BUSINESS START-UPS

Planning your business:

Starting your own business is very exciting but can be rather daunting. It can also be a risky thing to do, so you need to make sure you understand the risks before taking the plunge and going into self-employment. You maywant to start by asking yourself a few searching questions:

Do you have the financial resources to start your business, and to pay your general living expenses while you go through the start-up phase? Can you afford to, and do you really want to risk these resources? For example, you might have to take a secured loan based on the value of your home - what would you do if your business failed and you were forced to sell your house?

Do you have the commitment and self-discipline to see through potential hard times? There may be timeswhen customer demands are particularly heavy, and itwill be up to you to make sure these demands are met. How will you cope with this, and are you prepared to put in the necessary hours to fulfil your customers' demands?

Do you have the confidence that you will be able to negotiate with suppliers to get the best deal, be sociable with customers (at all times!), think clearly under pressure, and take criticism without getting upset?

Are you familiar enough with the market for your product or service, and will you be able to assess how this changes over time so that you can adapt your business strategy to deal with fluctuating demand?

1

There are no specific answers to these questions, but it is very important for you to consider if you will be ableto cope with the pressure of running your own business.

To get your new venture off the ground, there is a mountain of tasks to complete, research to carry out, things to do and people to contact. You need a thorough understanding of the information you need to find and thecontacts you need to make in order to pull your start-up plan together. You may already have done a lot of the groundwork, or you may be right at the beginning of your quest to get your new venture started.

Whatever your personal starting point, there are some fundamental questions you need to ask yourself about yourbusiness idea, your personal aims, and your own ability.

Why are you going into business?

Why do you want to run your own business and what do you want out of it?

Are you going in to business to

Supplement your main income? Replace your main income? Provide employment for your family? Start a business as an investment opportunity, with

the intention of selling it on at a later date? Provide employment for the local community?

Your personal objectives for starting in business will directly influence some of your business aims and targets. For example:

If you are starting a business as an investment opportunity, the focus of your planning will be leading up to your exit, that is the sale of your business. Your plan will involve building a businessand maximising its value in order to achieve the best selling price possible.

If you are building up a family business, your plan will include your succession strategy. How will your

2

family take over when you retire? By planning ahead you will be able to ensure that your business does not rely on you too heavily and that your family arefully prepared for what they will need to do to run the business.

Are you clear about what your business will do?

This may seem quite obvious, but many people overlook theimportance of this question. You need to be as specific as possible about the kind of business that you are starting. For example, if you are going to open a restaurant, will it be a family restaurant serving good quality, local food at competitive prices in a family friendly environment? Or will it be more upmarket, serving gourmet dishes to discerning customers in an intimate setting?

The decision you make about this will ultimately affect every aspect of your business, including your choice of premises and location, the amount of money you need for fixtures and fittings, and the different laws you will need to comply with.

What do you want your business to be in three years' time?

Your aim for what you want your business to be in three years' time will shape your strategy and objectives now. Do you want to develop your business to be the market leader? Do you want to be renowned for your quality and service? Do you want to be a large business or a small, family concern?

Have you got what it takes?

There is no single 'type' of person who becomes self-employed, but there are some characteristics which successful self-employed people often have in common:

Logical, perceptive, organised and responsible (goodat getting things done).

Extrovert and confident.

3

Able to communicate and get their point across. Sociable, with the ability to lead. Single-minded, but able to take advice. Flexible and adaptable. Quick to take opportunities (and ready to take

risks). Hard-working, committed and determined ('get up and

go' type). Tough-skinned (able to handle failure). Individualistic (not afraid to stand out from the

crowd). Creative and imaginative (always coming up with new

ideas for the business).

This list is not necessarily complete, and you do not need to have all these characteristics to be a success atrunning your own business. The key is to develop and growyour own skills and characteristics as you gain more experience.

On the following table, rate yourself according to your present knowledge and experience, then consider which activities you will need to know more about if you start your own business. The list is not exhaustive, but you will almost certainly experience and have to deal with all of the issues in your business at some time or another.

 

BUSINESS ACTIVITY None

Poor

Fair

Good

Researching your idea or market

       

Finding premises        Preparing a business plan

       

Preparing cash flow forecasts

       

Raising start-up finance

       

Dealing with banks andother funders

       

4

National Insurance, VAT and tax

       

Bookkeeping        Costing products and services

       

Designing promotional material

       

Writing copy for salesmaterial

       

Dealing with customers        Selling face to face        Recruiting staff        Employing staff        Dealing with staff        Purchasing stock and equipment

       

Stock control        Writing business letters

       

Health and safety requirements

       

Insurance and other statutory requirements

       

Consumer law        

 

Apart from your business and personal skills, some tradesalso require professional qualifications or standards. Ifyou are considering starting a business, it is important that you check whether you need specialist qualificationsbefore you start up. Knowing the basics may not be enoughto obtain the licences you require or to receive accreditation with trade associations. You can find out if formal standards or qualifications are required from the relevant trade association or professional body.

The Trade Association Directory may be available at your local city/central library, alternatively try the Trade Association Forum (www.taforum.org.uk) for further information.

5

Tasks

List three main objectives for running your own business.

