the richest man in atherstone

This series of articles was inspired by a wealth-building strategy created by Stuart Goldsmith. It is called 'Double Your way to a Million Plan' and you can sign up for your free copy on this webpage. For a brief outline of the strategy, take a look at this post.

Since becoming self-employed a few weeks ago, I've been thinking an awful lot about whether I should keep my business income and Doubling income separate. This is the way I've done it over the past year, the main reason being that the rules for Doubling state that Doubling money should be kept separate from personal cash.

This poses a number of problems. Firstly, I will have two sets of accounts to keep and working out the split for National Insurance and taxes will be quite difficult. Secondly, each time I come up with a new money-making idea, I will have to decide whether it contributes to my personal or Doubling income. I would have to design some sort of criteria to help me make the decision - and what sort of criteria would I use?

Over the weeks, I've come up with a number of strategies for keeping the funds separate, however none of them 'felt right' and they were all unnecessarily over-complicated. I feel I could continue to ponder upon this until the cows come home but, even then I don't think I would come up with a satisfactory solution.

So, I made a decision.

I will combine my Doubling quest with my other business ventures and split all the income between myself and the Doubling Pot. Although this is technically breaking one of the rules of Doubling, I believe it is the only satisfactory solution to the dilemma. My business will become my 'Doubling Account' and one of the expenses from said account will be my salary. I think at some point everyone that attempts to 'Double to a Million' will have to pay wages or labour costs, and that is the way I think about drawing a salary from it.

As well as gaining personally from my Doubling exploits, my Doubling Project will gain from my personal business income (including income from this website). A joining of forces, as it were.

The way I intend to split the profits is by totting up the income earned every quarter and splitting it three ways. The first third will be held back to pay the end of year tax bill. The second third will be retained as the Doubling Fund and the third third(?) will be transferred to my personal bank account.

My salary will be further divided as highlighted in my personal financial plan for 2008.

This also has the advantage of amalgamating the Doubling updates I make here into a single quarterly post.

So, with this plan in hand and a little math, I find that I need to earn a little over £15000 during 2008 to achieve two of the goals I set myself at the beginning of the year (goals 4 and 5).

I'd better get cracking...

A little over a week ago, I registered as self-employed with HM Revenue & Customs.

Now that I am earning hundreds of pounds from my money-making ideas ideas (rather than just a few extra quid as in previous years) it seemed like the right time to put them into a more taxman-friendly structure. Additionally (and more importantly to me), one of my goals for 2008 is to set up and run my own business. This was also on my goals list for 2007 but procrastination and apprehension resulted in it not being completed. I was determined not to let that happen again this year.

My initial plan was to set up a Private Limited Company, but the additional costs and administration soon quashed that idea. I got a few quotes from accountants and realised that it would take a big chunk out of my projected profits if I were to run a Ltd Company and the over-complicated tax-structure in the UK would be too big a learning curve to do the accounting myself. I also found that the legislative responsibilities required to run a Limited Company would take up a lot of my time and/or money - time and money that I think would be better spent on the business's growth during it's infancy. At this point in time, I felt that the best course of action would be to trade as self-employed with a view to incorporation in the future, once profits are large enough to cater for the additional requirements.

Before registering as self-employed, I did a lot of research into the responsibilities of running a business as a sole-trader from home and would like to share the process I went through in the hope that it will help someone in a similar position. Of course, this article is no substitution for your own research and due-diligence but it will hopefully provide you with a few pointers in the right direction.

Homeworking
The nature of my work meant that a lot of the regulations and legislative requirements of running a business were not applicable to me. Being a one-man-band, I don't have to worry about employment law and tax for employees, my own wages being withdrawn directly from the business.

I checked the smallprint on my mortgage to make sure there were no conditions preventing me from running a business from home - fortunately there wasn't. I also checked my home insurance policy. Business items are not insured, however this wasn't an issue as my business assets are primarily the websites I run. The only other thing is my laptop, which is also a personal item and therefore covered. The data on my laptop is probably more important than the laptop itself, however making regular backups and storing them at another location (my mum's house) should mean I won't have to change the policy.

