Business Start Up For Dummies Three e-book Bundle_ Starting a Business For Dummies, Business Plans For Dummies, Understanding Business Accounting For Dummies ( PDFDrive )

Business Startup Bundle For Dummies® Table of Contents Business Startup Bundle For Dummies Starting a Business For Dummies Table of Contents Introduction Chapter 1: Preparing for Business Chapter 2: Doing the Groundwork Chapter 3: Can You Do the Business? Chapter 4: Testing Feasibility Chapter 5: Structuring Your Business Chapter 6: Preparing the Business Plan Chapter 7: Getting Help Chapter 8: Finding the Money Chapter 9: Considering Your Mission Chapter 10: Marketing Your Wares Chapter 11: Employing People Chapter 12: Operating Effectively Chapter 13: Keeping Track of Finances Chapter 14: Managing Your Tax Position Chapter 15: Doing Business Online Chapter 16: Improving Performance Chapter 17: Exploring Strategies for Growth Chapter 18: Becoming a Great Manager Chapter 19: Ten Pitfalls to Avoid

Chapter 20: Ten People to Talk to Before You Start Chapter 21: Ten Ways to Cut Costs Chapter 22: Ten Steps to Prepare to Move On Business Plans For Dummies Table of Contents Introduction Chapter 1: Starting Your Business Plan Chapter 2: Charting the Proper Course Chapter 3: Setting Off in the Right Direction Chapter 4: Checking Out the Business Environment Chapter 5: Taking a Closer Look at Customers Chapter 6: Dividing Customers into Groups Chapter 7: Scoping Out Your Competition Chapter 8: Establishing Your Starting Position Chapter 9: Focusing On What You Do Best Chapter 10: Figuring Out Financials Chapter 11: Forecasting and Budgeting Chapter 12: Preparing for Change Chapter 13: Thinking Strategically Chapter 14: Managing More than One Product Chapter 15: Planning in Turbulent Economic Times Chapter 16: Making Your Business Plan Work Chapter 17: Learning from Others: A Sample Business Plan Chapter 18: Ten Questions to Ask About Your Plan Chapter 19: Top Ten Business-Planning Never-Evers Understanding Business Accounting For Dummies Table of Contents Introduction Chapter 1: Introducing Accounting to Non-Accountants Chapter 2: Bookkeeping 101: From Shoe Boxes to

Computers Chapter 3: Taxes, Taxes and More Taxes Chapter 4: Accounting and Your Personal Finances Chapter 5: Profit Mechanics Chapter 6: The Balance Sheet from the Profit and Loss Account Viewpoint Chapter 7: Cash Flows and the Cash Flow Statement Chapter 8: Getting a Financial Report Ready for Prime Time Chapter 9: Managing Profit Performance Chapter 10: Business Budgeting Chapter 11: Choosing the Right Ownership Structure Chapter 12: Cost Conundrums Chapter 13: Choosing Accounting Methods Chapter 14: How Investors Read a Financial Report Chapter 15: Professional Auditors and Advisers Chapter 16: Ten Ways Savvy Business Managers Use Accounting Chapter 17: Ten Places a Business Gets Money From Chapter 18: Ten (Plus One) Questions Investors Should Ask When Reading a Financial Report Chapter 19: Ten Ways to Get a Better Handle on the Financial Future Appendix A: Glossary: Slashing through the Accounting Jargon Jungle Appendix B: Accounting Software and Other Ways to Get the Books in Good Order



Starting a Business For Dummies®, 3rd Edition

by Colin Barrow Starting a Business For Dummies®, 3rd Edition Published by John Wiley & Sons, Ltd The Atrium Southern Gate Chichester West Sussex PO19 8SQ England E-mail (for orders and customer service enquires): cs- [email protected] Visit our Home Page on www.wiley.com Copyright © 2011 John Wiley & Sons, Ltd, Chichester, West Sussex, England Published by John Wiley & Sons, Ltd, Chichester, West Sussex All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, Saffron House, 6-10 Kirby Street, London EC1N 8TS, UK, without the permission in writing of the Publisher. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, England, or emailed to [email protected], or faxed to (44) 1243 770620. Trademarks: Wiley, the Wiley Publishing logo, For Dummies, the Dummies Man logo, A Reference for the Rest of Us!, The Dummies Way, Dummies Daily, The Fun and Easy Way, Dummies.com and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc. and/or its affiliates in the United States and other

