Tips for starting a business after redundancy

If you are worried about losing your job or think it might happen in the future, you’re not alone.

Many people experience redundancy during their careers, sometimes more than once.

Between October and December 2024, there were around 114,000 redundancies in the UK.

Redundancies can happen for various reasons, such as company changes, new technologies, or decreased demand for specific goods or services.

Although losing your job can be unexpected, it doesn’t reflect your job performance and can happen to anyone.

Redundancy could cause financial stress, making the future seem difficult.

However, it could also be the chance to start a new career and become your own boss.

So, what should you consider when you’re starting a business after redundancy?

Think about your options

When you’ve been made redundant, you have two main paths: look for a new job or start your own business.

Before deciding, carefully consider both options and their benefits.

Finding a new job

• stability – offers a steady income and benefits
• skill development – you could learn new skills in a new role, or benefit from training funded by your employer
• career progression – you could build on your current career within a new company.

Starting a new business

• full control – you can make all business decisions
• flexibility – you can set your own environment and working hours
• follow your passion – work on something you care about.

Remember, age doesn’t matter – whether you’re in your early twenties or approaching retirement, starting your own business could see you turn your passion into a successful venture.

Before deciding, you might consider:

• your current skills
• your finances
• your existing commitments, such as family
• market opportunities
• your personal goals.

If you are ready to start your own business after redundancy, read on.

Use your skills and experience

If you want to start your own business, a good first step is to evaluate your skills and experience.

Consider your hard skills – specific, learned knowledge that might be job-specific – and soft skills, which are personal traits that affect how you interact with others.

• hard skills can include things like knowing a foreign language, accounting, or programming.
• soft skills can include communication, problem-solving, and organisational skills.

These skills can help you get started more quickly and confidently, as you can apply them to your new business idea.

For example, if you’ve worked in a bakery and know a lot about the industry, you might think about opening a cake business from home.

If you’re an accountant, you might launch a freelance business or consultancy, building on your professional experience and contacts.

Alternatively, you could view redundancy as a chance to try something completely new.

If you’re passionate about gardening, you might turn your interest into a thriving gardening service business.

By listing your skills, you may discover you have a rich set of both hard and soft skills to help you on your journey.

Discover the advantages of being an older entrepreneur.

Determine if there is a demand for your business

The next step is to find out if people want to buy your products or services.

You can do this by conducting market research, which helps you understand your potential customers and whether your business idea is feasible.

This involves collecting information about your target market and customers to see if your business idea is viable.

There are several market research techniques you could use, such as:

• asking friends and family
• conducting surveys
• looking at official documents and statistics
• networking within your chosen industry
• attending industry events
• talking to owners of similar businesses.

The information you collect could help you determine whether your business idea is viable and how to make it happen.

Market research also involves looking at the competition.

By researching your competitors, you can learn what products or services they offer, how successful they are, where they operate, and what they charge.

Performing a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) on your business idea and your main competitors can give you a clearer picture of the market.

All this information could be incredibly valuable as you develop your business plan.

Learn more with our guide to competitor research for start-ups.

Create a robust business plan

Every business can benefit from having a plan of action.

A business plan is a working document that describes your core business objectives and how you plan to achieve them over a set period of time.

Creating a business plan could help you keep your start-up on track, secure essential funding, or grow your business.

You may wish to include details such as your:

• main goals
• target customers
• products or services you want to offer
• competitors
• funding and financial plans
• operational plans
• how you plan to market your start-up.

Download our free business plan template.

Having a solid business plan might make it easier to secure funding because it gives lenders a clear picture of how much money you need and how you will use it.

If you wish to apply for a Start Up Loan, read our guide to how to write a business plan for your Start Up Loan application.

Think about start-up costs

Think about how much money you will need to launch your start-up.

One way to do this could be to list everything you will need to get started and estimate the cost for each item.

Depending on your business type, this could be anything from basic technology to hiring employees.

Typical start-up costs may include:

• technology such as a laptop, mobile phone, or printer
• software and online tools
• stationery
• rent for premises or storage
• overheads such as electricity or gas
• inventory or service supplies
• employee costs
• speciality equipment
• marketing expenses.

If you don’t have personal savings to cover your initial costs, other funding options exist.

A popular option is to apply for a bank loan, especially if you have a good credit history.

You could also look into government grants for small businesses, crowdfunding (particularly if your business has a community interest), and even angel investment.

Start Up Loans is a government-backed loan scheme that provides entrepreneurs with personal loans for business purposes of up to £25,000 at a fixed 6% interest rate.

You might choose to use your redundancy payment to help fund your business idea, and you may also need to factor in your financial security.

Read our guide to financial planning after redundancy.

Understand tax and legal positions

As a small business owner, your tax and legal responsibilities will differ from those you had as an employee.

Understanding these obligations could be crucial for your start-up’s success.

Your responsibilities will depend on the business structure you decide on for your business.

Examples of business structures include sole trader, limited company, and partnership.

A sole trader is a straightforward structure that involves one individual owning and operating the business.

However, you would be personally liable for all business debts and obligations.

Read our full guide on how to be a sole trader.

Forming a limited company offers liability protection for personal assets, potentially providing tax advantages.

This structure involves more complex tax paperwork and regulatory requirements.

Consider consulting a business or financial expert to help you make the best choice of business structure.

Building your support network

Being made redundant and starting a new business can be stressful and lonely, so building a support network could be essential.

A supportive group could help you tackle personal and business challenges, keep you on the path to success, and support your mental health.

You may already have a personal support system of friends, partners and family, so consider relying on them more.

If not, you might consider joining support groups that focus on mental health or entrepreneurship where you can share and discuss your experiences.

Peer mentorship initiatives could also help you connect with other people in similar circumstances.

Networking with other businesses in your industry or local area at workshops or events could help you meet other start-up owners.

Consider looking at sites such as Eventbrite for ideas.

Use industry forums and social media, such as LinkedIn, to expand your network and meet people online.

Consider joining a mentorship scheme to gain expert guidance and build confidence.

Start Up Loans recipients also receive a year of free business mentoring with their loan which could be really helpful.

Five tips to try

These ideas could help you in your start-up journey after redundancy:

• stay flexible and adaptable – it’s a good idea to be ready to change your strategy based on feedback and shifting market conditions during the early stages of your business
• use redundancy support resources – make the most of any support offered by your former employer, the DWP, or other initiatives, such as financial help, retraining courses, or career counselling
• start small – you could start with a minimal viable product or service to test your market, then gather feedback and make potentially effective changes from it
• invest in continuous learning – you may want to keep updating your skills and knowledge to stay competitive and innovative. Learn With Start Up Loans is our online course scheme, created in collaboration with The Open University
• leverage your contacts – if you previously worked with individuals who have the necessary skills and were also made redundant, you could consider working with them to expand your team.