Start a Business an easy guide laying the groundwork could you be an entrepreneur? 5 researching your market 8 pricing your product or service 14 marketing your business 20 setting the whole thing up financing your business 25 forming your business 31 your legal obligations 37 setting up your first communications and IT system 44 you’ve got your first customers effective selling 51 simple book-keeping 58 credit control 63 the essential plan writing your business plan 69 Content by BHP Information Solutions Design by Ben Wuersching Photography by Harrison Photography Printed by Warwick Printing Ltd © BHP Information Solutions Ltd 2011. All rights reserved. No part of this publication may be reproduced or transmitted without the written permission of the publisher. This publication is for general guidance only. The publisher and expert contributors disclaim all liability for any errors or omissions. Consult your local business support organisation or professional adviser for help and advice. Provided by Invest Northern Ireland and part financed by the European Regional Development Fund under the European Sustainable Competitiveness Programme for Northern Ireland. we’re here to help Invest NI has produced Start a Business to encourage and support people like you. This guide is just one of the services we provide for new businesses. three pages explaining how to use Start a Business, telling you more about us and how we can help you useful contacts 2 76 Start a Business an easy guide why I wanted to set up my own business 6 how I researched my market 10 how I raised finance for my business 28 how I set up my firm’s IT 48 how I sold to my first customers 54 how I wrote my business plan 72 contents we’re here to help If you’re looking to start a business, you’re looking in the right place. This guide is just one of the services the Invest Northern Ireland business- support network offers to people like you every day. So if you want to know how to start up a business or how to make it grow, get in touch with us. 2 Call 0800 027 0639 or visit our website at www.goforitni.com to find out more about the Go for it programme. 3 our mission Invest NI provides businesses in Northern Ireland with a single point of contact and with expert advice and high-quality programmes of support. Our role is to grow the economy by helping new and existing businesses to compete internationally – and by attracting new investment to Northern Ireland. And our commitment to you doesn’t end on the last page of this guide. In fact, it’s only the beginning. We’re confident the guide will be useful, but we also realise it won’t solve all your problems. That’s where Northern Ireland’s business-support network comes in, with specially trained business advisers who know how to deal with the issues that confront start-up businesses. The business-support network in Northern Ireland is made up of a number of partner organisations. The support available for new businesses can be broken down according to the market you intend to serve: global: if you have potential sales of £1 million (including 30 per cent in export markets), contact our Global Start Team – global@investni.com export: if you are planning to sell outside Northern Ireland, including into Britain and the Republic of Ireland, contact Invest NI 028 9069 8000; enquiries@investni.com local: core support and advice is provided through the Go for it programme – contact 0800 027 0639; www.goforitni.com Am I suited to starting and running a business? What market research should I carry out? What are my legal and tax obligations? How much do I need to sell each month to break even? What’s the best way to keep my books? how to use this guide You can use this guide in two ways. If you’re considering making the leap and creating your own business, you can read it through to get a clear idea of all the areas you have to cover. And if you do decide that running your own business is for you, the guide’s logical, practical structure means you can use it as a reference companion every step of the way – from identifying the niche your business will fill to the best ways of winning your first customers and writing that all- important business plan. starting up? go for it! You can join the thousands of people who are already making a success of their business in Northern Ireland, providing goods and services to both domestic and international markets. If you’re planning to start a business, Invest Northern Ireland is dedicated to helping you. We provide advice and support through the Go for it programme and we’ve produced this guide because it’s our job to encourage and support people like you to start and grow successful businesses. We’ve also produced The No-Nonsense Guide. It sets out the rules and regulations that apply when you start up in business, and how to comply with them. Starting a business isn’t easy and you need all the support you can get. This guide points you in the right direction with easy-to-read, no-nonsense advice on a range of topics essential to starting your business. The quality of this advice should give you a flying start. We’ve made sure all the major issues you want guidance on are here, including: If you require a copy of this document in an alternative format (including Braille, disk, audio cassette or in minority languages to meet the needs of those whose language is not