Suffolk. Small Business Guide A guide to starting and growing a small business in Suffolk

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1 Suffolk Small Business Guide 2010 A guide to starting and growing a small business in Suffolk

2 A guide to starting and growing a small business in Suffolk Introduction This guide has been developed with your needs in mind. It is designed to be an informative introduction to starting a business in your local area and outlines the key factors that you need to think about at the start-up phase and during your first year of trading. The guide includes information on key business areas including: market research, writing a business plan, meeting all the legal requirements, raising finance, marketing your business, finding suitable premises, information and communication technology and business support. There is also a useful contact list that will assist you in identifying where help is available. Starting and running your own business can be a challenging process as well as a most rewarding experience, but whatever line of business you are in, competition is tough. Enthusiasm and dedication alone will not guarantee success. Accessing good quality, informed business advice, support and training, both at the start-up stage and as your business grows, will significantly increase the chances of the business surviving. Contact your local Business Link or Enterprise Agency for advice, support and training: Business Link East: Tel: Web: MENTA - Mid Anglian Enterprise Agency: Tel: Web: NWES - Norfolk and Waveney Enterprise Service: Tel: Web: Suffolk ACRE (Social Enterprise): Tel: Web: Being your own boss comes with numerous benefits so don t be put off by the challenges that lie ahead. We hope the following pages will be of real benefit to you and wish you every success in your business future. Contents Researching your market The business plan Legal requirements Raising finance Marketing - Winning customers Finding suitable premises Information and communication technology Business support Directory Useful telephone numbers and websites xx xx xx xx xx xx xx xx xx Produced, designed and published by Lansdowne Publishing Partnership Limited, School House, 2nd Avenue, Trafford Park, Manchester M17 1DZ T: F: E: W: Editorial by Lansdowne Publishing Partnership Limited. Whilst every effort has been made to ensure the accuracy of the information contained within this Guide, the Publisher can not accept any responsibility for errors or omissions. You are strongly advised to seek professional help from a suitably qualified business adviser. The inclusion of advertising, associations, organisations or businesses in this Guide should not be taken as an endorsement by the Publisher of the product(s) or service(s) offered. Copyright 2010 Lansdowne Publishing Limited. All rights reserved. No part of this publication may be reproduced in any material form (including photocopying or storing it in any medium by electronic means whether or not transiently or incidentally to some other use of this publication) without the written permission of the copyright owner except in accordance with the provisions of the Copyright, Designs and Patents Act

3 Researching your market All successful businesses need to have a comprehensive understanding of their existing and potential customers and the marketplace they work in. This is crucially important when you are starting up a new business. Developing your business idea into a viable product or service is a critical part of building a business. Thorough assessment and market research at an early stage will help you to establish whether there is a market for your product or service and therefore whether there is a potential for success or failure. This section explains the fundamentals of market research, how to conduct your market research, why it is important to understand your market, and how it changes. Understanding your market Market research forms the bedrock of your whole business plan and involves understanding how your industry or product will work and where it will fit into the marketplace. To base all your strategic decisions or financial forecasts on guesswork and not fact is a recipe for disaster and many businesses are handicapped by a lack of up-to-date research at the planning stage. The more information you have, the better equipped you will be to understand your potential customers, the marketplace and how your product fits in. Consider whether your idea satisfies or creates a market need and whether there are any potential customers. If there is competition, is your idea unique, distinct or superior to theirs, and is the competition local, national or global? Is your product safe for public use, complying with relevant regulations and legislation? Market research can play an important role in answering many of these questions and increasing your chances of success. There are two types of market research, as follows: 1. Desk research (secondary data or second-hand information) There are many sources of available information but at first the obvious route is to search the internet. Libraries, specialist directories and market survey reports (such as Economic Intelligence Unit, Mintel or Keynote reports), local authorities and government departments, trade associations, trade press and trade exhibitions can also provide a wealth of information. 2. Field research (primary data or first-hand information) There is no substitute for speaking to people directly by telephone or face to face but carefully plan what you are going to ask. The easiest way to get the information you want is to compile a questionnaire, with a limited number of short and simple questions that are easily answered, - and easily analysed. Understanding the business environment But researching your customer market is not enough - you need to assess the business environment as well so you can understand how this will influence the success of your product. This can be done in two ways, the first being via a PEST analysis. Politics: understanding the rules and regulations applying to your business; Economics: gaining a knowledge and understanding of how this impacts on your business via disposable income and interest rates; Society: understanding how culture, fashion and even population changes can affect your business; and Technology: understanding how developments in equipment, techniques and method can impact on your business. The second method is to use a SWOT analysis which produces an overview of a business idea by looking at its Strengths, Weaknesses, Opportunities and Threats. Strengths and Weaknesses are issues within your own control. For example strengths in a business might include high levels of technical skills, a strong financial position, good customer relations, high gross profit margins and low fixed costs. These are the things that the business should utilise and build on. Weaknesses require actions to address them. For many small businesses the lack of formal business skills within the management team can be a weakness and should be addressed through training or, if the business can afford it, perhaps by buying in the skills required. Insufficient working capital is another common weakness in small businesses and might be addressed by better credit control or by securing an overdraft facility depending on the underlying cause. Opportunities and Threats reflect the external environment in which you operate and identifying and understanding them will help you develop your risk strategy and also keep you aware of any opportunities that might present themselves. This section should include things like potential legislation, new technology and your competitors. Your customers Once you have done this analysis you need to build up a profile of your customers - after all, they are whom you will rely on to make your business or product successful. You ll need to focus your efforts on finding out as much as you can about existing and potential customers. Who are they? What are they looking for? Where do they currently buy the product or services from and when? Why do they choose one shop/supplier over another? 2

