Where do I start?
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Most people don’t just get up one day and start working as a self-employed person. As well as spending a lot of time planning the work they’re going to do, they also get together money to help their business off the ground and to support themselves until their business is up and running. This is usually called raising finance.
Where the money comes from
The money that people raise to start businesses comes from all over the place:
- Some people spend years squirreling away enough savings to support themselves and their work in the early days.
- Others get a regular job working for someone else to keep them going and start their business in their spare time.
- Some get given or borrow money from family or friends.
- Some receive grants from charities or trusts.
- Many borrow money from banks or building societies or other organisations that support people starting up in business.
As an ex-offender, you probably haven’t had the opportunity to save up money for yourself and, having been out of the job market for a while, you’ll be at a disadvantage when trying to borrow money, particularly from banks, which like to see you settled in a home with a job and a good track record of looking after your money before they hand out any cash. But you may well find that there are grants and awards that you can apply for. Business Link has a good directory that helps you find those that are suited to you.
How much money will I need?
The amount of money you need behind you depends on the sort of work you’re planning to do and also your own circumstances. For example, if you’re living somewhere where you don’t have to pay for rent or food and you’re planning to do something that doesn’t involve much travelling or equipment, you’ll need less money than someone forking out for all their household expenses and hoping to set up a café in a smart location.
It’s quite tricky trying to work out how much money you’ll need to start your business, then keep it going and hopefully earn some cash for yourself because, until you actually start, you can only estimate – which means work it out roughly.
Even experienced business people often get their numbers very wrong at this stage so you should definitely try to get some help from an experienced person. But, as a rough guide, what you need to do is work out what all your business costs are going to be and then make sure you have enough money on top to pay for your life outside work.
What are my business costs going to be?
Business costs include everything from the materials you use for work to your overheads, which means rent on premises, electricity and gas, any wages you pay to other people and things like advertising. To complicate things, there are two different sorts of business costs: variable and fixed.
- Variable costs are those that change according to how much you make or sell. For example, if you run a business making sandwiches, the more you sell, the more bread and butter and sandwich fillings you’ll need. And if you’re planning to wash windows, the more you wash, the more cleaning products you’ll get through. These are called variable costs because they can go up and down.
- Fixed costs, on the other hand, are those that you’ll have to fork out for regardless of how much you make or sell. These include things like rent, business rates and heating bills. An example is the amount you pay for a market stall. You may have a bumper week followed by one where you may sell almost nothing. In spite of this, the amount you pay for the market stall stays the same for both weeks.
Business Link has a lot of information on the money you’ll need to start your business and keep it afloat in the early days and so too do a lot of the big banks.You can go into a bank branch and ask for information or visit the business banking sections of their websites. It’s also a good idea to talk it through with an expert such as a business advisor. Business Link and the Prince’s Trust should be able to help you or point you in the right direction.
