i START UP & RUN YOUR OWN BUSINESS ii THIS PAGE IS INTENTIONALL LEFT BLANK iii START UP & RUN YOUR OWN BUSINESS THE ESSENTIAL GUIDE TO PLANNING, FUNDING AND GROWING YOUR NEW ENTERPRISE SEVENTH EDITION JONATHAN REUVID Do you need free legal advice on starting up or running a small business? Legal pitfalls have been the downfall of many promising businesses Through the Lawyers For Your Business scheme the Law Society offers you: • access to business-related legal advice • a free half-hour initial consultation with a solicitor in your area Call a Lawyers For Your Business member for advice on a range of legal issues, including: • • • • • Finance Taxes Insurance Cash flow Company structure • • • • • Franchising Employment Business premises Contracts Health & safety For a list of solicitors in your area who are members of Lawyers For Your Business call: 020 7405 9075 e-mail: lfyb@lawsociety.org.uk www.lawsociety.org.uk/lfyb legal advice Lawyers For Your Business Setting up in business should be an exciting process, but without the right advice it can also be a minefield, particularly where legal issues are concerned Often businesses not consult with a solicitor for fear of large legal bills, by which time any remedy still available is likely to be expensive Early consultation is advisable if there is legislation to be complied with or important legal documents, such as contracts, to be signed Lawyers For Your Business is a network of 1,000 solicitor firms in England and Wales offering specialist advice to small and mediumsized businesses To help firms access business-related legal advice, Lawyers For Your Business offers a free half-hour initial consultation with a solicitor in your area who is a member of the scheme Advice could be sought on a range of legal issues including finance, taxes, employment law, contracts, company structure and health & safety The initial Lawyers For Your Business consultation is free, however, it is important that you clarify estimated costs at the outset before you decide to proceed You should ask for a forecast of how costs will change in various eventualities, for example, if a matter goes to court For a list of solicitors in your area who are members of Lawyers For Your Business call: 020 7405 9075 e-mail: lfyb@lawsociety.org.uk www.lawsociety.org.uk/lfyb advertisement feature GOOD FOR BUSINESS Running your own business? You’re dealing with enough risks without taking any chances with your health Invest in the award-winning Aeron, Mirra and Celle chairs from Herman Miller Seating that looks after your back, leaving you to look after your business Find out more at: www.fastaeron.co.uk or call 0800 043 3278 Authorised Supplier Are you sitting comfortably? Why ergonomic working is essential for even the smallest business Around 10.2 million working days are lost in the UK every year due to back, neck and upper limb problems* In the light of this uncomfortable fact, it’s no surprise that the smartest businesses are increasingly realising the importance of creating a healthy working environment Ensuring wellbeing at work – or ‘wellworking’ as it’s known, provides a wealth of benefits, including increased efficiency, better productivity and improved health And whilst wellworking will help any business, it's particularly important for small businesses Why are small businesses so at risk? Start-up businesses often don’t invest in the right office furniture These same businesses require huge amounts of work to get them up and running, and all those long hours and late nights hunched in front of the computer on the wrong chair can quickly lead to back problems Also, most small businesses rely heavily on a few people If one or two of these key individuals develops back or neck problems making them unable to work, the effect on the business can be sudden and dramatic To put it simply, investing in an ergonomic working environment makes complete business sense How to create an ergonomic working environment A huge array of wellworking products is now available, from brilliantly designed ergonomic furniture (such as the famous Aeron chair), through to sophisticated efficiency software that helps prevent Repetitive Strain Injury and