Is the demise of sole traders a myth?
5 min read
16 July 2019
We're hearing a lot about the doomed plight of sole traders. But is this true? After all, I started out as a sole trader, and I've done pretty well...
Apple, one the world’s most successful tech companies, started out from a garage. Co-founders Steve Wozniak and Steve Jobs met through their shared passion for electronics. Apple then became the first public company to be valued at $1 trillion.
Another unlikely garage start-up is the world-conquering Amazon, which has had a seismic impact on the global retail landscape. Back in 1994, a bloke called Jeff Bezos quit a well-paid job to set up an online book shop. From the first year worked from the garage of his rented house. Latest estimates put his net worth as £113 billion, making him the world’s richest man.
James Dyson, a British success story
Here in the UK, after a string of inventions, a fella called James Dyson set up his own company to make the unlikely-sounding Ballbarrow. This was a plastic wheelbarrow that replaced the traditional tyre with a ball. Fed-up with continually clogging air filters at his factory, Dyson created a cyclone particle collector, later adapting the idea to vacuum cleaners.
Last year his business generated revenue of £4.4 billion.
I decided to highlight these success stories as there has been plenty in the news lately about the plight of the sole trader.
The plight of sole traders, fact or myth?
According to tax records provided by the good old HMRC, a fifth of sole traders don’t even make it past a year. There is a tremendous churn of these types of businesses. Which is encouraging in one way, given the number of people out there willing to give it a go.
The number of sole traders grew by 70,000 between 2014 and 2015, a study by the Institute for Fiscal Studies found.
However, this was merely the net effect of 650,000 sole trader businesses launching and 580,000 closings over the same period. The figures reveal that while the sector continues to grow, despite the risks, 20% of sole trader businesses close within a year. Further to this, over 60% fail within five years.
According to the Government, in 2018 sole traders accounted for almost 60% of British businesses and as such are a driver of the UK economy.
Being a sole trader is tough, – I should know after all
Being a sole trader is tough. You must deliver a product or service, learn about sales and marketing and then there’s all the bookkeeping. This includes ensuring your tax is paid on time and managing employees, should you have any.
It’s 40 years since I started out as a sole trader. I had a good foundation though, completing a four-year apprenticeship in plumbing where I learned everything I could – having left school at the age of 15.
I set up Pimlico Plumbers from the basement of estate agents. During those early days, I relied on my own skill, hard work, and determination to succeed.
Pimlico is now London’s largest independent plumbing and home services company with a 400 plus workforce. I believe anyone with the guts to set up as a sole trader must be applauded and supported. Why? Because the day to day decisions and the difference between success and failure are theirs and theirs alone.
The need to have confidence in your business idea and the ability to effectively deliver it is a given. However, the position of a sole trader is often a precarious one. Especially in the early days. So the ability to innovate and adapt is the key to longevity.
The outstanding examples of Apple, Amazon, and Dyson might be the exception. But all grew from a sound idea and an ability to react and innovate. Despite the massive churn of sole traders in the UK, I’m encouraged that this country’s entrepreneurial spirit remains alive and kicking.
– I look forward to hearing about the next big success story. Especially if it starts out from a garage or a basement!