A downtime - a good time to start a business?

BUSINESS WITH CONFIDENCE icaew.com

A downturn - a good time to start a business?A presentation by Clive Lewis, Head of Enterprise


Copyright © ICAEW 2011. All rights reserved.

A downturn – a good time to start a business?

Why start a new business?

• Have a skill, trade, profession or vocation and want to exploit opportunities

• Have a new innovative product/ service/ idea • Have a hobby or interest which might generate an income• Need an income




Start-up survival rates

• 90% last one year• Two-thirds last three years• 20% still going after ten yearsBased on VAT statistics




Reasons for businesses ceasing include:

• Move back to employment• Sell business• Merge with other business• Retirement• Business failure resulting in insolvency or bankruptcy• Becomes a part-time business




Soft Issues – Positives

• Being your own boss• Building something from scratch• A place in the community• An entrepreneur role-model• Tax advantages• Can sometimes be highly financially rewardingBUT: No Merc without work




The Soft Issues – Negatives

• It can be lonely being the boss• You have to be a Jack-of-all trades• Getting out there / getting known• Paperwork & regulation burden• Long hours• Fear of Failure • Difficulty in “selling” your business idea




Being in business is not for everyone

• If you need a regular income• If you are risk averse• Personal circumstances/ financial situation may mean timing

is wrongConsider the alternatives• A part-time business• Gaining experience in chosen sector




Two quotes from Barclays Bank ‘Running a business’ survey

‘ It’s the most satisfying and liberating experience I can imagine and a fundamental part of my life that I could not surrender’

‘The practicalities are sleepless nights, worrying about my staff and how I can pay them every month and where we can find new business’




Ten tips: 1 - Do research • Customer satisfaction - Who/ where / what / how much?• Test product / service/ idea /price/quality• Use feedback to refine product / service / idea




Ten Tips: 2 - Write business plan

• Use research to write plan• Description of product or service, market• Details of key people, experience, roles, etc • Financials: Year 1 in detail; Year 2 quarterly• Use plan to identify finance requirements, if any• Update plan regularly & compare actual performance to date

with the plan.• In light of comparison review forecasts




Ten Tips: 3 - Secure finance

Being underfinanced is often a factor in early poor performance• How much & when • Different types of finance• Cost• Obligations• Credit history• Friends & family finance




Ten Tips: 4 - Build in Contingencie

• Setting up always takes longer• Think about regulations e.g. Health & Safety, Planning regs,

etc• Delays usually increase costs & add to finance requirements




Ten Tips : 5 - Hire the best people you can afford

• If you intend to grow having people capable of taking on more responsibility is a decided advantage.

• People will often work for below market rates if convinced of potential for growth in role/ business.

• Being able to trust employees is vital




Ten Tips: 6 - Find a mentor

• Combat the loneliness • Someone to bounce ideas off• Your chartered accountant often fills this role• Use customers and suppliers as sources of advice




Ten Tips : 7 - Information is Vital

• Financial information is not just to satisfy the taxman – use it to inform yourself on trading performance

• Set up your records from the start• Talk to your accountant• Use software if you are comfortable with it• A good book-keeper is a possible first option




Ten Tips: 7 - Information is Vital – Key Performance Indicators – daily, weekly, monthly, annual data

• Turnover• Gross margins• Overheads• Finance costs• Net profit• Cashflow/ Bank balances• Working capital – stocks, debtors and creditors




Top Tips: 8 - Be alive to the possibilities

• Don’t exclude taking the business in a different direction with the product or service

• Keep a watch for competitors in difficulties• Listen to customers, suppliers & staff • Maximize the potential of the Internet- your website should be

professional looking and well designed• Develop a marketing plan & think about advertising- leaflets, leaflet

inserts &drops, Ads in yellow pages, etc• Work at getting personal recommendations from customers




Top Tip: 9 - Starting is a Learning experience

• As an entrepreneur you will learn a great deal & obtain new skills.

• Learn from your mistakes – ask why did that (potential sale) not achieve the outcome I wanted?

• Mentors - someone who has faced the challenges of starting a business and succeeded – can help with the learning.




Ten Tips: 10 - Minimise the likelihood/ effects of failure‘Manage the downside’

• Shorten the learning curve – have previous experience of sector/ employ someone who has

• Appoint a chartered accountant before starting – many have a wealth of experience with start-ups

• Manage overheads/ working capital: - minimise investment in stocks - finance any assets by HP/ leasing - encourage prompt payment

- keep some balance at bank/ unused facilities for contingencies




Ten Tips:10 - Minimise the likelihood/ effects of failure

• Be prepared to recognise it’s not working out• Protect personal assets - if possible• Ask ‘If I didn’t do this, what would I want to do/ be doing’?




Chartered Accountants (ACA or FCA) – the trusted adviser

• Record-keeping• Help decide business format• Who do I need to notify?• Taxation compliance / planning• Help preparing business plans• Help raising financeHelp - a phone call away




Come to the London Region Stand

• Talk over some of your issues• Find a chartered accountant• Obtain a copy of “Run a successful business” publication We’re at Stand 284



ICAEW Business Advice Service (BAS)





Aim of the BAS

BAS is intended to provide businesses with experience of talking to a chartered accountant about business issues, so that they gain insights into the financial, management and taxation issues involved in running a business.

To offer an initial consultation for SMEs and start-ups with an ICAEW Chartered Accountant free of charge





Searching for BAS firms



Advantages for SMEs and start-ups

• Provides SMEs/start-ups with professional advice• Easy to find on website and book consultation• No long term ‘lock-in’• Initial meeting is free of charge

A world leader of theaccountancy and finance profession
