Running a business as a sole trader is a tough call. You may have been working for a company before to build up your knowledge and expertise in your field and then decided that your skills gave you the chance to carve out your own business.
Small businesses are the lifeblood of the UK economy, and when you consider that over 98% of businesses in Scotland have between one and 49 employees, you get a sense of the key role they play in the country. Sole business traders are a key component of the small business world – not only do they have the drive to succeed and build their business, but they are also highly likely to take on employees and hire contractors to help as their business grows.
Growing the business
It’s not that easy to grow a business if you don’t have some financial backing to invest in a new plant, vehicles and your raw materials as you move your enterprise forward. Initially, it’s natural to think of banks that could be interested in investing, and you need to do your homework by providing a realistic forward business plan to try to get support. You should also, if you are offered investment from a financial institution, look carefully at the small print of the contract so that you completely understand your liabilities. Banks may also offer different interest rates, so it’s worth shopping around. If they think your plan has a good chance of success and making them money down the line, they might suggest taking some equity in the business.
If banks make you slightly uncomfortable – and, to be fair, the numerous banking scandals of the last few years have certainly tarnished the reputation of financial institutions – then you could always look to family members and friends to invest. An input of money – provided again that your business plan is sound and will stand up to investigation – could mean the difference between getting to your next stage of development or being frustrated. All investors know there is a risk, so if you can explain how that risk can be mitigated and demonstrate that potential for growth and good returns, you’re more likely to get the investment you need.
Control the finances
Your balance sheet is the most important thing you have to keep control of your finances. Naturally, you need to provide excellent customer service and be fair to your suppliers, but the bottom line is financial. You can cut costs by negotiating with new suppliers to get a better deal, swap your utility company for one that provides cheaper rates, and not spend money on unnecessary items. You do need to ensure that if you change things to cut costs, you watch out for quality control for supplies – sometimes cheaper is not always better. Keep your eye on your balance sheet, see what’s coming in and going out, and see where you can do better.
As a sole trader, at this stage, you’ll find it gets to be almost impossible to do everything you need to do for your business by yourself. You can free up your time to devote to the main aspects of running the business by contracting out some of the basic services that you need but don’t have the time or skills to do as well as you would like.
In simple terms, this means giving over some of your internal business functions to another organisation that specialises in that field. Here are two examples to consider:
- Bookkeeping and accounting: you probably didn’t go into business to have to constantly enter financial information and pore over spreadsheets. Yes, it’s part of the whole package, but if it’s not a real strength of yours or you can’t devote the time to it, then bring in contractor accountants. They can do your day-to-day bookkeeping by entering your incomings and outgoings and then do your accounts at year-end, or give you monthly or quarterly management accounts so that you can keep track of where you are.
- Digital marketing: the internet is a key driver of business, so you need your digital marketing to be sharp and sophisticated. This is where a web designer and social media expert can help you build long-term client relationships and garner more clients along the way.
Outsourcing is a sensible and cost-effective way to move your business forward. You’ll have more time to give to your core business activities by using trusted professionals to take care of your back office functions.