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About the Author Colin Barrow was, until recently, Head of the Enterprise Group at Cranfield School of Management, where he taught entrepreneurship on the MBA and other programmes. He is also a visiting professor at business schools in the US, Asia, France, and Austria. His books on entrepreneurship and small business have been translated into twenty languages including Russian and Chinese. He worked with Microsoft to incorporate the business planning model used in his teaching programmes into the software program, Microsoft Business Planner. He is a regular contributor to newspapers, periodicals and academic journals such as the Financial Times, The Guardian, Management Today, and the International Small Business Journal. Thousands of students have passed through Colin’s start-up and business growth programmes, going on to run successful and thriving enterprises, and raising millions in new capital. He is on the board of several small businesses, is a University Academic Governor, and has served on the boards of public companies, venture capital funds, and on Government Task Forces. Author’s Acknowledgments I would like to thank everyone at Wiley for the opportunity to write and update this book – as well as for their help, encouragement, feedback, and tireless work to make this all happen. Publisher’s Acknowledgements We’re proud of this book; please send us your comments through our Dummies online registration form located at

www.dummies.com/register/. Some of the people who helped bring this book to market include the following: Commissioning, Editorial, and Media Development Project Editor: Jo Jones (Previous Edition: Steve Edwards) Commissioning Editor: Samantha Spickernell Assistant Editor: Ben Kemble Development Editor: Sally Lansdell Proofreader: Charlie Wilson Production Manager: Daniel Mersey Publisher: David Palmer Cover Photos: © Picsfive Cartoons: Ed McLachlan

Composition Services Sr. Project Coordinator: Kristie Rees Layout and Graphics: Samantha K. Cherolis, Corrie Socolovich Proofreader: John Greenough Indexer: Ty Koontz

Starting a Business For Dummies®, 3rd Edition Visit www.dummies.com/cheatsheet/startingabusinessuk to view this book's cheat sheet. Table of Contents Introduction Why You Need This Book How to Use This Book How This Book Is Organised Part I: Getting Started Part II: Making and Funding Your Plan Part III: Staying in Business Part IV: Making the Business Grow Part V: The Part of Tens Icons Used in This Book Where to Go From Here Part I: Getting Started Chapter 1: Preparing for Business Understanding the Enduring Rules of Business Strategy Focus, focus, focus Appreciating the forces at work in your sector

Recognising the first-to-market fallacy Getting in Shape to Start Up Assessing your abilities Discovering a real need Checking the fit of the business Confirming Viability Researching the market Doing the numbers Raising the money Writing up the business plan Going for Growth Gaining economies of scale Securing a competitive advantage Retaining key staff Gaining critical business mass Chapter 2: Doing the Groundwork Understanding the Small Business Environment Defining Small Business Looking at the Types of People Who Start Businesses Making your age an asset Considering location Winning with women Being educated about education Coming Up with a Winning Idea

Ranking popular start-up ideas Going with fast growth Spotting a gap in the market Revamping an old idea Using the Internet Solving customer problems Creating inventions and innovations Marketing other people’s ideas Being better or different Banning Bad Reasons to Start a Business Steering clear of bad assumptions Avoiding obvious mistakes Recognising that the Economy Matters Spotting cycles Preparing for the ups and downs Preparing to Recognise Success Measuring business success Exploring the myth and reality of business survival rates Chapter 3: Can You Do the Business? Deciding What You Want From a Business Gaining personal satisfaction (or, entrepreneurs just wanna have fun) Making money Saving the planet

Exploring Different Types of Business Selling to other businesses Opening all hours Making products Servicing customers Working from Home Finding the space Checking out the rules Vanquishing visitors Assessing Yourself Discovering your entrepreneurial attributes Working out a business idea that’s right for you Figuring out what you’re willing to invest Weighting your preferences Chapter 4: Testing Feasibility Finding Enough Product or People How much is enough? Buying in equipment and supplies Hiring in help Sizing Up the Market Figuring out what you need to know Finding your segment of the market Budgeting for your research Doing the preliminary research Conducting the research

