Once you’ve established yourself as a sole trader and making consistent profit, it’s a good idea to plan for growth. To business owners, growth often means increasing sales, however, you also need to focus on how to maintain or improve your profitability and learn how to maximize your time while scaling.
Here are five things to consider when growing into a small business:
1. Growth Management
As a sole trader that is growing, you have two options: your growth can go to either price or volume. First, with the price option, you need to take into account the worth of the product or service that you offer. The work and effort that goes into the products mean you could sell it at a more expensive price.
The second option, you would need to if you can provide more of the same product or service and at a lower price. This can be done by discounting which can help your pricing strategy. You need to make sure that it can be used to bring in committed and larger orders. If not done correctly there can be a loss of profit.
2. Plot Business Plans
Most businesses have a well-structured business plan from the beginning. This is something that you should be updating regularly. This is important because there needs to be clear goals because things are constantly changing and your business needs to keep up. Your plans also help you think about how you can set yourself apart from the competitors. With business plans, you can think about different ways that can increase your sales among new and existing customers. This also can help improve your products or services by researching and testing changes to improve and make your product what your customers would enjoy. Business plans also help develop new products and services and to figure out who and where to sell it.
3. Seek Out Support
Many sole traders want to do everything themselves and this is because you are the business. Only you know the projects ins and outs better than anyone. Although you know your work the best it is not beneficial to improve work. There are resources out there that can lighten the load and offer insightful advice. If you don’t have extra money it would be a good idea to look for sources of funding and finding new investors to help your business grow.
To run a business by yourself it can be difficult because everything relies on how productive you are and if you don’t do anything your business will lose clients and sales. Time is important and if you can get a little bit extra time from getting help it will increase your productivity. You can outsource for simple things such as general business admin or marketing or many other roles to save time. In small businesses, you will need a few employees so it could be time to hire someone for a longer time.
5. Think about the next steps
As growth continues you need to think about what you should do to protect your achievements so far. If your turnover rises quickly it might be worth it to switch from a sole trader business to a limited company. A limited company is a legal structure that ensures that the liability of company members is limited to their stake in the company by way of investments or commitments. It’s not the best move for everyone, but it can help with tax and if things are not done correctly you could be fined.
Becoming a Limited company
There are many positives to becoming a limited company but it is not for everyone so make sure this is the best option for your business. One big benefit is tax benefits but many things have to be done before to become a limited company. You have to register with Companies House to protect your company name by law. With a limited company, your business becomes a separate legal entity where you become the company director unlike when it was sole because all the liability is on you. Your profits are subjected to a corporation tax at a rate of 19% which means as a sole trader you would pay less in tax. When you become a limited company you have greater responsibilities such as having to submit annual financial records to Companies House that you have to manage yourself. There are benefits and disadvantages but becoming a limited company could be the best option for you.
If you believe that it would be beneficial to switch to a small business or limited company call our team on 0203 697 4166. Also to learn how to apply to become a limited company go here.