If you are working for someone else but you have a great idea for a business of your own, you may have thought about quitting your current job and making money for yourself on a full time basis.
That approach has certainly worked well for many people.
But there are a number of reasons why it may be better for you to stagger the whole process of starting a new business by beginning on a part time basis and ramping things up later if all goes to plan.
Similarly, if you don’t have a job or you are looking after your children at home, then starting a business on a part time basis can also make sense.
This article will go through some of the pros and cons of starting a business on a part time basis, and will look at some of the things you need to think about before making the decision as to whether the part time option is the right one for your circumstances.
Pros & cons of a part time start up
Starting a business on a part time basis is the perfect solution for some people. Other people prefer to launch right in and get their business going on a full time scale from Day One. Which method is right for you will depend on your character, your finances and the sort of business you would like to start.
you can continue to earn money from another job to support you until your new business starts to make a profit
you can manage your time looking after children while starting a part time business
you can dip a toe in and test whether your business idea will work without over committing time and finances
you can continue to learn skills at work which might help your new business
your existing job can be a great source for network contacts for your new business
time constraints due to other commitments may hamper the success of your new business
if you hold down another job, you will need to pay tax on both your current employment and your new part time business income
it can be difficult to concentrate on both if holding down a job and starting a new business
the hours involved in working full time and starting a new part time business can be stressful
looking after children while starting a part time business can be difficult
finances may be strained if you have no other means of support
Before setting up a part time business
Research your business idea thoroughly
One of the most important things to do before starting up any business, let alone a part time business, is to research your business idea thoroughly. You might think that your idea is absolutely wonderful and that your products will be flying off the shelves or that people will be queuing up for the services you offer.
Do plenty of market research to see whether there definitely will be a demand for your product or service. Are you solving a problem that many people have? Will you offer an answer to a question that many people are asking?
Preparing a business plan might be an exercise that clarifies whether your new venture will have legs.
Sole trader or limited company?
When you set up your part time business you will need to decide which form of legal structure is best for you. Both have advantages and disadvantages which are largely independent of whether you will be setting up on a full time or part time basis.
When you have considered your options and decided which model is best for your new business you will need to register with HM Revenue & Customs no matter which structure you choose. You will also need to keep accurate financial records for your business.
In addition, if you decide to trade as a limited company, then you will also have to register with Companies House even though you are only starting up as a part time company.
Work from home or find some business space?
The idea of working from home is very attractive to many people who are setting up a part time business. It cuts down on costs while you test out your business idea and it also saves time on the commute. It isn’t always the best solution for everybody though. There could be distractions from other family members and you need to have good self discipline to make sure that you spend your time focusing on your new part time business rather than making coffees and watching TV.
If you are the type of person that can handle such distractions and concentrate on your business even when you are at home, then this can be a highly effective way of getting your part time project off the ground in a cost effective manner.
If you feel that the distractions of working at home could possibly hamper the growth of your new business, then it could actually make a lot more sense to think about renting some office or business space. There is little point in trying to save on overhead costs if it would mean that you will never be in full command of your new business. Many small businesses have extra unused space (a spare room) that could let out. Adverts in local shops work as well for finding commercial space as they do for finding living space.
And, don’t forget that working from home isn’t as straightforward as just opening up your laptop on the settee. There are tax implications involved if you use your home as a workplace and you may also have to take health & safety and security issues into consideration. If you're renting your home, you may need permission to run your business from your landlord.
Does your existing employment contract allow you to take on other work?
Some employment contracts stipulate that you are not allowed to work for another business while you remain in their employ. Make sure that you check whether or not you will be breaking the terms of your contract by setting up your own business and working for it.
In practice, if you don't work on your business while on your employer's premises, during their work time, or using their equipment, it is very hard for an employer to prove that you are breaking the terms of your employment contract. If you delay registering a company (if you decide to do this) until you are ready to trade, an employer would be very hard pressed to take action against you. However, remember that you might have signed other contracts (such as confidentiality agreements) that could be enforced more easily.
Even if your contract allows you to work elsewhere, then there may be a clause in your employment contract which states that you must inform your employers of any other sources of income.
Letting your current bosses know about your business plans can be a good idea. They are likely to be more understanding when you stop working for them, and, unless you would be in direct competition with them, then they may be able to help you (such as giving you references, or use of space or equipment). If you are a valued employee, they will want to accommodate you for as long as possible in their employ, and help may be an easy way of keeping you close to their business.
Will you need to enlist the help of others?
Do you have all of the skills that your part time business will need to succeed? Maybe you have the contacts and the sales skills, but are less sure of your footing when it comes to the finances and paperwork.
Could you afford to employ someone to manage these tasks if you wouldn’t be able to handle them proficiently yourself?
Finding a self employed contractor may be one solution, entering into partnership may be another, or you could employ someone. The implications of each are far ranging.
Be realistic about whether you will have enough time, money and energy to commit to your business. You don't want to find that you have spent money developing ideas only not to be able to spend the necessary time marketing your products.
If you are holding down another job then use some holidays to kick start your new business. Not only will it save you the money you might have spent going on holiday, it will give you time to focus on your new part time business without work distractions. We don't advise taking sick leave to do this.
Draw up an action plan and prioritise the most important tasks. Create a very clear time management plan – and stick to it.
If feasible, ask if your current manager will allow you to shift from full time to part time.