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!