Write down your initial ideas for your business - why are you going into business? Are you clear aboutwhat your business will be? Where do you want to be in three years?

Use the table above to assess your skills and qualifications to evaluate if you need any training.

Tips

Be clear about why you want to be in business, and try to be as realistic as possible with your objectives.

Focus on what you want to achieve and don't set too high goals for yourself.

Starting your business

Researching the market for your business

Thorough market research will help you establish whether there really is a market for your enterprise. The more research you do initially, the better position you will be in when it comes to making future business decisions. When setting up in business you should be able to identify:

Where there is a market for your business. How much demand there will be for your product or

service. Who will buy your product or service. Who you are likely to be competing against.

What market information do you need to find?

Your initial market research should identify your target market sectors, your customers' buying habits, and your competitors' strengths and weaknesses.

6

Market sector information

Researching your market builds up a picture of the key issues and trends affecting your business idea. Does yourknowledge of the market and the research you have carriedout suggest that there is sufficient demand for your product or service? Are these markets expanding or declining? What are the current trends? What are the forecasts for the next two to three years?

Customer information

Have you considered who will buy your product or service?Do you know the groups of customers to target? Why will specific groups of people or businesses buy from you? Do you know how much they are prepared to pay? Will you be able to achieve a large enough share of the market?

Competitor information

Have you identified your competitors? Are they local, regional or national? What do your competitors sell, and how? Consider your competitors' strengths and weaknesses and assess what will make your business different from theirs. A major consideration is to assess whether new competitors will be entering your market in the near future - this should be a regular task, as no business can afford to be complacent and ignore new developments and suppliers in their market.

Where can you find market information?

Business information is available from a variety of sources. Some is available free, but often more in-depth information will need to be paid for.

The reference section of your local city/central library may carry market reports, Government statistics, trade publications and local business directories. The library may also have directories of trade associations and tradepublications.

7

The Internet is a good starting point, although it can betime consuming finding the exact information for which you are searching. When using the Internet for research, make sure that the websites you use are reliable and contain up-to-date information. Select a good search engine such as Google (www.google.co.uk), where you inputthe type of business, geographical area, product name, suppliers, competitors and so on, and the search will bring up related websites for you to browse.

For information on market trends try:

Mintel (www.mintel.co.uk) Key Note (www.keynote.co.uk) Euromonitor (www.euromonitor.com)

For information on Government statistics and demographicstry:

Office for National Statistics for census data, social trends and regional trends (www.statistics.gov.uk)

For information on who may be trading in your area, either as a competitor or a potential partner, try:

Yellow Pages (www.yell.com) Kelly Search (www.kellysearch.com) Thomson Directory (www.thomweb.co.uk) Kompass Online (www.kompass.com) British Companies (www.britishcompanies.co.uk) British Chambers of Commerce

(www.chamberonline.co.uk)

These sources often just provide basic business details, such as name, location and sector. For useful competitor analysis, you will need to find out more information, such as who they target, what they charge, and how they market themselves.

If your competitors are limited companies, you should be able to obtain financial data on them, for example from

8

ICC (www.icc.co.uk), or Dun & Bradstreet (http://dbuk.dnb.com), but you will have to pay for it.

Finding information on smaller businesses is more difficult. A good start is to look at their websites which can provide an insight into their business ethics, products and target customers.

Tasks

Find out as much information as you can about your market by reading market reports, trade journals andnewspapers and by searching the Internet.

Make a list of your competitors using your knowledgeof your market, business directories and trade journals.

Make a list of your competitors' strengths and weaknesses and assess how you can compete with them.

List the differences between your products and services and your competitors' products and services.

Talk to your business adviser. They will be able to help you organise your research and find sources of information.

Find out from your business adviser if any research grants are available.

Do some market research by talking to potential customers to build up a picture of the local market and its requirements. Designing questionnaires and selecting the right time, place and method (such as face-to-face, telephone or postal) can be complicated, so if you are inexperienced in research, seek help from a business adviser.

Tips

Your market research will form a major part of your business and marketing plans, so it is important to keep your research to refer back to when you are developing your plans.

Make time to do your research. It is one of the mostimportant things you will ever need to do. Getting

9

the right type of information now will help avoid problems later.

Be realistic with your research findings, and be sensible with your assumptions and market predictions.

Be careful if talking to your friends and family andasking for their input as potential customers, as they may offer a biased view.

Starting your business

Choosing premises

Making the right choice of business premises can be crucial to the success of your business. Do you know whatoptions are available? Have you thought about the facilities you need? Do you need premises, or do you planto work from home? This section will guide you through the options that are available to you, and some of the issues you need to be aware of when choosing property.

What do you need?

It's important that you think very carefully about what you need, and where you need to be located, as mistakes now could be costly in the future. If you underestimate or overestimate the space you need, you may be stuck withthe wrong premises until the end of a lengthy lease.

Your premises should be in a location that balances the needs of your customers and suppliers with your budget. Consider your customers' requirements. Will your premisesbe easy to find? Do you require parking space for customers, or are you near public transport? Consider your suppliers. Is there ample room for delivery wagons to park and offload?

The premises should provide you with enough room to carryout your business in a safe working environment, with

10

some room for expansion as your business grows. The cost of heating, insurance and maintenance should be within your budget.

What are your options?