4 Researching your market How do you communicate with them about your product and ensure they will want it? For business customers, you ll want to know how big their businesses are, what sectors they re in, and who makes the decision to buy your product or service. And if you re targeting individual consumers, it may be useful to know such things as their gender, age, occupation, income, lifestyle, attitudes or social class. You will also need to analyse where your customer base lives and determine whether you are located in the right place so that there are enough people to support your business. The competition Understanding your competition is also vital. Who is already supplying your potential customer with what you can offer? And if there is no one offering an equivalent product or service, then what are the alternatives from the customers point of view? It is only by understanding your potential customers that you are able to identify the competition in the first instance. Once you have researched the customer base and the competition, you can clarify your Unique Selling Points (USPs) and focus on the right target market rather than the whole market. Did you know market research involves understanding how your industry or product will work and where it will fit into the marketplace. you need to consider whether your idea satisfies or creates a market need. understanding your customer profile will help realise your potential. analysing your competition will help you define your Unique Selling Point. Your most unhappy customers are your greatest source of learning. Bill Gates, Founder Microsoft Corporation Suppliers Finally, consider your suppliers so that once demand comes in from customers you can meet it. Consider how stable your source of supply is. Are there any potential problems with the availability and regularity of supply and deliver? Can you get credit from them? And don t be reliant on one or two suppliers - have a solid shortlist and a back up option too. The final important fact to remember is that market research is not limited to start-ups. It is an ongoing activity, with any information gathered used in order to stay one step ahead of the market. And that s where you want to be to be successful. 3

5 The business plan This section sets out the key components of a business plan and how to write one. Overview The one essential tool for raising funds for your business is a comprehensive business plan. This sets out how your business will operate and should be regarded as a route map for achieving what you want with your business. Your business plan will help you focus your ideas and should be produced whether or not you need to raise finance for your business. It should include a focused summary of the business itself, financial projections, an outline of the marketing strategy and a thorough evaluation of the market. Your financial projections must be more than just a profit forecast. They should include a cash flow projection and a prediction of how the company s balance sheet will look at the end of the forecast period. By preparing these financial forecasts you can test the viability of your business idea before you commit any money to it - a great way to see if it will work without actually losing any money. Your business plan must be succinct or it will be discarded long before the investor reaches the end of it. It must also have an executive summary at the beginning highlighting all the key facts and what they have been based on. Explaining this succinctly will ensure your plan is seen in a much more professional light and investors will understand the background to your venture from the start. You should also include a sensitivity analysis because the only certainty about business forecasts is that they are usually wrong - but by how much, in which direction and why is not so clear? Business plans need to recognise this and identify what the impact will be if, for example, the business misses its sales target by 5 per cent in the first year. Once drafted, the business plan must be shown to experienced business consultants who can ask all those difficult but what if? questions. Set aside your ego and listen to what they say because if changes to the plan are necessary, your pride must take second place to good advice. Accepting external input is essential for success in any business. Few lenders or investors will simply hand over money to entrepreneurs and wait patiently for a return on their investment. Finer details The following highlights the five key areas your business plan should include: 1. Introduction Briefly outline details of your business - its name, address, telephone/fax number, the name of the owners/partners, the start-up costs and total funding requirement. Also include a table of contents. Include CVs of your business partner(s) highlighting work experience and education. Place particular emphasis on the skills you have that are relevant to running your business - for example; mention any book-keeping experience. Describe in detail your business product or service. Go into enough detail so that someone who has little knowledge of your type of business will be able to understand what you are doing - so avoid using jargon or highly technical terms. Also include details of the other products or services involved in making and producing your item, for example; raw materials. Objectives: provide a brief outline of what you hope your business will achieve in the short term (next 12 months), the medium term (next 2 years), and the long term (3 years and more). Legal issues: indicate which trading style (for example; sole trader) your business adopts, and show that you know what legislation is relevant to your business and that you are adhering to it. (see Legal Requirements section). 2. Resources Premises: where will your business be based? You may be based at home or choose to take on business premises. Justify the decision you make, outlining the legal implications such as costs and length of leases, plus layout, size and usage, physical alterations and any refurbishments required. (see Finding Suitable Premises section). Include details on production methods or service delivery, suppliers, credit terms and stock control. Include details on staff policy and wages, health and safety, and insurance. 3. The Market You must be able to show that there is a demand for your product or service - that customers will want to buy from you. Your market research (see Researching your market section) will demonstrate this. You will also need to show how you will promote your product or service and the associated costs. 4. Finance Financial information: this is the most important section of the Business Plan (see The Business Plan section) because your business has to make money. Business Link or your local Enterprise Agency can help you put together the figures and all other aspects of business planning. You will need to include the following: Financial requirements: explain what you need to raise money for, how much you will need and where you will get it (see Raising Finance section). Include capital costs (equipment, car), 4

6 The business plan initial stock purchase and initial running costs (anything you have to pay - for example wages - before you receive sales payments). Pricing: demonstrate how you have arrived at your chosen prices for your products or services, and show how these prices compare with those of your competitors. Break even analysis: this shows the level of sales needed to cover all your costs. Profit forecast: this shows when sales and purchases are actually made (rather than the payment and receipts in the cashflow), and will allow you to calculate the profit you expect to make. Cashflow forecast: this shows when you will be paid for the sales you make, and when you have to pay for purchases you make and expenses you incur. Assumptions: show how you have arrived at the figures in the profit and cashflow forecasts - how much you will sell and when - and make the assumption that your customers will take 60 days to pay. If you are providing equipment you already own for use in the business, make this clear. Did you know your business plan is the one essential tool for raising finance. how you develop your business plan could be your make or break point. you must provide precise cash flow forecasts to demonstrate if your business will be viable or not. you should get some good external advice before you launch your business - and take the advice on board. Drive thy business or it will drive thee. Benjamin Franklin, American printer, scientist and congressman ( ) 5. The Future Realistic assessment of the medium-term prospects of the business. 6. Appendices Include CVs of key personnel including details of past employment responsibilities, qualifications, skills and background, plus any other directorships and business interests. Extract from the lease of business premises, if relevant. Certificate of incorporation (if a limited company). Up-to-date management accounts and end-year accounts - in the case of existing businesses. Advice on how to develop your business plan is available from Business Link ( ) or your bank. Your accountant or financial adviser can help you prepare your business plan (but please note that you may have to pay for this advice). 5

