Every year, thousands of people choose to set up their own enterprise. This guide looks at why you might decide to run your own enterprise and the different ways of making the move. It considers the positive and negative aspects of each approach.

A good business idea

A good business idea could be an innovation and an invitation, a new product or service, or an original idea or solution to a day-to-day problem. It might also be:

• a gap in the market that you can fill up
• a business related to the work your doing already
• an hobby or an interest that you can turn into a business

Whatever your idea is, you need to be aware that it fits with your needs as an individual, as well as being a viable business proposition. Questions to ask yourself are:

• What is it that you will bring to the business in terms of relevant experience and expertise?
• Is there a market – the need for an idea and the reliable customers willing to buy?
• How big is the market, and how will you reach it?
• Who are your main competitors?
• What is special about your idea and what makes it different from similar products or services already out there?
• How will you fund your business or the idea?
• What might go wrong?

Tested business model

Some self-starters choose a well-trodden path - such as buying an existing business or rights to a franchise - which can carry fewer risks than going it alone.

Benefits:

• It is usually simpler to get finance.
• A market for the product or service will have already been demonstrated.
• A business plan and marketing method will be in place.
• You should have valuable experience to draw on.
• Many of the problems experienced before may have already been discovered and resolved.
• A franchise comes with financial support too.

Disadvantages:

• Some of the businesses that are up for sale may be experiencing difficulties. Make sure you fully understand the reasons for selling, as you may need to invest quite a bit more on top of the purchase price to give it the best chance of growth.
• The rights to a franchise or to sell particular products or services may be expensive.
• With a franchise, there may be a particular way to run the business that you have to stick with.

A surprise business opportunity

Sometimes the possibility of owning your own enterprise can come as a complete surprise. Perhaps you are offered the opportunity to buy out your employer, or take on a family business.

Opportunities like these are like any other business start-ups. You still need lots of personal commitment and you may need to put your own money on the line. You also need to carefully assess the business to make sure it is viable.

Benefits:

• Development, planning and market testing should already be in place.
• There may be established customers, a reliable income, a reputation to capitalise and build on, and a network of useful contacts.
• You probably already have expertise in the commodity or service and a good understanding of the business you’re taking on.

Disadvantages:

• You may be taking on someone else’s problems when you take on the business. Ask yourself if there are problems with the business, and if so, can you solve them?
• If you are buying out your employer, you may lose support services that you take for granted now. You won’t just be responsible for your core role, but for everything else as well, such as accounting, staff management and payroll.

A business with social objectives

You may want to set up a business that isn’t only made for profit but also has a social purpose. For example, you might want to provide a service for a disadvantaged group in your local community or perhaps improve the local environment.

Although any business can include social objectives, you may want to consider setting up a specific type of business known as a social enterprise. Even though a social enterprise is run as a business, and often operates under the same financial and profit-driven pressures, it also aims to offer a clear social benefit. The profits are mostly reinvested, or used to support its social aims, rather than being paid to the owners of the business.

Benefits:

• You earn a living by doing something you believe is worthwhile.
• As your business develops and matures, your community or beneficiary will also benefit.
• Customers may be more willing to buy from a business that supports a good cause.
• It may be easier to motivate and attract employees (or even volunteers) to work in a social enterprise.
• You may qualify for a grant, or be able to raise finance from people or organisations who share the same social aims.

Disadvantages:

• Making profits and attaining your social aims can sometimes conflict with each other. You may have to make difficult choices.
• Although you can earn a reasonable income working for a social enterprise, you will not make your fortune - most of the surplus profits are put back into the business or go to support its aims.

A dramatic personal event

A major life change can often allow you - or enable you - to set up your own business. Maybe a dramatic personal event kick-starts you into action, or your job situation means that now would be the time to take the plunge. Such changes might include:

• redundancy
• unemployment
• a change of family circumstances
• coming into money

Benefits:

• A change in your circumstances might be a chance for you to start over or do something you’ve always wanted to do.
• Redundancy payments or receiving a lump sum of money can offer you the opportunity to invest in a business.
• At its best, being your own boss can give you the flexibility to work around any family commitments.

