Things to know before you start up your home-based side business

The way that people work has changed drastically over the last few years, beside the obvious changes to where we work, there’ve been massive changes to how we work – with most people suddenly finding that they have a lot more time to themselves thanks to saving on the commute, or new productivity tools saving them admin and meeting times.

As such you might be thinking about starting up your own work from home business, side-project, or simply turning your hobby into something you can make a bit of money from. Whatever you call this, there’s a fair few things you need to know before you start the foray into getting going as a new business, and a lot of this changes depending on where you’re based. I’ve had some experience working as a sole trader in the UK, and so I’ve pulled together three hints and tips for getting started. One of the major things you should consider is to hire professional writing services like businessplanwritersuk.co.uk if you need to pitch your business plan to potential investors. Hopefully they’ll help you out too.

Check what you can do before forming up

Before you even start off you should check out what you can do before you start officially trading. In the case of the UK you can actually earn a small amount of money from a side project before you have to declare it – but, also, similarly, once you do start trading the first £1000 turnover is tax free. As such I highly recommend checking out the Self Employed and Sole Trader pages on the government website (Here’s the UK one, if you need a link). If you’re not going to come in near that though, as it will advise, there’re actually very few reasons to form up.

In addition to this, the rules are different for trading companies, sole traders and limited companies. You might want to register as a traded company to protect or officialise a business, or to gain access to business loans or banking, however once you do that you open yourself up to things like annual accounts and more, even if you declare the business as dormant.

In the case of registering as a sole trader, wherein you are the only owner of the company, or self-employed, you’ll also open yourself up to a few annual forms that’ll be required. There are plenty of accounting services for sole traders and self-employed workers out there if you get stuck, however its important that you learn the difference between these different states before you commit — both can work for others, but a sole trader is an entity while self-employment is a status.

Each of the options have different things that you can and can’t claim, but most importantly, you don’t need to be any of these forms if you are not turning a profit — and if you are, it’s only once you’re past a certain threshold, although that doesn’t mean you shouldn’t be keeping track of it.

Cost yourself and your time into your pricing

Once that’s all done and dusted, it comes to down to how and what you price; after all, without any actual sales or earnings its still just a hobby. It’s absolutely critical to consider all elements of the costing and work when it comes to pricing, otherwise you’ll just be trading at a loss.

If you’re starting up a hobby like jewellery making, or miniatures painting, then it’s critically important that you cost out each and every one of your supplies from the moment you ‘start trading’. Those brushes, even though they’ll see thousands of uses, or those paints, or that pack of 1000 ringlets, all add up. If a jewellery piece is made of 10 beads, 2 chain segments, a hook and loop, then you need to cost all of those into the pricing. You might be buying this stuff in bulk, and 1000th of £40 might not seem like much at time of manufacturing, but if you don’t cost it in then when you run out you’re simply paying out of pocket. Treat it like it’s your only job.

Similarly, never forget to cost yourself into it. If you feed 30 hours of duds into learning to perfect a certain technique then that’s more than just a learning experience, it was training, and not only does it improve the quality of your work, but it also costs resources. As a writer I’d like to think that I improve with every piece of work that I complete, as such I’m become more and more experienced and my work is becoming of greater value all the time. Cost your work in, an apprentice’s work isn’t the same value as a master’s, but both of them deserve an hourly rate.

Another, lesser known thing that you can claim back is some of the upkeep on the place where you complete your work. If you travel then you may be able to claim that and part of the value of the vehicle and repairs back, while if you work from home (or a dedicated space) you might find that you can claim back a percentage of the bills or even rent. Similarly, I used to work with somebody who would claim back any meals out with their employer as part of their self-assessment, as those meals and meetings were integral to continued work.

Research payment processes before you start

While I could prattle on with advice and learnings all day, one that I wanted to make sure was in this list was payment processes. There’re a whole bunch that you need to be aware of.

For a start, cash in hand is not sustainable long-term, and ultimately slides into the invoicing technique for the sake of tracking. Invoicing is fine, especially if costed out, but its critical that you are aware of payment terms. In some industries the payment terms can be quarterly after completion of work, and this means that you could be waiting almost a year from when you term the contract complete until payment — especially if the client is incredibly picky with their expectations.

However, another thing to consider is that there are hidden fees when it comes to taking card payments. If you run a website then you’ll find that there’s a merchant charge, as well as a transaction charge (commonly around 2.5% of the transaction) on each purchase made on your site. (Of course, if you’re also doing this then you need to factoring in your website running costs into your work too.) Not only this, but international transactions come with additional conversion costs, and money can be held depending on where it comes through from. There are a lot of different payment processes, and a lot of hidden costs, when it comes to card transactions, and it’s important to be aware of this before you start costing things up.

Hopefully this gives you a few ideas of things to consider before taking the step into trading as a business, or changing your hobby into a job. If you’ve any questions then don’t hesitate to drop them below and I’ll do what I can to answer them quickly.

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