other back and upper limb disorders Choosing the right furniture and ergonomic accessories will help keep you and your business healthy, productive and profitable Luke Munro is Managing Director of Wellworking, the leading specialists in ergonomic working solutions – from office furniture and accessories to software and consultancy See www.wellworking.co.uk for more details *UK Health and Safety Executive figures for 2006-7 advertisement feature viii Publisher’s note Every possible effort has been made to ensure that the information contained in this book is accurate at the time of going to press, and the publishers and authors cannot accept responsibility for any errors or omissions, however caused No responsibility for loss or damage occasioned to any person acting, or refraining from action, as a result of the material in this publication can be accepted by the editor, the publisher or any of the authors First published in Great Britain in 2003 Second edition 2003 Third edition 2004 Fourth edition 2006 Fifth edition 2007 Sixth edition 2007 Reprinted 2008 Seventh edition 2009 Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licences issued by the CLA Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned addresses: 120 Pentonville Road London N1 9JN United Kingdom www.koganpage.com 525 South 4th Street #241 Philadelphia PA 19147 USA © Kogan Page Limited, Jonathan Reuvid and individual contributors, 2003, 2004, 2006, 2007, 2009 ISBN 978 7494 5415 The right of Jonathan Reuvid and the individual contributors to be identified as the authors of this work has been asserted by them in accordance with the Copyright, Designs and Patents Act 1988 British Library Cataloguing in Publication Data A CIP record for this book is available from the British Library Typeset by Saxon Graphics Ltd, Derby Printed and bound in Great Britain by Bell & Bain Ltd, Glasgow ix Contents Introduction Part One: Planning Your Business Defining and Analysing Your Business Business start-up experience in the UK 8; Profiling business start-up entrepreneurs 12; Using business support organizations 15; Defining your business 17; Analysing your business needs 19; How others started 22; Case study: Legend Press 22; Case study: Crave Maternity 25; Case study: Deliberate PR 29; Your first SWOT analysis 33; Inherent weaknesses and threats 34; Facing up to entrepreneurship 35; Checklist 36 Researching Your Market and Business Environment Different types of research 39; Research objectives 39; Carrying out desk research 40; Engaging in field research 41; Using your market research findings 44; Checklist 45 38 Developing Your Formal Business Plan Kevin R Smith and Jonathan Reuvid Writing the business plan 47; External weaknesses and threats 50; Taking advice 57; Checklist 58 46 Ownership Issues ❚ ❚ ❚ ❚ ❚ ❚ ❚ ❚ 265 paramount for both purchaser and vendor Succession plans can provide for exit payments to owners through the company’s purchase of its own shares, which are subject only to capital gains at the current preferential rate Owners should plan for retirement by building up pension funds rather than expect to continue drawing salaries or dividends subject to income tax Trade sales through the sale of a company’s shares are preferable to a sale of assets for the vendor The latter is subject to double taxation charges Trade sales can involve ‘earn-out’ elements in the payment of the consideration Take care to secure a substantial cash payment on completion and written undertakings to ensure that neither pre-tax profits nor shareholders’ funds are deflated, and your shareholding is not diluted during the earn-out period MBOs and MBIs involving institutional investors are an acceptable variation on trade sales If you remain an employee after any kind of trade sale, not expect your employment to continue beyond the short term Asset realization through a voluntary winding-up of the company may be appropriate following a sale of the assets and ongoing trade Good timing and prompt decision making will help to maximize the outcome Public flotation of your company may be the stepping stone to substantial financial rewards, but there will be restrictions on the disposal of owner shareholdings for