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REVEALED: HOW LONG IT TAKES TO BREAK EVEN WHEN STARTING A TRADE BUSINESS

  • Joinery businesses are the cheapest trade to set up, costing around £6,600
  • Self-employed plumbers recover their start-up costs the quickest – under six weeks

 

Joinery businesses are among the cheapest trade companies to set up in the UK, averaging nearly £2,500 less than other sectors, new research has revealed.

With over 40% of construction firms expected to make redundancies due to the virus[1], tradespeople may be considering going self-employed. IronmongeryDirect, the UK’s largest supplier of specialist ironmongery, has identified the cheapest industries in which to do so.

The study added up the typical costs people pay when entering the UK’s four most popular  trades[2] (joinery, building, electrical, plumbing), with everything from insurance to marketing.

Joiners pay the least, with the average set-up fee totalling £6,642. With the typical daily rate for joiners around £150[3], these initial costs could be repaid within nine, five-day weeks.

Despite being the most expensive businesses to set up, plumbers can expect to earn back their investment quickest, as they are able to charge the highest daily rates. Averaging nearly £350 a day[4], the £9,124 start-up cost could be repaid within six working weeks.

The trade businesses which are the cheapest to set up in the UK are:

1)     Joinery – £6,642 (repaid in nine weeks, £150 a day)

2)     Building – £6,791 (nine weeks, £160 a day[5])

3)     Electrical – £6,873 (six weeks, £245 a day[6])

4)     Plumbing – £9,124 (six weeks, £347.50 a day)

 

One of the most significant outgoings is accreditation. New plumbing companies pay the most in this department, with organisations like HETAS and OFTEC charging substantial sums for membership. Such credentials, combined with the cost of other important courses, like First Aid at Work, the Gas Safe Register and Asbestos Awareness, can set you back over £3,000, which is significantly more than other trades.

Some expenses, however, are necessary across all sectors, such as insurance, marketing, company registration and van hire.

A new trade business can expect to pay over £600 a year to completely cover themselves with insurance. Contractors All Risk insurance is one of the most costly forms of protection, starting at £298 a year, but includes cover against both property damage and third-party injury, so is worth the investment.

Marketing is another significant outlay, but an important one nonetheless. Paying out for business cards, flyers, logo design and a new website usually costs at least £600 pounds. However, such costs will pay for themselves if they lead to a surge in new clients.

Finally, there’s the crucial cost of equipment. A tradesperson may have accumulated tools during their career, but if they are new to the industry, there are tools they will need before taking on work. Joiners pay the most here, with key equipment adding up to £600. Circular and table saws are the biggest outlays, so it could be worth looking for second-hand retailers, whilst ensuring the products are high quality, as income will depend on their performance.

 

The full breakdown of costs per trade is as follows:

 

Type of CostJoinerBuilderElectricianPlumber
Accreditation£1,005.00£1,041.00£1,005.00£3,481.00
Trade Association£117.00£472.80£585.00£231.00
Marketing£610.54£610.54£610.54£610.54
Insurance£638.21£638.21£638.21£638.21
Equipment£599.38£355.97£361.87£490.98
Other (storage, van hire, business registration)£3,672.00£3,672.00£3,672.00£3,672.00
Total£6,642£6,791£6,873£9,124

 

Andy Porter, a self-employed carpenter from Southampton, has given his three top tips for people looking to set up their own trade business:

1)     Look at local adverts and see what similar trades are doing (e.g. services, pricing)

2)     Get quote and invoice terms and conditions in place early and make sure they are watertight

3)     Make sure you have plenty of money saved up as cash flow is incredibly important

 

Marco Verdonkschot, Managing Director at IronmongeryDirect and ElectricalDirect, said: “Many tradespeople will aim to run their own businesses one day, so it’s useful to get an idea of how much it would cost to do so. While these sums can appear quite daunting, most of the expenses will directly improve your service or help you win more work, so are worth the investment in the long run.

“Owning your own business can be incredibly satisfying, so to help those who are considering going it alone, we’ve compiled a list of tips on how to do so effectively.”

For eight pieces of advice from tradespeople who have set up their own business, visit: https://www.ironmongerydirect.co.uk/blog/eight-top-tips-for-setting-up-your-own-trades-business

 

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IS BITCOIN SET TO HAVE A 2017-STYLE MINI BOOM THIS YEAR?

Bitcoin’s price is set to “surge before the end of 2020” with investors keen not to “sleepwalk” through a 2017-style mini-boom, says the CEO of one of the world’s largest independent financial advisory and fintech organizations.

The prediction from Nigel Green, the deVere Group CEO and founder, which has $12bn under advisement, comes as Bitcoin – already one of the best-performing assets this year – appears to be on the brink of a bullish breakout.

In recent days, Square, which is owned by the billionaire founders of Twitter, has allocated 1% of its cash reserves to the cryptocurrency, whilst a former Goldman Sachs hedge fund chief says the price of Bitcoin will jump to $1m in five years.

Mr Green comments: “There’s been something of an avalanche of interest in Bitcoin in recent weeks from household-name investors.

“Investor activity is picking up considerably with various on-chain metrics and ongoing – and heightening – global political, economic and social turbulence suggesting that there will be a price surge before the end of the year.