7 Legal requirements This section provides an overview of the main legal issues that apply to running a business, explaining where to go for help. It is by no means exhaustive, and should you be in any doubt, seek advice from a solicitor. To put your new business on a proper footing with HM Revenue & Customs and other authorities, you need to make sure that it has the right legal structure. It s worth thinking carefully about which structure best suits the way that you do business because this will affect the tax and National Insurance that you pay, the records and accounts that you have to keep, your financial liability if the business runs into trouble, the ways your business can raise money and the way management decisions are made about the business. Choosing a legal structure - the pros and cons If you are a sole trader, a partner, or a member of a limited liability partnership as an individual rather than a company, you will be self-employed. If you are not sure whether your work counts as self-employment, will you: present your clients with invoices for the work that you do for them? carry out work for a number of clients? be responsible for the losses of your business as well as taking the profits? hire other people on your own terms to do the work that you ve taken on? have control over what work has to be done, how the work has to be done, the time when and the place where the work has to be done? be investing your own money in your business or partnership? provide any major items of equipment which are a fundamental requirement of the work you carry out? and have to correct unsatisfactory work in your own time and at your own expense? If you have answered yes to most of these questions then you are self-employed - and should be registered with HM Revenue & Customs ( within the first three months of trading. You may be fined 100 if you fail to register within three months of becoming self-employed. Note that there is no fee for registration with HM Revenue & Customs. For most new businesses, operating as a sole trader is the least complicated and most common business structure. There is no need to register the business (although you need to inform HM Revenue & Customs of your self-employed status). If you are not trading under your own name you must disclose your company name and address on your stationery. An audit is not necessary, but HM Revenue & Customs will need to see accounts, especially if your sales are more than 15,000 a year. Personal income tax at normal rates is payable on trading profits. Class 2 National Insurance contributions are paid weekly at a flat rate, while Class 4 contributions are based on the profits you make and are paid with your tax payments. It is advisable to open a business bank account to keep business money separated from personal money. Free advice on all aspects of National Insurance is available from your local Contributions Agency office or you can call If you operate as a limited company, National Insurance contributions will be paid at the same time as your income tax through PAYE. If a sole trader s business fails the owner is personally liable for all the business debts which means your home or other assets may be at risk if your business runs into trouble. In a partnership, two or more people share the risks, costs and responsibilities of being in business through a written agreement drawn up by a solicitor. This Deed of Partnership costs approximately 100 and indicates how profits will be distributed, losses apportioned and how goodwill is to be valued on the death or retirement of one of the partners (the partnership must be dissolved but the business may not need to cease). Each partner is self-employed, raising money for the business out of their own assets and/or with loans, and taking a share of the profits. They share in the decision-making and are all personally responsible for any debts that the business runs up. The partnership itself and each individual partner must submit annual self-assessment returns to HM Revenue & Customs and must keep records showing income and expenditure. Tax and National Insurance are treated in much the same way for partners as they are for sole traders. Limited Liability Partnerships (LLP) are available for businesses owned by two or more people. It is similar to an ordinary partnership in that the individuals or limited companies share in the risks, costs, responsibilities and profits of the business, and will be taxed like a partnership, but the liability is limited to the amount of money the partners have invested in the business and to any personal guarantees they have given to raise finance. This means that members have some protection if the business runs into trouble. Should the LLP become insolvent, it will be treated similarly to a Limited Company. The LLP itself and each individual member must submit annual self-assessment returns to HM Revenue & Customs, and accounts must be filed with Companies House. Individual members of the LLP are taxed on their share of profits and pay the tax and National Insurance contributions according to their business structure, whilst a limited company member will pay Corporation Tax. 6

8 Legal requirements Limited companies are legal entities in their own right that can sue, and can be sued. The main advantage of a limited company is that the company s owners (shareholders) are only liable for the amount remaining unpaid on the shares for which they have subscribed. However, the capacity of a company to borrow might be restricted unless the directors are prepared to personally guarantee any loans they obtain from banks and other financial institutions. You can form a limited company yourself at buy an off-the-shelf company from a company registration agent (see Yellow Pages), or ask a solicitor or accountant to form a company for you. Limited companies are subject to legal requirements affecting disclosure of information: names and addresses of directors must be filed at Companies House, as must annual accounts and details of shareholders. A limited company s taxation is treated differently to that of a sole trader or partnership. The profits of the company are subject to corporation tax and losses can be carried forward to the next year s trading accounts. The directors of a company are employees and are therefore paid salaries, with personal income tax deducted through PAYE. Depending upon your financial status, the formation of a limited company may or may not have beneficial tax implications. A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners. Within this definition, social enterprises can take on a variety of legal forms, including: unincorporated associations; trusts; limited companies; some industrial and provident societies such as community benefit societies; Community Interest Companies; and charitable incorporated organisations. Social enterprises also need to consider whether or not to set themselves up as a charity, which has a number of benefits, including significant tax reliefs, but comes with increased regulation and less flexibility. Further information can be found at using the Starting Up site map. And finally, Co-operatives are a simple way for two or more people to go into business together as equals. A co-operative is not a separate legal structure. It is usually based on a company, but with special rules that give everyone who works for the business a share of ownership and a say in the business. It gives members the advantage of limited liability whilst also giving them the rights of employees on PAYE. Co-operatives can also be formed from existing businesses, for example through an employee buy-out. Business names If you form a limited company, your company name and other details have to be registered with Companies House. Before you fill in the forms, check that your name doesn t break any rules. Ensure it: ends with limited, plc, Ltd or Welsh equivalents. This must not be used anywhere other than at the end of the name; isn t offensive; isn t the same as - or very similar to - one already in the register; and doesn t include any sensitive words or expressions - unless you have obtained permission to use them. It s also a good idea to check that your proposed name is not already in use or too similar to a word or expression that someone else has registered as a trademark. Failure to do so could result in legal action. Use the Companies House database to check limited company names, or check the UK-Intellectual Property Office (UK-IPO) website to check that your name or title is not in use ( Limited companies that trade under a name other than that of their limited company should also check that the title or name is not already in use by any business or company. If your business is to have its own website you will need to register your own unique Domain Name to help people find your site on the internet. Most Domain Names are registered through an Internet Service Provider (ISP) who will act as your agent. To check if your preferred domain name is available visit VAT If you expect your annual turnover to exceed the registration threshold of 70,000, or if you anticipate supplying taxable goods and services valued at more than 70,000 in a 30-day period alone, then you must by law be registered for VAT. You may be liable to financial penalties if you don t register. If your business turnover is below the registration threshold you can register voluntarily so VAT can be reclaimed on purchases of equipment, goods and services. Contact your local VAT office - they can advise you, give you a copy of a booklet called Should I be registered for VAT? and send you the relevant registration forms. Working from home Many small businesses are started from home but do check with your local authority that planning permission is not required. Also check your tenancy agreement or the deeds of your property to ensure that you are not prohibited from running a business from home. Your household insurance policy is unlikely to cover business equipment so contact your current insurer to get cover extended. If any part of your home is used exclusively for business purposes it may be subject to the Uniform Business Rate and subject to Capital Gains Tax upon sale. 7