Disadvantages:

• Major life-changing events can be very stressful and it may be unwise to make any further big decisions at times of personal upheaval.
• Starting your own business is unlikely to offer you a speedy return on your investment and you should be prepared for a long haul.
• In the initial stages especially, running your own business can mean putting in long hours and making sacrifices elsewhere in your personal life.

Taking control of your life

For many individuals, the biggest attraction of starting up a business is the independence provided by being your own boss and the opportunity to create the lifestyle you look for.

Benefits:

• Setting-up an enterprise can offer a career with built-in independence and flexibility.
• Being your own superior can give you the choice to work more convenient hours - such as working around your children’s school hours and holidays.
• You will be able to decide on doing some professional development or training.
• You will be the one behind the wheel, making the choices that will enable you to lead your chosen lifestyle.
• If your enterprise takes off, the payoff in financial and lifestyle terms can be huge.

Disadvantages:

• You may find yourself working longer hours.
• You may find it difficult to separate home life from your work life, especially if you run the business from home, and this can put extra demands on your family and friends.
• Some business owners suffer stress when things are not going so well.
• You should be prepared for the loss of perks such as pension schemes, holiday pay and sick leave.
• It’s quite common to have financial difficulties, especially when you’re starting to set up your business.

Tags: startups

You may need alternative sources of income while your business is growing. Many businesses do not make a profit in their first year but can earn enough to cover their outgoings. If your business does make a profit, you may want to plough back it to help your business develop.A financial adviser or accountant can help you address these issues in the initial days.

Forecast your personal financial needs

When starting your business you will need to make a realistic forecast of your personal financial needs. A personal budget is a plan detailing your domestic financial needs for the year. It should try to set limits on the amount you plan to spend each month on various items like rent, food and housekeeping.

Tracking your personal spending can help you find out how much money you will need to take from the business. You can record how much you spend each month in our personal budget spreadsheet (XLS) and adapt it to your individual needs.

You can now work out how much money you will need each month. If you multiply the monthly figure by 12, and make adjustments to cover one-off spending such as holidays or car tax, you will know how much you need to live on during your first year of trading.

It is important to be realistic. You may need to find other funds or borrow money. Financial advisers usually say that the equivalent of three months money should be held on deposit for a rainy day.

Some expenses, such as your rent or mortgage, are likely to be fixed, whilst your spending on other items may change from month to month. You need to keep a close eye on the areas where savings can be made - such as leisure or travel. The first year in business is vital to its growth and you may have to accept that a financial sacrifice of some sort is required to keep on trading.

You need to identify how much money your business is likely to bring in over the coming year and then how much profit you hope to make.

You can do this by:

• estimating your total income from sales
• estimating your expenses
• working out a figure for salaries and dividends, including tax
• working out the difference between your financial requirements and the amount you are prepared to take out of the business

This will leave you with the amount you potentially need to find from other sources. For advice on what you will need to take into account and plan for.

Profit and cashflow

It may not be easy to calculate exactly how much your business will make in its first year, so concentrate on cash. Cash and profit are very different, a fact which is often misunderstood. A business can survive for a short time without sales or profits but not without cash.

Profit is the difference between the total amount your business earns and the costs it must pay out over the trading period - usually a year.

Cashflow is the balance of all the money flowing into, and out of, your business. It covers actual payments of money, as opposed to what is owed by your debtors or to your creditors. Cash pays the bills and allows trading to continue. The need for cash is even greater if your business is growing and extending credit to more customers.

The main outflow of cash is the money you spend including salaries and overheads such as stock, raw materials and any other capital spending.

