Self Employed Commission Basis

[Lilly1999]

Hi guys, I was just wondering if I could get ur expert guidance on the commission split if going self employed on commission basis?

I have worked in the beauty industry for a while and I now feel like starting something of my own. And going self employed by having a room in an established salon looks to me like a good first step in that direction. I have no first hand experience of running a business and can’t take my clientele from my current work. So, I would basically be starting from scratch.

I am currently in talks with a salon owner- who I used to work for, and who is willing to offer me a room in her business on commission basis as follows:

Option 1- the owner will provide products and take 55% from every treatment (for example, if I make £100, they will take £55 and I will get £45). No reception help but will help with online booking.

Option 2- I will have to buy my own products, but the owner will take 25% and I will get the 75%. No reception help but will give access to online booking system.


There is also a 3rd Option of a flat rent of £50 per day. I will have to self-manage every aspect of the business.

Also, what would a contract for all three arrangements look like, and what important clauses need to be included in the contract.

Would a verbal arrangement be as reliable over the long term?

Should I create my own brand, business name and insist that it be included in her website and socials for promotion and bookings?

How do folks make arrangements for dividing the daily takings to maintain the trust and confidence in each other? Do people use any app or online tool to keep track of the number of treatments and daily takings that can be shared between the salon owner and self employed therapist for full disclosure and transparency?

How do I promote my new business to attract clients when first starting out. What strategies have proven successful for you?

Your guidance will be highly appreciated.
Thank you in advance.

 

[TheDuchess]

Hi Lilly1999

Congratulations on planning your first step into running your own business. It’s a big step and of course there are risks as with all things. You might want to consider having a sideline paid job so you have some guaranteed income. It makes a big difference to your mental attitude - feeling stressed about money affects your business in a hundred different ways. It’s harder to motivate yourself to do all the things that help you grow when you are anxious.

Firstly the three options are all very fair. Option one is the smallest outlay and least risk.

The first question is are you setting up a business or are you working on a self employed basis? There is a difference. Option 3 is definitely your own business but option 1 and 2 you could be a freelance contractor working for the salon.

If you are a contractor, your landlady is your employer and you qualify for some employee benefits such as holiday pay. I’m sure she doesn’t want to do this so it’s important to create enough separation between your two businesses so that clients understand the arrangement as well as HMRC.

The advantage of creating separate businesses is that clients don’t have to pay VAT on your services until your turnover reaches £85,000 within a 12 month period. It’s easy for two professionals working together to hit the threshold and be legally forced to add 20% VAT on to the client’s bill and there’s quite a bit of admin involved so it’s worth trying to avoid falling into the VAT threshold if you have a choice,

If your landlady already pays VAT she may not care about this. If your business is part of hers, remember she won’t be keeping 55% or 25% she’ll have to pay VAT over to the taxman on the total that the client paid.

If she’s using a booking system and her card machine to help you get set up, this may be quite a big advantage for you, you can imagine that clients will find it easy to book in if it’s all one booking system. The same with payments - if they can pay for several services in one checkout transaction they’ll prefer this option and may get frustrated if they have to pay in separate transactions.

Payment systems can be quite pricey - often you are tied into agreements for over a year and you can’t cancel without paying for the total contract. So the offer of online booking and payment collection makes it easier for you to acquire bookings and reduces your overheads and risk.

It’s important that you ensure clients know you are separate businesses - especially if they are booking and paying through one portal. A good booking system will enable you to make this clear.

You need to invest in some professional advice to help you understand the potential pitfalls. You need to speak to an accountant for advice about keeping the taxman happy and figuring out VAT (get your own advice and also speak to your landlady’s accountant to make sure that both accountants agree. You may decide to use the same one.). You’ll also need to get a contract drafted by a solicitor - or join a professional body, they have contracts that you can use. Either way speak to a solicitor as they’ll give you a checklist of pitfalls to consider. However bear in mind that you can only enforce a contract through the courts and this isn’t free. I’ve several times been forced to accept being ripped off by a landlord because it would cost to much to go to court. Ultimately you need to have a good relationship with someone you feel you can trust.

Trust is essential. A written contract ensures that there is less scope for misunderstanding. This is how you “insist’ without being annoying or petty. If you have a column on your landlady’s a booking system you can easily track your bookings and client payments. Keep your own records - a spreadsheet/bookkeeping record, diary and a manual card system are a minimum recording names, contact info, treatment, dates/times and amounts paid for products and services as a minimum. Remember you need to be responsive to clients contacting you so you need to know what availability you have and to be able to update your column. You also will be responsible for notifying clients if you have to cancel or reschedule due to illness or other emergency. If you have a falling out with your landlady - or she goes bust or some other disaster - you need to be able to walk out instantly with your client info safe, even if you lose your equipment. You can buy more equipment but you can’t recreate data,

Speaking of data, you will need a privacy notice advising all clients that you and your landlady are sharing client data between you for commercial reasons. Get advice on the appropriate way to word this. You can tell each client face to face when you book them, but there needs to be a formal notification on the business website(s).

Regarding brand. HMRC will expect you to create your own business. You might want to have your own separate social media and share rather than giving your landlady admin access and vice versa.

To help you decide on your best option, maybe see an accountant for advice, I’d be tempted to talk to your landlady’s accountant in the first instance about how to create a separate business within the salon and go from there.

 

[Lilly1999]

Thank you is a small words in here for you