9 Legal requirements Licences Certain businesses require a licence to operate: For cinemas, theatres, child minding, private hire, public entertainment, nightclubs, pet shops, boarding kennels, scrap metal dealing, residential care, nursing homes and agencies, street traders and indoor sports venues - apply to your local authority licensing department. For sale of alcohol in shops, public houses, clubs, nightclubs, restaurants and hotels - apply to your local authority licensing department. For hotels, restaurants, abattoirs, hairdressers, mobile food sales, massage, skin piercing and tattooing, work involving asbestos - apply to your local authority environmental health department. For Heavy Goods Vehicles or Public Service Operators (buses and coaches) - apply to the Vehicle Operator and Services Agency on or at For licences for betting shops and other gaming establishments - apply to your local magistrates court (see telephone book). For money lending, offering and arranging credit, debt collecting, issuing credit cards, operating a credit reference agency, hiring, leasing or renting out goods, you may need a credit licence. For clarification and a licence application form, contact Consumer Credit Licensing at the Office of Fair Trading on or at Health and safety As an employer you have a legal responsibility for your own health and safety at work as well as that of your employees, visitors to your premises, people at other premises where you may work (such as a construction site), members of the public and anyone affected by products and services you design, produce or supply. Health and safety legislation is about preventing people from being harmed at work or becoming ill by taking the right precautions and providing a satisfactory working environment. Implementing good health and safety practices will help you comply with the law and provide an acceptable workplace. Poor health and safety leads to illness and accidents and significant costs for your business. If you employ five or more people there must be a written statement of health and safety policy in your workplace and you must register your business with the Health & Safety Executive or your local authority. Contact the Health and Safety information line for advice on or visit A risk assessment of your business premises should be undertaken by a qualified professional to see if there is a chance - whether it is high or low - that someone or something could be harmed by a hazard - for example; chemicals, electricity or slippery floors. You also need to comply with certain specific legal requirements including recording and reporting accidents, consulting employees or their safety representatives on health and safety matters, and ensuring your employees understand and carry out their responsibilities for health and safety. Finally, you must comply with the smoking ban in public places, workplaces and company vehicles used by more than one person. Trading regulations Your local Office of Fair Trading or local authority will be able to advise you on local trading regulations such as opening hours and Sunday trading. Employment If you employ people you have certain duties towards them such as the provision of a contract of employment and adherence to fair disciplinary procedures and take out Employers Liability Insurance. For advice on employment issues, contact the Advisory Conciliation and Arbitration Service (ACAS) on or visit their website: Insurance There are certain minimum requirements that your business must have by law. If you employ people you must have Employers Liability Insurance to insure your employees against risks caused by the nature of their employment and provide cover against claims made by employees for injuries or illnesses they ve suffered as a result of working for you. If you own cars you must have third party motor insurance. Your insurance broker will be able to advise you about the other types of insurance for you or your business but you should consider the following: Public Liability Insurance, which protects your business if it is sued as a result of injury or damage to third parties or their property caused by your or your employees negligence. Product Liability Insurance, which should be considered if your products may cause injury or damage to third parties. Fire Insurance, which is advisable if there are business assets such as property, machinery or stock which could be damaged by fire, explosions or floods. Consequential Loss, which covers your business for loss of profits if some peril, such as fire or theft, prevents your business from trading for a period of time. Goods in Transit Insurance, Theft Insurance and Money Insurance, which protects cash or goods in transit or when on business premises. Fidelity Guarantee Insurance, which protects against losses caused by dishonest employees. Engineering Insurance, to insure certain plant against breakdown or damage or causing danger to third parties. The Factories Act requires that plant is checked by a competent engineer. Personal Health and Sickness Insurance, and Permanent Health Insurance, which pays your wage if you are unable to work. 8

10 Legal requirements However, insurance is only a back-up. Accidents are not always the result of exceptional circumstances - they can and do happen in the course of everyday business. Some planning and simple actions can usually prevent most incidents from occurring. Data Protection Act If you keep details of living, identifiable individuals on computer, even just names and addresses, you will need to register your business with the Information Commissioners Office. Call for an information pack or visit their website Intellectual property When you start a new business, you should think about protecting the valuable assets you have in the name, brand or logo associated with your business or in the innovative product you may have developed. Intellectual property rights protect these assets: patents for inventions, registered trademarks for names, logos, slogans and brands, and registered designs for the external appearance of a product. Patent and trademark attorneys can advise you on the best way to prevent others copying what you have created. For more information contact the Intellectual Property Office, the government body responsible for granting intellectual property rights in the UK, on or visit Legal advice A solicitor can guide you through the laws that relate to running a business. Under the Lawyers for Your Business Scheme operated by the Law Society, designated solicitors will offer a free initial legal consultation of at least half an hour. With the message that prevention is better than cure, a solicitor will attempt to forecast the problems which may affect your business and help you avoid costly problems later. The solicitor will tell you what further help you need and how much it will cost. You are under no obligation to take matters further. If you do not have a solicitor, you should call the Law Society on They will send you a list of Lawyers for Your Business (LFYB) members in your area. Simply choose one of the firms on the list and arrange an appointment, mentioning LFYB or visit the Law Society website at Did you know you need to choose the right legal structure for your business. your business must be registered with HM Revenue & Customs. you should insure your business for your benefit and that of your employees. designated solicitors will offer a free initial legal consultation of at least half an hour to help you find your feet. Obviously everyone wants to be successful but I wanted to be looked back on as being innovative, very trusted and ethical and ultimately making a big difference in the world. Sergey Brin, co-founder of Google search engine Useful contacts 1. Lawyers for Your Business Tel: British Insurance Brokers Association Tel: Companies House Tel: Health and Safety Executive Tel: HM Revenue and Customs Tel:

11 Raising finance This section explains the importance of having adequate funding to support your business, how the business plan plays a central role in raising finance and what options are available if you need to raise finance. Business plan If your business is to be a success then you must understand your finances and keep track of them - and to do so means understanding how your business operates. You will firstly need to develop a business plan which is a detailed model of how your business will operate, showing how you will fund the purchase of capital equipment and start-up costs, your outgoings, income, profit, loss and forecasts. This is a means of testing the viability of your business idea without actually risking any money, but is essential to have when trying to raise finance for your business. More information on developing business plans is available in The Business Plan section. Raising money Once your business plan is finalised you will need to raise finance to run your business. Most businesses will use a combination of sources to raise the necessary money, and choosing the right one may be crucial to your business. Your own resources Do you have your own money to invest in your business, or perhaps your family wants to invest in it? Funding your business from your own resources provides you with a greater determination to succeed - after all, no-one wants to lose their own money and you won t have to worry about making loan repayments. Self-investing will also give greater confidence to other lenders - banks and other financial institutions - who will be reassured that if you have invested your own money you won t want to fail. Banks/building societies These are an obvious and important source of finance for many small businesses. When you start in business you will need a business bank account so you can keep your personal finances separate from your business finances. Most banks offer free banking facilities for new businesses in their first year of trading. There are two types of loans available, as follows: overdrafts - a source of short-term finance normally used for working capital purposes; and loans - a source of longer-term finance with regular repayments, normally used for the purchase of capital equipment. Banks are careful lenders. They will need to be convinced that you have a viable business and will be able to repay the money you borrow from them. If you put your own money into your business and can offer the banks some form of security against it (for example your house), then you stand a much greater chance of success with your loan application. Small Business Loans Small business loans are available through Foundation East for new and existing businesses and social enterprises. For information telephone or go to the website Enterprise Guarantee Scheme This scheme has replaced the Small Firms Loan Guarantee Scheme. Under the Enterprise Finance Guarantee, the Government will guarantee lending to viable businesses to ensure that they can get the working capital and investment that they need. This is not because the business has suddenly transformed from a success to a failure; but because the current economic conditions has made a significant impact on the availability of capital as the banks change their approach to risk and tighten lending conditions. The 1bn Enterprise Finance Guarantee (EFG) Scheme will support up to 1.3bn of new lending by banks to viable SMEs with working capital or investment needs. Who will benefit from the scheme? The EFG Scheme is open to businesses with an annual turnover of up to 25m, seeking loans of 1,000 to 1m, repayable over a period of up to 10 years. Most businesses in most sectors will be eligible for the scheme. However, state aid rules exclude businesses in the agriculture, coal and steel sectors. What sorts of lending will this cover? The guarantee can be used to support new loans, refinance existing loans or to convert part or all of an existing overdraft into a loan to release capacity to meet working capital needs. How much of the loan will Government guarantee? Government will guarantee 75 per cent of the loan. How long will the scheme run for? EFG will be available from Wednesday 14 January 2009 and will operate until March Grants Incentive funding programmes are available from national, regional and local sources but usually only for specific projects such as the development of a new product or the setting up of a specific training programme. Before commencing your project contact Business Link to undertake a grant search. Asset finance Long-term assets should be financed from long-term funds, hire purchase (HP) or lease finance (renting an asset for most of its 10

12 Raising finance useful life). This is the best way to finance an asset if your business lacks security, plus there may be tax advantages to doing this. Factoring and invoice discounting If you want to improve the cashflow of a healthy, growing business then this may be the best route, with a financial advance secured against the business outstanding invoices. Finance is automatically linked to turnover increasing as sales increase. Venture capital (including Business Angel) Some businesses may be attractive to venture capitalists who will take a share in your business in return for providing finance (think BBC TV s Dragons Den ). Potential investors include venture capital funds, another business or a private investor (aka Business Angel, who will generally provide funds below the normal amount provided by Venture Capital funds). The main advantages are: no capital or interest payments; the investment of new management skills; and a strengthened balance sheet due to equity investment. The Prince s Trust The Prince s Trust helps young people set up businesses by offering them advice and finance. The Trust offers: loans of up to 4,000 for an individual and 5,000 for a partnership, with reasonable repayments; grants of up to 1,500 in special circumstances; and market research or test marketing grants up to 250. The Prince s Trust is particularly keen to get involved with disadvantaged or unemployed young people, but is not a lender of first resort, only considering applications from those who are unable to obtain finance from other sources. If you are interested in applying for a Prince s Trust grant, you must fall within the following categories: Useful contacts 1. Prince s Trust Tel: Shell LiveWIRE Tel: British Venture Capital Association Tel: The Asset Based Finance Association Tel: Finance & Leasing Association Tel: British Business Angels Association Tel: you must be between 18 and 31 years old; no partners (if applicable) over 30 years old allowed; you must be unemployed and underemployed; and be unable to obtain finance elsewhere. For more information please contact The Prince s Trust on or visit Competitions If you are 16 to 30-years old and thinking of starting up in business, LiveWIRE can put you in touch with organisations that can help. LiveWIRE publishes free booklets and runs an annual business plan competition with cash prizes and widespread publicity. Call or visit for further information. A specialist adviser in access to finance is available at Business Link and will give guidance in your funding search. Seminars and workshops are frequently run to aid customers. Keeping the books Once you have raised the money for your business you need to keep track of where it is going - this is called book keeping. Book keeping is a legal requirement for all businesses and will enable you to stay abreast of your income and outgoings and, therefore, keep effective control of your business. Essentially: every business registered for VAT has to keep its records according to guidelines laid down by HM Revenue & Customs; HM Revenue & Customs requires every business to keep proper records for the calculation of tax liabilities and for PAYE. If you fail to do so you could end up paying much more tax than necessary; records are required for year-end accounts. If you have borrowings from a bank they will require these to see how your business is performing; and you need regular information to ensure that margins are maintained and profits are on target. Accurate record keeping is essential to provide information for managing the business. There are many computer-based programmes available now to help you make light work of book keeping and ensure you keep your records up to date. Advisers at Business Link or an accountant can recommend a system that is suitable for your business and advise on the records you need to maintain on the computer and in paper form. Make sure your figures stack up. Nobody is going to be interested in doing business with you if they can t see a financial return. James Caan, CEO Hamilton Bradshaw and BBC2 Dragon 11