If you sell on credit, your cash inflow is delayed until you are actually paid so effective credit control is important. A business that buys on credit and is paid in cash, such as a retailer, is at a great advantage in cashflow terms.

Many businesses rely on bank overdrafts and quickly reach their borrowing limits. It is therefore important to think carefully about your cashflow and reduce the need to rely on an overdraft.

Make savings

There are ways you can save money on goods and services, both at home and in your business.

You could reduce the amount of money you pay out each month by consolidating your debts. This might mean taking out a further loan to cover all your existing commitments. One single monthly payment will often work out cheaper than a number of separate payments to credit card companies or banks. Many credit card companies now offer 0 per cent APR on six-month periods with balance transfers, but again you should look carefully at exactly what is being offered.

Today many companies offer different mortgage options. Re-mortgaging your property can reduce outgoing monies that would otherwise be tied up.

There are many ways you can save money on essential goods and services. Many utility companies offer attractive deals when you change to a new supplier. You could think about changing your telephone, electricity, gas or water supplier. Look carefully at exactly what is being offered by each of the utility suppliers. You may find, for example, that you can make savings if you receive both your gas and electricity from a single supplier.

You can also try to reduce your everyday expenses. For example, you could sell your car and buy one that is cheaper to run or use public transport.

You could implement simple cost control systems across your whole business to identify scope for savings. You could cut unnecessary or excessive costs, for example, by not heating your premises at night or finding low price suppliers for goods or services. Consider leasing goods or buying them second hand. Consider whether you can save money by running your business from home.

Other sources of income

You will almost certainly have to find other ways to finance your needs during the initial days of your business.

There are a number of options open to you. You could:

• Use savings - make sure that you have an emergency rainy-day fund which should add up to three months spending.
• Release equity from an existing asset - for example, trading in your car for a cheaper one.
• Sell unwanted assets to create income - many people have things that they do not use or want that can be sold at auctions, online or private sales.
• Get a loan from your family and friends. In most cases people who borrow from family or friends do not pay as much interest on such loans. However, be aware of ill feeling that may be caused if you are unable to repay on time.
• Borrow against future income by selling your debt to a third party.
• Get an overdraft. Remember that the overdraft will have to be repaid, and the interest rate may be high.
• Look for investment from external sources in return for a share in your business.
• Take on a second or part-time job - this will offer a useful source of income but it is important that it does not distract you from your priority of running your business.

Prepare a financial plan

Once you have gathered together all your key financial information such as estimates, overheads and expenses you can construct a financial plan.

The first step is to draw up a budget - a plan for spending and saving your money.

It is important to stick to a budget so you don’t risk overspending or running out of money for essentials. The key to budgeting is maintaining simple but good records. You will need to keep track of where your money comes from and where it goes.

You should:

• prepare budgets showing the level of sales and profits you expect to achieve, and the costs involved in doing so
• estimate your total sales
• prepare monthly or weekly cashflow forecasts (which should be regularly updated), looking ahead one year - overheads such as rent can be accurately predicted
• make sure you will have enough money on the day to cover each payment

Find support

The majority businesses require assistance at some stage in their development. This is especially true of businesses in the initial days.

There are a number of sources of help, including:

• local Business Links  
• start-up schemes
• schemes for young starters - eg Shell LiveWIRE, Prince’s Trust
• financial advisers
• accountants

You may also be entitled to Working Tax Credits. These are payments to top up the earnings of working people on low incomes, together with the self-employed. You can uncover more about Working Tax Credits by calling the HM Revenue & Customs Tax Credit Helpline on Tel 0845 300 3900.

Tags: startups

Launching a small business can be risky and growth is not always guaranteed. Businesses are most vulnerable to failure during the initial years of trading, with 20 per cent of new businesses folding within their first year and 50 per cent within their first three years.

These figures should not scare you off, but should prepare you for some of the challenges businessmen face when starting a business. With hard work and an awareness of the issues, a new business can be a great growth.