English) then please contact Invest NI’s Equality Team on 028 9069 8273; Textphone 028 9069 8585 or email equality@investni.com 4 tailored support If you’re starting a new business – or just thinking of it – the Go for it programme can provide you with a range of support tailored to your business needs. Call the Go for it helpline on 0800 027 0639 or visit www.goforitni.com If you're already in business but want to grow, then contact our Regional Business Team who may be able to help. Call Invest NI on 028 9069 8000 or visit www.investni.com knowledge is power The Business Information Centre at Invest NI provides access to a wealth of published and electronic business information to help businesses develop and grow – confident they’re basing their decisions on sound commercial intelligence. Using carefully selected resources and support from fully trained and experienced staff, the Business Information Centre gives you information on: Key markets around the world Company profiles worldwide Sourcing of key components and raw materials Sales leads Business opportunities Agents and distributors Funding information EU legislation and updates on EU policies and programmes EU public tenders information The Business Information Centre also holds a contract with the European Commission to host Enterprise Europe Northern Ireland — part of a network of some 500 centres in Europe and beyond. Through a dedicated email system, the network provides vital local knowledge within a short timescale. For more information contact the Business Information Centre and Enterprise Europe Northern Ireland, based at Invest NI's headquarters: Bedford Square, Bedford Street, Belfast – it’s open Monday 11am-5pm; Tuesday-Friday 9am-5pm. To make an appointment to use the resources at the Information Centre, or if you have a query, please call 028 9069 8000 or email bic@investni.com our partners Invest NI works closely with its partners to ensure that services are tailored to your needs. Among the organisations we work with are: Enterprise NI/Local Enterprise Agencies Prince’s Trust NI Advantage NI Trading Standards Local councils Department of Agriculture and Rural Development (DARD) NI Chamber of Commerce and Industry InterTradeIreland Women’s networks Association of Northern Ireland Colleges (ANIC) JobCentre Online 1 all about you and your team 1.1 You will need determination, total faith in your business idea and confidence you can turn it into reality. 1.2 You must have an independent spirit. 1.3 You must be determined and motivated. 1.4 You will need flexibility and humility. 1.5 You must be responsible and reliable, paying attention to detail and applying yourself to tasks you may not enjoy. 1.6 You must have stamina and be willing to make sacrifices and work long hours. 5www.nibusinessinfo.co.uk/startingup At this stage, it’s all about you. There are key qualities that every successful entrepreneur has. Some might come naturally to you, others you might have to work at. You’ll need to check you’ve got at least some of these attributes before you start. You can’t be half hearted. You must be able to show others that you are confident too. But as your business grows, you must be ready to share responsibility and to build and lead a team. For more information, visit www.nibusinessinfo.co.uk/leadershipskills. Running your own business can be lonely. You’ll need to be a good networker and find the people out there who can support you. Have you got the inner resources not only to survive but to thrive? You will have to keep going when times are tough. Have you got the grit to make things happen – even when they are not going your way? You must learn from mistakes and make changes if you discover a better way of doing things. Are you happy to ask questions when you're unsure? Are you happy to ask questions even when you're sure? And are you comfortable taking advice? Just because you will be boss won’t mean you can put off work or decisions. Also, you don’t have to act on your own without getting advice, but once you’ve made important decisions, can you stick with them? Make sure you understand the effect that starting a business will have on your personal life. Be prepared for change. For more information, visit www.nibusinessinfo.co.uk/worklifebalance. could you be an entrepreneur? Running a business can be exhilarating, liberating and rewarding. But it isn't for everyone. There are millions who have done it successfully, but there are many who have found that it isn't as simple as they thought. You need to consider seriously whether starting a business is right for you by honestly appraising your strengths and weaknesses and what making the move would mean to you, your family and your friends. This section covers: The personal qualities needed to run and own a business. The factors that can make the difference between success and failure. laying the groundwork 6 make Learning SPACE a reality. I was constantly talking to people about starting the business, getting others’ opinions and ideas. I used other teachers, therapists and support organisations like Autism NI for advice and as sounding boards. And I had a business mentor to bounce ideas off and got practical support from Women in Business. I’d worked in a toy shop while I was supply teaching because I wanted to get some experience of working in a toy shop. The more research I did, the