How to tackle common sole trader challenges

Being your own boss can bring many rewards. You can earn more money, work where, when and how you want and have far greater flexibility. It can also enable you to escape a job you hate, maybe move to a new location or even earn a living from doing something completely different.

However, becoming a sole trader can bring a range of specific challenges, some you may not have encountered as an employee. So, what challenges can you face as a sole trader and how do you tackle them?

1 Unpredictable income

This can come as quite a shock when you’ve been used to a regular set monthly salary. Things sometimes aren’t as predictable when you work for yourself. Although there can be good or very good months, there can be bad ones, too.

Solution: You have to "make hay while the sun shines". Maximising your sole trader earnings when possible can enable you to put away money to pay yourself during lean months. Where income dips are seasonal, try to think of ways to diversify your offer or maybe even start another different business that will give you an income at that time.

2 Late payment

This remains a big problem for many small businesses. Late payment is thought to affect 52% of UK SMEs and as well as significant cash flow pressure, small-business owners have to waste time chasing money they’re owed for goods or services provided.

Solution: You don’t have to grant credit to new customers straight away. You could grant it after, say, six months, once the privilege is earned. Don’t be too generous with your credit terms. Make sure your invoice details are correct before sending and use online invoicing solutions with payment reminders. Consider affordable small early-payment discounts.

3 Rising costs

All sole traders have had to deal with significant price rises in recent years, which have had major cash flow consequences, making many businesses much less profitable.

Solution: Try to negotiate better deals with existing suppliers or ask them how you could save money. Alternatively, consider other suppliers, but remain focused on value rather than just price. A cheaper supplier may give you an inferior product or poor customer service. Regularly assess your outgoings and eliminate all waste. If you don’t need it – don’t buy it. Don’t rule out increasing your own prices.

4 Cash flow pressures

Managing your cash flow must always be a top priority. Run out of cash and it’s game over, unless you can borrow from elsewhere. Successful cash flow management isn’t just about spending less than you earn. It’s also about making sure that you get paid on time, because delays can prove fatal.

Solution: Keep a constant eye on your cash flow. Don’t spend more than you earn; minimise your costs, while maximising your prices. Don’t be too generous with your credit terms, but seek generous credit terms from your suppliers. Get your invoices sent as soon as possible and chase them when overdue. Remain friendly but firm, but remember – it’s your money.

5 Workload/long hours

Running a successful sole trader business usually means having to "wear many hats" as you manage all/most aspects of the business, work harder and longer, certainly in the early years when you’re trying to establish your business. This can impact your work-life balance, while working long, hard hours can increase your risk of burnout.

Solution: Make the most of the time- and effort-saving software/apps. Set sensible working hours and stick to them. Work smarter, not longer. Take breaks, because it can make you more productive. Budget permitting, consider outsourcing some tasks. It will also free up some of your time. Don’t allow yourself to be distracted by your phone, emails or social media. At the end of your working day, switch off and find ways to relax.

6 Attracting more customers

It can be easy to get caught up in keeping your current customers happy that you don’t devote enough energy to attracting new customers, which is ill advised. Almost inevitably, you’ll lose some customers along the way, often through no fault of your own. And your business won’t grow unless you attract enough new customers.

Solution: Make marketing a key priority. Develop a marketing plan for your business, detailing your target customers/clients and explaining how you will attract and sell to them, so that you’ll achieve specific marketing goals. Always be selling and marketing. Budget permitting, seek expert advice on how best to market your business.

7 Safeguard your health

You need to protect your physical and mental health, which can both suffer if you’re not careful. Running your own business can be tough and all-consuming, but never neglect your health. And don’t allow yourself to become isolated, because it can impact your mental health.

Solution: Start and finish your working day at consistent times. Excessive work hours should be the exception, not the rule. Have set times for breaks and lunch. Eat healthily, don’t skip meals and avoid sugary drinks and too much caffeine. Drink plenty of water. Make time in your day for exercise, even if that means going for a walk. Be sure to relax, enjoy a hobby and spend quality time with your loved ones. Aim for eight hours of quality sleep each night. Build a support network of mentors, advisors and other business owners. If you’re worried about your mental health – seek support.

8 Tax compliance

Your tax knowledge is likely to be very limited if you’re new to self-employment. Truth is, you don’t need to become a tax expert, you just need to know what you need to know.

Solution: Do some reading so that you at least know some essential tax basics. Seek knowledge from trusted sources (government website GOV.UK is a good place to start). Using good software, for example, tax return-filing software, can also help with tax compliance. Budget permitting, an experienced accountant will help to ensure that your sole trader business is tax compliant.

Copyright 2025. Sponsored post by Mike Parkes of GoSimpleTax - tax return software that can help you manage your self assessment.