This guide looks at the a large amount of common mistakes new business owners make and, more importantly, how you can avoid them. It also shows you how to improve the chances of your business idea succeeding.

Poor market research

Research and planning are vital to ensure that your business idea is viable.

Lack of proper market research is one of the key problems for new businesses. It’s easy to get carried away with a business idea and set up a business without testing its financial viability.

Failing to share your business ideas with people you trust means that you will miss out on objective feedback. Brainstorm with other colleagues to give you a valuable perspective. Note down any good ideas you get from brainstorming and apply them when developing your business. If you want to keep your ideas confidential, think about using a non-disclosure agreement, also known as a confidentiality agreement. This will let you share your ideas with colleagues without the risk of them divulging the information.

If you do not complete adequate research, you are in danger of selling to the wrong people or of not understanding your marketplace. To avoid this:

• use information, such as free government data or your own network of contacts
• do field research to explore customers’ profiles and discover buying trends
• swap ideas with people in the similar sector

Weak financial planning

Financial planning is extremely important for most new businesses. Not enough capital, lack of a contingency plan and reluctance to seek out professional advice can all bring major problems.

Having enough capital is necessary for the survival and prosperity of your business, and is a primary indicator of your business’ health.

It is crucial to create a high-quality business plan to draw in and secure the right type and amount of funding that you require to make your business growthful. A business plan can:

• be used as a tool to structure the financial side of your business and can be updated and changed as your business grows
• keep your expectations for what can be delivered grounded

Lack of a contingency plan. Without a contingency plan you can leave yourself exposed to the unexpected. Situations beyond your control that may impact on your business and cashflow include interest rate rises, transport strikes and political instability. While your business can live on periods where there are no sales or profits, it cannot survive without cash. Building up cash reserves will assure you that you can trade effectively and develop your business.

Failing find professional advice will make any financial troubles worse. Few new business owners can maintain expertise in all areas of their business. Using an accountant or financial adviser can help you ensure you borrow and manage money cost-effectively.

Setting sights too high

It is important to make realistic forecasts about your business’ potential. Throughout the start-up phase, it can be simple to make over-optimistic forecasts, nevertheless, there can be serious consequences for your business if your projections are not realistic.

Inaccurate forecasting of market size is a widespread mistake when starting up. Cash levels can be rapidly depleted if you recruit too many people, buy unnecessary equipment or spend too much on business premises. Effective cashflow and income forecasting can help you avoid this.

Focusing on sales volume or size not profit. A frequent mistake for new businesses is to focus too much on growing the sales volume or size rather than profit. Overtrading can take place during the rapid expansion of a new business when it takes on more orders than can be supported by its working capital or net current assets. This can have serious repercussions. 

Taking your eye off the competition

During the busy start-up phase it can be easy to overlook and set aside enough time to monitor the competition. However, it’s necessary that you are ready to respond to competitors in your market place and to new developments. 

Failing to monitor your rivals will prevent you from seeing what competition or threats to your business exist in your market place.

Competition is not just another business that might take money away from you. It can be another product or service that’s being developed which you ought to be selling or looking to license before somebody else takes it up.

You can get clues to the existence of competitors from:

• advertising
• press reports
• exhibitions and trade fairs
• questionnaires
• searching on the web for similar commodities or services
• approaches reported by your customers
• flyers and marketing literature that have been sent to you - this is quite frequent if you’re on a bought-in marketing list
• planning applications and building work in progress

Failing to use information collected about your competitors will weaken your position in the market. Feed any helpful information into your marketing plan. Your marketing plan and research will help you to set realistic targets and deadlines, and allocate appropriate resources. You can then choose to focus on building relationships with your existing clients or draw in new customers. Your marketing can then be turned into sales by deciding on your sales methods.

Poor supplier and customer controls

Failing to decide on your suppliers carefully and set up satisfactory credit arrangements are widespread mistakes for new businesses. Choose carefully as your business’ profitability and reputation could be at stake.