Working Out Whether You Can Make Money Estimating start-up costs Forecasting sales Exceeding break even Part II: Making and Funding Your Plan Chapter 5: Structuring Your Business Choosing the Right Structure Going into Business by Yourself Advantages Disadvantages Settling on sole-trader status Building up to Network Marketing Evaluating the pros and cons Distinguishing pyramids from network marketing Working with a Limited Number of Other People Taking on an existing business Forming a partnership Looking at limited partnerships Checking out co-operatives Finding Your Way to Franchising Looking at franchise types Defining a franchise

Founding a Larger Company Opting for a limited company Buying out a business Looking at Legal Issues in Marketing Naming your business Looking at logos Protecting patents Registering a trademark Detailing your design Controlling a copyright Abiding by fair business rules Setting terms of trade Describing your goods Dealing with payment problems Chapter 6: Preparing the Business Plan Finding a Reason to Write a Business Plan Building confidence Testing your ideas Showing how much money you need Providing planning experience Satisfying financiers’ concerns Writing Up Your Business Plan Defining your readership Choosing the right packaging Deciding on layout and content Writing and editing

Maintaining confidentiality Doing due diligence Using Business Planning Software Recognising the limits of software Reviewing systems Presenting Your Plan Starring in showtime Making an elevator pitch Chapter 7: Getting Help Connecting with Government services Linking to Local Enterprise Agencies (LEAs) Choosing Small Business Associations The Federation of Small Businesses Forum of Private Business The British Chambers of Commerce A few more strings to your bow Universities and Colleges Entering an Incubator Finding the right type of incubator Getting into an incubator Assisting Inventors Helping Young Entrepreneurs Attracting Livewire Trusting the Prince’s Trust

Learning by doing – the Young Enterprise motto Chapter 8: Finding the Money Assessing How Much Money You Need Projecting receipts Estimating expenses Working out the closing cash balances Testing your assumptions Reviewing Your Financing Options Deciding between debt capital and equity capital Examining your own finances Determining the Best Source of Finance for You Considering the costs Sharing ownership and control Beating the clock Staying flexible Gaining security and certainty Limiting personal liability Going for Debt Borrowing from banks Financing cash flow Getting physical Uniting with a credit union Borrowing from family and friends Sharing Out the Spoils

Benefiting by business angels Going for venture capital Looking to corporate venturing Finding Free Money Getting a grant Winning money Chapter 9: Considering Your Mission Developing Your Concept Composing Your Mission Statement Thinking through your mission Seeing the Vision Thing Setting Objectives and Goals Chapter 10: Marketing Your Wares Making Up the Marketing Mix Defining Your Product or Service Parameters Using Advertising to Tell Your Story Considering the customer’s point of view Making an exhibition of yourself Setting advertising objectives Deciding the budget Defining the message Choosing the media Choosing the frequency Writing a leaflet Using the Internet for viral marketing

Providing opportunities to see Figuring your bang-for-the-buck ratio Getting in the News Deciding who to contact Following through Using blogs and social networks Selling and Salesmanship Telling the difference between selling and marketing Selling yourself Outsourcing selling Measuring results Pricing for Profit Caring about business conditions Working to your capacity Understanding consumer perceptions Skimming versus penetrating Avoiding setting prices too low Pondering Place and Distribution Choosing a location Working from home Selecting a distribution channel Part III: Staying in Business Chapter 11: Employing People Finding Great Employees Deciding on full-or part-timers

Recruiting and selecting Testing to find the best Exploring Other Ways of Recruiting Using agencies Using Job Centre Plus Recruiting over the Internet Outsourcing jobs Motivating and Rewarding Employees Getting the best out of employees Dealing with difficult or demotivated employees Keeping motivation in the family Rewarding achievements Staying on the Right Side of Employment Law Keeping employment records Preparing contracts of employment Working legal hours Granting leave Avoiding discrimination Keeping the work environment healthy and safe Chapter 12: Operating Effectively Proposing Premises Calculating requirements Finding the right premises Renting or owning? Sorting out equipment

Taking the Make-or-Buy Decision Making it yourself – pros and cons Outsourcing – a low investment option Setting quality standards Choosing a Supplier Evaluating trading terms Building a relationship Buying online Minimising Risk and Assessing Liability Protecting your employees Covering yourself against an employee suing Protecting assets Covering loss of profits Goods in transit Protecting yourself Guaranteeing goods and services Dissecting Directors Finding and Choosing Business Advisers Tallying up an accountant Investing in a bank Soliciting for a lawyer Managing a consultant Chapter 13: Keeping Track of Finances Keeping the Books Recording financial information

