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Are you setting up as a Portfolio Executive or planning to? The chances are you’ll have a long list of things you want to get in place, the reality is you won’t need half of them, at least not yet. This article is written from the perspective of someone who helps people build up a Portfolio Executive workstyle. I’ll share what you really need to be doing – and how to avoid the non-essential things that will sap your time, money and energy.
By following these tips, you’ll have more time to focus on developing your product and network and winning your first new client. After all, that’s what will get your business off to a flying start.
The Portfolio Executive start-up checklist:
I am assuming that you are going to provide business to business professional services, which is the Portfolio Executive proposition, and that you are moving from a situation where you a full time permanent salaried employee. There are some basic hygiene factors.
1: Establish your legal entity
You need to establish a legal entity through which to trade. There are two options either to start a limited company or start a limited liability partnership. From a tax point of view I suggest you get independent advice but from a practical point of view, starting an LLP, you need to have two partners. It may be that your other half is the right partner and they are coming into business with you or it may be that you are on your own – in which case the most appropriate legal entity is a limited company.
Why a limited company? People are often much more comfortable buying from a registered company. If you are self-employed then it can raise all sorts of concerns in the mind of your buyer. For example, if you are providing professional services the buyer may worry they are at risk of liability or PAYE / National Insurance if the HMRC decide it is not self-employed relationship. So, let us assume for the purposes of this article that you’ve started a limited company. The same is true for an LLP, but I’ll use the term company for the sake of simplicity.
How can you register? You can go to Companies House and you register a company with a single director for a very low fixed fee online. There is no longer any need to have a company formations agent or to buy an ‘off the shelf’ company. You can pick a name that suits you, there are a few limitations that Companies House imposes, but in a few clicks, you can establish a limited liability company. You can completely separate your company name from your trading name so do not let trying to get the very best company name hold you back from getting started – just register a company. If you want to have a different trading name in the future, you can always have a ‘trading as’ name.
2: Register the company for VAT
The VAT threshold in this country is probably more than you are going to earn in your first quarter, but as soon as you have registered for VAT you can claim VAT on your inputs (i.e. the money you spend on developing your business) and for most of your clients, that is companies that pay VAT on your inputs, it is, in effect, free.
When your company is still small, you can use a particular concession that HRMC provide, where your VAT is assessed on turnover, not the difference between your inputs and your outputs. This is very attractive in the early stages of a business because you can move to this at any point that you like. The paperwork is very simple, you just have to put in your turnover, you don’t need to submit detailed VAT returns and the percentage of turnover that is treated as turnover for VAT purposes is usually less than the 20% that you would add to your invoice for VAT.
What happens if you delay charging VAT? At the point when you do need to charge VAT your clients may suddenly perceive that your increase in price is by 20%. This really not helpful at the point that your turnover is moving to £80-£90k a year and suddenly feels very risky. So, get that problem out of the way and get it started straight away.
3: Get setup for PAYE
If you have gone for a limited company you will need to set yourself up for PAYE and you will need to make sure that HMRC are fully aware of your position as an employee of that company. The conventional wisdom is that you pay yourself the maximum that enables you to take benefit of your income tax exemption and pay the balance in dividends. There is just one risk about that; you can only pay out dividends on profits and if you have less profits than you want, then you may not be able to pay yourself. By this I mean if you’ve been paying yourself an amount each month, you may end up in a situation where you have a need to suddenly pay tax and national insurance on a much larger number than you expected.
4: Start bookkeeping – or use an accountant
So, you now have a limited company and have established your relationship with HMRC and you are in a position where you can start keeping your books. There are various options around this, and a popular option is to have an accountant. I think there is a lot of reassurance around having a reporting accountant but there are also a number of low cost providers of online accounting services where they will take you all the way through and submit your returns to HMRC for a relatively low fee if you put your expenses into their system. But you don’t have to do that straight away. For now, a simple spreadsheet and a simple way of collecting your receipts can be enough. And you can buy very low cost, almost free, tools that will allow you to use that spreadsheet to submit your returns digitally to HMRC.
5: Do you really need a website at the outset?
It’s tempting to create a nice new website and hire a designer to create a brand to go with it. Those things are really not necessary – you can get by perfectly well with a simple URL, a business card and business email and a well written LinkedIn profile and company page.
The minimum you need to do is choose a meaningful URL (e.g. via a company such as Go Daddy) and then subscribe to an email account. For example, you could have Charles.email@example.com ) The reason you are doing this is that 1) it doesn’t look very professional to be trying to run your business from a Gmail, Hotmail or iCloud account 2) as soon as you have a valid email address with URL you can set up a company page on LinkedIn (more on that below).
Instead of using a designer to create a brand and logo, you can create a perfectly decent business card using a service such as moo.com where you’ll find a number of templates ideal for a professional consultancy service business.
6: Maximise your visibility on LinkedIn
For me the simplest substitute for building an expensive website when you start out is to use LinkedIn. I’ll assume you’ve already got a LinkedIn account and connections, but what you may not have is a company page and you can create one on LinkedIn for free as soon as you have a unique URL and email address that you can use for that site. It’s also a good idea to regularly review your LinkedIn profile and make sure that it’s written in a way that positions you as a Portfolio Executive and shows how you can solve the problems that your ideal clients might have.
There are many guides on how to improve your profile and presence on LinkedIn, but why not start with some very good tips from LinkedIn’s own blog, which you can view here.
7: Be easy to contact
You might feel you need to engage with a serviced office with a landline number that clients can call. But most people do not need a landline in order to be seen as someone selling their services – or have a serviced office to collect their post. These days many self-employed consultants work perfectly well from a home based office where they can keep their running costs low. In your early days a mobile telephone number is all you need, the most important thing being that you are easy to get in touch with.
So your basic business start-up kit consists of:
• A legal entity, set up for VAT and PAYE
• A simple bookkeeping and expenses process
• A URL and business email address
• A well written LinkedIn profile with company page
• Being easy to get in touch with
That is it! That is something you can achieve in two or three hours and it will have cost you, depending on which URL you go to, less than £200. Everything else can wait.
Follow these tips and you’ll have got your business started. You can go out and find customers, make contracts, network and raise invoices as someone established. Most importantly, you can go out there and win your first client. Good luck!
If you are interested in building your career as a Portfolio Executive, why not find out more about the Portfolio Executive Growth Academy and our programme pathway.
Charles McLachlan is the founder of FuturePerfect and on a mission to transform the future of work and business. The Portfolio Executive programme is a new initiative to help executives build a sustainable and impactful second-half-career. Creating an alternative future takes imagination, design, organisation and many other thinking skills. Charles is happy to lend them to you.