Finding a reliable and competitively priced supplier can be fundamental to the growth of your business. This is because you rely on your suppliers to supply you with the goods and services your business needs to function. And getting the best deals can have a significant effect on your business’ profits.

When selecting your suppliers, price is an evident concern. However, other factors such as value for money, quality, reliability and service must also be taken into consideration.

Create exactly what you are looking for in a supplier. Carry out a credit check to make certain that the supplier can deliver what you need and is not about to fold. When you have identified your chosen supplier, you can then discuss terms and conditions and draw up a formal contract.

If you are dealing with a possible new customer, it can be tempting to offer credit without carrying out checks. But this can leave your business exposed to delayed or non-payment. You may find that you cannot pay your suppliers or bank on time. In turn, they may withdraw their supplies or funds, putting your business at risk.

To avoid potential problems with customer payments, you may want to:

• carry out credit checks on new and existing customers
• check bank references, trade references and online credit-ratings, from a credit-reference agency
• ensure that your customer is aware of your credit terms (eg they must pay within 30 days) and that the payment terms for your debtors is longer than the terms offered to customers
• motivate customers to make initial payments by offering discounts
• investigate legally enforceable ways of encouraging prompt payment

Poor stock and asset management

Poor stock control and over-investment in fixed assets can mean your capital is tied up unnecessarily.

Efficient stock control (inventory) will mean you have the correct amount of stock in the right place at the right time. It ensures that capital is not tied up unnecessarily, and protects production when there are problems with the supply chain.

You need to put systems in place to keep close track of stock levels and values. Taking control will let you free up cash, while also having the right amount of stock on hand.

There are a number of ways you can come near stock control. You can:

• re-order when stock reaches a minimum level
• carry out regular reviews of stock
• use just in time (JIT) delivery to keep away from excessive stock building up

In the initial years of your new business, you have to to limit drawing on your cash reserves unnecessarily. Over-investment in fixed assets, such as office furniture or computer equipment can be a problem. Acquiring fixed assets outright provides you with ownership straightaway, but you have to pay for the full cost upfront, which drains cash.

The alternatives include:

• Leasing assets - at least while your business finds its feet. This allows you to spread payments in regular instalments over a fixed period, thus freeing up more cash. You may be able to upgrade equipment without having to buy more up-to-date models.
• Hire purchase - you own the asset at the end of the payment process. This is not the case with leasing.
• Buying second hand - for office furniture, fittings, etc.

Hiring the wrong people

A large part of your new business’ growth will be determined by the quality of the people you recruit. Taking on people will always imply some form of investment for your business and requires careful consideration. Taking this investment seriously can make it more valuable and develop your chances of growth.

Ensuring that you hire high calibre people with the right mix of know-how is not a simple process but one that will pay dividends.

How you go about employing new people will depend on your business requirements, eg whether the work is constant, how long it will last and the number of hours available.

You need to explore all the options available to you. These include:

• recruiting permanent staff on a full or part-time basis 
• fixed-term contract employee
• temporary staff
• freelancers
• consultants
• contractors

Employing relatives and friends may appear an easy solution to staffing issues, but they may not have the right mix of know-how that you need. It can also be more difficult to bring a period of employment to a close when a personal relationship exists.

Failing to delegate

Being your own boss may be a key motivator to starting up your own business. Nonetheless, delegating the right task to the accurate person is important for both you and your business. Failing to delegate could mean you take on too much and enhance your stress levels. A good way to tackle delegation is to identify a few key tasks of your own that are very important to the business and handover the rest to your team.

Tags: startups

Every new business needs money when starting up. For the majority of businesses, equipment will need to be bought, the workplace established and marketing costs met - all before the first sale is made. Then once you’re trading, you’ll need cash to pay the bills and keep the business going.

There is a range of financing options. Choosing the right ones for your needs is essential. You can use your own money, borrow from banks, family and friends or attract outside investors. Grants and government support may also be available.