Working from home

Many new businesses are started from home, and if you decide on this option there are various issues you need to consider. Does the lease or deeds for your property allow you to run a business from home? Do you need planning permission? Check with your local authority who will be able to advise you about planning and health and safety requirements. Use the sources of business information section in this guide to find out who can provide what in your area.

Think of your neighbours. Will your business cause a nuisance? Will there be a constant stream of visitors? Isthere enough space for parking? You also need to tell your insurance company. If you rent the property, you should inform your landlord. If you have a mortgage on the property, you should inform your mortgage lender. If you choose not to work from home, there are three main options:

Managed workspace

Managed workspace can take some of the routine worries ofrunning a business off your shoulders. This type of arrangement often provides shared facilities including equipment, such as photocopiers and fax machines, and a receptionist. If the managed workspace is run by a business support organisation, there may also be businessadvice on hand. Utility bills are often more reasonable. Occupation is usually by way of an easy in, easy out licence, giving far more flexibility than a lease.

On a national level, the Tavistock Directory (www.tavistockdirectory.com) provides listings of business centres, serviced offices and managed workspace.

11

Business incubation

At first glance, business incubation can seem very similar to managed workspace, providing premises with shared facilities and business support. However, businessincubation provides more intensive business support and advice, and there are certain qualifying requirements which must be met.

Business incubation concentrates mainly on supporting newand innovative ideas. Certain business incubation centrestake a mix of industry types, while others provide specialised centres.

Information about the business incubation centres in England is available from the UK Business Incubation Directory which may be accessed on their website (www.ukbi.co.uk).

Commercial lettings

Commercial lettings do not provide the same level of flexibility and support for new businesses as managed workspace and business incubation. With commercial letting you will rent the premises only. There will be noadditional business advice on hand and probably no central facilities such as photocopiers. Leases are long-term, with three-year leases often the shortest you can expect.

When considering commercial premises, look at as many properties as possible to compare facilities. Work out the overall cost per square foot in order to find out which property is the best value for money. As well as considering what is provided in the lease, you should also take into account factors such as the cost of securing and insuring the property.

Take legal advice before signing any leases to ensure that you understand all of the terms of the lease.

12

What costs are involved?

Repairs

Check your responsibility for repairs during your lease. The property must be left in an acceptable state of repair at the end of the lease.

Insurance

Check to see who is responsible for the insurance of the premises. You will need to insure contents.

Service charges

This applies to a building with multiple occupants. The landlord will usually pay for common costs, such as structural repairs, common areas, heating, and caretakingservices, and the cost is recharged to the tenants on a proportional basis (normally a ratio of floor areas). Ensure that you know how this is calculated; that you have the right to see and check the landlord's expenditure, and that you are not paying for empty areas.

Business rates

These are payable by all businesses and is based on the rateable value of the property. For further information about business rates, contact your local authority or seewww.mybusinessrates.gov.uk.

Landlord's professional fees

When renting business property, you will normally be expected to pay your landlord's solicitors' and surveyors' fees. If you go into a managed or incubator workspace, you will probably only be required to sign a licence, in which case there will be no need for solicitors and surveyors.

Tasks

If you are planning to work from home, check with your local authority, mortgage lender or landlord,

13

to see if there are restrictions preventing you fromrunning a business from home.

Make a list of the characteristics of the location you are looking for. This will help you decide on the best location for your business - a high street,off-street, a trading estate or in the country?

Determine how much space you require, remembering toallow enough space for your staff, stock, vehicles and so on.

Make a list of the facilities you need - workspace, meeting rooms, kitchen, stock room, reception area.

Once you have a list of the characteristics of your ideal location, the facilities you want and an idealsize, make a list of vacant properties that match your requirements.

Check with your local authority or business support organisations to see if there are any grants for locating in a particular area.

Visit each property, comparing how well they match your requirements. This should include the overall cost of the building per square metre. To calculate this, you need to include insurance and utility bills.

Check if any improvements are required to bring the premises in line with current health and safety, fire, disability discrimination and building regulations. If so, are you responsible for the costs, and have you budgeted for this?

When you have decided on your premises, determine the budget or finance you need to secure the property.

Consult an accountant and solicitor before committing to any agreement or signing any paperwork.

Tips

It is important to balance location against costs when deciding on your premises.

Lawyers for your Business provide 30 minutes of freelegal advice on premises and leases

14

(www.lawsociety.org.uk/choosingandusing/helpyourbusiness/foryourbusiness.law).

Shop around for premises before committing to anything.

Look at your competitors' premises and their location - are they near transport links, pubs, car parks, or other shops - and should you follow suit?

Remember to consider what will happen if your requirements change - will you be tied to the property by a long lease?

If you are making any changes to a property, make sure that you check with your local authority to seeif you need to obtain planning permission.

Take a photo of the premises so you can prove the state they were in before you moved in.

Starting your business

Raising finance

Before you begin trading, you will require sufficient finance, both to set your business up and cover initial running costs. Do you know how much money you need to launch your business? If you do not have enough money yourself, you will need to approach other sources for finance. This is where your market research becomes critical, as you will need to show that you have a viablebusiness proposal to anyone considering investing in yourbusiness.