less of a gamble it became. I had to make sure it was a viable business idea before I started – not least to persuade the bank manager! Becoming my own boss was a big learning curve. At the initial stages, you have to be absolutely everything – the accountant, the marketing person, the sales team. It’s hard, but exhilarating. And now I’ve got my sister, Mary, on board as assistant manager, it’s a lot easier. The business has grown and I can finally delegate some of the responsibility and concentrate on strategy and business development. I couldn’t do it alone – and there’s plenty of support out there from people like Invest NI. You’ve just got to go and get it. Starting and running my own business has made an enormous difference to my life. It’s incredibly satisfying to do something that supports so many people. It really is something I love doing – it’s fun to come to work every day. And there’s not many people who can say that. Lorraine’s tips 1 Be passionate about your idea 2 Research as much as you can 3 Ask for advice and support ” I’ve always been aware that some children need extra support when they’re growing up. My sister Emma has Sotos syndrome – a genetic condition where children grow too quickly in their first two to three years which can lead to physical, communication and learning difficulties – and I was always trying to find suitable resources to help her. While I was teaching in London for six years, I was aware that both teachers and parents were frustrated when looking for products to meet the needs and interests of children. I thought there had to be a quicker more convenient way to get suitable products. I saw a niche in the market, was intrigued and started my research. In the back of my mind, I’d always known I wanted to go into business in one way or another. And I’d always loved working with children. So creating a business that involved mixing the two together was the perfect solution. I came back home and completed Invest NI’s Start a Business programme in 2006. It was great – it made me really focused. As soon as I came up with the concept I knew it was vital to keep the ball rolling to Sock it to 'em: Lorraine's educational toys are a business hit Learning SPACE 11a Fountain Centre College Street Belfast BT1 6ET Tel: 028 9031 9360 www.learningspaceni.co.uk why I wanted to set up my own business Lorraine McAleer is owner of Learning SPACE, an award-winning retailer of toys and educational support aids. She set up the business to provide easier access to toys, games, software and books that help and support learning. Now selling online and through a retail outlet, she says that the business has transformed her life “ laying the groundwork :: could you be an entrepreneur? 7 1.7 You will need to be resilient, patient and realistic. Success isn’t usually easy or quick. 1.8 If you’ve answered Yes to most of these questions, you’re in with an excellent chance of success – so read on. 2 the right circumstances 2.1 Check you have the support of family and friends. 2.2 Make sure you can afford any financial risk. 2.3 Be sure you are thinking of running your own business for the right reasons. 2.4 Once again, if the answers are positive, you’re on the right lines. 3 facing up to doubts 3.1 You may have a fear of failure. This is perfectly natural – it can happen. 3.2 You may be worried about the implications of business failure on your career. 3.3 Don’t worry if you don’t have all the qualities listed above. 3.4 You shouldn’t be worried if your knowledge of the finer details of running a business is not great – that’s what this guide is about. You will need to face obstacles with renewed strength and determination, have the energy to bounce back and the long-term vision to see setbacks as isolated incidents. Are you realistic enough to realise you won’t make millions overnight? Can you nurture the business over a long period of time to make it work? If your responses are mainly negative, you have a number of barriers to surmount. You should talk to a business adviser to help you assess how these can be overcome. For more information, visit www.nibusinessinfo.co.uk/startingup and www.nibusinessinfo.co.uk/goforit. You may be the right kind of person to run a business, but this doesn’t necessarily mean that it’s the right thing for you to do. There are other factors you should carefully weigh up. It helps if family and friends have the same faith in you and your business that you do. Will they support you every step of the way? You are probably thinking of committing your own money or assets. Can you afford to lose this investment? What is more important to you – safeguarding the money and security or seeing the business grow? If you place others at risk, have you considered the implications for them? Are factors other than a determination to ‘go it alone’ affecting you? It’s not enough to be fed up with your existing job – you have to be actively prepared to take on the challenge of running your own business. But if serious questions remain, you’ll need to persevere and do more work and thinking before creating your own business. Starting a business may be a challenge and you may understandably be apprehensive. But it’s worth acknowledging any doubts before you proceed. You will need to accept that risk is part of starting and developing a business. If so, you are thinking of failure before you