“Like gold, Bitcoin can be expected to retain its value or even grow in value when other assets fall, therefore enabling investors to reduce their exposure to losses.
“Investors will increase exposure to decentralised, non-sovereign, secure digital currencies, such as Bitcoin, to help shield them from the potential issues in traditional markets”.

He continues: “There’s a growing sense that we’re set to experience a mini-boom similar to that at the end of 2017.

“Prices are yet to catch-up with investor interest – but this is only a matter of time as investors will not want to sleepwalk towards perhaps year-high prices in the run-up to the end of 2020.”

The late 2017 bull run saw the Bitcoin price reach its all-time high of $20,089.

The deVere CEO concludes: “There’s been a notable ramping-up of interest in Bitcoin amongst investors since the end of summer. Indeed, it has been the best performing week for one of the year’s best-performing assets since July.

“I can see no reason why this upward trajectory will not continue between now and the end of the year.”

 

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Wealth Management

HOW THE DEMOCRATISATION OF TRADING AND INVESTING CAN HELP INVESTORS

By Oleg Giberstein, Coinrule

 

Not long ago, I attended an event in the City of London. Suave bankers had come together for a discussion about Fintech. “Normal people should not be trading” was the general agreement in the group. With a slightly disgusted look on his face, one of them told me straight out: “these people don’t know what they are doing, they will just lose money if they get their hands into the market”. Given the track record of banks, this seemed slightly out of touch, but one way or another, the message was clear.

I am recounting this anecdote because it fits a narrative that has become widely accepted: ‘normal’ people are too stupid to make money investing. They should just put their funds into a so-called robo-advisor like Nutmeg or Wealthify which will put their hard-earned cash into index-tracking passive investment funds.

This investment approach looks backwards to a past when investing was for the elite only. However, today is different and investment is being democratised.

 

How can the everyday person get the most out of the markets?

Side-stepping Robo-advisors

Oleg Giberstein

Robo-advisors are a class of financial advisers that provide advice or investment management online with moderate to minimal intervention from humans. Their advice is based on mathematical rules or algorithms alone. And management fees can be 1% of your funds.

Although passive-investing has worked while the markets have been going up, this won’t go on forever. Michael Burry who predicted the Subprime Mortgage crisis which led to the financial crisis of 2008/09 has warned that Index Funds are the next big bubble.

Next Step:

With some research, anyone can create their own long-term, low-cost multi-asset fund held via a platform, with total costs below 0.5%. Explore platforms like eToro or IG Index to buy an index fund that holds a range of stocks directly, or create your own.

To spread your risk, pick stocks from different industries and decide what percentage of your portfolio you want to allocate. If that percentage becomes higher or lower, you can buy or sell to balance it out.

 

Having a strategy rather than chasing trends

When the dotcom Bubble (https://en.wikipedia.org/wiki/Dot-com_bubble) collapsed, those left holding worthless stocks were mostly the retail investors who’d gone for the ‘trend-of-the-day’. Today’s trend is passive investing into index funds.

Next Step:

I use a ‘Barbell strategy’ by keeping the majority of my funds in safe, liquid assets with only about 20% of my portfolio invested in high-risk high-reward assets, like cryptocurrencies or certain tech stocks.

Cash in a 0.1% rate savings account may not seem attractive, but having the majority of your money in cash, bonds, or gold means you’re protected. When others are in a panic and selling during a market crash you’ll have cash available to buy.

 

Using advanced trading tools

Robo-advisors give you average annual returns in normal times. But when times are bad, I wouldn’t want to be sitting in an index fund when everybody is trying to get out at the same time.

Those who get out first are the ones who won’t suffer. In March 2020, when markets dropped over 30%, Hedge Fund Pershing Square reported $2.6 billion in profits in less than a month.

Next Step:

Hobby investors tend to shy away from anything more complicated than buying and selling. However, a simple ‘Put’ option can act as an insurance that allows you to sell a certain financial asset at a predetermined price: perfect when you want to protect yourself against a market drop.

Automated trading rules allow hobby investors to use algorithms to trade like professionals. Platforms like Coinrule provide the tools to build strategies that protect against losses and help catch market opportunities. By designing and then automating the strategy you don’t need to sit by the computer all day. Innovation is starting to provide access to the markets for more and more people.

 

Learning is key

Most of the problems holding normal people back are related to access. Access to the right trading instruments, the right knowledge and the necessary experience. If you just put your money into a passive fund, you never learn and are forever victim to whatever crisis hits the market.

Next Step:

Study the markets. Books like “The Intelligent Investor” by Benjamin Graham “What I Learned Losing a Million Dollars” by Paul and Moynihan and others provide great introductions. Free resources and communities allow normal people to get up to speed quicker than ever.

 

Deciding for yourself

Platforms like Robinhood, Freetrade or Revolut have made waves in the retail online investing market. But they don’t go far enough when it comes to financial inclusion.

The need for a market that, at least has the potential for full transparency, fast learning and large opportunities, is there. Cool tech is making this a reality.

Next Step:

Do your own research. Learn to make your own judgements. Use the platforms and tools offering full transparency and which have the ethics you value. Companies like Luno, eToro, Coinrule, Kraken, and TradingView stand out as frontrunners in making exciting investment opportunities accessible to normal people.

Trading involves time and risk. However, with the tech now available opportunities abound for the non-professional. Democratisation is with us.

 

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