I thought that working from home would mean that I would have to pay business council tax rates on my house, but after a quick phone call to the local authority I discovered that one guy sitting at home with a laptop is not liable.

Banking
I opened an Alliance + Leicester Premier Direct Current Account last year as part of my Doubling Project. I believe that this is the ideal bank account for anyone starting a small business as a sole trader. This account pays a whopping 8.5% on all balances below £2500 - a rate which is fixed until April 2009 - and comes with a 0% overdraft for the first 12 months. A deposit of at least £500 is required each month, but if cashflow is poor, you can easily use the overdraft to bounce £500 to another bank account and back again. It is not a bona-fide business account, so cheques and deposits cannot be written in the name of the business, but this was not a problem for me as everything is set up in my own name.

Stationery
All business stationery such as letters, invoices etc. must display the name of the business owner and address of the business by law. I also wanted to include my business name, logo, telephone, website and email address on all external documentation. I used OpenOffice - a free suite of business tools similar to Microsoft Office - to create a few templates for the business. This included a standard letter template, standard email template and a basic template for internal documentation.

Trading
Trading under a business name that is the same or very similar to another business could lead to legal wranglings in the future, so I did a few checks to make sure no-one else was using the name I planned to use for my business. I did a check on Companies House website for other Limited Companies as well as doing a Google Search to see if it was being used by anyone else. Fortunately, nothing turned up.

It is also necessary to become acquaited with a few pieces of legislation when trading including the trade descriptions act (how you allowed to describe goods and services), the sales of goods act (how to deal lawfully with sales, returns etc) and, if trading over the Internet, the distance selling act. It is also important to understand the data protection act when storing the details of customers and prospects.

Health & Safety
Although most legislation with regards Health & Safety will not apply to me (being a lone home-worker), I had to carry out a risk assessment of the area that I was working in, as required by law. Basically, this just meant having a look around for any potential hazards and making adjustments to reduce the risk. As an example, I noticed that the power cord for my laptop could cause a tripping hazard. I reduced the risk by moving my desk closer to the wall where the plug socket resided. Although a risk assessment has to be conducted by all businesses, it does not have to be documented unless there are four or more people working in the area.

Accounting
Accounting is not something new to me as I have been keeping my own personal accounts for a few years now and it is just a matter of transferring my existing system to the business. I aim to keep my business and personal accounts completely separate or sake of clarity. I use a fantastic double-entry book-keeping and accounting package called GNUCash although I must add that this is only available for computers running Linux*. It comes with an accounts receivable, invoicing and receipt system which will help me keep on top of my cashflow.

Income Tax & National Insurance
The final thing to do was to give HM Revenue and Customs a ring to register myself as self-employed. The call lasted around 5 minutes and all that was required was for me to give them my National Insurance Number, the date I became self-employed and my personal details. I will have to pay income tax and national insurance for 2008 after my first year of trading.

Summary
I found that becoming self-employed is relatively easy to do. I must admit there are a lot of things of things that you are required by law to be aware of, however there was a lot of help at hand from goverment and commercially-run websites.

I found a lot of useful information on the Business Link website and they also provide a handy booklet entitled 'The No-Nonsense To Government Rules & Regulations for Setting Up Your Business'. Other resources of note include ByteStart and Startups.

I hope that this brief guide to setting up a business as a sole trader has been of some help to somebody out there in Internet Land. As always, feel free to make any comments below. After all that red tape, I'm off to start doing something a bit more productive...

* - GnuCash is available for Linux, MacOSX and Windows. Thanks jsled.

Update 6th Oct 2008 - Following the devastating news of IceSave's parent company, Landsbanki, being taken over by the government I have begun to make updates of the situation on my main IceSave webpage.