Starting simple with single entry Dealing with double entry Choosing the right accounting program Outsourcing bookkeeping Understanding Your Accounts Forecasting Cash Flow Reporting Your Profits Calculating gross profit Reckoning expenses Appreciating the different types of profit Accounting for Pricing Breaking even Pricing for profit Building in more products Handling price changes Balancing the Books A balance sheet Categorising assets Accounting for liabilities Understanding reserves Analysing Performance Using ratios Gearing down Keeping on the Right Side of the Law Carrying out an audit

Filing your accounts Managing Your Accountant Chapter 14: Managing Your Tax Position Tackling Taxes for Different Types of Businesses Figuring out sole traders and partnerships Looking at levies on companies Assessing the best legal structure Paying Taxes Valuing value-added tax Minimising taxes Handling Employment Taxes Paying PAYE Allocating national insurance Accounting for employment taxes Part IV: Making the Business Grow Chapter 15: Doing Business Online Appreciating the Power of the Internet Richness versus reach Clicks and bricks Recognising the limits – there are none! What You Can Do Online

Generating advertising revenue Recruiting staff Answering frequent questions Carrying out research Establishing an Internet Presence Deciding on content Designing the website Using a consultant Registering domains Selling Goods and Services Using third party websites Building a store front Getting paid online Fulfilling orders Gaining Visibility Understanding search engines Using a submissions service Paying for placement Checking out competitors Tracking traffic Chapter 16: Improving Performance Checking Your Internal Systems Keeping track of your routine Analysing market position Retaining Customers

Realising why retaining customers matters Working to retain customers Improving Productivity Trimming expenses Increasing margins Working smarter Rewarding results Budgeting for Beginners Setting the guidelines Analysing the variances Flexing the figures Budgeting from zero Chapter 17: Exploring Strategies for Growth Understanding the Importance of Growth Measuring market share Building a brand Increasing Sales Getting customers to buy more Encouraging referrals Entering new markets at home Selling overseas Adding new products or services Diversifying as a last resort Forming Alliances

Going on the alliance trail Investigating and approaching Franchising Your Way to Growth Bolting on a franchise Weighing the advantages and disadvantages Doing the pilot Finding franchisees Rolling out the franchise Chapter 18: Becoming a Great Manager Building a Team Founding principles Coaching and Training Appraising Performance Developing a Leadership Style Understanding leadership Delegating Evolving leadership styles for growth Managing change Measuring Morale Part V: The Part of Tens Chapter 19: Ten Pitfalls to Avoid Knowing Too Little Being Overly Optimistic about the Market Underestimating Start-up Time Spending Too Much at the Start

Mistaking Cash for Profit Choosing the Wrong Partner Ignoring Accounting Forgetting Working Capital Having No Clear Competitive Advantage Choosing the Wrong Location Chapter 20: Ten People to Talk to Before You Start Speaking with Your Spouse Making Use of Your Professional Network Benefiting from Entrepreneurs Who Started a Similar Business Spending Time with a Friendly Banker Tapping into Your Local Enterprise Agency Director Communicating with Your Current Boss Calling Your Colleagues Bringing in Your Best Friend Reporting to an Accountant Plugging into a Business Angel Network Chapter 21: Ten Ways to Cut Costs Using a Suggestion Scheme Forming Smart Circles Going Green Using Less Utilities Stripping Out Waste Reducing Shrinkage Negotiating with Suppliers Going In for Benchmarking Getting Kitted Out for Less Setting Cost-cutting Priorities

Chapter 22: Ten Steps to Prepare to Move On Monitoring Market Prices Valuing Your Business Figuring Out Who to Sell To Dressing to Kill Finding Advisers Doing Due Diligence Earning Out Your Profits Starting Up Again Becoming a Business Angel Winding Up Cheat Sheet