start, which doesn’t bode well. Besides, your business will be your career. If you’re worrying about this, it may not be right for you. It is essential that you recognise your weaknesses and any other obstacles in your way. It is likely you will need support in areas where you are lacking. Once again, don’t be afraid to ask for advice. Family, friends, banks and business-support organisations such as Invest Northern Ireland, your Local Enterprise Agency, Prince’s Trust NI and Advantage NI – all will have experiences and expertise you can draw on. Few people know everything about running a business when they set out. Remember: talk to friends, family and people who have been involved in business to gather information. And read on. www.nibusinessinfo.co.uk/startingup 1 what you need to know 1.1 Your intended market or sector. 1.2 Who your potential customers are. 1.3 What they buy and in what quantities. 1.4 When they will buy. It is likely that you have an instinctive idea of who your customers could be. If you wanted to start a retail business selling children’s hair accessories, the main targets would be mums or young girls. If you were setting up an ironing service, single business people or busy parents would be two possible market sectors. If you do not have a clear idea of the market for your business, your research will have to be more broad-ranging to find one. A potential business without a defined customer base is a failure waiting to happen. If you will be selling to individuals, you need to know their sex, age, marital status, occupation, income and lifestyle. If you will be selling to businesses, you need to know their size, industry type, product-buying patterns and service requirements. You also need to know what characteristics are common to all your customers and who makes or influences the buying decision. For more information, visit www.nibusinessinfo.co.uk/valuablecustomers. A printing firm should understand whether its customer base will want a thousand postcards or a million brochures. A successful sandwich shop will predict its top-selling sandwiches and how many of each they expect to sell every day. Customers of a toy manufacturer will buy more towards the end of the year so that they are fully stocked for the pre-Christmas trading period. A taxi firm will usually expect more business on Saturday evening than Monday evening. For more information, visit www.nibusinessinfo.co.uk/seasonalbusiness. laying the groundwork researching your market When you’re setting up a business, researching your potential market is essential. Although time-consuming to acquire, a thorough and reasoned knowledge of the market is invaluable to the future of your business. With a true picture of your potential customer base, you can realistically assess the viability of your venture. Resist the temptation to rush ahead, analyse your results hurriedly or cut down the amount of research – it can be the difference between make and break. This section explains: How to decide what you need to know. How to exploit existing information sources. How to conduct market research. How to analyse and act on the results. 8 www.nibusinessinfo.co.uk/marketresearch 9 1.5 Where customers prefer to buy. 1.6 Why and how customers will buy your product or service. 2 your own research 2.1 Quantitative research is the type of survey in which every participant is asked an identical set of questions. 2.2 Qualitative research explores people’s feelings and attitudes by letting them discuss things (eg ‘Why do you like playing tennis?’). laying the groundwork :: researching your market A bookseller will know that while many customers like visiting a shop, some also buy books over the internet. Do a hairdresser’s customers want to come to the salon, or would they rather have their hair done at home? You also need to make a decision on a specific location – in terms of access, passing trade or cost, for instance. For more information, visit www.nibusinessinfo.co.uk/saleschannels. Every new business has to know why customers will buy from them rather than the competition. This will become your unique selling proposition (see Marketing your business, p20). Your research should test how effective this is. If you are starting a sandwich shop, are you sure your potential customers will prefer the taste of your sandwiches to those sold in supermarkets? If you are going to manufacture jewellery, do retail jewellers think the designs will sell to their customers? If you are going to manufacture office furniture, you need to know how often your target customers will want to renovate their offices, and how regularly they need replacement equipment. You also need to know about the health of the business-property sector – if the economy was shrinking and businesses giving up property, you might find your customers have no need to buy from you. You have to understand the needs of your customers and the position of the market you are going into. The research technique you use will depend on whether you need numerical information about people’s attitudes or a deep understanding of their views and motivation. The answers provide key statistical information. For example, a survey by a tennis club developer may find that 22 per cent of local adults play tennis, 7 per cent are already members of a club and 8 per cent would like to join a club. Using this