This section will help identify the financial requirements necessary to get your business idea up and running, and how you go about funding it. The sources of business support, advice and information in this guide will also help you find out more about sources of available finance, and where to find it by type and area.

What type of finance is available?

15

In general terms, businesses are funded through just three types of finance: equity (money invested in return for a share of the business), debt (such as an overdraft or loan) and retained earnings (profit that is generated from trading activities and retained within the business). Start-ups, of course, do not have retained earnings, so will need to rely on equity and debt. In addition, there may be grant aid available in certain areas or for certain types of business. It is important to consider all of the options.

What are the main sources of equity finance?

Personal savings

Your own personal savings and money raised from friends and family is your first source of equity finance. Investors will want to see that you are putting your own money into your business venture before they are likely to back you. Personal equity is the most common form of finance for start-ups. However, for business ideas with high growth potential, it may be possible to obtain equity from other sources including business angels and venture capitalists.

Business angels

A business angel is a personal investor who will invest smaller amounts of money (generally from £10,000 up to £100,000), helping a business to reach the level of turnover required before other investors become interested.

Venture capitalists

Venture capital provides businesses with access to large amounts of money, often in excess of £1 million. In return for this investment, the venture capitalist will expect a share of your business, rapid growth and an exitstrategy.

Advantages of using equity finance:

16

There are no interest payments. Investing in your own business, and encouraging

others to do the same, can increase your chances of obtaining debt finance.

If you are using venture capitalists or business angels, there may be additional management help available.

Disadvantages of using equity finance:

You have to give up a stake in your business, thoughin most cases this is outweighed by the benefits.

You have to share control and rewards. Your investors will typically look for an internal

rate of return of around 35-40%, though much of their return comes when they sell their stake, rather than through annual dividends.

Arranging the finance can involve expensive professional fees.

Where can you find out more about equity finance?

If you have money of your own, such as savings, to investin the business, contact your business adviser or business bank manager who will advise you on how to make the best use of this money.

Your business adviser will be able to put you in contact with venture capitalists and business angels. You can also contact the British Venture Capital Association (www.bvca.co.uk), Venturedome (www.venturedome.com), Venture Capital Directory (www.vcr1978.com), or the British Business Angels Association (www.bbaa.org.uk) formore information. The 3i Group Plc (www.3i.com) can provide private equity to support both new and growing businesses in the UK.

What type of debt finance is available to you?

Debt finance can range from short-term debt such as an overdraft, to medium and long-term loans. Aspects to consider include the length of the loan period, the interest rate charged and the need for security. The term

17

of the loan should be matched to the life of the asset which is acquired with the money. Use short-term overdraft facilities for working capital, and medium to long-term loans for the purchase of fixed assets.

So-called 'soft' loans are an attractive alternative to the traditional bank loan. They are usually provided by business support organisations, and other agencies, dedicated to encouraging the growth of small businesses. Soft loans sometimes provide additional benefits for small businesses, in the form of lower interest rates, repayment holidays and lower security requirements. They are often available to small businesses that have difficulty raising finance from other sources.

Where can you find out more about debt finance?

Banks are usually the first place to start when looking for debt finance. They provide financial solutions ranging from overdrafts, which provide your business withworking capital, through to loans and mortgages. Contact your local bank and speak to their small business section.

The Small Business Service (www.sbs.gov.uk) offers a Small Firms Loan Guarantee (SFLG) scheme which guaranteesloans from banks and other financial institutions for small firms who have failed to secure conventional loans due to a lack of security. Loans are available for periods between two and ten years for sums between £5,000and £250,000 for firms that have been trading for less than five years.

For information about non-bank loans, contact your business adviser.

Where can you find out more about grants and awards?

Grants are usually available for a specific purpose, for example, to fund marketing costs, or to help refurbish your business premises. Awards are often made to reward aspecific achievement. Grants and awards do not usually have to be paid back and are available to businesses that

18

meet certain criteria. Job creation projects, for example, are often eligible for grants.

Your business adviser, Business Link, or other business support organisations, are the best points of contact forinformation about grants and awards. You can also contactyour local authority for details of regeneration schemes,which often provide financial incentives for small businesses. Use the sources of business support, advice and information in this guide to find out about availablefunding, and where to go for further information.

What information do you need to prepare?

Preparation is vital before approaching anyone who you think may be able to provide finance for your business. Before anyone invests in your business, they will want tosee evidence that you have thoroughly researched your business idea, and that it has good potential. Your business adviser will be able to explain exactly what youneed and how to prepare it.

You should be able to provide the following types of information for any potential investors.

Financial forecasts

Your financial forecasts are an important part of your preparation.

Cash flow forecast

This will show the expected receipts of money coming into, and payments of cash going out from your business. It will then indicate how much cash will be available in the business. It is important to show that you will be monitoring cash flow carefully. If you are paying your suppliers, but your customers are not paying you, you will quickly run out of cash.

Balance sheet forecast

This shows fixed assets, such as equipment, and current assets, such as stock and debtors (people who owe your

19

business money). Your balance sheet forecast also shows how your assets are financed (by equity, loans, and current liabilities such as creditors - people your business is yet to pay). The balance sheet forecast showsthe expected net worth of your business and whether or not it will be solvent.

