Setting up an outsourced payroll company

[PayrollGirl]

Hello!

I've been working in an outsourced payroll company for 7 years now and I want to set up my own company.

I know I need to register for money laundering and someone has recommended that I take out professional indemnity insurance, but does anyone know if there's anything else I need to register for? Or anything else I should do before taking on clients?
I've decided to use Sage 50 Payroll - not everyone's cup of tea, but I know the software inside out so it seems the easiest option. Their monthly fees aren't too bad either.
I'm also torn between registering as a sole trader or setting up as a limited company.

Any advice would be very welcome please

Thanks!

 

[Scalloway]

You need to register with HMRC as apayroll agent.

https://www.gov.uk/guidance/payecis-for-agents-online-service

How are you planning to get clients?

 

[PayrollGirl]

You need to register with HMRC as apayroll agent.

How are you planning to get clients?

Thanks for your reply. I’m going to contact accountants and see if they would like to outsource. Maybe offer a discount for outsourcing multiple clients. If that doesn’t work then I might start offering an incentive for client referrals.
I’ll probably contact small businesses directly too and offer a cheaper, more efficient service than their current provider.

 

[intheTRADE]

Are you planning to remain in your current employment whilst setting up your own company or leave your job altogether to do it?

 

[PayrollGirl]

Are you planning to remain in your current employment whilst setting up your own company or leave your job altogether to do it?

I’m undecided at the moment

 

[Scalloway]

If you continue working in your job you need to be careful your employer doesn't accuse you of stealing potential clients. Does your contract allow you to do outside work?

 

[Mark T Jones]

Thanks for your reply. I’m going to contact accountants and see if they would like to outsource. Maybe offer a discount for outsourcing multiple clients. If that doesn’t work then I might start offering an incentive for client referrals.
I’ll probably contact small businesses directly too and offer a cheaper, more efficient service than their current provider.

May I strong recommend that you put most of your effort at this point into developing a clear marketing strategy - ideally one that doesn't rely on cheapness, because if you sell cheap you will get cheap clients.

The good news is that there is a lot of demand for what you d. The less good news is that there is pretty good supply.

You really need to differentiate yourself and find your ideal target client.

 

[PayrollGirl]

If you continue working in your job you need to be careful your employer doesn't accuse you of stealing potential clients. Does your contract allow you to do outside work?

My contract doesn’t say anything about potential clients, just current ones.

 

[PayrollGirl]

May I strong recommend that you put most of your effort at this point into developing a clear marketing strategy - ideally one that doesn't rely on cheapness, because if you sell cheap you will get cheap clients.

The good news is that there is a lot of demand for what you d. The less good news is that there is pretty good supply.

You really need to differentiate yourself and find your ideal target client.

I agree. I don’t believe that being the cheapest is ever a good marketing strategy. My prices are mid-range and even with a discount they wouldn’t be low enough to be considered cheap. However, if an accountant has multiple payrolls that they outsource then I think the idea of someone with proven experience running them for a slightly lower price would be appealing enough for them to consider switching provider.

 

[intheTRADE]

My contract doesn’t say anything about potential clients, just current ones.

I think @Scalloway was alluding to potential for you from your employers current clients. You will need to very careful around that aspect of things because if they find out, you will almost certainly be dismissed from employment and if your business hasn't yet took off it could be a big hit in your life

However, if you have funds/savings to keep you going I would say 100% leave your employment and go for it

 

[PayrollGirl]

I think @Scalloway was alluding to potential for you from your employers current clients. You will need to very careful around that aspect of things because if they find out, you will almost certainly be dismissed from employment and if your business hasn't yet took off it could be a big hit in your life

However, if you have funds/savings to keep you going I would say 100% leave your employment and go for it

Agreed. In an ideal world I would leave and focus on my own business. As soon as I have enough clients to live comfortably then I’ll definitely be leaving.

 

[fisicx]

Thanks for your reply. I’m going to contact accountants and see if they would like to outsource. Maybe offer a discount for outsourcing multiple clients. If that doesn’t work then I might start offering an incentive for client referrals.
I’ll probably contact small businesses directly too and offer a cheaper, more efficient service than their current provider.

