What does it take to become a successful Sole Trader? We review the pros and cons.
Setting yourself up as a successful Sole Trader is a tough challenge, but it is the way that many of us start in business, whether trading from garage, spare room or the kitchen table.
Most often a business owned by one-person, Sole Traders are usually small in size, but they make up the majority of businesses in the UK. The Department for Business and Trade calculates that there are聽 in the private sector which makes up 56% of the total number of businesses in the UK.
Sole Traders are extremely diverse in nature, reflecting the variety of small and medium sized businesses which make up the backbone of the UK economy. They include roles such as electricians, landscape gardeners, plumbers, bicycle repairers, hairdressers and butchers. But also, IT consultants, inventors, writers, actors and artists. In setting up their business Sole Traders often have to rely on their own savings or loans from friends and family to finance their venture. As it often takes time to make a profit, financial consultants advise that Sole Traders should be able to cover all their own costs for at least two years.
Many Sole Traders set up in business as they have an idea which they want to exploit, or they see a gap in the market for a product or service. However, others do so out of necessity, for example to enable a person to work from home or following someone being made redundant. Sole Traders are particularly evident in more remote areas of the UK, web access enabling people to run a business from almost anywhere in the country. Although not an easy life, .
Advantages of being a Sole Trader
- Starting up as a Sole Trader is legally the easiest of all types of business ownership, most people being able to start one from home
- Sole Traders can run a business which interests or inspires them
- Autonomous, sole traders are more in charge of their own fate than bigger businesses, making all the key decisions
- Sole Traders keep all the profit they make for themselves.
- A lot of聽 to help Sole Traders make their business idea a success
- Flexibility, Sole Traders are able to take advantage of less red tape, rules and regulations than other types of business.
- Job satisfaction, being a Sole Trader in charge of your own business can be a truly fulfilling role
Disadvantages of being a Sole Trader
- Sole Traders take on all the risks of starting their own business themselves including in some cases unlimited liability
- Start-up costs, although limited help is available, Sole Traders are mainly responsible for all their own business costs.
- Risk, running up a large debt as a Sole Trader can mean eating into your savings, in a worst-case scenario putting at risk your assets such as your car or home to pay off business debts.
- Sole Traders tend to work long hours and have a heavy workload as they have to do every aspect of the business themselves, from producing products or services to sending invoices and from posting parcels to registering for tax.
- Being a Sole Trader can be a lonely experience as to keep costs down most people operate as a single unit, preferring to save money by doing all the work themselves.
- Sole Traders can only raise limited capital, usually having to finance their idea from their own savings or borrowing money from family and friends.
- Banks are often reluctant to invest initially in Sole Traders until they have shown a profit for over a year or more, considering them a high risk for lending
- Sole Traders are rarely good at every aspect of running a business but often cannot afford to buy in help
- Getting paid can sometimes be a challenge for Sole Traders, most having to split their time between looking for jobs, working and chasing clients to get paid.
Despite the disadvantages of being a Sole Trader, when it comes to making your business dream a reality, setting yourself up in business as a Sole Trader can be a very rewarding experience. It can also be one which leads onto bigger and better things, many very famous businesses from聽 starting off as one-person venture.
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