13 Marketing - Winning customers This section explains how to create a good marketing strategy and plan which can be used as an effective tool to win customers. It also explains how you can market your product and provides some best practice advice to attract new customers. Having researched your market thoroughly (see Researching your market section), your attention now needs to turn to the actual marketing of your company and/or your product to generate work/sales. Marketing is key to the success of any business and involves understanding which customers you will target and how you will reach them. It ensures that you keep existing customers happy but also helps you decide how you are going to win new customers. And you need to keep reviewing and improving everything you do to stay ahead of the competition. Marketing strategy Successful marketing is dependent upon the development of a marketing strategy - without one, your efforts to attract customers are likely to be a bit hit and miss. The focus of your strategy should be about understanding your customers so that your products and services meet their needs better than those of your competitors. It should also help you develop longterm and profitable relationships with your customers, making you their preferred supplier. It may also help you identify new markets to target. A key element often overlooked is that of monitoring and evaluating how effective your strategy has been. This not only helps you see how the strategy is performing in practice, it can also help inform your future marketing strategy. A simple device is to ask each new customer how they heard about your business. Marketing plan and activity Once you have decided on your marketing strategy, draw up a marketing plan to set out how you will execute and evaluate the success of that strategy. The plan should set out clear objectives based upon your strengths and weaknesses, and should always follow the SMART rule, as follows: Specific: for example, you might set an objective of getting ten new customers or reaching a certain sales target. Measurable: whatever your objective is, you need to be able to check whether you have reached it or not when you review your plan. Achievable: you must have the resources you need to achieve the objective. The key resources are usually people and money. Realistic: whilst you should set targets that stretch you, there is no point in being too ambitious. Time-bound: you should set a deadline for achieving your specific objectives, so you might aim to get your ten new customers or reach that certain sales target within the next 12 months. Once you have decided what your marketing objectives are, and your strategy for meeting them, you need to plan how you will make the strategy a reality. Many businesses find it helpful to think in terms of the four Ps: Product: what your product offers - time, creativity or a service - that your customers value, and whether/how you should change your product to meet customer needs. Pricing: for example, you might aim simply to match the competition, or charge a premium price for a quality product and service or you might choose either to make relatively few high margin sales, or sell more but with lower unit profits. Remember that some customers may seek a low price to meet their budgets, whilst others may view a low price as an indication of poor quality levels. Place: this considers how and where you sell, so you make it easy for your customers to access your product. This may include using different distribution channels, for example selling over the internet or through retailers. Promotion: using the best opportunities to reach your existing and potential customers. For example, you might use advertising, PR, direct mail, personal selling and, of course, the internet. Limit your activities to those methods you think will work best, which will avoid spreading your budget too thinly. If you are selling a service, you can extend the four Ps to seven Ps, taking into account: People: ensuring that you have the right employees with the right training to hit your sales targets. Processes: ensuring that the right processes are in place so you can offer a consistent service that suits your customers. Physical evidence: making sure the appearance of your employees and premises gives the right image to your customers. Even the quality of paperwork, such as invoices, makes a difference. Whichever methods you choose, you need to keep up the marketing momentum to retain a regular flow of sales and work. 12

14 Marketing - Winning customers Forecasting and targets Once you have made your key decisions and determined your strategy, you are now ready to forecast the results. A sales forecast is a month-by-month forecast of the level of sales you expect to achieve and is an essential tool for managing a business of any size. Most businesses draw up a sales forecast once a year, basing it on their knowledge of likely customer buying patterns, as follows. How many customers and sales can you expect each month? What is the average spend on each type of sale? What seasonal variations exist? How and when will you be paid? What is the maximum level of sales possible in a year? What level of sales do you require to break even? What lead times and conversion rates can you expect from your promotion? Once this is done, an action plan can be produced as follows: Did you know a comprehensive marketing plan will lead to successful marketing. make sure you are SMART about your marketing objectives. forecasting your sales will help you keep to budget - and keep track of where you want to be. Really successful people don t live in the present. They imagine the future and visualise what their customers want. Robin Rowland, CEO, Yo Sushi! Who is going to do what and when? How long must each activity be sustained? How often should it happen? How much will it all cost? Finally, calculate how much money needs to be allocated to each month s activity. This becomes your marketing budget which can be transferred into your business plan. 13

15 Finding suitable premises Choosing the right premises is a key business decision. You want premises that help you operate effectively without excessive costs, but you want to avoid being tied to premises that might not suit you in the future. This section will help you assess your requirements, advise you where to go to find the right premises and show you what to be aware of before signing any agreement. Working from home Different options suit different businesses. If all you need is a small office space then working from home may be a much better option than renting or buying business premises. However, you will need to think about properly equipping your workspace, so get yourself a comfortable workstation and consider any potential hazards to yourself, workers, visitors and other members of your household and how you can reduce the risk of accidental damage to your work or equipment. Working from home can also have important consequences for your mortgage, insurance and tax position. For example, your mortgage might not allow you to use your home for working, and your insurance might be invalidated if you do so. There are also legal considerations - you might need planning permission, or you may become liable to business rates. Even if you just have a small home office, or work on client premises, you ll need to think about health and safety. You must carry out a health and safety risk assessment, taking into account the kind of work you do and the risks to other people. You will also need to think about how to separate your work and home life when both take place in the home. You need to avoid being disturbed when you are working but also need to be able to relax during your time off, without being interrupted by work. Renting or buying premises Renting or buying premises outright may be the best route, but there are a number of important factors to consider before you make the move. The first is the cost of premises. After wages, premises are the second highest overhead for most small businesses and can include: initial purchase costs, including legal costs such as solicitor s fees; initial alterations, fitting out and decoration; any alterations required to meet building, health and safety and fire regulations; ongoing rent and service charges; business rates; continuing maintenance and repairs; and building and contents insurance. With a typical lease, you agree to occupy the premises for a fixed number of years and pay an agreed rent, though the lease may allow the rent to be reviewed periodically. Upfront costs for leasing premises are often relatively low, though you may pay a premium to purchase the lease. Sometimes you may have to provide a refundable deposit. You should also take into account the legal fees. However, there are disadvantages to renting. You may have significant maintenance and repair or other obligations and restrictions. You may also have difficulties if your needs change and you want to move before the lease ends. If you do choose to buy, it can have several advantages as follows: you control your own premises and can stay there as long as you like; you can choose to occupy the premises yourself, rent them to someone else, or sell them; your costs are relatively fixed, particularly if you have a fixed-rate mortgage, whereas rents can increase significantly over time; you can alter the premises to suit yourself - subject to legal restrictions; and over the long-term, the value of the property may rise. Against this, you have to weigh the disadvantages. Buying property is an expensive and often time-consuming process, involving significant professional fees and stamp duty. You ll also be responsible for all the maintenance and repairs. If your needs change, selling the property can be difficult and expensive, and you might find that the value has fallen. Other factors you need to think about include: 1. The type of premises you need: retail space includes market stalls, retail accommodation with short-term licences and typical high street shops. Industrial space includes factory space and small workshops in managed workspaces. You may require office space of the type available in a number of managed business centres and serviced office schemes. Whatever type you need, the correct size and layout are critical. 2. Your physical requirements: this includes access hours, provision of central services such as photocopying, typing, natural light, loading bays, furniture, water and drainage, three phase electricity, computer cabling, parking, comfort facilities (kitchen and toilets) for employees and visitors and other services or structural requirements that are important to the success of your business. 14