Introduction If you’ve pulled this book down from the shelf or had it passed to you by a friend or loved one as a gift, you don’t have to be psychic to know something about your current business situation. You may be in need of this book for any number of reasons: You saw Lehman Brothers’ staff queuing outside their offices with cardboard boxes and don’t want that to happen to your business. A relative, hopefully a distant and elderly one, has died and left you a pile of dosh and you don’t fancy leaving it to your stockbroker to lose on your behalf. Your employer is in the middle of a major downsizing operation as well as proposing to close its final salary pension scheme and relocate to somewhere with lousy schools and no healthcare facilities. You have a great idea for a world-beating product that no one has ever thought of but every one of the world’s billion Internet users desperately needs – when they hear the good news they’re going to click a path to your website. Your brother, sister, father, mother or best friend – or worse still, all of them – has started his or her own business and retired to a chateau in France to breed horses, tend the vines and sail on a luxury yacht. If your present situation is founded largely on luck and serendipity, that isn’t enough to get you through the business start-up process unaided. Good ideas, hard work, relevant skills and knowledge about your product and its market, though essential, on their own aren’t enough. The 400,000 small firms that close their doors every year in the United Kingdom, a figure that rose sharply in the recent

recession, are evidence enough that the process is a tough one. This book is aimed at you if you either want to start up a business or to review your prospects in the small business world. It brings together, from a wide variety of sources, the essential elements of knowledge that are a prerequisite to understanding the world of small business and to achieving financial and personal success whatever the economic weather. Why You Need This Book Most business failures occur within the first 18 months of operation. That fact alone has made it increasingly clear that small businesses need special help, particularly in their formative period. The most crucial needs for owners and managers include: Help in acquiring business skills in such areas as basic bookkeeping and accounting. Most failing businesses simply don’t know their financial position. Even if the order book is full, the cash can still run out. Knowledge of what sorts of finance are available and how to put themselves in the best possible position to raise money. Surprisingly, funds aren’t in short supply. Problems lie, rather, in the business proposition itself or, more often, in the way in which the owner makes the proposition to the financier. Information with which to make realistic market assessments of the size and possibilities of their chosen market. Over- optimism about the size and ease with which a market can be reached is an all too common mistake. Skills and tools to grow their businesses into valuable assets to pass on to family members or to sell up and sail off into the sunset.

This book gives you help in all these areas. In addition, every business needs a business plan, a statement of business purpose, with the consequences of each element of that purpose spelt out in financial terms. You must describe what you want your business to do – who its potential customers are, how much they’re likely to spend, who can supply you and how much their supplies cost. Then you must translate those plans and projections into cash – how much your business needs, how much you already have and how much you expect ‘outsiders’ to put in. This plan also helps you to avoid catching the ‘common cold’ of small businesses – underestimating the amount of start-up capital you need. Going back to a bank and asking for 30 per cent more funding six months after opening your doors, and retaining any credibility at all, is difficult if not impossible. And yet new businesses consistently underestimate how much money they need to finance their growth. Many people have never prepared a business plan, they don’t know how to start and they need new knowledge. That’s where this book comes in. In these chapters, I give you the information you need to formulate and follow a business plan. The book is also invaluable to innovators, who have special problems of communication and security when they try to translate their ideas into businesses. All too often their inventions are left for other countries to exploit, or they feel unhappy about discussing ideas, believing that a patent is their only protection. But more often than not, these business owners simply don’t know who to talk to, little realising that sophisticated help is often close at hand. Thus this book illuminates a path from the laboratory to the marketplace so that small firms and inventors can see a clear route. How to Use This Book Starting a Business For Dummies can help you succeed no matter

what kind of business expertise you’re looking for. If you have a great and proven business idea, you may want to plug straight into finding out how to raise finance. If you need more than just yourself to get your great business idea off the ground, then you may want to discover how to find great employees or perhaps a business partner to take some of the financial and emotional strain. This book is set up so that you can dip in and out of it in a number of ways depending on your situation. If you haven’t started a business before, or been profit accountable for part of an enterprise, then you may want to start at the beginning and work your way through. If you’re more experienced, then you may start by selecting the areas you are less knowledgeable about to fill in the gaps and work outwards from there. If you’re quite confident in the business world, you can use the book as a guide and mentor to review a particular topic. You can even use it to plan to sell your business after it’s established and move on to a different challenge. If you learn by example, you may want to flip through the book, using the True Story icon as your guide. The text next to this icon highlights ‘straight from the horse’s mouth’ examples of how successful entrepreneurs have tackled specific situations, be it finding a partner, raising finance or getting a free grant from the government. The next section tells you what the various parts of the book cover so that you can turn to a certain part for a specific need. How This Book Is Organised Starting a Business For Dummies is divided into five main parts based on the major elements involved in planning, launching and running a

business. You don’t have to read all the parts, however, and you certainly don’t have to read them in order. Each chapter is devoted to a particular business start-up topic and you may need some chapters more than others. Feel free to jump from section to section and chapter to chapter; pick and choose what really matters to you and your business proposition.

