By Fred Hicks, Senior Policy and Communications Advisor at IPSE – The Self-Employed Association

Running your own business is one of the most rewarding career paths you can embark on. It offers autonomy, flexibility and the chance to build a professional journey and legacy of your own. But as any business owner will tell you, it’s not for the faint of heart.

From sole traders to small business owners, the thrill of running your own enterprise comes with unique challenges that threaten to stop your success in its tracks. But with a clear strategy for navigating what a life in business can throw your way, you stand a much better chance of overcoming the toughest challenges of running a business.

What the biggest challenges when running a business?

Managing income volatility as a business owner

There’s no such thing as a guaranteed income when you’re in business; it’s one of the toughest things for new entrepreneurs to adjust to after a salaried career. A busy quarter can be followed by a quiet spell, and seasonal demand requires careful budgeting to ensure you aren’t caught short later in the year.

Whether your business involves selling goods or providing services, a healthy pipeline of business requires regular, if not daily outreach. It should be as much of a priority as the work you’re already doing for your clients. Schedule time for outreach or promotion at regular intervals. If you’re already getting enough interest via your website, job board or agency, you have the opportunity to focus your outreach on winning work that feels more ‘on brand’ for you, or that keeps you booked up for longer.

Even if it feels like you have enough work enquiries for the time being, plans can change and clients can pull out at the last minute, so it’s important not to take your pipeline for granted.

However, even the most diligent planning can’t totally eliminate the uncertainty of running a business. Cases of illness, injury or a call to jury service can disrupt work unexpectedly, and unlike employees, there’s little in the way of financial support for the self-employed when these things happen. Having appropriate income protection in place will give you peace of mind when you are working, and help maintain stability when you’re unable to.

Investing in yourself

Another key challenge is the need to continually invest in oneself. Running a business means staying competitive, and that requires continuous learning and development.

You’ll learn huge amounts just from the cut and thrust of running a business, though it pays to be proactive too. But it can be difficult to find the money, and the time, to do it. Research from IPSE in 2023 found that, among freelance business owners, over half had not undertaken professional or work-related training in the preceding 12 months, and those that did spent an average of £828.

Nonetheless, successful entrepreneurs are often those who treat professional development as a core part of their business strategy, rather than an optional extra. Whether it’s mastering new skills, keeping up with industry trends or embedding AI and automation into your workflows, continuous development can enable you to offer a more premium service, tap into new markets and reduce input costs by becoming more efficient over time.

Like outreach, training can be a good use of your time if you find yourself in a quiet spell. In fact, of the freelancers we surveyed who had undertaken training, 44% said they carried it out between contracts or other periods in which they weren’t working.

And whilst training costs have undoubtedly increased, there are some options to keep costs down. Grants for training are offered by local authorities and central government, whilst professional organizations and trade associations often offer discounted access to training for their members. Ultimately, you’ll want to weigh up whether it pays to take time and money away from the business today, to reap the benefits later.

Navigating the tax system

The tax system presents its own set of hurdles, and it’s usually the complexity and time burden of reporting it that causes the most frustration for business owners.

Keeping detailed records, claiming tax relief entitlements and getting your returns right creates an administrative and mental load that detracts from the work business owners really want to be doing. HMRC has also faced scrutiny for its slow response times on its customer service phone lines, a problem it has committed to fixing.

Ultimately, enlisting the help of a qualified accountant is almost always worth it – even if you’ve got by until now without one. A good accountant, especially one that specialises in your type of business, isn’t just there to help you file your tax returns – they’ll ensure you’re accurately claiming any and all reliefs you’re entitled to, save you time and stress, and assist with forward planning too.

Depending on the size and complexity of your business, you may not need ongoing support year-round. In any case, getting support that’s tailored to your business will be one of the best investments you can make in the financial health and stability of your business.

Long waits for payments

Late payments remain a widespread problem across the small business and self-employed sectors. Campaigners have raised awareness of the problem to an all-time high, prompting government to unveil legal proposals that it dubbed the “biggest late payment crackdown in a generation.”

But in the meantime, a missed payment deadline can have a serious impact on your business’ cash flow and growth. Research from 2023 found that freelancers were owed more than £5,000 on average in outstanding invoices, prompting some to turn to unplanned borrowing to make ends meet.

But paying on time isn’t always enough; a powerful client or supplier’s insistence on needlessly long payment terms, especially in excess of 60 days, can put just as much of a strain on small businesses.

Your best defence is to agree on clear, unambiguous terms and deliverables for your business-to-business contract. Make sure it’s clear exactly what you need to do in order to receive your fee, which will also prevent the client from adding requirements or changing the scope later on without your agreement. And if you can get hold of their contact details, it also helps to copy your client’s accounts team into any invoices you send too.

You might also consider different pricing and payment strategies, such as milestone payments, payment up front, or even adding small surcharges for longer payment terms, to incentivise prompter payment deadlines.

Ultimately, your client is within their rights not to agree to terms you propose. But if you start to get a bad feeling about the client or the way the contract is shaping up, don’t forget that you have the power to walk away too.

Taking work home with you

Finally, it’s the age-old problem of bringing work home with you. This isn’t exclusive to business owners, but it’s nonetheless one of the biggest challenges of being personally invested in a major undertaking like running a business.

Business owners often work from home in their bedrooms, living rooms and kitchens – spaces that aren’t dedicated to work – which can make it difficult to switch off, especially when sharing that space with other home workers. Over time, the blurring of boundaries between work and home life can take a toll on your wellbeing.

If you’re running your own a business, creating a clear separation between professional and personal time and space can help you to manage stress and burnout more effectively. Start with setting a rough schedule for your day, with a normal ‘clock out’ time and breaks for light movement or exercise.

If you run things from home, set some ground rules with people you live with. Of course, that’s easier said than done when children are around, but just having some quick conversations with family or housemates will help them understand when you’d prefer not to be interrupted.

Finally…

Dedicate some space – however big or small – to your ‘core’ work. We can’t all convert a spare room into an office with a top of the range office chair right away, and that may not be how you want to work anyway. Wherever you choose to work, keep the space comfortable and free of clutter, and keep laptops and screens at eye level to reduce strain on your neck and back.

But the long-term health of your business, and yourself most importantly, will be best served by investing in a workspace that best supports your physical and emotional wellbeing – whether that’s at home, on-site or in a dedicated co-working space.

How can IPSE help you?

Running your own business brings unique challenges, and there are gaps in the support available to the self-employed. IPSE exists to fill in those gaps. From essential resources to expert advice, they’ll help you create your path to success. Learn more about IPSE memberships and take advantage of a Caroola discount!