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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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Top 10

WHY BETTER PLANNING COULD BE THE INSURANCE INSURERS NEED

Adam Bimson, Chief Customer Officer, Vuealta

 

Insurance is predicated on the ability to plan effectively, to model accurately, and to predict the likelihood and impact of certain events. Whilst already facing significant regulatory, competitive, and customer disruption, the industry, like all others, has now been deeply disrupted by the pandemic. From an operational perspective, insurers have seen their workforces dispersed, their technologies stretched to the limit, and customers put under immense pressure – and in turn, that strain has been put on the insurers themselves.

Then there’s the increase in customers focusing on wanting to better protect themselves. Separate reports have found that the number of people making wills has risen at the same time as life insurance has seen a spike in interest. And for commercial lines, corporate customers are carefully scrutinising their current and future business disruption insurance, again with an eye on increasing their cover.

When is a growth in customers a problem? When you can’t handle each one properly. No business wants to fail due to too much success, but if insurers do not adapt rapidly, that is the risk they entertain. Whilst there may be an uptick in demand in some areas, the market is still awash with competition and tight margins.

Adam Bimson

Added to this are the demands of IFRS17, due to come into force in January 2023. That may seem a long way off, but the reporting requirements it places on insurers will require significant organisational, data and technological change, all of which needs to be started now.

 

Two challenges to overcome to achieve better insurance

This all points to the need for a fundamental shift in the way insurers operate in not one, but two areas.

Firstly, there is the need to adapt their operational model so that the effects of disruption, whether driven by the pandemic or regulation, do not impact the experience their customers receive.

Secondly, they need to reinvent their business so that the services and products they provide are both appropriate for customers and capable of withstanding future upheaval.

In both instances, technology, or rather the ability to consolidate, analyse and action data-driven insights through the use of technology, may offer the solution.

Why? Because as with so many things, the issues that insurers face are built on data. Being able to harness it gives them a much better chance of tackling those issues head-on. For instance, when it comes to operational models, better visibility (powered by data), combined with accurate scenario-based modelling and planning, will aid the development of a more agile organisation. Whether it’s adapting to a reduction in staff headcount as infections spike in different parts of the country or anticipating when customer service functions may be impacted by local lockdowns and increased restrictions. Being able to identify problems and react accordingly will be critical to delivering operational continuity and, therefore, unimpeded customer experience, and data lies at the heart of this.

Then there’s how it can be applied to evolving products and services for customers. Customers, whether consumers or businesses, are going to want to feel covered by their insurance – insurers will want to balance this with the need to not overexpose themselves to events that could appear out of nowhere. Here’s where the combination of accurate data use and the right digital tools, such as artificial intelligence-driven solutions, can help insurers take a major leap forward. Premiums can be adjusted, and more dynamic products tailored to the needs of customers can be developed.

Being able to use data more effectively is going to play a major role in complying with IRFS17, both in getting ready for its implementation and meeting its requirements in the years to come. Complying with a reporting standard will drive an investment in data and technology, but harnessed correctly, that investment can unlock wider benefits – the same commitment can be used to cover off all the challenges already covered.

In short, those that use technology effectively, and plan for scenarios appropriately, are more likely to build the types of products and services that fulfil both those objectives, and ultimately keep customers coming back.

 

Planning for the unpredictable

Much like other sectors, insurers need to revamp their business models. Technology, and the better use of data, offers a solution to both operational and customer experience challenges.

Planning for the unpredictable may seem impossible, but by using a variety of data sources, and more importantly, by being able to connect them all and read them effectively, insurers can ensure they continue to meet customer expectations while preparing their businesses for whatever comes next.

 

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Finance

GEOSPATIAL DATA VISUALISATION MAKES SENSE OF MASS OF COMMERCIAL PROPERTY INSURANCE DATA

Heikki Vesanto, Manager GIS Data Science, LexisNexis Risk Solutions UK & I

 

Like most areas of the general insurance market, data, analytics and technology are helping commercial property insurance providers make faster and more accurate decisions based on a holistic view of risk.  The big difference in commercial property (and to an extent home insurance) is that it is quite literally a picture or map of risk that’s being created – right down to an individual property outline – through the evolution of desktop based geospatial data visualisation tools.

Knowing that visual imagery is more intuitive and speeds up the ability to assess risk, data visualisation tools developed specifically for the insurance sector have become increasingly sophisticated.  They help make immediate sense of the huge and growing volume of data at the market’s disposal.

This data includes the characteristics of a property (floors, height, roof type etc.); its location; the individuals behind the business; the crime and environmental risks including near real-time data on flood and river flows direct from the Environment Agency plus customer and policy data held within an insurance providers’ own databases.

Heikki Vesanto

All this data can now be analysed, aggregated and visualised in map form for use within the insurance continuum – marketing, pricing, underwriting, claims. It reveals where exposures and accumulations exist in an instant and shows insurance providers where there is capacity to write more business.  Fundamentally, the inclusion of all this data allows insurance providers to more accurately price each risk upfront relative to its unique profile.

The demand for this level of insight is only set to grow as commercial insurance providers face changing risks on two fronts. The first is climate change and the cost of claims emanating from extreme weather events. Profitability in commercial property insurance is significantly affected by weather conditions and a recent report suggests commercial property insurance rates were up around 20% on average in Q3 2020[i].

The second is the shift in the use of commercial property space, partially caused by the pandemic.  Surveys suggest that the enforced exodus of workers from offices could be permanent for at least part of the week[ii].  Indeed, several banks across Europe have confirmed they will be closing branches and asking staff to work from home[iii].   There are also questions over the future of town centres which were already in decline before COVID-19.

Understanding which insured properties are vacant versus occupied in a flood, fire or a severe storm, knowing roads closed due to fallen trees, where flood water will flow or how a fire in one building could spread to another is now possible through the evolution of geospatial data visualisation tools such as LexisNexis® Map View, enabling complex property data to be quickly and easily understood and acted upon.

When a weather event occurs, insurance providers can look at a specific geographical region, a postcode, an address or a single property outline, pulling on a wide range of data including live feeds from the Environment Agency.  This means that rather than wait for an influx of claims to assess the exposure to a climate event, they can upload their policy and claims data to visualise the risks and exposure for a whole book of business. They can understand which policyholders could be impacted and where on the ground resources need to be located.

The flexibility of the tools offered today makes it easy to filter down to the risks most of interest, focus on one property for underwriting purposes or a whole block of properties in the path of a coming storm.

The use of ‘live’ data also means that Estimated Maximum Loss and Potential Maximum Loss can be calculated.

Risk can be assessed as needed or a constant monitor created for a whole commercial property portfolio. Looking at a whole portfolio alongside past claims may also help insurance providers price more accurately and understand how they could help mitigate future claims and potential losses.

As well as supporting underwriting, pricing and claims management, with this visual depiction of risk, insurance providers can easily identify areas where they can sell more business in large cities and automatically see where they have areas of high concentrations of Sums Insured for reinsurance calculations.

Insurance specific geospatial data visualisation tools are enabling the insurance market to utilise the increasing availability of ‘live’ and new data sources related to commercial property risks.  This is helping the market to price with pinpoint accuracy, manage their portfolio and get on the front foot when a weather event hits to limit their losses and protect policyholders.

 

[i] https://www.artemis.bm/news/commercial-property-insurance-price-rises-accelerate-globally-in-q3/

[ii] https://www.bdonline.co.uk/news/london-office-market-collapses-amid-pandemic-deloitte-survey-finds/5109149.article

[iii] https://www.ft.com/content/a15f17d3-dc86-4030-85fe-74a29eb1fafa

 

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