Part I: Getting Started Before you get a business off the ground you have to do all the preliminary legwork and make sure that you have a viable business on your hands before you commit too much time and money. This part gets you on track right away by helping you to gather crucial information on your marketplace, potential customers and competitors, and so test whether your idea is viable. It also provides a chance for you to check out your skills and attributes to help you establish the right business for you to start. Part II: Making and Funding Your Plan To ensure that your business prospers you have to know something about the legal structures under which you can trade and which suits you best at the outset. You need a business plan to help you both test the viability of your proposition and to share your ideas and aspirations with others, including potential investors, bankers or partners. You also want to review the financing options to make sure that you get both the right amount and type of finance for your business needs. You don’t have to do all this on your own, because the chapters in this part list key organisations that offer advice and help to business starters.

Part III: Staying in Business After you get going you’ll almost certainly need to employ staff either full time, part time or on a temporary basis. This involves legal responsibilities that you should be prepared for. A business needs controlling in much the same way as a car or plane does. You need to understand what the key control documents are, and what they tell you about how your business is performing. You also need to have a sound appreciation of your income, expenses and tax liabilities, and how to minimise those liabilities legitimately.

Part IV: Making the Business Grow After you have your business up and running you want to see how fast you can make it go without blowing a gasket or running off the road. Part of this process is a bit like fine-tuning a car engine. But part involves substantially changing everything, including the products and services, the markets you serve and perhaps even the very nature of your business operations. The process may even involve adopting a strategy to franchise your business idea, bolt a franchise onto your venture or form some other form of strategic alliance. This part covers the ins and outs of expanding your business safely and smartly.

Part V: The Part of Tens The Part of Tens presents four chapters. One is a collection of warnings about the problems that most new businesses are likely to encounter and how to counteract them. Another contains details of the people you absolutely have to talk to before, during and after you’ve started up. The third chapter gives vital details on how to cut costs and so keep your business competitive. The final chapter provides pointers on maximising the value of your business, finding a buyer and then moving on to pastures new. Icons Used in This Book To help you pinpoint vital information, I’ve placed icons throughout the text to steer you to nuggets of knowledge. This icon calls your attention to particularly important points and offers useful advice on practical topics. This icon serves as a friendly reminder that the topic at hand is important enough for you to make a note of. Business, like any specialist subject, is awash with specialised terms and expressions, some of which may not be familiar to you. This icon draws your attention to these. This icon alerts you that I’m using a practical example showing how another business starter has tackled a particular topic. Often you can apply the example to your own business.

This icon alerts you to a potential danger. Proceed with caution; look left and right before crossing. In fact, think carefully about crossing at all when you see this icon. This icon refers to specialised business facts and data that are interesting as background data but not essential for you to know. You can skip paragraphs marked by this icon without missing the point – but reading them may help you build credibility with outside investors and partners. Where to Go From Here Take a minute to thumb through the table of contents and get comfortable with the topics the book covers. Pick a chapter that strikes a particular chord with the aspect of starting a business that’s uppermost in your mind. Read that and see where it leads you. You can also use Chapter 6, ‘Preparing the Business Plan’, as a framework for gathering knowledge and diving back into the other chapters as you go. If all else fails, start at the beginning. That technique has a pretty good track record.

Chapter 3 Can You Do the Business? In This Chapter Understanding whether being your own boss is right for you Checking out various ventures Setting up your business at home Figuring out your profit motive Taking a skills inventory to identify any gaps Governments are keen to foster entrepreneurship: new businesses create jobs for individuals and increased prosperity for nations, which are both primary goals for any government. If those new firms don’t throw people out of work when recessions start to bite, supporting them becomes doubly attractive. But people, you included, don’t start businesses or grow existing ones simply to please politicians or to give their neighbours employment. They have many reasons for considering self- employment. The idea of escaping the daily grind of working for someone else and being in charge of their own destiny attracts most people. But despite the many potential benefits, they face real challenges and problems, and self-employment isn’t a realistic option for everyone. The questions you need to ask yourself are: Can I do it? Am I really the entrepreneurial type? What are my motivations and aims? How do I find the right business for me? This chapter can help you discover the answers.

