10 questions to ask before becoming your own boss
Thinking of becoming your own boss? Ask yourself these 10 questions before making the jump into the world of self-employment.
As a tradesman, the idea of becoming your own boss can be attractive for many reasons. Chief among them are:
- The ability to set your own working hours
- The power to do things your own way
- The fact that you’ll keep most of your profits from your hard work.
With these in mind, it’s no wonder that so many tradesmen and other employees spend their days dreaming of being their own boss.
But are you really ready to go it alone? Do you have the right personality, skills and business acumen?
We’ve put together these 10 questions to help you work out whether you’re indeed prepared to become a self-employed tradesman.
Is the grass really greener?
Why are you thinking of ditching the old nine-to-five? And what makes you think being your own boss would be any different from what you’d be leaving behind?
Everyone has his or her own reasons for wanting to enter self-employment. But that’s not to say all reasons are equally good.
If you don’t get on with your current boss for example, you might be happier at another company. If you’ve reached a ceiling in terms of your earnings, you might be able to make more elsewhere. And if you’re fed up with working around the clock, there’s little chance that it’s going to be any easier once you’re your own boss.
So before you take the plunge and become your own boss, talk to self-employed people you know (perhaps avoiding those who’ll become your direct competitor – they might have their own reasons to put you off!) This will help you work out whether the grass really is greener on the other side.
Are you being honest with (and about) yourself?
Once you’re your own boss, you’ll have nobody else to motivate you or keep you in line. ‘Perfect,’ you might think, ‘I don’t need anyone telling me what to do.’
But do you really possess the self-motivation to work hard day-in day-out without someone behind you, cracking the whip?
If so, great. But can you also work hard on the tasks that have little to do with the job you do best – tasks like routine paperwork, billing and chasing payments, or finding new customers?
Your success in business will depend as much on these as it will on the skills of your trade.
Will you dip your toe in or dive head-first?
For many people entering self-employment, the biggest start-up expense is the loss of income that comes from quitting your old job.
You can get around this by working just in the evenings or weekends at first, or by asking to go part-time in your existing role.
This way, not only can you cope better with the cash-flow issues that many new businesses face, but you can also get to know the market, experimenting a little with your prices and approach before the stakes become too high.
Have you got a plan for success?
You don’t necessarily need a ‘business plan’ in the sense of a formal word-processed document, although you will if you’re looking for any funding from the bank. But it’s still a good idea to put some numbers together– expected expenses and profits, some analysis of your competitors’ pricing and what you plan to charge.
Set some targets so that you can look back and judge what’s worked and what hasn’t at the end of a particular period (usually a year).
If you can’t motivate yourself to do this, are you sure your heart’s really in the idea of becoming your own boss?
Do you know what you don’t know?
It’s easy to underestimate everything that’s involved in being self-employed in your industry.
There are likely to be issues handled by your boss that you’d never had any cause to know about until now.
When it comes to basic business information, there is a lot of good content available online and in books like ‘The Financial Times Guide to Business Start Up 2016’ by Sara Williams.
There are also invaluable organisations around the country, where you can receive often-free advice and training, and even sometimes secure finance.
The issues you’re likely to need to know more about involve the law, accounting, and insurance. These are the basis of the next three questions to ask yourself.
Do you understand all the legal issues?
Certain trades, like construction for example, are highly regulated and you could easily find yourself in breach of important laws unless you understand how they affect your line of work.
Other laws, such as the Data Protection Act 1998 contain some stipulations that can affect people across all industries.
This act governs how people’s personal data is handled, so if you store your customers’ details (on a server or your own PC for example) you need to make sure it’s accurate, used lawfully and kept securely.
You don’t need to qualify as a lawyer but you do need to read up fully, so you can avoid getting caught on the wrong side of the law.
How’s your record-keeping?
Particularly if you set up as a sole trader, bookkeeping and accounting needn’t cause a huge headache. So long as you keep all your invoices and receipts, stay on top of your records and meet all the deadlines set by HMRC.
A simple spreadsheet is likely to be sufficient for tradesmen whose affairs are straightforward.
But if you plan to employ people or form a limited company, it may be best to speak to an accountant.
Even if you only ever plan to be a one-person business, it wouldn’t hurt to seek some advice to make sure you’re doing things properly.
Do you have the right insurance?
If you plan to take on any employees, getting insured is a matter of law. As well as obtaining employers’ liability insurance, you’ll also need to display your certificate publicly in your place of business.
Public liability insurance is not legally compulsory for most businesses. But it’s widely considered essential as it covers you in case a member of the public (including a customer) alleges that you’ve caused them damages while going about your business, and decides to sue.
Professional indemnity insurance could also be beneficial if you give advice or provide professional services to customers.
Finally, remember that a standard car insurance policy will not cover you for business use.
So if you intend to use your vehicle for business purposes, you’ll need either a van insurance policy or to have business use added to your existing car cover.
Have you got the right equipment?
Have you got everything you need to get started?
Try not to offer customers a service you cannot provide because you don’t yet have the tools or equipment to deliver it.
If you need to hire any equipment, include this in your budgeting when you quote for any work.
Do you know how to get your name out there?
You’ll have to overcome any natural shyness or modesty when it comes to promoting your new business, whether that’s through leafleting, social media or simply knocking on doors.
If you don’t believe in what you do, nobody else will, so be confident to give your business the best chance of success from the outset.
You’ll also need some knowledge of how to go about promoting yourself. Luckily, a little marketing know-how goes a long way, so pick up a few books, attend some training sessions and search online for ideas.
One tried and tested technique is to look at what your most successful competitors are doing and try to do something similar – but if you can, do it better.
Nobody can tell you whether your decision to become your own boss will pay off. But if you have good answers to these 10 questions, you’ll have improved your odds of success dramatically.