several years, while owner-managers must stay on postflotation When you can no longer contribute usefully to the business, plan your exit 266 Appendix 1: Further Reading KOGAN PAGE TITLES Kogan Page publish a wide variety of helpful titles for people in business A full list of titles is available by writing to the publisher at the address given on the back cover, by calling on 020 7278 0433, or by visiting the Kogan Page website: www.koganpage.com Business communication Marketing Communications, 4th edition (2004), Paul Smith Secure Online Business Handbook (2006), ed Jonathan Reuvid Finance, accounting and fund-raising How to Understand Business Finance (2006), Bob Cinnamon and Brian Helweg-Larsen Accounting for Non-Accountants (2008), Graham Mott Essential Management Accounting (2008), Belinda Steffan Practical Financial Management (2008), Colin Barrow Raising Venture Capital Finance in Europe (2007), Keith Arundale How the City Really Works, 2nd edition (2008), Alex Davidson Appendix 267 Strategy Floating Your Company: The Essential Guide to Going Public, 3rd edition (2007), ed Jonathan Reuvid Mergers & Acquisitions (2008), ed Jonathan Reuvid Law and company secretarial The Company Secretary’s Handbook: A Guide to the Duties and Responsibilities, 5th edition (2008), Helen Ashton The Employer’s Handbook, Revised 5th edition (2008), B Cushway Essential Law for Your Business,13th edition (2009), Patricia Clayton Management How to Be an Even Better Manager: A Complete A–Z of Proven Techniques and Essential Skills, 7th edition (2008), Michael Armstrong Sales, marketing and advertising Selling by Telephone (2001), Chris De Winter The PR Buzz Factor (2006), Russell Lawson Winning New Business: Essential Selling Skills for Non-Sales People (2007), Richard Denny How to Write a Marketing Plan (2006), John Westwood Start-ups, business plans and new directions Doing Business in the Countryside (2005), Jonathan Reuvid Forming a Limited Company, 10th edition (2008), Patricia Clayton Working for Yourself, Revised 25th edition (2008), Jonathan Reuvid How to Write a Business Plan (2006), Brian Finch Working from home Running a Home-based Business, 2nd edition (2001), Diane Baker 268 Appendix OTHER SOURCES OF INFORMATION Official information Leaflets from government offices provide a further source of information They are normally available either from the government department concerned or from The Stationery Office Information on employment issues Butterworth’s Employment Law Handbook (2004), 12th edition, Butterworth, London IRS Employment Review (published fortnightly), Industrial Relations Services, London Legislation is available from the BERR website (www.berr.gov.uk) Relevant Acts include: Asylum and Immigration Act 1996 Data Protection Act 1998 Disability Discrimination Act 1995 Employment Act 1989 Employment Act 2002 Employment Equality (Religion or Belief) Regulations 2003 Employment Rights Act 1996 Race Relations Act 1976 Rehabilitation of Offenders Act 1974 Sex Discrimination Acts 1975 and 1986 Sexual Orientation Regulations 2003 The Children (Protection at Work) Regulations 1998 and 2000 Trade Union Reform and Employment Rights Act 1992 Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE) 269 Appendix 2: Useful Contacts GOVERNMENT The Adjudicator’s Office (For complaints against rulings by HM Revenue & Customs) Haymarket House, 28 Haymarket, London SW1Y 4SP Tel: 020 7930 2292 Web: www.adjudicatorsoffice.gov.uk Business Links Addresses of regional offices are available by phone or internet Tel: 0845 600 9006 Signpost line: 0845 756 7765/freephone 0800 500200 Web: www.businesslink.org Business Eye (Wales) Tel: 0845 796 9798 Web: www.businessconnect.org.uk Business Gateway (Scotland) Tel: 0845 609 6611 Web: www.bgateway.com 270 Appendix Invest Northern Ireland Tel: 028 9023 9090 Web: www.investni.com CCTA Government Information Service A gateway to all Government Department websites: www.open.gov.uk Central Office of Information Web: www.coi.gov.uk The Data Protection Registrar Wycliffe House, Wilmslow, Cheshire SK9 5AF Tel: 01625 545745 Web: www.dpr.gov.uk Department of Education and Skills Sanctuary Buildings, Great Smith Street, London SW1P 3BT