information, the developer can decide where to build a new club and how large it should be. The questions can be answered in a focus group – usually six to eight people – or in one-to-one interviews. The tennis club developer might discover that most people join tennis clubs to make new friends and so decide to add a bar or café to the building plans. Insights like this can give you a significant edge over your competitors. common mistakes Failing to do any market research. Carrying out market research once – and never finding out how things changed afterwards. Being unclear about what you are trying to find out or asking questions in the wrong way – and getting the wrong information. Cutting costs by using small samples or just asking a couple of friends – and getting misleading results. Interpreting statistical information wrongly and failing to see when one or two opinions distort the overall picture. Drawing optimistic conclusions from information to support your preconceptions. www.nibusinessinfo.co.uk/marketresearch [...]... can advise you on what information is required and how figures should be presented when seeking a loan 3.3 Bank finance costs can vary widely 4 other finance interest rate for overdrafts and The loans is usually set at a margin over the bank base rate, which can vary Margins on loans can differ depending on how risky the bank thinks the loan is arrangement fee is usually levied An when an overdraft... personal guarantees in case the company fails Sole traders (and partners) are already personally liable for all business debts a personal guarantee is supported If by a legal charge over your personal assets, these assets (including your house) can be at risk if the guarantee is called upon 5.2 The Enterprise Finance Guarantee may also provide a source of security your bank manager whether you are eligible... used by another business in a similar line Check the Companies House index of company and limited liability partnership names at www.companieshouse.gov.uk/info or use a company registration agent The fact a name is not in use does not necessarily mean you will be able to use it agent can also check for names An that are already registered as trademarks But unless this is part of a company formation... with You Companies House Unless your earnings are high, total tax and National Insurance payments can be lower than if you formed a limited company Remember that if you are a sole trader with employees, you will have to pay employers’ National Insurance contributions can form a limited company You later and transfer the business to it, though some stamp duty may have A shareholders' agreement helps... to arrange a repayment holiday to allow time for your cashflow to pick up before the first repayment is due Loans are more suitable than overdrafts for longer-term finance www.nibusinessinfo.co.uk/finance setting the whole thing up :: financing your business Both you and the bank make a commitment to the business, based on an understanding of your longterm plans and forecast cashflows Your bank can... the bank will want to see a viable business plan See Writing your business plan, p69 6.2 Once your business is operational, provide the bank with regular management information summarising sales, margins and costs Draw up a table of figures comparing what you actually achieved with your budget and with the previous year Add comments to explain any differences and mention key events you are expecting... Withdrawing money What dividends, directors' fees and salaries will be paid? What happens if one person needs to take out extra money? get it in writing 2.2 The disadvantages are relatively few, but could have serious implications 2.3 Setting up as a sole trader is quick and easy 3 partnership 3.1 3.2 A partnership has similar advantages and disadvantages to a sole trader But there are three other factors... or sell a part of the It business There can be tax advantages for high earners through keeping money in the business or making pension payments 4.2 The disadvantages are associated with greater costs and obligations Annual accounts are generally more complicated If your turnover climbs above £6.5 million or your business has a balance sheet total of more than £3.26 million, an independent audit... directors and employees Unlike a sole trader or partnership, it is not the same as the individuals who own or run it For example, it can sue or be sued in its own name limited liability partnership has some of the advantages (and disadvantages) A of both a company and a partnership For example, it is a separate legal entity and can continue despite the resignation or death of some members Other legal... extricate yourself and switch to normal bank finance later It on when this might be more appropriate 4.4 Stock finance, where cash is raised against the value of stock held by a manufacturing company, may also be a possibility www.nibusinessinfo.co.uk/finance 27 how I raised finance for my business Peter Rafter runs one of the leading veterinary practices in the Belfast region Peter had more than ten years’ . Mary, on board as assistant manager, it’s a lot easier. The business has grown and I can finally delegate some of the responsibility and concentrate. Invest NI Business Information Centre can give you access to searchable company databases including Kompass, FAME, AMADEUS and Dun & Bradstreet's