16 Finding suitable premises 3. Legal aspects: including planning permission to use the premises for your type of business, and the flexibility to alter or expand the premises. 4. Long-term requirements: are the premises suitable for your long-term needs or would you need to consider moving to new premises as the business grows (meaning more costs). 5. The importance of location: choosing the right location can be something of a balancing act. Ideally, it should be convenient for your customers, employees and suppliers - without being too expensive. For shops and other retail businesses, your location must attract customers. If you rely on passing trade, you want to be in an area where enough people who want your product or service can see you. For example, key cutters are often located in or around train stations. You could also benefit from customers who are attracted by other shops in a shopping centre. Did you know choosing business premises is one of the most important decisions you will make. after wages, premises are the second highest overhead for most small businesses. you should always draw up a specification list so you get the premises you require, not the premises you necessarily want. For employees, the best location is easy to travel to. Good public transport links make it easier for employees who don t live within walking distance. Employees also tend to prefer working somewhere with good local facilities. Or you may want to be near suppliers for a quick, flexible service. Deliveries may be easier if there are good road and transport links. So decide how much you can afford to pay and build the cost of premises into your business plan and cashflow forecast. It is important that you do not take occupation of premises in the faint hope that the profits you make will cover your premises costs - they very frequently do not. Once you decide to work for yourself, you never go back to work for somebody else. Lord Alan Sugar, Founder Amstrad Corporation 15

17 Information and communication technology Understanding and utilising information and communication technology (ICT) is absolutely vital in today s hi-tech business world because it gives you the information you need to stay on top of your business. With constant developments in ICT it is sometimes difficult to keep track of what is available and what is most suitable for your needs. However, it is important to understand your immediate and future requirements and make the best choice that fits these - within your budget. Computers It goes without saying that computers are at the heart of any organisation s ICT system. They can be utilised in a number of ways, from stock control, record-keeping and sales promotion to customer profiling, database and financial management, research and more. And, of course, and internet access. Whatever your business, there are specialist software packages available for all your requirements and an IT solutions company will be able to tailor-make a suitable system that will save you time and effort and transform the way you run your business. Think about how many computers you will need, whether they should be networked and whether laptops are better than desktop PCs. These days it is all about being accessible, so laptops and wireless connections are becoming the obvious route. What printer do you require and will you need to share it with other computers in your office? If so, will you need a server or be creating a peer to peer network? Also think about what you will be printing. If good quality output is very important then you will need a higher-spec printer that will cost more to buy - and to run. And finally, what other peripherals are you likely to need - a scanner, digital camera, back-up device or portable/removable hard drives? Whatever system you install, ensure you regularly back up all your data on a networked server or external hard drive, and sign up for a maintenance and support contract for both the equipment and the software. You will be thankful for it when the computer system crashes - which it undoubtedly will. is essential for your business, for keeping in touch with suppliers and customers and for sending files and information quickly and efficiently. Do shop around to find the right package for you as there is a huge choice of suppliers offering varying options for different costs. When you ve made your choice, ensure your address reflects your website/domain name (see below). If your business website is your business will look most professional if the address reflects your website, for example; Websites A website can be a relatively low-cost way for a small business to promote itself to existing and potential customers. The technology allows you to not only advertise your business and what it offers, but also to perform e-commerce (buying and selling) and other complex transactions online. You should first decide what you want your website to say and draw up a site plan diagram to demonstrate this. This can then be transferred into the website s design by whomever you choose to build the website. It is best to use the services of a professional web designer if you can afford to as designing a good website is difficult and complex. Establish how long it will take the web designer to build the site and then ensure you agree on a final price and deadline date for them to work to - you can t afford a delay on the launch of your business. You must also consider whether you or the website designer will maintain the website (keep it updated). The easiest way for this to happen is to have your website designed using a content management system which enables businesses to maintain website content themselves. If this is the route you want to go down then ensure you get the necessary training in the software used. But if you opt for the website designer to maintain the content, you need to agree a cost for the maintenance package and draw up a schedule for when the updates should be done. You will also need to think about domain names and whether you want,,.biz or any of the other available options, and finally you will need to find someone to host your site. The cost for this varies from a few hundred pounds a year to many hundreds, depending on the complexity of the site. With all this done, you then need to get the website noticed because having a great site is little use if no one visits it. You need to work hard to ensure that you get as many individual visits to your site as possible and having a good website name has a big effect on search engine rankings. It is, however, also important to have a short but descriptive name that people can easily remember if they try and find your business through a search engine such as Google. You also need to think carefully about how you want your website to be described - so each page should have an individual title describing the page topic. Also think carefully about the page s content, using relevant words specific to your business mixed in with your page text as this is what the search engines look for when they look at your site. Make sure that the page content changes regularly so that search engines are kept interested. You can get listed onto Google for free. All you need to do is tell them that your site exists, by using 16