Profit and loss forecast

This shows the expected month-by-month income (mainly from sales) and expenditure. This is different from cash flow, for example, by taking into account that you may have invoiced for sales, but not received payment. The profit and loss (often referred to as P&L) also shows non-cash expenditure such as depreciation. The differencebetween income and expenditure is profit. Anyone investing in your business will be keen to see when you forecast that it will start making a profit.

Business plan

This should provide the evidence that your business has the potential to be a success. It should contain:

An overview of your business. Details of the business' legal status, key

personnel, aims and objectives. Details of the products and/or services your

business will provide. Details of your target customers' characteristics

and estimated numbers. An assessment of your competitors' strengths and

weaknesses. How your business is different from the competition. Details of how you intend to market your business. How and where your business will operate. Financial requirements, including how much money is

needed and when it is needed.

Personal budgets

You should work out your personal expenditure, such as your mortgage payments, and gas, electricity and

20

telephone bills. Anyone financing your business will wantto see that you have considered your living expenses, andthat you know how much money you will need to take out ofthe business to live.

As your business becomes established and profits increase, you will be able to take more out of the business, but initially you will probably want to reinvest most of your profits into building the business.

Forms of identification

Before anyone invests in your business, they will want proof of your identity. You can use your passport, driving licence, or a bank statement. It may be worth contacting the potential investor to find out exactly what form of identification they usually like to see.

Outline your objectives and how you plan to achieve them in your business plan. You should include the finance you need and when you will need it.

Contact NatWest for advice on the finance they can provide. They may also advise you on how to use the finance you have already raised for your business.

Contact a business adviser for information about sources of finance available to you and for help on putting together an application for finance.

Be sure that you can afford any repayments, either personally or through business profit.

You may find that the bank asks you for some form ofpersonal security against a loan or overdraft. This is usually difficult to avoid, at least for loans over £10,000. If you can't provide adequate securityagainst a loan, it is worth asking about the Small Firms Loan Guarantee Scheme - telephone 0845 001 0032 and speak to the Small Firms Loan Guarantee Unit.

Shop around for the best small business finance package on offer from a bank, and don't just set up a business account with your existing bank.

Legal aspects of starting up a business

21

A major consideration before starting any new enterprise is to make sure that you do so legally. Do you need any licences? Are you aware of the health and safety requirements? Are you entitled to use your chosen business name? Are you going to be self-employed or in a partnership?

There are many issues to be considered, many of which arenot just for convenience, but are required to run your business within the law. Companies House can be contactedfor help and advice on 0870 333 3636 or you can log on totheir website at www.companieshouse.gov.uk for further information.

Deciding on your business structure

There are four main business structures.

Sole trader

There is no legal difference between you and your business. You keep all the profits, but you will be personally liable for any debts. This means that if your business runs into difficulties, you could lose your house and car to pay the debts. You are entitled to fewersocial security benefits than other forms of business andhave fewer options for raising finance. You pay lower National Insurance. You can present unaudited accounts toHM Revenue & Customs.

Partnership

Running a business as a partnership is very similar to being a sole trader except that you have someone else to share ideas, the highs and lows of business and more importantly, the profits. You should take legal advice ifyou are setting up a partnership and make sure a Deed of Partnership agreement is drawn up, otherwise you will automatically be governed by the Partnership Act 1890.

Limited company

22

A company is a separate legal entity. Setting up a limited company means finance can be raised from issuing shares in the company. Your liability for debts is reduced, though you may have to give personal guarantees.There can be some tax benefits. Accounting procedures aremore complicated, which means that a professional may be required. National Insurance costs are higher. Setting upa limited company is relatively straightforward and inexpensive - the fee for registering a private company with Companies House is currently £20.

Limited Liability Partnership

If you set up a Limited Liability Partnership and the partnership does not act negligently, your personal assets, such as your house, are protected. A Deed of Partnership will need to be drawn up, and you will need to pay a solicitor to complete all the necessary documentation.

Giving your business a name

Choosing the name under which you are going to trade is very important. The name of a business portrays a certainimage, and can provide good marketing potential, but the name must also meet legal requirements.

When you have decided on the name for your business, you need to check that there is no one already trading under that name, and that it does not infringe any trade marks.To find out if a business is already operating with the same name, log on to www.companieshouse.gov.uk for further information. You could also check to make sure that there is not a local business with the same name by logging on to www.yell.com and searching for the name.

You also need to make sure that your name is not subject to any restrictions. Certain words such as British, council, dentist and so on, cannot be used in business names without special permission, as it may give a false image of experience or professionalism. Companies House provides some useful booklets; log on to www.companieshouse.gov.uk for further information.

23

What does 'disclosing' a business name mean?

If your business does not trade under your exact name on business stationery, shop signs, bank details and so on, you need to let your customers and suppliers know your name and the business address where you can be contacted.This is called 'disclosure', and is covered by the Business Names Act 1985. For example, if your name is 'P.Brown', and your business trades as 'P. Brown', you do not have to disclose. However, if your business stationery and banking details are 'P. Brown Repairs', you have to disclose.

If your business is a partnership that does not trade under the names of all the partners (as is common with large legal and accountancy practices) you will also needto disclose. The same is true if your business does not trade under its registered company name. For example, if your business is registered and trades under ABC Textiles(GB) Limited, you do not have to disclose. However, if you are registered as ABC Textiles (GB) Limited, but trade as ABC Textiles, you have to disclose.

