Things to consider before starting your own business
January 2013
(c) Copyright NatWest Classification: Public
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Introduction
Welcome
Objective of the session - what we will achieve today?
Start up surgery:
- Being your own boss
- Business Types, Tax & Legal information
- Location, Logistics & Marketing
- Funding Your Start Up
- Planning your journey
Interactive Q&A
Handouts available to get you started
Security may be required. Product fees may apply. Over 18s only
ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT
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Topic 1. Being your own boss
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To successfully run your own business you have to ask yourself some tough questions. Are you ready to be your own boss?
15 questions to be answered honestly to give you an idea of whether you are ready to take on the responsibility of running your own business
Answer all questions with one of the following statements ;
Rarely
Usually
Always
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Reality Check: Many new business start ups fail, why does this happen?
You start a business for the wrong reason
Poor management
Insufficient capital
Location, location, location
Lack of planning
Over expansion
Our Business Start Up Surgery aims to address each of these points to ensure
you don’t make the same mistakes.
Source: businessknowhow.com
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The Personal Factor
A business start up requires the following:
Commitment & desire
Good health
The backing of family & friends
Hardworking
Self motivated
Ability to work on your own
Ability to overcome hurdles
Ingenuity
Resilience
An ability to handle difficult situations & challenges
Remember a weeks holiday for the self employed is likely to cost two weeks money, one
week to pay for the holiday and another week of lost income
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Draw on your key skills, strengths & experiences….but what about the other things?
Educate yourself – research how successful businesses start up?
Enterprise Agencies – what external advice exists to help you get started?
Business networking - which partners will you need to work with?
Insight – do you understand your customer?
Competition – who are they, where are they and what do they do well?
Your team - do you need staff on board?
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Topic 2. Business Types, Tax and Legal information
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What’s the difference between a sole trader and a limited company ?
Business types by definition:
Sole trader: You and the business are the same legal being, most common way for people to get started as it is the easiest and most straightforward
Limited company: A separate legal being to you but does limit the liability that you have
Partnerships: A business owned by two or more people who agree on the method of distribution of profits and/or losses and on the extent to which each will be liable for the debts of one another.
Limited Liabilities Partnership: A limited liability partnership (LLP) is a partnership in which some or all partners have limited liability.
How to register your business: Visit HMRC website for full details www.hmrc.co.uk
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Understanding Tax
As a Sole Trader Income Tax liability:
Individual tax allowance set at £10,000 for 2014-2015 no tax to pay
20% standard rate up to £31,865
40% higher rate
45% on income over £150,000 a nice problem to have !!
Sole Trader, Partnerships have to complete a self assessment – to be completed by 31 January each year
How do I pay tax:
Self assessment
By employing an accountant
More information can be found www.hmrc.gov.uk/incometax
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Understanding Limited Company taxes
Corporation Tax
20% of profits up to £300k
Income tax then paid on the salary you decide to pay yourself
National Insurance for companies
- Employees contribution 12% from £153 per week, further 2% over £805 per week
- Employers contribution 13.8% from £153 per week
What do I need to know about National Insurance?
National Insurance for sole traders and partnerships
- Most likely to be Class 2 and Class 4 registered which means paying £2.75 per week plus up to 11% profits
- Refer to HMRC free workshops before you get started
- More information can be found www.hmrc.gov.uk/ni
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VAT – how does this impact my business?
Definition: Value Added Tax, currently charged at 20%
If turnover (sales) are greater than £81,000 per annum you MUST register
Amount you pay will depend on the goods that you sell
VAT payable is the net amount of what you have collected minus what you have paid on your supplies
Make sure you account for the VAT % in your pricing
How do I register VAT?
More information can be found www.hmrc.gov.uk/vat
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Topic 3. Location, Logistics & Marketing
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Location, location, location – where will your business trade from?
Considerations when planning to work from home:
Home expenses
Business rates possible
Planning consents and permissions
Family interference / work life balance
Insurance / different business types have varying implications ; chemical usage, health & safety
Business premises
Are you in the right location, competitors nearby?
Change of use planning consent required?
How will your customers and suppliers get there?
Can your customers park to visit you?
Can stock be easily delivered?
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Your working practice – points to think aboutDepending on your trade consideration of the following is needed:
Planning consents or licenses
Trading hours
Sales contracts
Health and safety
Criminal records checks
Employment law advice
Food hygiene certificates
Keeping data and storing it
Directors or partnership share agreements
Insurances to reflect business
Insure the car, the property but what about you!
