While you may get to enjoy 100% of your business’ triumphs as a sole-trader, you also have to deal with all of its troubles. You’re also more likely to be in a vulnerable financial position as a sole-trader than you would be in a limited company. Therefore, smaller financial setbacks can potentially have a more damaging impact. This is even more true when you consider the limited liability protection offered by limited companies doesn’t apply to sole-traders.

Fortunately, there are some simple steps you can take to reduce your outgoings, and consequently reduce the likelihood of your company getting into debt.

Compare Your Service Costs

Electricity, water, heating, and Wi-Fi can often be costly but essential expenses for a most businesses to operate. They also just make the office an environment pleasant to work in. Fortunately, there isn’t a monopoly on the US utility market; and different companies may have vastly different prices for similar services. If you’re not sure which one to choose, find a comparison service that can gather quotes from each company based on your circumstances to help you make an informed decision. You might not save a fortune, but it’s better money in your pocket than theirs.

Make Sure your Overheads are Necessary

When you set up, it may be tempting to get an office in the hippest, flashiest business center in town, or sign up to every business subscription service going to give you a ‘better chance’. The harsh truth is, if these services aren’t directly benefitting your business, or bringing in new customers, they can be an unnecessary drain on your finances. While you can certainly aim for an office in a trendy building, you might have to start somewhere cheaper and work your way up. The same applies to services and subscriptions; during your start-up phase, you should only pay for those essential for your operations.

Claim Back What You Can

When you submit your self-employment tax return, you can include receipts for various purchases made for the benefit of the business, or in order to carry out work. These costs include fuel for travel, office supplies, equipment, and refresher courses. Depending on how much you spend on your business, you could save a lot on expenses. You should make sure any expenses you submit are purely for the business though and subtract any amount spent for personal reasons. It’s also worth checking what your tax allowance is before submitting it.

A full list of what you can claim is viewable on

Invest in Marketing, Where Appropriate

Marketing is essential for businesses to reach new customers, and without it, spreading awareness of you and your brand is much more difficult. While marketing isn’t something you should hold back on investing in, nor completely sacrifice if cutbacks are needed, you should look to be smarter with what you spend. If one avenue is generating loads of customers, but another isn’t bringing in new business, you might want to consider cutting back on the less fruitful campaigns. By concentrating your efforts on the more profitable avenues, you’ll be spending less money and potentially generate more leads.

Act if you Find Yourself Getting into Debt

Despite your best efforts and intents, your business could still find itself in debt. It may sound obvious, but you should work to pay off any debt accumulated as soon as possible.

If the debt has gotten to such a level that your business has become insolvent, and not enough money is coming in to cover its costs, you should seek professional help from a financial advisor. Failure to act when you fall into debt increases the likelihood of further, more drastic action from your creditors, who could force you into bankruptcy.


Being a sole-trader can be a solitary, lonely way of working, and the implications of becoming insolvent can be more damaging than in a limited company. However, there are simple steps you can take to reduce the risk of becoming insolvent. These measures include reducing your outgoings, so you’re only paying what you must on services, utilities, and subscriptions, and reclaiming expenses where you can. You should consult your marketing analytics to ensure your advertising budget is returning enough leads to justify the spending. Finally, if you realize your debt has pushed you into insolvency, you must act immediately to avoid further creditor action.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Skip to content