None of the above is going to work.

If they want to outsource they will either be already doing it or will do their own research. What they won’t do is use a complete unknown (you).

And they aren’t going to give away potential leads no matter how much you offer.

And nobody is going to switch to an unknown and unproven provider (you).

What you need is a really strong website with referrals, reviews and testimonials. You will need to spend cash on marketing and advertising. It’s going to be hard work and could take a couple of years to get established.

Do you even know who you are targeting?

 

[PayrollGirl]

None of the above is going to work.

If they want to outsource they will either be already doing it or will do their own research. What they won’t do is use a complete unknown (you).

And they aren’t going to give away potential leads no matter how much you offer.

And nobody is going to switch to an unknown and unproven provider (you).

What you need is a really strong website with referrals, reviews and testimonials. You will need to spend cash on marketing and advertising. It’s going to be hard work and could take a couple of years to get established.

Do you even know who you are targeting?

Everyone was unknown at some point. I like to think my expertise will help attract clients… a phone call can go a long way.

Website and reviews is not a problem. That’s all in hand, along with marketing.

 

[Spur Support Services]

I think you are severely restricting your client base with Sage 50 Payroll software, because it won't integrate with non Sage accounting systems.
Have a look at BrightPay, or become an expert in one of Xero Payroll or Quickbooks Payroll.

Whichever way you choose, it may be that those softwares can offer you specific guidance on setting up a bureau through them.

My main worries would be what reassurances you could give potential clients over data security and it may be that you should seek obtaining work via accountants at first before seeking to work directly.

If you are a qualified accountant then you will need a practising certificate to undertake this work.
If you are qualified under CIPP, then I am sure they will be able to give you a lot of support and guidance, on their requirements.

If you are not qualified under CIPP, then I really suggest that you look into that qualification with the support of your current employers, before venturing out on your own.

Re Self employed vs Limited Company, there are a myriad of factors, especially if this business is going to be in addition to your current employment. It is best to talk through with one of us Accountants.

 

[PayrollGirl]

I think you are severely restricting your client base with Sage 50 Payroll software, because it won't integrate with non Sage accounting systems.
Have a look at BrightPay, or become an expert in one of Xero Payroll or Quickbooks Payroll.

Whichever way you choose, it may be that those softwares can offer you specific guidance on setting up a bureau through them.

My main worries would be what reassurances you could give potential clients over data security and it may be that you should seek obtaining work via accountants at first before seeking to work directly.

If you are a qualified accountant then you will need a practising certificate to undertake this work.
If you are qualified under CIPP, then I am sure they will be able to give you a lot of support and guidance, on their requirements.

If you are not qualified under CIPP, then I really suggest that you look into that qualification with the support of your current employers, before venturing out on your own.

Re Self employed vs Limited Company, there are a myriad of factors, especially if this business is going to be in addition to your current employment. It is best to talk through with one of us Accountants.

I haven’t looked in to Xero but I’ve worked with Quickbooks in the past and will definitely look in to both of them.

I’m ICB qualified with plenty of additional training and courses. I would like to do a CIPP qualification but my current employer isn’t supportive - he doesn’t think I need it and says it’s of no benefit to his business.

Your reply is very helpful and has given me a lot to think about, thank you

 

[fisicx]

Everyone was unknown at some point. I like to think my expertise will help attract clients… a phone call can go a long way.

No it won't. Nobody knows who you are. Nobody knows about your expertise.

 

[PayrollGirl]

No it won't. Nobody knows who you are. Nobody knows about your expertise.

They will know about my expertise when I speak to them and they read my current reviews. No business starts off with hundreds of good reviews. Everyone has to start somewhere.

 

[UrbanRetail]

The advice you’ve been given above is good food for thought.

Don’t take any of it personally, it’s a reality check. Business is bloody hard and having the right building blocks in place will get you off to the best start.

Rose tinted glasses are all too common with business owners, especially new ones.

 

[fisicx]

They will know about my expertise when I speak to them and they read my current reviews.