Tel: 0870 000 2288 Web: www.dfes.gov.uk Department of the Environment, Food and Regional Affairs Nobel House, 17 Smith Square, London SW1P 3JR Tel: 020 238 6951 Web: www.defra.gov.uk Department for Business, Enterprise and Regulatory Reform Enquiries: Victoria Street, London SW1H 0ET Tel: 020 7215 5000 Web: www.berr.gov.uk Appendix 271 Export Credits Guarantee Department (ECGD) PO Box 2200, Exchange Tower, Harbour Exchange Square, London E14 9GS Tel: 020 7512 7000 Web: www.ecgd.gov.uk Her Majesty’s Treasury The Public Enquiries Unit, Horse Guards Road, London SW1A 2HQ Tel: 020 7270 4558 Web: www.hm-treasury.gov.uk HM Revenue and Customs Formerly the Inland Revenue, HM Revenue and Customs has a number of helplines for enquiries, a listing of which can be found on its website at www.hmrc.gov.uk Local Enterprise Companies These have different titles and forms in different areas Details can be obtained from regional Business Link offices Tel: 0845 600 9006 Web: www.businesslink.org Office of Fair Trading Fleetbank House, 2–6 Salisbury Square, London EC4Y 8JX Tel: 0845 722 4499 Web: www.oft.gov.uk Office for National Statistics Cardiff Road, Newport, Gwent NP10 8XG Tel: 0845 601 3034 Web: www.statistics.gov.uk 272 Appendix Revenue Customs and Excise Addresses of regional/advice centres are available by phone Tel: 0845 010 9000 Web: www.hmrc.gov.uk GOVERNMENT OFFICES FOR THE REGIONS Various departments have been organized into integrated offices known as Government Offices (GOs) for the Regions Government Office for the East of England Eastbrook, Shaftesbury Road, Cambridge CB2 2DF Tel: 01223 372 500 Fax: 01223 372 501 Government Office for the East Midlands The Belgrave Centre, Stanley Place, Talbot Street, Nottingham NG1 5GG Tel: 0115 971 2759 Fax: 0115 971 2404 Web: www.go-em Government Office for London Riverwalk House, 157–161 Millbank, London SW1P 4RR Tel: 020 7217 3328 Fax: 020 7217 3450 Web: www.go-london.gov.uk Government Office for the North-East Citygate, Gallowgate, Newcastle upon Tyne NE1 4WH Tel: 0191 201 3300 Fax: 0191 202 3830 Web: www.go-ne.gov.uk Appendix 273 Government Office for the North-West Sunley Tower, Piccadilly Plaza, Manchester M1 4BE Tel: 0161 952 4000 Fax: 0161 952 4099 and Cunard Building, Pier head, Water Street, Liverpool L3 1QB Tel: 0151 224 6300 Fax: 0151 224 6470 Web: www.go-nw.gov.uk Government Office for the South-East Contact details for numerous personnel and departments are given on their website Web: www.go-se.gov.uk Government Office for the South-West Rivergate, Temple Quay, Bristol BS1 6ED Tel: 0117 900 1700 Fax: 0117 900 1900 or Mast House, Shepherds Wharf, 24 Sutton Road, Plymouth PL4 0HJ Tel: 01752 635000 Fax: 01752 227647 or Castle House, Pydar Street, Truro, Cornwall TR1 2UD Tel: 01872 264500 Fax: 01872 264503 Web: www.gosw.gov.uk Government Office for the West Midlands St Philip’s Place, Colmore Row, Birmingham B3 2BW Tel: 0121 352 5050 Fax: 0121 352 1010 Web: www.go-wm.gov.uk 274 Appendix Government Office for Yorkshire and the Humber PO Box 213, City House, New Station Street, Leeds LS1 4US Tel: 0113 280 0600 Fax: 0113 283 6394 Web: www.goyh.gov.uk/ Invest Northern Ireland Invest Northern Ireland 44–58 May Street, Belfast BT1 4NN Upper Galwally, Belfast BT8 6TB and 17 Antrim Road, Lisburn BT28 3AL Tel: 028 9023 9090 Fax: 028 9049 0490 Web: www.investni.com START-UP ADVICE National Federation of Enterprise Agencies Tel: 01234 354053 Web: www.nfea.com England and Wales Local Enterprise Agencies Business in the Community, 137 Shepherdess Walk, London N1 7RQ Tel: 0870 600 2482 Web: www.bitc.org.uk The National Assembly for Wales Industry and Training Department, Crown Buildings, Cathays Park, Cardiff CF10 3NQ Tel: 029 2082 5111 Web: www.wales.gov.uk Appendix 275 Welsh Development Agency Plas Glyndw ˆ r, Kingsway, Cardiff CF10 3AH Tel: 01443 845500 Web: www.wda.co.uk Scotland Scottish Business in the Community PO Box 408, Bankhead Avenue, Edinburgh EH11 4HE Tel: 0131 442 2020 Web: www.sbcscot.com Scottish Enterprise Atlantic Quay, 140 Broomielaw, Glasgow G2 8LU Tel: 0141 248 2700 Web: www.scottish-enterprise.com The Office of the Scottish Executive Enterprise and Lifelong Learning, Meridian Court, Cadogan