Most businesses use a combination of these, tailored to their specific needs and circumstances.

When starting your business, you need to put together a business plan. This plan sets out how you intend to operate your business and includes essential financial forecasts. These forecasts will help you determine how much funding the business is likely to need, what you need it for and when you will need the money. Good planning will also make it easier to raise the money you need. Use your business plan to explain your business to your bank and other potential sources of finance. A good plan helps convince them that you know what you are doing, and that it is worth risking their money backing you.

It’s essential to have an accurate idea of your financial needs. Once you’ve calculated the amount you’ll need to cover your initial start-up costs, you’ll also need to factor in your running expenses. Customers may not pay you immediately - but you will still need to pay all your bills to keep trading. It’s sensible to have sufficient capital to cover projected expenses for at least six months. At the same time, you need to make sure that you have taken into account how much money you need to live on. In the early stages, a new business is unlikely to produce spare cash that you can spend on yourself.

The type of finance you choose will depend on what kind of business you are starting, how much money you need and what you will use it for.

• Many people use their own savings or personal borrowings to fund the business. This may be the only choice if you can’t convince anyone else to lend you money or invest in the business.
• Family or friends might back you. However you should carefully consider the risk that they could lose their money if your business fails.
• If you have a credible business plan, you may be able to borrow from a bank. Many businesses use overdrafts for day-to-day borrowing and loans to finance large purchases such as equipment. If your business is likely to have peaks and troughs in its cashflow, it’s essential to be able to clearly illustrate these to your bank so you can plan an overdraft.
• A larger business with good prospects might attract outside investors. For example, “business angels” typically invest £10,000 or more in exchange for a share in the business.
• You might qualify for a grant - for example, if you are setting up a business in a deprived area.
• If your business is setting up in a deprived area, or in a sector that is not normally catered for by mainstream lenders, you might be able to attract finance from a community development finance institution. Alternatively you might be able to attract support from other businesses in your peer group.

Most businesses use a mixture of finance sources. For example, you might invest your own money in market research, bring in outside investors to share the risk and borrow from the bank to purchase equipment and machinery.

Set up your business on your own money

If you’re starting a new business, it’s likely that you’ll have to put up some of the money yourself. In fact, it’s usually difficult to borrow from a bank or attract other investors unless you’re investing some of your own money. The easiest way to provide your own financing is if you have savings you can use. If not, you’ll have to think about other possibilities, such as:

• getting a mortgage, or second mortgage
• borrowing privately
• getting an unsecured loan, or borrowing on credit cards
• selling possessions or assets

You should think carefully before borrowing to finance your business and should match the financing to your needs. For example, using credit cards for long-term expenditure can be cripplingly expensive while some loans can be inflexible - you could end up paying interest over many years. Don’t over-extend yourself. If you borrow too much, you may not have enough money left to cover your living costs while the business gets going. You should also try to leave a contingency fund, in case you need extra money to see you through a difficult period.

Advantages: Self-financing your business gives you far more control than other finance options. Outside investors or lenders could decide to withdraw their support at any time and most will expect a good return on their investment in the form of interest, shares or dividends.

Disadvantages: You must be aware of the risks. If your business fails you could lose your home and other personal possessions. And just knowing how much you have borrowed can put a lot of pressure on you and your family.

Friends and family may help to start your business

If you can’t raise enough money yourself to start your new business, your friends and family may be willing to help. They might lend money to you or to your new business or they might invest in your business, eg by buying shares.

You should provide potential investors with an up-to-date business plan. It will help demonstrate how their money will be used and explains the long-term plans for the business. You should also make sure that you have a written agreement in place that sets out terms and conditions, including any interest and repayment terms. This should help avoid misunderstandings.

There may also be tax implications for you and your family, especially on interest-bearing loans.