That's not how it works. How many cold calls do you get each day? How many of those do you respond positively to? When you call someone your expertise counts for nothing and your review will be invisible.

Imagine you are a SMB with an efficient and cost effective payroll system. Someone you have never heard of calls you up out the blue and offers their services. Do you really think you are even going to consider checking their reviews?

Invest in marketing. £1000/month would be good figure to start with.

 

[Newchodge]

That's not how it works. How many cold calls do you get each day? How many of those do you respond positively to? When you call someone your expertise counts for nothing and your review will be invisible.

Imagine you are a SMB with an efficient and cost effective payroll system. Someone you have never heard of calls you up out the blue and offers their services. Do you really think you are even going to consider checking their reviews?

Invest in marketing. £1000/month would be good figure to start with.

I am a little confused. How have you got reviews and testimonials if you haven't yet started your own business? If these have been given to you as an employee from clients of your employer you will need to be very careful about using them.

 

[PayrollGirl]

The advice you’ve been given above is good food for thought.

Don’t take any of it personally, it’s a reality check. Business is bloody hard and having the right building blocks in place will get you off to the best start.

Rose tinted glasses are all too common with business owners, especially new ones.

So true. I’ve put off setting up on my own because it’s never been the right time or I haven’t had the finances behind me to start it up perfectly how I envision it. But I’ve realised there is a never a right time, nothing is ever perfect, and I just have to do everything to the best of my abilities with the finances available to me right now and make the most of it! As long as the foundations are there I know I’ll make it work.

 

[Spur Support Services]

I haven’t looked in to Xero but I’ve worked with Quickbooks in the past and will definitely look in to both of them.

I’m ICB qualified with plenty of additional training and courses. I would like to do a CIPP qualification but my current employer isn’t supportive - he doesn’t think I need it and says it’s of no benefit to his business.

Your reply is very helpful and has given me a lot to think about, thank you

Perhaps ask your employer if they will support your training on a Salary Sacrifice basis, if you can afford to give up some of your salary.

This saves them money in Ers NIC on the salary sacrificed and they can recover any VAT on courses, further reducing the cost.
It also helps you as you don't have to consider funding out of your net pay.

 

[fisicx]

I am a little confused. How have you got reviews and testimonials if you haven't yet started your own business? If these have been given to you as an employee from clients of your employer you will need to be very careful about using them.

Yes, which is why they need to spend money on marketing. You can start with no reviews but it's a lot harder. What you do is lots of adverts, become well known on accounting and employment forums, do lots of blogging and generally become well known for your expertise. Cold calling might work if properly targeted but you may end up making thousands of call for little return. But get some warm leads and you can get much better results.

I'm not questioning the expertise and skills of @PayrollGirl. I'm just trying to point out the difficulty in getting anyone to move from an existing payroll system to a complete unknown.

 

[PayrollGirl]

I am a little confused. How have you got reviews and testimonials if you haven't yet started your own business? If these have been given to you as an employee from clients of your employer you will need to be very careful about using them.

I’ve advised friends and relatives with PAYE scheme set up, auto enrolment etc, so they have all written reviews for me. My previous employer and a few of their clients have written reviews too.

 

[PayrollGirl]

Perhaps ask your employer if they will support your training on a Salary Sacrifice basis, if you can afford to give up some of your salary.

This saves them money in Ers NIC on the salary sacrificed and they can recover any VAT on courses, further reducing the cost.
It also helps you as you don't have to consider funding out of your net pay.

That’s a good idea, thanks. It’s more the time away from the office that they are opposed to, even though it’s only around a day each month.

 

[PayrollGirl]

Yes, which is why they need to spend money on marketing. You can start with no reviews but it's a lot harder. What you do is lots of adverts, become well known on accounting and employment forums, do lots of blogging and generally become well known for your expertise. Cold calling might work if properly targeted but you may end up making thousands of call for little return. But get some warm leads and you can get much better results.

Blogging is a good idea, thanks.

 

[fisicx]

Blogging is a good idea, thanks.

Yes, but only as part of a coordinated marketing campaign. Blogging in isolation is pointless.