How do you disclose your business name?

Sole traders and partnerships usually disclose their names on business stationery. Limited companies have specific rules regarding how their names are disclosed.

For professional partnerships with more than 20 partners,the names and addresses of all partners do not need to appear on business stationery. But a contact address, where a full list can be obtained, does.

How do you disclose a limited company name?

The Business Names Act 1985 and the Companies Act 1985 govern the disclosure of limited company names. As a limited company, there are certain rules that dictate where you have to display your company name. For example,a limited company must display its name outside all of its premises in a prominent place and in clearly legible letters. Limited companies also need to disclose their

24

corporate name, registration number and registered officeon their business stationery and e-mails. If a limited company fails to disclose its name correctly, it may be liable for a fine.

Health and safety

Regardless of the type of business you are running, you need to ensure that your business is operating in a safe working environment. Regulations cover subjects such as computer monitors, first aid, lighting and heating.

When your business starts trading it is important to takeadvice from, and register with, the relevant health and safety body. Contact the Health and Safety Executive advice line on 0870 154 5500, or log on to www.hse.gov.ukfor further information.

What are your responsibilities when considering fire safety?

If you have two or more employees, you must carry out your own fire risk assessment, looking for possible hazards and reducing the risk. You must ensure that a fire will be detected quickly, the building can be evacuated (ideally within two and a half minutes), fire-fighting equipment is provided and maintained, and that staff are trained in what to do in the event of a fire.

As a general rule, a fire certificate is required if you employ 20 or more people, you employ 10 or more people onfloors other than on the ground floor, you own a hotel, or you own a factory where explosives or highly flammablesubstances are stored.

Trading licences

Depending on the type of business, you may need to apply for trading licences, which are numerous and varied. For example, sports venues and care homes need licences from the local authority licensing department, and mobile shops and restaurants need licences from the local authority environmental health department.

25

For further information about the licences you might need, contact your local authority for advice. Some licences will be required in advance of trading. For example, some local authorities will hear applications ona monthly basis for licences to serve alcohol, and applications often have to be made 21 days before the hearing date. If you do not have your licences in place, you will have to delay trading, otherwise you will be trading illegally.

Tax liabilities

All businesses are required to pay some form of tax. The amount and type of tax that you pay will depend on the legal structure of your business, and the level of profitthat you make. Contact HM Revenue & Customs on 0845 915 4515 to obtain information about registering for tax, National Insurance and VAT, or log on to www.hmrc.gov.uk for further advice.

The level of your business turnover determines whether you need to register for VAT. If your turnover is greaterthan £61,000 per year, you have to register for VAT. If your turnover is less than £1,350,000 you are required tosubmit one VAT return annually. If it is greater than £1,350,000 you will have to submit a VAT return quarterly.

Even if you are below the VAT threshold, it may be worth registering voluntarily so that you can claim back the VAT on any business purchases. This is of benefit if mostof your customers are VAT-registered.

Insurance requirements

Insuring a business is more complex than insuring a home or a car, and you need your insurance to be in place as soon as your business is up and running. Some insurance policies are essential, others optional. An insurance broker will be able to provide you with information on the insurance policies that your individual business requires. Some businesses that provide advice for a fee,

26

such as solicitors, accountants, architects and consultants, also need professional indemnity insurance.

You are likely to need a combination of the following:

Public liability insurance Product liability insurance Employers' liability insurance Motor insurance (if you have business vehicles) Buildings and contents insurance (including

insurance for goods in transit)

Employing staff

Employment law covers a multitude of areas ranging from maternity leave, parental leave and working hours, to pensions, itemised pay statements, contracts and job descriptions.

Employment law is a specialised area. In order to avoid employment and staffing problems that can be costly and unpleasant, seek professional advice. The Acas website www.acas.org.uk is a good source of information and the Tailored Interactive Guidance on Employment Rights website, www.tiger.gov.uk, provides information and advice on employment issues.

Data protection

It doesn't matter how small your business is, if you are storing information about individuals (employees, customers or suppliers), either manually or electronically, the Data Protection Act 1998 will affect you.

Some types of business need to register with the Information Commissioner if storing information for reasons outside of their core business; others are exempt. The Information Commissioner's Office at www.informationcommissioner.gov.uk provides further information.

27

All businesses, whether exempt or not, need to ensure that the information they hold is stored securely and responsibly - it makes sense to use passwords on computers, and use locked filing cabinets to store manualfiles. Data must also only be held for a specified reason, and not kept longer than necessary.

Disclosure of data can lead to prosecution. For example, when compiling customer lists, it is important to make sure that your customers do not object to receiving direct marketing information from you. If they do object,you must remove their contact details from any mailing lists.

Individuals can also request the information that you hold on them and by law you need to provide this information within 40 days of their request. You can apply a charge of up to £10 for the cost of providing theinformation. Failure to comply with the law can lead to afine and court costs. It is wise to have a procedure in place for handling queries of this type, so that it does not take up too much time.

Tasks

Take professional advice to decide which business structure suits your requirements, and prepare any necessary documents.

