-to-be can overcome these complications effectively.
1. No safety nets:
Business experts and ex-entrepreneurs believe that startups or small businesses in the market are the ones that are most vulnerable to suffer from cash shortages or financial crisis as compared to medium or large-sized businesses.
This is true as small business owners have to deal with the health care of their employees, unemployment compensation and other issues with very little to no personal savings and almost zero bank balance.
As a result, entrepreneurs bootstrap their ventures within their financial capacity to grow at their full potential. This can result in individuals running out of personal savings with no safety nets or protection covers financially.
There are more serious safety concerns for self-employed individuals other than business finances, for instance, their indifference towards registering under an insurance scheme and incapacity to save enough for life after retirement.
It is advisable to get an effective business plan ready by speaking to a competitive accountant, accounting firm or tax accountant before you dive into a potential business venture. Effective financial planning can be the key difference between staying afloat or being completely bankrupt with little or no access to any funds.
2. DIY approach
More than a century old, The DIY method is an act of building and modifying things without seeking any assistance from an expert or a professional. However, the DIY approach can not be fully relied upon in current times due to complicated tax rules, strict competition and the shortness of time.
The increase in competition has led to business owners seeking more and more advice for maintaining the financial health of their business from concerned professionals, this has increased the chances of those business owners, who only rely on their personal expertise to be left behind.
According to an expert, small businesses perform exactly like large businesses but differ only in terms of their scale of production and the number of their employees, it has also been noticed that large businesses have more expertise and relevant professionals in their team.
It is of the utmost necessity for small business owners to have inside knowledge about the industry they are operating in and have business accountants or tax accountants on board to help them get an instantaneous picture of their financial status or taxes in the market.
3. Time and money constraints on growth
According to statistics, time and money are the two major hurdles most entrepreneurs face while on the journey to business growth. Entrepreneurs have to take on different roles, which can also be delegated to others but money shortages limit them from hiring new employees.
As an entrepreneur with very few employees on board, you will have to personally manage various factors of your business like sales and marketing, logistics, website, production, etc along with regular bookkeeping to ensure that your finances are in the right place. You might also want a tax accountant for your tax planning and an administrator for small administrative work.
It’s absolutely normal for the shortage of money to act as a barrier to business growth. On the other hand, the shortage of time is another issue that most self-employed individuals face.
Employment or self-employment, what should you pursue?
Opting for either employment or self-employment is your personal decision, but one should at least know about the advantages and disadvantages associated with both types.
|Individuals employed in a regular job get to enjoy multiple benefits like sick pay, holiday pay and also get to enjoy minimum wage||Regular employment offers no flexibility in terms of work and time|
|By pursuing self-employment, individuals get enrolled under a pension regime automatically||It has very little to no scope for financial planning|
|The firm works out your PAYE or National Insurance (NI) every month and income is taxed before being paid to you||You dedicate your effort and time for someone else instead of yourself|
|You will have to work out your taxes and national insurance on your own, which gives you room for tax planning using a good tax accountant or personal tax accountant.||Self-employed individuals do not get to enjoy regular employment benefits like sick pay, maternity or paternity leave, and standard insurance (unless you register for it)|
|You get the authority to choose your work hours and who you want to work with||You’ll have to enrol under a pension regime by yourself and will not enjoy the benefits of employment pension|
|You are free to make whatever arrangements you like for yourself if you want to go for a holiday or stay home when you fall sick||You might be liable to make payments on account if your tax bills exceed £1,000|
How can entrepreneurs address these issues?
In order to tackle various problems, entrepreneurs need to first identify and address them and then introduce changes accordingly if needed. Here’s how entrepreneurs can get handle the numerous problems they are most likely to face.
Write down what you really want on a piece of paper
An entrepreneur who fails to plan plans to fail. Before setting up your business, you need to write down the different strategies you will be utilizing to achieve your set goals and targets. Figure out how you can achieve your targets utilising a minimal amount of resources and time. Once you know what you really want, you will then be required to keep track of your progress towards achieving them.
Focus on primary tasks (business growth plan and leadership, etc) and delegate secondary tasks (bookkeeping, etc) to specialists
If you focus on smaller issues instead of delegating or outsourcing them, you will be failing yourself. Your primary responsibility is to work and drive your business to your desired vision, spending time on minor tasks that can be performed by experts in your team as well as outsourced can be a major reason for your business failing. Think about outsourcing your bookkeeping or administration work.
To avoid all of this you must have standard operating procedures and routine procedures which you should explain to your employees by conducting meetings on a regular basis.
Implement your business growth strategies cost-effectively
There will be days when your business will face cash surpluses and there will be days when your business will run out of money, however, don’t start spending too much on your campaigns if you find yourself with lots of cash surplus at the end of the month.
Learn how you can utilize different growth tactics in favour of your business. Think about how you can increase your brand visibility through word of mouth.
Evaluate your business’s situation
Just like you assess your personal life every now and then, financial evaluation of your business holds equal importance as well if you are working as an entrepreneur. Figure out how your product or service fulfils the need of your customers? Are their demands changing over time? Is your customer base growing or shrinking over time? How well are your competitors performing?
Clear House Accountants are specialist Accountants in London who have years of experience working with self-employed individuals helping them set up and grow their businesses. Contact us to learn more.