An Introduction to Running Your Own

Business

Running Your Own BusinessThe 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 SurvivalStarting 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 1 - 2 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 2013

4

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 ideanew, unique, original or revolutionary? Will it work and will people buy it?

Have you got theinterest, experience, skills or qualifications to carry out the core activities?

Will you offerextra features or benefits? Will they give you an edge over the competition?

Will you have a viable, thought-through planfor marketing your idea, successfully?

Researching the MarketWhat 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 Forecasting3 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 = £208,000• 52 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 ForecastSales (Turnover) 208,000

Cost of sales (156,000)

Gross profit 52,000

Rent & rates 20,000

Staff wages 6,000

Gas, electric, water 1,500

Insurances 600

Work clothes 200

Vehicle & Travel 3000

Advertising 600

Administration 500

Telephone 600

Professional fees 600

Total overheads (33,600)

Net profit 18,400

The Cash Flow ForecastJan Feb Mar Apr May June July Aug Sept Oct Nov Dec Total

Sales (Turnover) 12000 13000 15000 15000 17000 18000 12000 10000 14000 20000 24000 38000 208000

Cost of sales 9000 9750 11250 11250 12750 13500 9000 7500 10500 20000 15000 26500 156000

Gross profit 3000 3250 3750 3750 4250 4500 3000 2500 3500 0 9000 11500 52000

Rent & rates 5000 5000 5000 5000 20000

Staff wages 240 320 640 1280 320 320 320 640 640 1280 6000

Gas, electric, water

125 125 125 125 125 125 125 125 125 125 125 125 1500

Insurances 600 600

Work clothes 100 50 50 200

Vehicle & Travel 250 250 250 250 250 250 250 250 250 250 250 250 3000

Advertising 200 100 300 600

Administration 40 40 50 50 40 30 30 30 40 50 50 50 500

Telephone 50 50 50 50 50 50 50 50 50 50 50 50 600

Professional fees 60 60 60 60 60 60 60 60 60 60 600

Net income 1535 2205 (2425) 1995 3365 (1385) 2485 1985 (2345) (1475) 7775 4685 18400

Bank 1535 3740 1315 3310 6675 5290 7775 9760 7415 5940 13715 18400

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 /PartnershipPro’s Quick and easy Informal Minimal accounting Decisions are all yoursCon’s Total risk

Limited Company

Pro’s Liability for debts is limited Easier to raise capital Tax bill could be lower Perceived as professionalCon’s More complicated

It is always best to get professional guidance before deciding on the best legal entity for your business

Companies Housewww.companieshouse.gov.uk

0870 33 33 636

Business Structures

HMRCwww.hmrc.gov.uk08459 15 45 15

Sole Trader Partnership Limited Company

Business owners draw money from profits of the

business

Directors are salariedIncome tax paid on gross salaryMonthly 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 NameAvoid names that are too specific/general Unless you are sure they will work if the business expands or diversifies

Avoid similarities with existing businessesYou 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 www.companieshouse.gov.uk

-Does not conflict with any registered trade mark www.ipo.gov.uk

-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 (www.start.biz) 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

https://www.gov.uk/browse/business

More information in the next workshop