There are a number of main risks you need to be aware of and consider as you set out on this journey which are summarised here:


Financial Risks

Legal Status

It will be vital for your success to ensure you set up and run the business in line with your legal responsibilities, such as paying your taxes and National Insurance.  

Failure to do this can result in incurring unnecessary heavy fines or even take legal action against you should you in extreme circumstances.  


Uncertainty
  • Sometimes you will not be clear as to what lies ahead for you.  
    • Many times you may not know if you will have a project after the current one is finished.  
  • When you are on a client assignment can leave you with very little time secure new clients/ customers.
  • No income BETWEEN between projects
    • You are not directly earning any money as you will need to find new work/sales.  
  • You will need to be able consider the next opportunity
    • Make financial savings for those quiet times when marketing and/or selling

Being Money-Minded

You may have to go a few months without having any earnings as you build up your business. 

You should consider whether you have enough savings to cover your living costs as you build up your business, or you may find you need to take on a part-time job to keep up with your living expenses.  


No Employee Benefits

You will not have the benefit of

  • Holiday entitlement, 
  • Sick pay and
  • Company Benefits
    • such as a pension scheme.  

You won't be covered if you take time off work for any reason as you are solely responsible for earning your living.  You will need to earn enough money to cover your holiday etc.  

Consider insurance cover to fill this gap in the event of an extended period of time off work due to illness.  
A pension scheme is worth considering.
Always take independent financial advisor before doing so.

Insufficient working capital

"Working capital is the capital you have available for use in day-to-day business activities".

Many people who set up on their own underestimate how much money is needed to run a business even if you are simply operating out of your home with a laptop at your kitchen table.  

It is imperative that you determine how much money your business will require; not only the costs of starting, but the costs of staying in business (i.e. what will your overheads be?)  I

It is important to take into consideration that many businesses take a year or two to get fully going.

This means you will need enough funds to cover all your expenses until you have enough income from your business to cover them.

Failure to price your service correctly

Many people setting up on their own overestimate the number of clients they will be able to work with at any one time and undervalue their skills and the service they provide. 

You need a manageable and realistic supply of clients at the right fee level to make the business viable.

Research your competitors

  • To find out what the market will bear and
  • Ensure you don’t under-cut them just to get business.  

Value your business appropriately

  • Customers can often (depending on the sector) equate higher costs with higher valu.
  • Undervaluing your product/service may not always be a good strategy.

Overdependence on a single customer

For some who are just starting up on their own, their first client is likely to be the company they used to work for.  

Initial Impressions tend to be positive:

  • You know the organisation; 
  • they know you and
  • you have a steady stream of work all from the one organisation. 

However, you could find yourself at their mercy.  

  • Avoid having one customer so big that losing them would make the difference between business success/failure.
Having a larger number of smaller clients is a much safer option

Poor financial controls

You have to keep good financial and business records.  

You will have to:

  • review your revenue and expense report each month, and 
  • you have to file taxes and other business-related documents.  

We are here to help you!



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