An Introduction to Running Your Own Business

Running Your Own Business The Negatives You, personally…. Lack of security Working by yourself / at home You may not enjoy all aspects of working for yourself Sometimes doubting your own abilities Running your business No sick pay or holiday pay Working long hours Dealing with administration & legislation

Running Your Own Business The Positives Greater control; you are the boss You make the decisions Build something of value to pass on Opportunity to build your income Greater job satisfaction Self-fulfilment Age is no barrier More freedom & independence Working from home

Source VCA and Brian Waugh Business Survival Starting a business is easy; it’s keeping it going that’s more difficult! Recent statistics on business start-ups and closures show that : Around 50% of business start-ups do not survive beyond their first years! Small business start-ups monitored over a 5-year period show that after 5 years: -50% are still open and trading -33% failed -17% closed (although were still successful at the time of closure) Source = Office for National Statistics – Report

Reasons Businesses Fail Do not make enough sales Cannot survive overdue payments & bad debts Fail to cover costs Fail to meet customers’ needs Depend too much on ONE customer Fail to set targets & monitor performance Take BIG risks Lose focus Poor health of the business owner

The Business Planning Process Decide what equipment you need Decide what premises you need for your business Recruit the best people to support your business Then …. bring them together in your business plan Decide how you will market & sell your products and services Decide if you will need to use quality standards Decide on your Customer Service policy Research your business idea Check your own ability to run the business Check which laws and regulations will affect your business Find out how much money you need to start and maintain the business Research your business model and pricing policy

What makes a ‘good’ business idea? Is your idea new, unique, original or revolutionary? Will it work and will people buy it? Have you got the interest, experience, skills or qualifications to carry out the core activities? Will you offer extra features or benefits? Will they give you an edge over the competition? Will you have a viable, thought-through plan for marketing your idea, successfully?

Researching the Market What do I need to know? The Market Place  What market sector are you entering? Is it a mass or niche market? Is it changing? Your Customers  Who are your target customers going to be? What will they want and/or need from you? What is their profile? Where can you reach them? The Competition  Who are they? What are their strengths and weaknesses? How will you be different?

Types of Market Research Primary Research Interviews Observation Street survey Questionnaire Focus group Test trading Secondary Research (Desk Research) Newspaper articles Company reports Government statistics Market Reports Keynote Internet

Market Research Questionnaires Ask questions in a logical order - the first question is the most important Ask easy and interesting questions first Phrase personal questions carefully and keep them till last Keep the wording simple & easy to understand Avoid leading questions Consider incentives Test out the questionnaire on someone who will give you objective feedback (possibly not family or friends) Always proof check for speling’s, grammer and, punctuation!

The best time to find out if your business idea will work Research your market Test your ideas Evaluate the results objectively ….is BEFORE you start! Develop your vision Formulate your strategy Work out your finances

Financial Forecasting 3 important processes  Calculate whether or not the business is going to be viable.  Work out how much cash you need to get the. business started and keep it going as it grows.  Cash Flow Forecast  Work out the volume and value of sales needed to support the business.  Sales Forecast  Profit & Loss Forecast

The Village Store Turnover needed = £208, weeks a year = £4000 per week 7 days a week = £571 per day 8 hours a day = £71 per hour /12 = £5.90 every 5 mins Average spend = £3.50 per customer 1.7 customers every 5 mins Preparing a Sales Forecast

The Profit & Loss Forecast Sales (Turnover)208,000 Cost of sales(156,000) Gross profit52,000 Rent & rates20,000 Staff wages6,000 Gas, electric, water1,500 Insurances600 Work clothes200 Vehicle & Travel3000 Advertising600 Administration500 Telephone600 Professional fees600 Total overheads(33,600) Net profit18,400

The Cash Flow Forecast JanFebMarAprMayJuneJulyAugSeptOctNovDecTotal Sales (Turnover) Cost of sales Gross profit Rent & rates Staff wages Gas, electric, water Insurances600 Work clothes Vehicle & Travel Advertising Administration Telephone Professional fees Net income (2425) (1385) (2345)(1475) Bank

Financial Forecasts: Why Bother? Financial Forecasts Know what you’re aiming for Assess viability of your business idea Gives you more control over your finances Banks or investors will want to see the figures Helps you make financial decisions Compare forecasts with actual figures when trading Get your business off to a better start Helps you understand your business You’ll learn more about financial forecasting in our next workshop

Which type of business or company? Unlimited Liability Businesses  Sole Traders  Partnerships Limited Liability Companies  Private Limited Companies (Ltd)  Limited Liability Partnerships (LLP)  Public Limited Companies (Plc) Or is your business ‘community-focused?  Not-for-profit companies (limited by guarantee)  Community Interest Companies (CICs)

Which is Best for You? Sole Trader /Partnership Pro’s  Quick and easy  Informal  Minimal accounting  Decisions are all yours Con’s  Total risk Limited Company Pro’s  Liability for debts is limited  Easier to raise capital  Tax bill could be lower  Perceived as professional Con’s  More complicated It is always best to get professional guidance before deciding on the best legal entity for your business

Companies House Business Structures HMRC Sole Trader Partnership Limited Company Business owners draw money from profits of the business Directors are salaried Income tax paid on gross salary Monthly tax returns are required Self-assessment income tax returns completed annually. Tax is based on net profits of the business Company pays corporation tax on net profits Employees and employer pay Class 1 National insurance Shareholders may receive a dividend on profits Owners pay Class 2 & Class 4 National Insurance Unincorporated /Full liability Incorporated /Limited liability

Choosing a Business Name Avoid names that are too specific/general Unless you are sure they will work if the business expands or diversifies Avoid similarities with existing businesses You may lose (or gain) business if people are confused Avoid trendy names, jokes and slang They could offend people or undermine your reputation and credibility You must check that your business name: -Is not already registered to a limited company -Does not conflict with any registered trade mark -Is not being used by an existing similar business in your trading area www. yell.com & check local directories

Registering a Business Name Limited Companies & Limited Liability Partnerships -Business name is registered with Companies House -HMRC recognises this as the company name Sole Traders & Partnerships -Business name NOT registered with Companies House -CAN be registered with National Business Register ( although there is a fee for registration. -HMRC is informed of your ‘trading name’ and recognises you as the business owner.

What are your responsibilities? Running Your Own Business Finance Health & Safety Insurances Tax & National Insurance Laws and Legislation Licences & Permissions Accounts & Administration More information in the next workshop