Choose a name for your business, ensuring that it isnot being used by another business, and that it doesnot infringe any trade marks.

Check on the licences you need, and the dates you need to apply for them, so that they are in place for when you plan to start trading.

Register with the relevant health and safety authority.

Make sure that you have assessed your fire risks and, if required, have obtained a fire certificate.

Ensure that all relevant insurance policies are in place at the right time. You may need to have insurance in place before you officially begin to trade.

Register with the relevant tax authorities.

28

Tips

If you are employing staff, make sure that all relevant employment regulations are met.

Contact the Information Commissioner's Office at www.informationcommissioner.gov.uk for advice on howthe Data Protection Act affects you.

Make sure you consider the costs associated with legal compliance when preparing your budgets.

Starting your business

Who you need to tell

When you are ready to start your business, there are certain organisations you must inform by law that you arenow in business. There are also other organisations and groups of people that you should tell in order to ensure the smooth running of your business. Use this section as a checklist to make sure that you have contacted all relevant statutory organisations and as a reminder of additional groups that it may be useful to contact.

Statutory contacts

HM Revenue & Customs

For sole traders, partnerships and limited liability partnerships, you need to inform HM Revenue & Customs that you are self-employed. It is important that you register with HM Revenue & Customs within your first three months of self-employment to avoid paying a penalty. You should contact HM Revenue & Customs as soon as possible to get their leaflet 'The Right Way To Start Your Business'. This contains information regarding your tax obligations and a registration form.

29

When you register as self-employed, you will be liable for the standard Class 2 National Insurance contributions. These contributions are payable monthly. Your income tax is collected by self-assessment at the end of the tax year, along with any Class 4 National Insurance contributions, payable by all self-employed individuals, which are based on your annual earnings and collected in two lump sums (in January and July).

For information about registering, contact the HM Revenue& Customs newly self-employed helpline on 0845 915 4515. The helpline is open seven days a week from 8am to 8pm, or try www.hmrc.gov.uk/menus/helpline.htm which lists allthe helpline telephone numbers by category.

If you are setting up as a limited company, all staff, including directors, are employed by the business. Tax and National Insurance is collected through the Pay As You Earn (PAYE) system. You therefore need to inform HM Revenue & Customs that you are an employer. They will send you all the necessary information needed to collect income tax and National Insurance from your employees.

Health and Safety Executive

When your business starts trading it is important that you take advice from, and register with, the relevant health and safety body. If you own a factory or workshop,contact the Health and Safety Executive information and advice line on 0870 154 5500 or log on to their website at www.hse.gov.uk for detailed advice.

Local authority

Contact your local authority to arrange payment of your business rates unless you are taking space in shared workspace, in which case the landlord will probably collect your rates as part of the service charge.

Contact your local authority to check if you need to register and apply for any licences or planning permission. You should leave plenty of time for the localauthority to process applications, which can take several

30

weeks, and until the licences are approved, you will not be able to start trading.

Insurance company

All businesses need insurance as soon as they start trading. Some insurance is required by law. Contact your insurance company or insurance broker to arrange the policies that you require.

Companies House

Companies House can be contacted on 0870 333 3636, or youcan log on to their website at www.companieshouse.gov.uk for further information.

Job Centre

If you were unemployed immediately before starting trading, inform your local Job Centre that you are now working, and will no longer be claiming benefit.

Additional contacts

Bank

Tell your bank manager that you are starting your own business, and set up business banking arrangements, including overdrafts.

Solicitor

Make an appointment to speak with a solicitor who will beable to advise you on the legal aspects of setting up andprovide the necessary documentation, such as your terms and conditions of trading.

Accountant

Not all businesses engage an accountant on a permanent basis. A one-off session with an accountant will outline the level of accounting records you need to keep, and anytaxation issues you should be aware of.

31

As your business grows, you may decide to use an accountant on a regular basis, which, although costly, may provide you with peace of mind and let you concentrate more on the business rather than spending hours trying to make sense of invoices and bills.

Utility companies

Inform your utility providers when you are moving into your business premises to ensure that all of your essential services are provided, and that they are charged on a business tariff. In shared workspace, check if the utilities are provided by the landlord and included in the service charge.

Your suppliers

Inform your suppliers that you are starting your businessand draw up agreements covering delivery lead times, credit terms, return of faulty goods, credit notes and soon.

Your customers

Ideally, your customers should already be aware that yourbusiness is opening. However, now is the time to make sure that your advertising and promotions are reaching your target market.

Tasks

Make sure that you have contacted all of the statutory contacts and that you are legally ready tostart trading.

Use the additional contacts checklist above as a guide to some of the other groups of people that youshould contact.

Tips

Take professional advice before making any major business decisions.

32

Contact all relevant bodies as soon as possible to avoid delays with licences or penalties for late registration.