Advantages:

• Friends or family may be more willing to lend you money than a bank, particularly if you cannot provide security for a loan.
• Friends and family may offer easy terms - eg an interest-free loan.
• If you can raise some finance from your own resources or friends and family, it should make it easier to get additional finance from the bank.

Disadvantages: You need to be careful. You may feel under personal pressure, particularly if your business starts to struggle and there’s a risk that friends or family will lose their money. Remember that they too may worry about their money and this may put a significant strain on your relationship. As a rule of thumb, you should never ask them to lend you more than they can afford to lose. You should also seriously reconsider whether your business is a viable prospect if traditional lenders such as banks are unwilling to lend you money to start up.

Borrow from a bank

Overdrafts and bank loans are the most common sources of additional finance. Before lending, a bank will want to know that you are a good risk. Typically, the bank will want you to:

• present a credible business plan
• provide evidence that you have a successful track record in business
• offer security for any money it lends you - either business assets or a personal guarantee
• invest some money in the business yourself

If you don’t meet all the bank’s normal requirements, you may qualify for a loan under the government’s Small Firms Loan Guarantee (SFLG) scheme.

Whatever type of borrowing you use, you may have to pay arrangement fees as well as interest. Many small businesses use an overdraft to cover their borrowing needs. If you need longer term financing, it’s a good idea to consider taking out a loan.

Always take advice from your accountant or business adviser before signing any agreement to ensure the loan meets your requirements and you understand the terms.

Outside investors

You might want to bring in outside investors. If the business does well, they share in the profits - but if the business fails, they lose their money.

Typically, your company issues ordinary shares (standard shares with no special rights or restrictions) to investors in return for their investment. Outside investment can suit promising businesses that do not expect to produce a lot of spare cash in the short term but offer the potential of greater returns over the longer term.

Advantages:

• Attractive for businesses looking to bring in additional expertise as well as funding.
• Unlike loans and overdrafts, you do not normally have to make payments to investors until the business can afford them.
• Increasing the capital invested in the business makes it easier to borrow from the bank.

Disadvantages:

• Your share of the business, and of its profits, will be lower.
• Investors may want control over how you manage the business.
• Investors may want the business structured in a way that makes it easier to sell their shares in the future.

Sources of investment:

There are several different sources of investment:

• individuals, such as friends and business contacts
• business angels
• investment funds and venture capitalists for larger investments

Business angels are wealthy individuals who typically invest £10,000 upwards and may also offer business expertise. Venture capitalists usually invest more than £2 million in businesses they believe will provide a high earning potential and a defined exit time.

Before approaching potential investors you need a good business plan, including evidence of your management ability. Your plan should include detailed financial forecasts and demonstrate what you will do with funds invested in the business. You will also need to prepare a pitch, which will sell your business to potential investors.

Grants and government support

Your business may qualify for a grant or government support to help you get started.

The main advantage of grants is cheap financing. For example, you might get a subsidised or zero-interest loan, or even an outright cash grant. In addition, support schemes can provide expert advice, information or subsidised consultancy.

However there are drawbacks:

• there is strong competition for grant schemes
• you must meet the scheme’s criteria - such as business location and size, and how you plan to use the money
• the application procedure can be complex and drawn out
• you normally have to use the grant for a specific project, rather than general business costs
• grants usually only cover a percentage of the costs - you also have to provide matching funds

The Small Firms Loan Guarantee scheme helps businesses that would not normally qualify to get a loan.

Other sources of finance

Many start-up businesses do not require a great deal of money to get up and running. These small amounts of finance - known as micro finance or micro credit - are often not available through traditional lending sources. If your business is setting up in a disadvantaged area or a sector that is typically underserved by mainstream lenders, you may be able to source finance or support from one of the alternative sources of micro finance. These include community development finance institutions (CDFIs) or through other companies in your peer group.