Deciding What You Want From a Business See whether you relate to any of the most common reasons people give for starting up in business: Being able to make your own decisions Having a business to leave to your children Creating employment for the family Being able to capitalise on specialist skills Earning your own money when you want Having flexible working hours Wanting to take a calculated risk Reducing stress and worry Having the satisfaction of creating something truly your own Being your own boss Working without having to rely on other people The two central themes connecting all these reasons seem to revolve around gaining personal satisfaction – making work as much fun as any other aspect of life – and creating wealth – essential if an enterprise is going to last any length of time. Even when your personality fits and your goals are realistic, you have to make sure that the business you’re starting is a good fit for your abilities. The following sections explore these reasons in more detail.

Gaining personal satisfaction (or, entrepreneurs just wanna have fun) No one particularly enjoys being told what to do and where and when to do it. Working for someone else’s organisation brings all those disadvantages. When you work for yourself, the only person to blame if your job is boring, repetitive or takes up time that you should perhaps spend with family and friends is yourself. Another source of personal satisfaction comes from the ability to ‘do things my way’. Employees are constantly puzzled and often irritated by the decisions their bosses impose on them. All too often managers in big firms say that they’d never spend their own money in the way the powers that be encourage or instruct them to do. Managers and subordinates alike feel constrained by company policy, which seems to set out arbitrary standards for dealing with customers and employees in the same way. The high failure rate for new businesses suggests that the glamour of starting up on their own seduces some people who may be more successful and more contented in some other line of endeavour. Running your own firm allows you to do things in a way that you think the market, and your employees, believe to be right at the time. Making money Apart from winning the lottery, starting your own business is the only possible way to achieve full financial independence. But it isn’t risk free. In truth, most people who work for themselves don’t become mega rich. However, many do and many more become far wealthier than they would probably have become working for

someone else. You can also earn money working at your own pace when you want to and even help your family to make some money too. Running your own business means taking more risks than you do if you’re working for someone else. If the business fails, you stand to lose far more than your job. If, like most owner managers, you opt for sole trader status – someone working usually on his own without forming a limited company (find more on business categories in Chapter 5) – you can end up personally liable for any business debts you incur. This can mean having to sell your home and other assets to meet your obligations. In these circumstances, not only will all your hard work have been to no avail, but you can end up worse off than when you started. Also, winding up a business is far from fun or personally satisfying. I don’t want to discourage you, just to apply a reality check. The truth is that running your own business is hard work that often doesn’t pay well at first. You have to be okay with those facts in order to have a chance of success. Fighting poverty through trade Traidcraft’s mission is to fight poverty through trade, practising and promoting approaches to trade that help poor people in developing countries transform their lives. The company has more than 450 different products sourced from more than 100 producer groups in almost 30 developing countries, selling through its nationwide network of fair traders and online shop. Traidcraft raises funds and gives aid, help and advice to the tune of £1.5 million a year to help enterprises in developing countries. Projects include improving market access for women producers in Vietnam; helping Indian tea workers achieve sustainable livelihoods; and analysing the dairy sector in Kenya, identifying key constraints affecting smallholder dairy farmers and their access to markets. Traidcraft received the Queen’s Award for Industry for Sustainable Development, along with a host of other awards. Oh, and it does a pretty good

job of making money too – with £15 million turnover each year, business has been growing at an average of 18 per cent a year, making a return on capital of 10 per cent. More details are on the company’s website, www.traidcraft.co.uk/socialaccounts. Saving the planet Not everyone has making money as their sole aim when setting up in business. According to the government’s figures, around 20,000 ‘social entrepreneurs’ run businesses aiming to achieve sustainable social change and trade with a social or environmental purpose. They contribute almost £25 billion to the national economy and assist local communities by creating jobs, providing ethical products and services using sustainable resources and reinvesting a share of the profits back into society. Ethical businesses have some unique advantages. For example, according to those running such firms they can relatively easily attract and retain intelligent people. Over 70 per cent of students say that a potential employer’s track record is an important factor in job choice. Customers also like ethical firms. According to a recent European Union survey on sustainable consumption, 86 per cent of those polled in the United Kingdom, Spain, Germany, Greece and Italy said that they felt very strongly about wanting things to be produced and marketed responsibly. They also blamed brands for not providing more environmentally and socially friendly products. If you want to explore the prospects for starting a social enterprise, contact the School for Social Entrepreneurs (website: www.sse.org.uk; tel: 020 8981 0300), which can help with specific and tailored support. If you need funds to start a social enterprise, contact Bridges Community Ventures (website: www.bridgesventures.com; tel: 020 7262 5566), a venture capital firm with a social mission. Its founding principle is that all the funds it invests go to businesses with a clear social purpose as well as

