Redundancy is often seen as a professional dead-end. It can happen suddenly and cause a great deal of anxiety and uncertainty. For many, it can even feel like they’ve lost a part of their identity.
But there is a silver lining. Redundancy can present the perfect opportunity for a fresh start in entrepreneurship. If you’ve been made redundant, this is your chance to pursue your ambitions and take back control of your career by starting your own business.
In this guide, you’ll see the potential that redundancy offers. You’ll also learn practical ways to confidently transition from employee to entrepreneur with the help of the UK’s leading company formation agent, Quality Company Formations.
Common challenges after redundancy
Let’s first acknowledge the real concerns that many people face with redundancy.
- Self-doubt – People often question their employability after redundancy, especially if it happens later in life. But entrepreneurship thrives on life experience, making age one of your greatest assets.
- Financial security – A fear of inconsistent income can hold many people back. However, you can establish a profitable business with a well-researched business model and realistic projections.
- Lack of direction – Not everyone has a business idea ready to go. But some of the best foundations for a business are to solve a problem you’re experiencing or pursue a passion.
Acknowledging these challenges is the first step towards overcoming them. With careful planning, you can overcome the barriers that come from redundancy.
The opportunities redundancy offers
It’s natural to see redundancy negatively. You might initially feel frightened and stressed, but with the right mindset, you can turn worry into meaningful change. Here are the positives redundancy can offer:
- Time to reflect – You can think deeply about what you want next from your personal and professional lives.
- Financial buffer – Redundancy packages can offer a temporary safety net, so you don’t need to rush any decisions and plan your next move carefully.
- Freedom to explore ideas – Without obligations to an employer or role, you can explore new careers and interests that excite you.
- Motivation to take control – Running your own business gives you control. Rather than looking for another job, you may find the prospect of working for yourself more appealing.
Is now the right time to start a business?
Starting a business is a bold step that requires careful planning, especially after redundancy. Still, for many, this can be the ideal time. If you’re unsure, try asking yourself these key questions to decide if entrepreneurship is the right next step:
- Am I emotionally ready?
Redundancy can have significant psychological effects, especially when it happens abruptly. Take the time to process the emotional impact and move forward once you feel focused and positive.
The key is to be motivated by genuine interest and ambition rather than panic or pressure. This way, you’re more likely to develop the resilience needed to start a business.
- Am I financially ready?
Next, check that your finances are in order. Launching a business can be relatively low-cost, but you need financial stability to make informed decisions. Your personal savings or redundancy package could help you here.
Remember that a new business might not generate income immediately, so it’s best to cover the next 3-6 months of personal expenses to avoid unnecessary pressure. You should also have a clear budget in mind for launching the business and estimate potential operating costs.
- What are my motivations for starting a business?
This is a crucial question you can’t skip. Understanding why you want to start a business is essential for staying focused and committed, particularly during challenging periods.
If you already have a business idea, you should be passionate about it. If not, perhaps you’re excited about the freedom and flexibility entrepreneurship offers. Whatever your motivations, define them clearly at this stage.
Steps to starting a business after redundancy
If you’ve taken the time to process redundancy and are confident in taking the next step, here’s how:
Step 1: Validate your business idea
You may already have a concept in mind, but before putting anything in motion, check that there’s a viable market for your product or service. You might find it helpful to answer these questions:
- What problem does my product or service solve?
- Who is my ideal customer?
- Is there competition? If so, how will I set my business apart?
- Is my product or service needed now?
Validation is a critical step, so take time to research your industry and trends.
Step 2: Choose a business structure
There are several business types depending on what you sell and how you’d like to structure your company legally. In the UK, one of the most popular choices is a private company limited by shares, thanks to the limited liability, tax efficiency, and credibility it offers.
At Quality Company Formations, we help entrepreneurs register new companies every day, providing professional guidance throughout the formation process and beyond. Explore our formation packages to see which one best suits your needs, and contact our expert team if you have any questions or need support.
Step 3: Secure your finances
You’ll need some upfront capital to start a business. Depending on what you sell, you may not need much, but you should still account for initial expenses like company registration, inventory, or production.
Here are some methods to help you get started:
- Consider allocating a portion of your redundancy pay to fund your startup
- Explore government support schemes, many of which offer non-repayable grants
- Invest some of your personal savings. This avoids taking on debt and may be more feasible than relying on your redundancy package.
- Ask friends and family to support your venture. Setting clear terms upfront can make this a low-pressure funding option.
- Starting your business from home dramatically reduces overheads and lowers financial risks for new companies
You can make limited resources go far if you’re frugal, creative, and clear about your goals.
Step 4: Register your business
To make your business official, you’ll need to register it with Companies House (and HMRC once you start trading). Registering a limited company takes less than 24 hours.
You’ll need to provide essential information like your company name, director and shareholder details, and your articles of association. Don’t worry; you’ll find all the guidance you need on the QCF website.
Step 5: Build a support network
This step can easily be forgotten when starting a business. But entrepreneurship can be lonely and busy, especially if you’re used to the teamwork and structure of traditional employment.
Think about:
- Joining industry groups or local small business meet ups
- Connecting with a business mentor
- Engaging with other founders on social media
- Asking old colleagues for relevant connections
Start afresh after redundancy
Rather than seeing redundancy as a closed door, see it as a new opportunity. This can be challenging at first, and it certainly takes time to rebuild confidence, but with the right mindset and action plan, it could be the best thing that ever happened to you.
When you’re ready to take the leap and start a business, QCF will guide you every step of the way. Speak to our experts or visit our resource hub for articles on getting started, business advice, and more.