CDFIs are sustainable, independent organisations established to develop and create wealth in disadvantaged communities or markets. They provide capital and support to individuals, micro enterprises and small businesses. A loan from a CDFI can be used to purchase equipment or property, to finance working or start-up capital or to fund marketing campaigns. Loans can be for as little as £50 or up to £1 million depending on the project.

Some businesses find that they can access finance, support and advice from other businesses in their peer group - known as peer-group lenders. There are many organisations that have been set up to support specific groups of individuals and businesses. These include:

• Prowess - the UK association of businesses and individuals that specifically support women in business. Find out about the support available to women in business on the Prowess website.
• The Asian Business Development Network (ABDN) Ethnic Minority Enterprise Network - assists Asian and minority businesses by creating access to opportunities and sharing best practice. Read about the Ethnic Minority Enterprise Network on the ABDN website.
• The Black Business Initiative (BBI) - aims to support the black and minority business community. Find information on the services provided by the BBI on the BBI website.

Tags: startups

Working from home is a dream for many – but actually going ahead and starting a home business is very difficult. So what makes so many people want to do it, and why would you ever try such a crazy thing? Here are some common reasons, and some things to consider.

You Can Build Your Great Idea

It suddenly hit you like a bolt of lightning: you’ve thought of a great business idea. This is perhaps the number one reason that people go into business from home: they’ve come up with something great that they really believe in, but can’t afford to rent any business premises. It does depend on what the business is, but working from home is often ideal in these situations.

Remember, though, that even the best ideas take hard work to become a reality. The kind of ideas that are good for a home-based business are ones that can become at least partly real quickly, and start bringing in an income – you shouldn’t sit at home for a year working on something that’s making you nothing whatsoever.

You Can Make Your Hobby a Job

Most people have something that they’re really passionate about, and would spend the rest of their life doing if they could, just for the enjoyment of it. Getting paid for doing what you love is obviously appealing – even if you only earn a living wage, it’d be your idea of paradise. Make sure, though, that you’d be able to take it if you had to make a living from your passion. It’s the things we’re closest to that hurt us the most – think of how you might feel if no-one buys what you’ve made, or if they send it back and with a note saying “what rubbish, I demand a refund!” Can you cope with your hobby becoming commercial?

You’re Tired of Your Boss

It seems like everyone hates their boss. They try to pretend like they’re your friend, but they’re not fooling anyone, are they? You’re forced to work to pointless deadlines and targets. Anytime you spot a better way of doing something you’re told that it’s impractical, or, worse, that it’s great but the stupid way of doing things is already “established” and “policy”.

What you might not realize is that “being your own boss” requires quite a lot of willpower. If there was no-one to make you get up in the morning and do any work, would you? Your home is supposed to be a place of rest and entertainment – and when it’s full of the equipment and temptation to do anything but work, working there can be hard.

You Want to Spend More Time with Your Family

You feel like all you do is go to work, come home, and then sit around, too tired to do anything fun with your family. If you have children, they seem to be growing up so fast, and you’re missing it all – all because you have to go out and work. Of course, the flipside here is that you might just end up spending too much time with your family, while you’re trying to work. When everyone knows you’ll be in the house all day, they’ll probably ask you to do all sorts of unimportant things, just because you’re available. It’s hard to say no, and before you know it, you’re doing the job of a full-time ‘housewife’ instead of what you set out to do.

You Don’t Like Wasting Time and Money Commuting

After all, once you get to the office, what is there anyway? Offices are dreary environments, and terrible to work in – traveling for hours there and back and spending a significant proportion of your wages to do it seems completely pointless (especially if you live in the middle of nowhere). If you could work from home, think of the time you’d save… and time is money, isn’t it?

Don’t be surprised, however, if you start to feel trapped in your home, since you never leave it. Can you find good ways to get away from it all?

But Don’t Be Put Off

While the list of warnings for working at home might look long, a list of warnings about working in an office would surely be longer. As long as you stay on your guard, you can get all the benefits of working from home without falling into any of the traps.

Tags: startups