Employment contracts & recruitment
Premises, vehicles, machinery, tools
Identify suitable suppliers
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Marketing your business
An important element of your business plan consideration of:
Understand your market ; what is the customer need?
Competitors ;research companies which are successful at selling a comparable proposition.
What do you bring ; define what makes you unique and better than your competitors.
Do you need a website – how can you develop, what needs to feature, how do you customers find you?
Seek customer feedback & endorsement ; it increases your credibility
Ask for referrals ; encourage your customers to do your marketing for you
Business networking ; liase and engage with businesses in your sector, what message are you aiming to deliver, form new relationships
Know your elevator pitch ; why consumers should buy from you, why businesses should work with you
Social media ; what avenues do you need to consider, how do you best leverage Facebook, & LinkedIn set up a profile, can you use Twitter to gain followers in increase awareness of your offering
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Unique Selling Point (USP)
What does it mean to you ?
Factors to think through:
Cost
Product offering
Service
Niche market
Expertise
Service - your people, online
Routes to market - location
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So who is your customer?
If you think that anybody could be your customer – nobody will be !!
Your ideal customer - identify who your customer is and how you plan to get to
communicate with them
Market research - ask for feedback, why did they choose you over others
Complaints – don’t be afraid of them, tackle positively and learn from them
Demonstrate your good work - case studies, customer quotations, star ratings, think about how you can use your customers voice to endorse your business
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Topic 4. Funding your start up business and managing your money
ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT
Security may be required. Product fees may apply. Over 18s only
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Writing an effective business plan when applying for funding
Ten top tips in preparing an effective business plan:
Be realistic
Work carefully
Executive summary
Team and skills
Products & services
Market
Selling
Operations
Finances
Talk to your bank!
ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT
Security may be required. Product fees may apply. Over 18s only
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Funding your start up business
How much will you need, when will you need it and why will you need it?
How much in savings do you have to put in?
Can you get help from friends and family?
Business Angels and venture capital?
Funding options - Bank loans including EFG, overdraft, small business loan?
Remember, As well as your cash you are investing your time and effort.
Security may be required. Product fees may apply. Over 18s only
ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT
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Managing your money!
Running out of cash is one of the biggest cause of business failures:
Profit is very important but does not necessarily mean that the cash is OK
Identify and plot your cash flow forecast
Know where your breakeven position is
Forecast your profit
Remember you need to pay yourself a wage, what’s the minimum you can live on?
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Topic 5. Planning your journey
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On a journey:You need to get from London to Manchester – what are your next steps ?
Now think about your journey to starting your own business, plan your next steps…..
Steps to launchKeys to your new business
Research, reflect, evaluate,
Idea / concept Research &develop
Adapt & innovate
Your journey:
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Journey continued
You have just displayed a lot of the areas that you need to think about for your business
Getting your business from London to Manchester or wherever you want it to go needs careful consideration throughout
Put your thoughts, ideas and who and what you need to help you get there in your business plan
Revisit the business plan regularly just to make sure that you are still heading where you wanted
Work on your business not just in it !!
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So are you ready to start your own business?
Lots of information here that you need to consider.
Do your research, soak up information available on the internet, from friends, family & colleagues who may have set up their own business
How can NatWest help you set up your business banking?
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Further information
www.hmrc.gov.uk tax information and free workshops
http://www.hmrc.gov.uk/startingup/index.htm - guidance on tax and NI when starting a business
www.patent.gov.uk patent office
www.bl.uk British Library
www.britishchamber.org find your local chamber of commerce
www.fsb.org.uk – the UKs leading business organisation
http://www.j4b.co.uk/ various grant information available in UK and Ireland
www.meetup.com sometimes free networking events in your local area
http://www.e-synergy.com/site/Home.aspx early stage seed capital for IT companies
Ask your local council whether they have services to support business
http://www.natwest.com/business.ashx free material and guides
http://www.natwest.com/business/business-school.ashx - online business school
http://www.mentorsme.co.uk/ find yourself a mentor
http://www.natwestmentor.co.uk/ - support in Employment Law & HR, Health & Safety, Tax
http://www.eventbrite.co.uk/mytickets/ organise your event – no cost if tickets are free
www.smarta.com – business information portal, practical guides & advice
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Thank you for your time
Help yourself to some NatWest Business Banking support materials
Appointments available now to help you open a business bank account
Good luck!