Street, Glasgow G2 6AT Tel: 0141 248 2855 Web: www.scotland.gov.uk Highlands and Islands Enterprise Cowan House, Inverness Retail and Business Park, Inverness IV2 7GF Tel: 01463 234171 Web: www.hie.co.uk Northern Ireland See p 274 for details of Invest Northern Ireland 276 Appendix NATIONAL ASSOCIATIONS REPRESENTING SMALL FIRMS Association of Independent Business 34 Bow Lane, London EC4M 9AY Tel: 020 7329 0219 The British Chambers of Commerce Manning House, 22 Carlisle Place, London SW1P 1JA Tel: 0120 7565 2000 Web: www.chamberonline.co.uk British Franchise Association Thames View, Newton Road, Henley-on-Thames, Oxon RG9 1HG Tel: 01491 578050 Web: www.british-franchise.org.uk Confederation of British Industry (CBI) Centre Point, 103 New Oxford Street, London WC1A 1DU Tel: 020 7395 8247 Web: www.cbi.org.uk Federation of Small Businesses Ltd Sir Frank Whittle Way, Blackpool Business Park, Blackpool, Lancs FY4 2FE Tel: 01253 336000 Web: www.fsb.org.uk The Forum of Private Business Ltd Ruskin Chambers, Drury Lane, Knutsford, Cheshire WA16 6HA Tel: 01565 634467 Web: www.fpb.co.uk Appendix 277 Smaller Firms Council (CBI) Centre Point, 103 New Oxford Street, London WC1A 1DU Tel: 020 7395 8247 Web: www.cbi.org.uk The Work Foundation (formerly The Industrial Society) Peter Runge House, Carlton House Terrace, London SW1Y 5DG Tel: 0870 165 6700 Web: www.theworkfoundation.com FORMING A COMPANY Companies Limited/Rapid Refunds For purchasing an off-the-shelf company 376 Euston Road, London NW1 3BL Tel: 020 7383 2323 Web: www.limited-companies.co.uk Industrial Co-operatives UK Advice on setting up worker cooperatives Holyoake House, Hanover Street, Manchester M60 0AS Tel: 0161 246 2900 Web: www.cooperatives-uk.coop Institute of Directors 116 Pall Mall, London SW1Y 5ED Tel: 020 7839 1233 Web: www.iod.co.uk The Law Society Lawyers for your business 113 Chancery Lane, London WC2A 1PL Tel: 020 7242 1222 Web: www.lfyb.lawsociety.org.uk 278 Appendix The Patent Office Concept House, Cardiff Road, Newport, South Wales NP10 8QQ Tel: 01633 814000 Web: www.patent.gov.uk Registrar of Companies Companies Registration Office, Crown Way, Cardiff CF14 3UZ For Scotland: 37 Castle Terrace, Edinburgh EH2 2EB For London: Companies House Executive Agency, 21 Bloomsbury Street, London WC1B 3XD Tel: 0870 333 3636 Web: www.companies-house.gov.uk BANKS Abbey National plc Abbey National House, Triton Square, Regent’s Place, London NW1 3AN Web: www.abbey.com Barclays Bank plc Business Direct Octagon House, Gadbrook Park, Northwich CW9 7RB Tel: 01606 844033 Web: www.barclays.co.uk HSBC plc Canada Square, London E14 5HQ Tel: 020 7991 8888 Web: www.banking.hsbc.co.uk Lloyds TSB Bank plc, Small Business Advice PO Box 112, Canons House, Canons Way, Bristol BS99 7LB Tel: 0117 943 3433 Web: www.lloydstsb.com Appendix 279 National Westminster Bank plc, Business One Stop Shop PO Box 4114, 120–126 High Street, Hornchurch, Essex RM12 4DF Tel: 0800 028 2677 Web: www.natwest.com/startup RAISING CAPITAL British Insurance Brokers Association (BIBA) BIBA House, 14 Bevis Marks, London EC3A 7NT Consumers helpline: 0870 950 1790 Fax: 020 7626 9676 Web: www.biba.org.uk British Venture Capital Association Tower 3, Clements Inn, London WC2A 2AZ Tel: 020 7025 2950 Web: www.bvca.co.uk EU Money Service Gallands Close, Swanland, Ferriby HU14 3GE Tel: 01482 651695 Web: www.europeangrants.com Factors and Discounters Association Boston House, The Little Green, Richmond, Surrey TW9 1QE Tel: 020 8332 9955 Web: www.factors.org.uk Finance and Leasing Association Imperial House, 15–19 Kingsway, London WC2B 6UN Tel: 020 7836 6511 Web: www.fla.org.uk ...i START UP & RUN YOUR OWN BUSINESS ii THIS PAGE IS INTENTIONALL LEFT BLANK iii START UP & RUN YOUR OWN BUSINESS THE ESSENTIAL GUIDE TO PLANNING, FUNDING AND GROWING YOUR NEW ENTERPRISE... Planning Your Business Defining and Analysing Your Business Business start -up experience in the UK 8; Profiling business start -up entrepreneurs 12; Using business support organizations 15; Defining your. .. resolved to start up and grow their businesses into substantial enterprises should not abandon ship A Start Up and Run Your Own Business pause for revisiting business plans and amending them