0-7494-3884-3-Be Your Own Boss - How to Set Up Your Own Business

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    Be Your Own Boss:How to set up a

    successful

    small business

    Third Edition

    David McMullan

    Kogan Page

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    Be YourOwn Boss

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    For my twin sister Ethel and my brothersLincoln and John Paul.

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    Be Your

    Own BossHow to set up a successful

    small business

    THIRD EDIT ION

    David Mc Mullan

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    First published in 1994

    Second edition 1997Third edition 2002

    Apart from any fair dealing for the purposes of research or private study, or criticismor review, as permitted under the Copyright, Designs and Patents Act, 1988, this pub-lication may only be reproduced, stored or transmitted, in any form or by any means,with the prior permission in writing of the publishers, or in the case of reprographicreproduction in accordance with the terms of licences issued by the CLA. Enquiriesconcerning reproduction outside those terms should be sent to the publishers at theundermentioned address.

    Kogan Page Limited120 Pentonville RoadLondon N1 9JNwww.kogan-page.co.uk

    David Mc Mullan 1994, 1997, 2002

    The right of David Mc Mullan to be identified as the author of this work has beenasserted by him in accordance with the Copyright, Designs and Patents Act 1988.

    The views expressed in this book are those of the author and are not necessarily thesame as those of Times Newspapers Ltd.

    Kogan Page Limited, Times Newspapers Ltd and the author cannot assume legalresponsibility for the accuracy of any particular statement in this work. No responsi-bility for loss or damage occasioned to any person acting or refraining from action asa result of material in this publication can be accepted by publisher or author.

    British Library Cataloguing in Publication Data

    A CIP record for this book is available from the British Library.

    ISBN 0 7494 3884 3

    Typeset by Saxon Graphics Ltd, DerbyPrinted and bound in Great Britain by Clays Ltd, St Ives plc

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    contents

    1. personal assessment 1changing for the better 2; the right frame of mind tosucceed 3; are you right for self-employment? 4; self-assessment 6; working from home: the familyimplications 11; action 12; training and hard work 14;lets not overthink this, lets just do it 14

    2. which business? 16buying an existing business 16; franchises 17; directselling 20; researching your business idea 21; the productor service is it right? 21; pricing 25; place 30;promotion 30

    3. professional advice 33government help for new businesses 34; help for youngerentrepreneurs 37; trade associations 37; other sources ofinformation 39; questions to ask advisers 41

    4. the business plan 42purpose of the business plan 42; format of the businessplan 42; an example of a business plan 45; overheadsbudget 51; sales turnover 54; profit and loss account 54;cash flow forecast 56

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    5. raising finance 61yourself 62; your business partners 63; your spouse orlife partner 63; parents, relatives or friends 63; loans 64;bank loans 64; the bank in perspective 66; financecompanies 67; building societies 68; venture capital 68;government and European Union schemes and grants 69;the Princes Youth Business Trust 69; credit unions 70

    6. setting up: the business structure 73sole trader 73; partnership 75; the limited company 78;cooperatives 80; value added tax 81; useful sources ofinformation 82

    7. premises 84working from home 84; location 85; an answering serviceor a business centre? 86; retail premises 87; leasingpremises 90; buying premises 91; local authorities,councils and development organisations 93; usefulreference points to help with your search 95

    8. marketing, selling and promotion 96prior to start date 97; advertising 98; using local papers100; the importance of selling 101; the mailshot 102;telephone selling 105; preparing for sales visits 116; theend of the selling week 123; development of existingaccounts 124; your company image 125; customer care129; the Internet 130

    9. managing the business 132managing your time 132; managing your cash flow 138;employing people 141; alternatives to employing people143; insurance 144; summary 145

    10. sources of further information 146

    vi contents

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    acknowledgements

    Special thanks go to Mr Barrie Moreton and the West LancsCouncil for Voluntary Service for their support during thecompletion of this edition.

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    1

    personal assessment

    You probably already have an idea for being your own boss,but need to look at the ins and outs of setting up in business.This book is designed to help you do that.

    To begin with, these are the kinds of question you need toask and which this book will help you answer:

    Are you suited to being in business for yourself? How do you research your market? What do you charge? Do you need capital? How do you get capital, if you need it?

    How do you sell? How do you manage your time properly? What do you need to know about business bank

    accounts, yearly accounts and insurance? Do you need to be VAT registered? Should you set up as a sole trader, a partnership or a

    limited company?

    Where can you get advice, and is it free?You will need to be business-minded and professional whetheryou are providing a service or a product, whether you areworking from home or from business premises, whether youare a sole trader or a limited company and whether you intendto run your own business on a part-time or a full-time basis.

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    To that end, this book sets out to be practical and thorough,

    expecting to take nothing for granted.

    changing for the better

    The best sort of change is self-generated and self-driven.Individual change can be brought about only by individuals.

    You have to make the attempt, in this instance, to becomeyour own boss.Change can be treated as a threefold process. First, you pro-

    ject yourself on a mental plane into the life you want when itis changed. Second, you behave as if you have already under-gone the desired change and are in the new situation. Third,you metamorphose into the new situation. The boundariesdissolve and the change is in place.

    The way others perceive you will have a strong effect ontheir willingness or otherwise to be of assistance from thebank manager through to your first customer. You need tobehave as though you were already a success in business.

    Here are some useful pointers:

    You have between one and four minutes to make agood first impression. How you make that mattersmore than what you say.

    Fifty-five per cent is what others see, including bodylanguage.

    Thirty-eight per cent is what they hear, that is, toneof voice.

    Only 7 per cent is determined by the actual words used.

    You represent your business. Continuous personal and profes-sional development is essential to your success. Results do notyield themselves to those who refuse to give themselves fullyto achieving the desired results.