Who to ask for help, information, finance and support in your region

Key support organisations

Business LinkTel: 0845 600 9006www.businesslink.gov.uk

Business support schemes

Business Link Consultancy ServiceBusiness Link is the single access point for small business advice in England. Assistance is provided to help develop a business plan using a network of advisers.Specialist counsellors are also available including Business Link innovation and technology counsellors and Business Link design counsellors. Tel: 0845 600 9006www.businesslink.gov.uk

Business Volunteer Mentor (BVM)Mentors are provided to pre-start and early start-up businesses to assist and advise on a wide range of issues.Tel: (01234) 831623www.bvm.org.uk

HM Revenue & Customs Business Support Business support teams provide free advice on tax and National Insurance. Tel: 0845 915 4515 www.hmrc.gov.uk/startingup/bus_sup.htm

33

Prince's TrustLoans, grants, and advice are available to 18-30 year olds who are unemployed or underemployed. Prince's Trust provides a volunteer business mentor for advice and support in the first three years' trading. The Trust alsooffers seminars, subsidised exhibitions, free advice lines and self-help kits. Extra help is often available at a local level.Tel: 0800 842842www.princes-trust.org.uk

Shell LiveWIRE Free start-up business advice for 16-30 year olds. Tel: 0845 757 3252www.shell-livewire.org

Sources of finance

Grants

Arts Council EnglandGrants are available for the arts in England.Tel: 0845 300 6200www.artscouncil.org.uk

Grant for Research and DevelopmentGrants to help individuals and small and medium-sized businesses to research and develop technologically innovative products and processes.www.dti.gov.uk/innovation/randd

Investigating an Innovative IdeaGrant to help with consultant costs to research a new product or innovative idea.Tel: (020) 7215 5000www.dti.gov.uk/innovation

Prince's Trust GrantsGrants for young people aged 18-30 to help start up a business.Tel: 0800 842842www.princes-trust.org.uk

34

Prince's Trust Test Marketing GrantPre-start market research grants available to young people aged 18-30.Tel: 0800 842842www.princes-trust.org.uk

Equity finance

3i Equity support for new and growing businesses in the UK.www.3i.com

Bridges Community VenturesVenture capital is available to small and medium-sized businesses located in certain disadvantaged communities in England. Tel: (020) 7262 5566www.bridgesventures.com

British Business Angels AssociationConnects small businesses with potential business angels.www.bbaa.org.uk

British Venture Capital AssociationInformation and help for finding venture capital funding.Tel: (020) 7025 2950www.bvca.co.uk

European Private Equity and Venture Capital Association Information, training and networking opportunities.www.evca.com/html/home.asp

Loan funds

Industrial Common Ownership Finance (ICOF)Loan finance for worker co-operatives and community businesses.Tel: (020) 7251 6181www.icof.co.uk

Prince's Trust LoansLow interest loans for young people aged between 18-30

35

who are starting their own business.Tel: 0800 842842www.princes-trust.org.uk

Royal British Legion Small Business LoansLoans for ex-armed forces people starting their own business.Tel: (01980) 847753www.britishlegion.org.uk/helpyou/how_employment.asp#1

Small Firms Loan Guarantee (SFLG)Loans are available for businesses unable to obtain conventional loans.www.sbs.gov.uk/sbsgov/action/layer?r.s=sl&topicId=7000022577

Street (UK) Micro FinanceLoans to assist business start-up.www.street-uk.com

Professional Services

Lawyer LocatorFind a local solicitor or law firm in your area.www.lawyerlocator.co.uk

Lawyers for Your BusinessFree 30-minute consultation provided by a network of solicitors in England and Wales.www.lawsociety.org.uk/choosingandusing/helpyourbusiness/foryourbusiness.law

Search AccountantsDirectory of UK accountants.www.searchaccountants.co.uk

Solicitors UKDirectory of UK solicitors.www.solicitors-uk.org.uk

36

Market and competitor information

The Advertising Association www.adassoc.org.uk

Ask Alixwww.askalix.com/uk

BRAD www.intellagencia.com

British Chambers of Commerce www.chamberonline.co.uk

British Companies www.britishcompanies.co.uk

The British Librarywww.bl.uk

County Webwww.countyweb.co.uk

Department of Trade and Industry (DTI) www.dti.gov.uk

Direct Marketing Association www.dma.org.uk

Directory of British Associationswww.cbdresearch.com

Dun and Bradstreet www.dnb.com

Euromonitor www.euromonitor.com

European and Business Information Centre www.euro-info.org.uk

ICC www.icc.co.uk

37

Kelly Search www.kellysearch.com

Key Note www.keynote.co.uk

Kompass www.kompass.com

Mintel www.mintel.co.uk

Office for National Statistics www.statistics.gov.uk

Tavistock Directory www.tavistockdirectory.com

Thomson Business Directory www.thomweb.co.uk

Trade Association Forumwww.taforum.org.uk

UK Trade and Investment www.uktradeinvest.gov.uk

UK250www.uk250.co.uk

Up My Street www.upmystreet.com

Willings Press Guide www.willingspress.com

Yellow Pages www.yell.com

Key contacts

38

Acaswww.acas.org.uk

Companies Housewww.companieshouse.gov.uk

Health and Safety Executivewww.hse.gov.uk

HM Revenue & Customswww.hmrc.gov.uk

Information Commissioner's Officewww.informationcommissioner.gov.uk

Training and skills

City and Guildswww.cityandguilds.com

Department for Education and Skillswww.dfes.gov.uk

Learn Directwww.learndirect.co.uk

Learning and Skills Councilwww.lsc.gov.uk

Training Pageswww.trainingpages.net

39