aiming to achieve financial returns for investors. Exploring Different Types of Business At one level all businesses are the same – they sell something to people who want to buy from them, while trying to make an honest buck along the way. At another level many very different types of business and ways of doing business exist, even within what superficially can appear to be very similar fields. Selling to other businesses Business-to-business (B2B) enterprises, such as those selling market research, database management, corporate clothing, management consultancy, telemarketing or graphic design, involve one businessperson selling to another. The attractions are that you’re dealing with other people who have a definite need and usually buy in relative large quantities and at regular intervals. For example, an individual may buy envelopes in packs of a dozen a few times a year, but a business buys scores, perhaps even thousands, and puts in an order every month. Corporate customers are harder to win, but are often worth more when you have them. And unlike private individuals, businesses like to forge relationships that endure over time. Some downsides exist too. Business customers expect credit, perhaps taking between 60 and 90 days to pay up. If they go bust they may owe a lot of money and take some of their suppliers down with them. You may have to attend exhibitions to make your presence known, a costly and time-consuming process, or advertise in trade directories. Check out these websites to find out more about these topics: www.idealbusinessshow.co.uk and www.b2bindex.co.uk.

Opening all hours Conventional shops, restaurants and the like have long opening hours and have to meet the expectations of increasingly savvy consumers, whose access to the Internet has made them aware of competitive prices as well as high specifications and standards of service. The upside of any form of retailing is that you’re almost invariably paid up front. But just because you get the cash in your hand doesn’t mean that you don’t have to meet exacting standards. Customers are protected in their dealings in a myriad of ways and if you fall short of their legal entitlement you can end up with a bigger bill than a simple cash refund. (I cover legal issues in Chapter 10, ‘Marketing Your Wares’.) In conventional retailing you also have to rent premises and stock them with products, both factors that can add significantly to the business risk. Increasingly, new retail business start-ups are Internet based. The website is in effect the shop window and the stock of products being sold may even be in a warehouse owned by a third party. This keeps up-front costs down but means keeping abreast of fast-changing technologies – the Internet, servers and computer hardware and software. (I look at these in more depth in Chapter 15.) Making products One of the attractions of manufacturing is that you have a greater degree of control over the quality, cost and specification of the end product than a retailer or wholesaler might. But with those advantages come some hefty penalties. Factories, equipment, stocks of raw materials and employees are costly overheads. You have to incur these expenses well before you’re certain of any orders – an unlikely way into business for someone without previous manufacturing experience and a deep wallet. Such owners also bear some significant risks towards their employees. The UK manufacturing sector reports over 32,000 work-related accidents to the Health and Safety Executive each year. This figure includes over

6,200 major injuries such as fractures and amputations as well as around 40 fatalities. A more likely route to manufacturing for a new business is subcontracting, where you’re working for a manufacturer on part of a product. The most common examples of subcontractors are plumbers, electricians and carpenters in building work, metal and plastic casing production and the like in civil engineering and a wide range of activities in the information technology sector. Servicing customers Service industries now dominate the British economy and account for around 70 per cent of gross domestic product (the value of the goods and services that the country produces). Services include financial intermediaries, hairdressing, real estate, computer services, research and development, education, health and social work, refuse disposal, recreational, cultural and sporting activities and an extensive range of other activities where no physical goods play a major part in any transaction. In truth, however, most manufactured goods include a service element, though the business functions are often separated. For example, manufacturing businesses produce cars but are quite separate from the garage chains that repair those vehicles. But some manufacturers go further – Dell manufactures computers and also carries out delivery and many other service functions. Service businesses require a high degree of personal involvement and as such call for founders who see their people skills as pivotal. In a nutshell, if you don’t enjoy understanding the intimate details of what makes customers tick and then going out of your way to meet their needs, running a service business may be of little appeal. Working from Home