Self-Employment and Trade accounts

[Gern]

modelling products are quite low compared to other industries, what you’re selling might be the same.

My margin on petrol sales when I ran a garage (as a franchise operator) was a staggering 2p per gallon - and I had to stand the losses from drive-offs' out of that! Of course that was back in the day when it only cost about £2.50 per gallon.

[AlanG]

The margins on the products i intend to sell are small for some things and bigger for others. It all depends on the quantities the customer buys. There are one or two that would be a negative profit should i decide to sell them at certain quantities but they are the most requested ones. I cannot understand how suppliers make a profit on those (if they do) as i know what the manufacturer/wholesaler sells them for.

[stillp]

I used to be a buyer for an electrical wholesaler and the RRP on cable was 95% profit if it was sold at full RRP, no one ever did.

I used to be in Sales & Marketing for a major electrical manufacturer, and the wholesales used to tell me they sold cable at a loss, or at cost, and depended on a yearly volume rebate from the manufacturer to show a small profit.

The margins on the products i intend to sell are small for some things and bigger for others. It all depends on the quantities the customer buys. There are one or two that would be a negative profit should i decide to sell them at certain quantities but they are the most requested ones. I cannot understand how suppliers make a profit on those (if they do) as i know what the manufacturer/wholesaler sells them for.

Alan, could it be that the manufacturers give their larger customers a rebate when they exceed a certain volume?
Pete

[AlanG]

Ah ok Pete. That would explain a lot. I'll never be a large volume customer and to be honest,i don't want to be. This business is going to be a side line to run along side my 'day job' and when i get it, my smallholding.

[Peter Gillson]

Hi Al

I agree with the comments about speaking to an accountant, or more specifically a tax accoutant. As a sole trader there may be a number of 'day to day' expenses which you can claim as business costs and reduce your income tax. you have different tax rules in the UK than we do in Guernsey but here are a few thoughts:

- petrol and / or depreciation on your car if you have to drive to the post office, or collect goods from suppliers. I would expect this to be based on the percentage of business milage compared to personal milage,

• internet and phone costs - even if you do not have a separate line for the business you may be able to claim part of the costs,
• if you have to keep a store room heated then those costs may be attributable,
• costs of attending trade shows.

Where this can really be a benefit is if you can include or combine what would be 'normal' activities, for instance combining a weekend at a modelling show with a visit to a nearby supplier and the costs of getting to the area/show/supplier may become a business expense; or taking things to the post office as part of your weekly shopping trip.

I knew a chap in the 1980's who ran a mobile disco, he was able to claim 1/3 of his haircut costs as a business expense on the bais that he had to have his haircut more often due to being a DJ!

Peter

[AlanG]

Hi Peter

Already looked into that. HMRC allow you 45p a mile for car expenses up to 12k mileage a year and then 25p a mile there after. Business rates are reduced because i would be running it from my house and only need about 10 square ft of space. But because i'm running it from home, like you said i can claim on heating,electricity and phone costs.

[stillp]

Alan, check with your house insurer. They probably won't cover any business stock, but best to make sure they're happy with you running a business from home.
I found it cheaper to not claim on electricity, heating, etc than to pay business rates on part of my house.
Pete

[dave]

I used to work for an electrical wholesaler/retailer. When buying we had general discounts with a supplier, on heating, ventilation etc. Then specific discounts on certain products based on quantities bought, so fast movers we would buy in large numbers to get the discount, balancing the discount against the warehouse space occupied.

[AlanG]

Just a quick thanks to all that have given advice to me regarding this topic. Using the questions you supplied i have now got myself two suppliers for items i want. Well chuffed. Now i just need to find £2k to get stock and equipment to get the ball rolling.

Onwards and upwards

[Guest]

Great news Alan.

[AlanG]

Cheers John. Just looking into start up loans and crowdfunding options. I'd rather do it on my own money if possible then i know the profit is all mine.

It's actually scary just how much the little items for admin and packaging all add up into quite big figures.

[Guest]

Keep a list Al of all you spend on the setting up, when I started the tax people were so helpful about things like that.
I was like you want to be I didn't have any loans just grew slowly and in profit not owing anyone. Stay that way if your able .