CA View - How to Start Your Own Business Allan Clark Elaine Macadie 22nd February 2012 internalaudit@chiene.co.uk

Areas to be Covered Is this for you? Starting your own business Developing your business Current business environment Conclusion INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Reality Check A good idea? Discuss with others A profitable idea Friends Impartial parties – an honest opinion? A profitable idea Is this for you? INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Business Plan I Focus your thought process Demonstrate your vision Something to measure performance against Communication with third parties INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Business Plan II (Exercise) What do you think should be in a business plan? INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Business Plan III (Discussion) Unique Selling Points (USPs) Key staff and structure (existing investors?) Financial projections Sensitivity analysis Product Pricing strategy Market and Marketing strategy Competition SWOT analysis INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

What Structure? I Sole Trader/Partnership/Limited Liability Partnership (LLP) Drawings Company Salary Dividends Directors Loan drawdown INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

What Structure? II Liability Flexibility Customer/Supplier perception Unlimited/Limited Reality for a small company Flexibility Profit share Number of shares Customer/Supplier perception Confidentiality INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Tax Regimes Inform HMRC!!! Sole Trader/ Partnership/ LLP Company All Income Tax National Insurance Company Corporation Tax All PAYE/ NIC (staff not partners) VAT (threshold £73,000) INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Setting Up A Company Company name Public record Company obligations Companies House Company obligations Directors responsibilities Annual return Statutory accounts (abbreviated?) Audit? Information required for formation INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Financing I (Exercise) Where could you go for financing? For which stage of the business is this most appropriate? INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Financing II (Discussion) Personal Friends and family Grants Loans Overdraft Hire Purchase/Leasing Factoring Venture Capital/ Business Angels INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Raising Finance (Debt) Loans, Overdrafts Business plan or projections To show repayment/affordability Meets monthly commitments Demonstrates can make any bullet payment Realistic/assumptions Covenants Security and guarantees Professional Timescale INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Raising Finance (Equity) Later in business cycle Proven sales/product Business plan or projections To show high growth Demonstrates can pay dividends (dividend growth)? Realistic/assumptions Exit strategy Dilution INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Key Individuals I (Exercise) Who do you think will be the key individuals in your business? INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Key Individuals II (Discussion) Directors/Company Secretary/ Partners Key staff Accountant Lawyer Bank Manager Others: IT, Patents, Sector Specific INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Business Bank Account Separate (from personal) Introductory deals (fee free) Deposit account? Information required to open an account Other things to consider Ongoing charges Debit/credit card terminal Interest rates (debit and credit) Signatories and authorisation Foreign currency? INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Administration Excel Accounting software Invoices Standalone Online Information Payment terms Credit Control INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Monitoring I (Exercise) How would you monitor your business? INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Monitoring II (Discussion) Management accounts Profit and Loss and Balance Sheet Refer back to Business Plan Reporting against projections with variance analysis Cashflows Monitoring cash against overdraft limit KPIs Sales Gross Profit Loan covenants INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Other Considerations Insurance Location/premises Best use of your time/time for assistance Hiring staff Pension ... INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Messages From Business Its tough out there Bank financing, Bad debts, Margins But there are opportunities Recessions are times of change! Find your niche Your passion Think about financing Remember lag times Take professional advice Get it early! INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Potential Pitfalls Idea/Product Financial Management Financing The key! Financial Management Invoice and collect promptly Spend wisely Financing Plan ahead Tax – paying and registering You can’t avoid it Plan for it INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Conclusions Have a robust business plan Know your USPs Refer back and compare Know your USPs Play to them Know your market Target sales Have adequate finance in place Then you can focus on business Don’t ignore tax Rangers FC! INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012

Questions? INNOVATIVE LEARNING WEEK 22 FEBRUARY 2012