Have you got what it takes to start out as self employed?

David Bird discusses the character traits required to be successful in self employment and what to consider before taking the plunge.

Whilst the answer to the question in the headline differs for everyone I think there are some common themes that are relevant for almost every entrepreneur. Below I’ll list some of the most commonly important qualities of a good entrepreneur.

Do/are/can you:

  • Be decisive when it really matters?
  • Have a commitment to seeing things through until the end?
  • Have the ability to network with others and build rapport easily?
  • Manage yourself well at crucial times of pressure?
  • Confident enough to take calculated risks when necessary?
  • An independent person who can manage yourself well without having to rely on another to tell you what to do or guide you all the time?
  • Have a growth mindset? Are you willing to always learn, adapt and grow?
  • Confident enough to take ownership of projects and leadership where necessary?

For me, most of the above boxes I already ticked. For the ones I didn’t, I wasn’t sure about because I’d never tested myself. I wanted to put myself to the test and find out what I was made of. For most people I really do believe they are capable of more than they realise. It’s just about having the right motivation and mindset to achieve.

A few other things to consider before taking the plunge

Choosing an accountant

It’s not always a complete necessity, especially where businesses carry little risk and the incomings and outgoings are fairly straightforward. However, in the majority of cases it is best to get an accountant.

Try to research the subject, or even speak to HMRC yourself for advice on how it all works. If you still feel well out of your depth then I would recommend it.

I’ve heard many people tell me that they pay for themselves pretty quickly just from the tax savings they can make for you.

Pensions

Being self-employed means that your income is likely to be less certain, especially in the first couple of years’. Combine that with the lack of holiday pay, sick pay and other rights that employed people get.

Pensions might have come as part of a package in your old career, but they are now your personal responsibility. There are a number of different options open to you so do make sure that you do your research.

Protection

Depending on the type of business you earn and its legal status, different types of business insurance may be required by law and others, whilst not compulsory, may be preferential.

I will outline a few of these below, although this list is definitely not exhaustive and I seriously urge you to do your own research in this matter or speak to a specialist.

For those who employ others, employer liability is a must. This covers claims made by employees for any injury or illness.

Professional indemnity is required for those who advice, implement and design. It covers the consequences of negligence in the professional capacity.

Health and accident is fir those who are injured through an accident whilst working and are unable to work. will either receive a regular income or a lump sum. Key Person Insurance is a type of cover that compensates a company when financial losses are made due to incapacity or the death of a person that is key to the business.

Mortgages

Mortgage lenders look upon those who are self-employed differently to those who are in employment. Gone are the days when self-employed people were able to just tell the banks what they earned and the banks would go on trust. This kind of lending was seen as risky and is now frowned upon.

The vast majority of mortgage lenders require three years’ worth of accounts. Some require two years’ worth and a small handful will look for one. However, there will be other criteria you will have to meet to be able to apply.

The criteria will be quite different for contractors and it will also be different for those taking their earnings from a limited company depending upon their personal circumstances.

With buy to let mortgages, accounts may not be necessary in certain situations, once again dependent upon the individuals circumstances.

If getting a mortgage or a re-mortgage is going to be an important priority for you in short to medium term it may well be worth speaking to a specialist independent mortgage broker to get a clear idea of what your different options are so that you can make some informed decisions before taking the plunge.

Further reading on self employment

Related Topics

Entrepreneurs

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