Many homepreneurs find they’re launched quickly into business by a sudden idea or change of circumstances, so there’s barely time for them to keep up with demand, never mind plan how their business will grow and develop or what sort of business structure might work best long term. If you’ve found yourself in the happy position of having a successful kitchen table business that has taken over your life along with the space you live in, you’re probably pondering what your next steps should be…and possibly hoping to reclaim your home too.
Looking at the following areas will provide clear points of action to help you transition from a sole trader to a growing SME.
Becoming a self-employed sole trader is often seen as the fastest way to start a business, so many business owners default to this structure when they first start out. Is it time you reviewed your set up? As a sole trader, you’re personally liable for any business debts and you’re likely to pay more tax too but submitting your tax return is relatively simple and your business will enjoy more privacy as there’s no requirement to publish your accounts.
For the tax breaks
In contrast, directors of limited companies may find they’re able to pay less tax as they’re able to use a combination of salary and dividends to influence what they pay. If your earnings are on the lower end of the scale, it’s worth remembering that the tax free dividend allowance is due to reduce from £5,000 to £2,000 this year. However, as an employee of your business you could be able to claim expenses such as paying for lunch or dinner when you’re out on business. There’s generally more paperwork involved in trading as a limited company and you will be required to have a separate business bank account in order to do so.
For the protection
For those planning to trade on a national and global scale, becoming a limited company can be seen as a step towards being a more ‘professional’ entity. Many larger companies prefer to work with limited companies and doing so can offer some financial protection for you too. By separating yourself and your finances from your company, the business itself becomes liable for any debts. The exception to this is if you’ve taken out business credit with a personal guarantee. Take a look at official government guidance to help you weigh up your options.
Search for the right premises
Taking on business premises can be a huge expense to a burgeoning business and one that needs careful consideration, so it’s no surprise so many businesses that start in the home stay there for as long as they can stick it out. After a certain point, manufacturing, storing products or simply operating out of the home environment becomes too far beyond impractical.
When you reach this stage, be sure to seek legal advice before signing rental agreements and factor in important things like business rates and transport links too. Too many fledgling businesses sign themselves into long term leases without adequate break clauses and then find themselves bound to pay the rent for the full term even when the premises is no longer suitable for them. Unsurprisingly, such agreements can sink successful SMEs fast. If you’ve been manufacturing and selling your own product via third party platforms or buying and reselling on existing sites, now may be the time to take the plunge to pitch for high street distributors or even to set up your own online premises with an e-commerce site. We recently shared tips for setting up your digital shopfront to help get you started.
Take on staff
Employing staff is something business owners commonly put off. Have you been getting by on you own steam for as long as you can? By going it alone you save on wages and you delay facing up to important administrative tasks associated with becoming an employer. From right to work checks to drawing up contracts and taking out employer liability insurance and pension schemes there’s a lot to consider but bringing in new blood could help your company to reach new heights.. Fail to expand with more staff at the right time and you could miss out on business opportunities by not having the manpower to fuel your ambition. Building up your own company culture can also be seen as a rewarding challenge and one that can help to shape your business reputation.
Protect your cashflow
Premises, staff, new equipment; expansion plans need funding. Business loans are harder to access these days but there are other options when it comes to keeping the cash flowing. If you opt to become a limited company, selling shares in your business could help you fund your next steps. You could also go down the route of seeking out an angel investor or even crowd funding direct to your customers.
One of the biggest challenges SMEs face is late paying customers. If your order books are full but you’ve not had time to call in the funds, invoice factoring is one way to make sure the well of cash doesn’t run dry. Worried about late payers? You’re not alone. Recent research reveals that SMEs operating in manufacturing are most impacted by late payments and are owed an average of £83,000. It your business involves B2B trading it can therefore be prudent to carry out credit checks on prospective customers.
What’s stopping you from taking you home grown business up a level? Are you ready to take steps to clear that kitchen table and strive for SME success?