Starting a part-time business

Starting a business, although highly exciting, is a big step to take. Sometimes before you take the plunge into full-time business ownership, it might be better and easier to think about doing it on a part-time basis, as a way of ensuring the business idea will work.

If you are employed part-time, or have young children and do not want, or are not in a position, to give up the time necessary to run a full-time business, a part-time business may be a good option for you.

This guide looks at the practical issues you will face when you run a part-time business. It also tells you where you can find support and useful sources of further information.

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What to consider when starting your part-time business

You should consider a number of issues when you start your own business, even if it is only on a part-time basis.

Are you ready to start up?

There are lots of reasons to consider starting a business but you need to be sure that you are ready. You’ll need to assess your own skills and where you might need some extra development or support – for example, looking after the business’ finances. You should also think carefully about the product or service that you want to sell, the audience you’re selling to and what you have that makes you stand out from the crowd. You’ll also have to be ready to face the challenges and pressures on yourself and your finances.

What legal structure?

You will need a formal legal structure for your business. This can take the form of anything from a sole trader to a limited company. When you have decided the structure, you will need to register with HM Revenue & Customs and (if it is a limited company) with Companies House.

What about premises?

You may have decided to run your business from home but you need to be aware of the implications of this as there are tax, health, safety and security issues. You might find that separating your work area from your living area will maximise efficiency. For more information, see our guide on starting a business from home.

If you decide not to work from home, read our guide on how to choose the right premises for your business.

Money matters

Your business will start out small and you will still need to fund both the set-up and the development of your business to help it grow. Creative thinking and planning your finances might save you money and make it less costly than you think to start your own business. You will find help in our interactive guide on how to identify the right finance options for your business.

Professional advice

Depending on the scale of your business, you may need professional advice or assistance, which can range from accountancy and bookkeeping through to marketing and IT support. You’ll find more information in our section of guides on further support for your business.

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Tax and legal implications of a part-time business

When you set up a part-time business you need to inform HM Revenue & Customs (HMRC) and if it is a limited company you’ll need to register it as well.

You also have an obligation to maintain accurate financial records – see our guide on how to set up a basic record-keeping system.

These requirements are the same whether you are starting a full or part-time business but there are other issues to consider which are specific to part-time businesses.

Continuing in paid work?

If you continue in paid work when you are not running your business, you have to decide whether to tell your employer. You should look at your contract of employment, as this may require you to tell your employer if you have another source of income. In addition, if your new venture is likely to compete with your employer, you have a conflict of interest which could cause problems.

You must be very careful about separating your personal business activities from those of your employer. Taking phone calls, sending emails, and writing letters that relate to your business may constitute a breach of contract, unless you have permission to do so. You should also not make use of your employer’s supplies, materials or intellectual property. For example, taking copies of proprietary software to use in your business is a criminal offence.

If you discuss your plans with your employer, they could become a source of encouragement or work, especially if you are a valued employee.

Just running the business?

If you don’t have other paid employment – eg you might be a parent or carer with family responsibilities – you still need to tell HMRC and, if appropriate, register with Companies House. If you were previously unwaged and had been receiving benefits, you will need to check whether your new venture affects that income, and report it to HMRC if necessary.

If you are working from home, you need to take into account insurance, health and safety issues. You can read about this in our guide on starting a business from home.

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Advantages and disadvantages of starting a part-time business

There are advantages and disadvantages to running a business on a part-time basis.

Advantages include:

• you are able to stay in paid work and have the security of a regular income until the business is up and running
• you can use skills you have learned working for an employer in starting and building your own business
• if you have obligations such as caring for dependents, it is a way of having an income
• you can test whether there is a market for your products or services without a major financial commitment
• if you have a hobby that you would spend time on outside work anyway, you may be able to make money from your interests

However, disadvantages include:

• finding the time to run a business can be difficult and it may take up more time than you have available
• you may find it hard to concentrate on paid work if the business has a problem
• you may have to put in long hours, which can cause stress
• it might take a long time for the new business to develop and become viable
• if you stay in work, you’ll have to pay tax on both sets of income, which may mean the business is not financially viable

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Help and support for part-time businesses

A wide range of help is available to you if you’re starting a business – through government agencies or business mentoring. You can get help from a variety of sources online, while other forms of support can be obtained from events such as networking meetings.

Alternative support from the government may be available in your local area, including grants, funding, advice, guidance, information and training. Find out more in our guide on government support for businesses.

Mentoring can help you develop business skills. Read more in our guide to the benefits of business mentoring. You can also benefit from online mentoring from one of the many mentoring organisations such as horsesmouth – find out how mentoring could help your business on the horsesmouth website- Opens in a new window.

Your local Chamber of Commerce offers support and advice and may organise networking meetings for businesses of a similar size and in similar business sectors. You can find contact details for your local Chamber of Commerce on the British Chambers of Commerce website- Opens in a new window.

You might find it helpful to join the trade association for your business sector, where you will be able to interact with peer businesses for advice and information. Find contact details for trade associations on the Trade Association Forum website.

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CASE STUDY

Here’s how I decided I was ready to start up my business

Paul Kruzycki discovered an entrepreneurial streak while running a not-for-profit charity convention and he decided to set up his own venture. When he did, a cautious approach to the launch of his real-ale mail-order company, Ales By Mail, proved important in giving the business a sound start.

WHAT I DID

Research the business proposition fully

“I continued working full time as a building surveyor while I developed my business plan, built contacts and got my idea to a stage where I felt I could get it off the ground. I wanted to prove fully to myself that the business could work.

“I also knew that if I wanted to get finance to help me start up I would need to answer some tough questions such as who are your customers, where will you advertise and so on.

“I spent a lot of time talking to people in the industry and finding information on websites – seeing how other people were doing things, at what level and how differently.”

Take the opportunity to work part-time to provide a financial buffer

“My research showed that Ales by Mail couldn’t pay me a salary at first so I decided I needed to save at least six months’ living expenses. Then an opportunity to work as a property consultant came up.

“I now do that two days a week and spend two days on Ales by Mail. On the fifth and sixth days I work on whatever needs doing most urgently.

“I’m building the business on a tight budget and am going for slow growth. My consultancy work allows me to take this approach.”

Consider domestic circumstances

“I spent 18 months preparing to start the business. There were things that needed to be resolved before I gave up my job. For example, I needed to wait until my house had been refurbished so that I could work from home.

“I’ve had a lot of support from my wife. Knowing I can go to my family after a bad day and receive that support helps me remember that the decision I made was the right one.”

WHAT I’D DO DIFFERENTLY

Think about the impact of routine paperwork

“Before starting up I’d find out more about the organisational aspects of running a business. I underestimated the amount of time needed to deal with tax matters, chase up clients and do all the other bits of paperwork.”