Following on from my previous post, Landsbanki's IceSave have recently announced their excellent Easy Access ISA. At 6.10% gross (or 5.94% if you opt for interest to be paid monthly), it is the best Mini-Cash ISA on the market. In addition, IceSave will guarantee to beat the Bank of England Base Rate by 0.30% until 31 January 2011 and at least match the Base Rate until 31 January 2013. There is no notice period or penalty for withdrawing your money or transferring it to a different provider in the future. You also have the option of transferring your previous Mini-Cash ISA's by filling in a transfer request form.

The only down-side seems to be that you need to put at least £1000 into it, whereas other products accept as little as £1. However, if you've got a grand or more, I believe that this is the one to choose.

I've been using IceSave's Easy Access Savings Account for over a year now (see my review of this account here) and I've been very impressed with the service I've received and the interest rate, so I'm planning on opening one of their ISA's in the next week or so.

I actually haven't opened an ISA this tax year (I moved house so wanted to keep the cash liquid in case it was required), so hopefully it'll be sorted before the end of March to maximise my tax-free allowance - and then I can open another one!

Once opened, I'll be sure to write a report of my experience.

UPDATE: Five minutes after writing this, I went to the IceSave website and read that because I already had a savings account with IceSave, I could apply for an ISA from their Internet Banking website. I logged on and the whole process was complete in about 2 minutes. I simply declared that I hadn't already opened an ISA this year, chose where I wanted the money to be deposited from and inputted my National Insurance number. I was informed that my ISA would be up and running in two days and I could view it from my existing Internet Banking with IceSave - if only all banks would make it this easy!

This is the tale of an affiliate marketing opportunity that came about entirely by accident.

Regular readers know that I occasionally write reviews about financial products I have used. At the beginning of last year, I wrote one such article about the IceSave Instant Access Savings Account.

A couple of months later I noticed I seemed to be getting an above average number of visitors to my site and upon investigation I discovered that I was getting a lot of visits from the Google Search Engine.

After a little more digging, I was happy to find out that the review I wrote was now ranked in the top 2 of Google's search results for the terms 'Icesave' and 'IceSave Review', second only to the IceSave website itself.

At this point, I thought it would be prudent to see if I could join an affiliate program partnered with IceSave to try and cash in on the popularity of the webpage I wrote, however my search was fruitless, so instead I added an extra Google Adsense banner. Although I got one or two extra clicks, the profits from the page were not particularly amazing.

Over the summer I experimented with quite a few different advertising options from ClickBank products to Debt Consolidation Services. All of these advertisements were related in some way to the financial theme of the website and article but none of them earned any more than a few pence. All the time, my review was getting more and more popular with people dropping off their comments at the foot of the article and it became one of the most visited pages of the website.

Fast-forward to the end of September 2007 and I received an unexpected email from an affiliate marketing network. They had recently partnered with IceSave to provide web-based leads and had discovered how highly ranked my review was in search engines for IceSave-related keywords. They wanted me to join their program and I obviously jumped at the opportunity. It was just what I had had been searching for.

I added the relevant banners to my IceSave article and awaited the results.

There were only a few days left in September, so I didn't earn anything in this month, however by the end of October, I was happy to find out that I'd earned £44. November was even better with profits of £88 and December earned me £66.

January 2008 was a fantastic month with earnings of £224 - people are more attuned to saving after Christmas, it seems.

In total I've earned £422 in 4 months. So, what have I learned from this experience?

I'd have to say that I'll never underestimate the importance of matching the right products with right people. I'm not sure what possessed me to try and sell debt consolidation loans to people who had money to save! But even similar products such as other savings accounts and money-making strategies bared no comparison to the success of the actual product I wrote about.

I've also discovered the importance of patience and tenacity in the affiliate marketing game. Although the page was successful in terms of visitors and search engine rankings early on, it didn't begin to be profitable until 9 months after it was written. Eventually, when opportunity came knocking, I was in the prime position to take advantage of it.