18 Information and communication technology You also have to make sure that your site has some extra information in it called meta tags and hope that spiders read them. This is not as strange as it might sound. Google often use computers to help them find interesting sites. Google is arguably the best at doing this. It sends out search programs into the internet called spiders to find new websites. They crawl around looking for meta tags. These meta tags are hidden from the user when they look at a page, but are visible in the HTML code, and are specifically written so the spiders pick them up. However, Google also works in another way. The more times another site links (that is mentions) yours, the higher up the search engine it goes. E-Commerce As well as helping you sell more through online trading, having an e-shop can really help you reduce your costs. Customers do most of the work for you by keying in their details on a secure area of your site, and card transactions can either be processed online (through what is called a payment gateway - or an online credit card transaction facility) or the details are stored in a secure area and then processed by hand. Either system is a great way to start trading online but do note that there are charges involved for the initial set up and for the use of a secure payment gateway. Payment gateways usually take a small percentage per sale which covers the cost of the transaction - for credit cards this is normally 3-4 per cent and debit cards are usually a flat fee of approximately 50 pence per transaction. But don t leave it there. Any information you get from the customers filling in their details on your site can be added to your database and be used for future marketing. Telephones No business can operate without an efficient telephone system but there are many competing suppliers all offering the best deals on combined landline/mobile/broadband packages. Before you invest Useful contacts 1. Department for Business, Innovation & Skills Tel: E-Skills UK Tel: Learndirect Business Tel: Telecoms Advice 5. Business Link Tel: Did you know computers are at the heart of all business operations. you need to make the best choice of computer system to fit the requirements of your business. the internet can seriously boost your custom - so build a creative and effective website. you need to be insured against errors and failures as insurance and maintenance are key to continuity. in any equipment, think about how many telephone lines and extensions you will need - and whether these can be increased if the business grows. Broadband is the obvious choice over slow dial-up connections because you can access the internet from your computer and use the telephone at the same time, but should you consider combined broadband telephone services which allow you to use the IP telephone to make cheap calls, especially overseas, via the internet. Faxes Although is the main way of communication today, it is still worth considering whether you need a fax. Faxed documents are accepted as legal copies, including signed documents such as contracts. Think about whether you need a dedicated fax line installed and therefore need to buy a standalone fax machine, or whether you could use computer-based fax software - which means you can send and receive faxes with your computer. Photocopiers As with the fax machine, is it really necessary for you to buy a dedicated photocopier? If you feel you won t need a photocopier much, many printers now double as scanners and photocopiers meaning you can print or documents from your computer. Or perhaps it would be cheaper to outsource photocopying to a reprographic firm as and when necessary. The first rule of technology used in business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency. Bill Gates, Founder, Microsoft Corporation 17

19 Business support Getting good quality business advice, support and training can be vital both at the start-up stage and as your business expands. Helping Suffolk businesses survive and thrive Business Link East is a free-to-use, independent business advice service. It provides relevant up-to-date information on business issues such as starting or expanding a business, managing people, marketing, finance, technology and exporting. As the economic downturn continues to bite, the Government has streamlined and increased the level of support available through Real Help for Business, which can be accessed via Business Link East. This includes small loans for business, grants for business investment and funding for training through the Train to Gain service. As well as a team of experienced Business Link Advisers who work with companies to check how healthy they are and develop an action plan for growth and sustainability, Business Link East offers several specialist services. Access to Finance Advisers diagnose the financial needs of businesses, help them develop funding strategies and work with them to enhance their appeal to lenders and investors. Skills Advisers work with companies to explore their training requirements, develop staff training plans, provide details of relevant training providers and identify any available funding. Innovation Advisers offer focused and in-depth guidance around innovation and increasing efficiency within a business. Business Link East can be accessed face to face, by telephone or through its award winning website. To find out more call , or visit East of England Development Agency Solutions for Business is a suite of highly targeted, publicly funded products and services offering solutions to real business needs and tackling market failure. Designed to drive qualifying businesses forward, it helps them to grow and succeeds by providing help in a number of areas. These include starting up, understanding finance, developing people, environment and efficiency, exploiting ideas, international sales and marketing and growing your business. Your gateway to the Solutions for Business products and services is Business Link, To find out more about how the government is simplifying business support visit the Solutions for Business section of EEDA S website MENTA (Mid Anglian Enterprise Agency Limited) MENTA helps Suffolk people start their own small businesses, and then helps them to grow. We are in Bury St Edmunds, Ipswich and Haverhill. Free advice and training: one-to-one consultations, workshops and seminars, networking events. Networking events: breakfasts, coffee mornings, lunches, trade fairs and more. Premises: serviced business centres in Bury St Edmunds and Haverhill. For more information call or visit NWES (Norfolk and Waveney Enterprise Services) NWES specialises in helping people who own a new or existing business by offering fully-funded professional advice, excellent business training courses and a loan fund specifically for anyone who has been refused finance. We also operate a number of business centres offering lettable workspace and virtual tenancy. For more information call or visit Suffolk ACRE (Suffolk Action with Communities in Rural England) Suffolk ACRE s aim is to help communities in Suffolk to identify and tackle their needs through community action. Suffolk ACRE s role is to support community groups and voluntary organisations to undertake self-help activities, and enable communities to take ownership for their own well-being. For more information call or visit Venture Navigator Venture Navigator is a state-of-the-art on-line service designed to help start-ups, small businesses and entrepreneurs improve their chances of success. If you have a new idea or an existing company ready for growth, Venture Navigator can help you steer a course to success! The service is free of charge. Web: 18

20 Directory Useful telephone numbers and websites Suffolk Business Support - Building Business Success - offers advice and signposting to the following: Business development opportunities Business start up Contact points Diversification Environmental Exporting Finance & grants Financial advice & support Redundancy Rural businesses Tender opportunities Training, skills and development Business Support Business Link Web: Business Link will put you in touch with its business facing brokers working on the ground to provide free and impartial support. Suffolk Chamber of Commerce Web: Princes Trust Web: Inspiring Women s Enterprise Web: Federation of Small Businesses (FSB) Web: Ipswich and Suffolk Small Business Association (ISSBA) Enterprise Agencies MENTA Web: NWES Web: Suffolk ACRE Web: Suffolk Universities & Colleges University Campus Suffolk Web: Suffolk New College Web: West Suffolk College Web: Otley College Web: Lowestoft College Web: Forming a limited company Companies House Web: To form a limited company or limited liability partnership and get all the forms and guidance notes you need. Paying tax as a self-employed person HM Revenue & Customs working for yourself Web: To register as self-employed if you are going into business as a sole trader or partnership. HM Revenue & Customs Self Assessment Orderline Forms, leaflets and factsheets on self assessment. 19

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