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    the right frame of mind to

    succeedApositive attitude in business translates into determination toadhere to your objectives without being deflected or discour-aged. This means concentration, persistence and an eye for themain chance.

    You have made the choice to be your own boss. Now clarify

    that objective. List what you see as positive about this choiceon one piece of paper, and what you see as negative on anoth-er. Then discuss these with someone you trust. This will helpavoid the floating anxiety that may occur if you dont prop-erly analyse and justify your choice.

    Once you have clarified your objective, and thought your-self into the frame, trust your decision and go with it whole-

    heartedly. Throw your heart over the bar and your mindwill follow.Accept full responsibility for your choice and stay open as

    to what happens as a result: it may not lead in the directionexpected. Review each stage continuously and modify asrequired so you remain flexible while staying on target.

    Once you have faced up to your choice and carried itthrough to a conclusion, your confidence will improve andyour frame of mind will adjust to being more positive.

    Successful people are often perceived as being serious-minded, so you can be forgiven if you feel that you shouldstiffen up your manner. Yet having a good sense of humour ispart and parcel of a positive approach. Not only does it helpto keep stresses at bay, but a smile gives the impression of suc-cess by conveying the message that you, and therefore your

    company, are doing well.If you can see your work as fun then you have latched on to

    an important component of the winning formula. Mood isimportant to performing a variety of tasks well. It makes senseto keep your sense of humour high on your list of goals.

    personal assessment 3

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    To stay positive you will need to be physically fit. Mental

    fatigue is aggravated by an unhealthy body, and you will needenergy aplenty as your own boss. Plan exercise into yourschedule. This will re-energise your mind. It will also keepstress at bay.

    A positive attitude must carry over into your generallifestyle so that your whole being becomes goal orientated.Being your own boss means that you have a duty to yourselfto remain well. Absenting yourself from work means lost cus-

    tom and credibility.Keep in mind the TRAIN formula:

    Talk about problems with someone who can help. Relax each day set aside time for this. Activity, in the form of exercise, keeps stress at bay. Interests beyond work allow you to recharge. Nourish yourself a good diet plus rewards for

    achievements.

    Self-employment is a calling, not a job. It is attitude, not justaptitude, that helps determine your altitude. By making choiceswe define ourselves and carve out our own paths. In the finalanalysis you must simply choose to be successful. And that is achoice you must make as soon as you wake up each day.

    are you right forself-employment?

    What is motivating you to start up your own business? Itmight be one of the following:

    1. You think it is better than being unemployed.2. You want to make a lot of money.3. You want to be your own boss.4. You want job satisfaction.5. You want to be other peoples boss.6. You want to join the fray and compete.

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    Look at these reasons more closely:

    1. If this is your reason, then you are not one of whatthe Department of Employment (now the Departmentfor Work and Pensions) used to call discouragedworkers who have given up trying to find a job, andthat is good news. But you should assess yourstrengths very carefully as you may be takingHobsons choice: accepting what you are getting

    rather than making a rational decision.2. Look at the statistics again. If you are one of the newbusinesses that do ultimately succeed, that successmay very well be the success of being able to sustainyourself and your family as a direct result of yourown creativity. It is relative success, not necessarilymonetary. Still, there is a great deal of satisfaction tobe had in chasing money with a reasonable chance ofovertaking it.

    3. You will be your own boss. But this does not meanyou are free. You will probably be tied to the jobmore than you would be if you took the nine-to-fiveoption. Freedom, at least at the outset, can meanhardship. Visit someone who already has their ownbusiness. It may cure you.

    4. If you want the satisfaction of doing something differ-ent every day, you must realise that whatever youchoose to do, there will be repetition involved. If youwant the satisfaction of directing your own destinyyou may be one of the lucky ones here. Generatingyour own income rewards you doubly, because itincreases your self-esteem and your confidence.

    5. The figures make for interesting reading. One sourcehas it that two-thirds of new start-ups only employthemselves. Only 5.9 per cent of men employ morethan 25 and only 3.6 per cent of women. If you wantto be other peoples boss, this is not the best route.

    personal assessment 5

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    6. If you are genuinely competitive, you will certainly

    find enough to get excited about. If you can perceivehard, persistent work as simply competing, youvegot a healthy focus. At the outset, it will not beunusual to spend two-thirds of your time looking forwork and one-third actually doing it.

    Now, having assessed anew your motivation for wishing to beyour own boss, complete the following:

    I want to be my own boss because ______________________________________________________________________________

    self-assessment

    What are your strengths and weaknesses, personal and finan-cial? You will need to know these in order to build on soundfoundations as you set off. It will help if you complete a sim-ple questionnaire to establish a clear view of yourself beforegoing any further.

    It is important to decide first whether your financial posi-tion is such as will allow you to survive the early months oflow or no income from the new venture.

    personal finances

    If you are in full-time employment now, it may be advisable tostart your business on a part-time evening and weekend basisto test its feasibility. If you take this course, then add in yourwage from your full-time job. Add in the income of your part-

    ner/spouse, if this is applicable.There is no set profile for the individual who wants to be

    their own boss. You may be a student, a housewife, a trades-man or a manager who hankers after independence.

    You may be of any age and either sex. You may have onlythe possibility of claiming on the Business Start-up Programme,

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    or you may have 10,000 from an insurance policy that has

    paid off. There are various start-up initiatives contact yourlocal Business Link for details.Many people start working for themselves after retirement

    which nowadays may be as early as 55, for example in the fireservice, or 50 if you have given 30 years service. Such peoplemay have finished paying off their mortgage, have a regularincome from their pension, plus interest on savings. These so-called grey entrepreneurs account for appr...