Make your business dream a reality So, you’ve got a fantastic idea for a business? Itching to get it off the ground? Or maybe you’ve just set up? We know that there’s an awful lot to cover when you’re starting out on your own. This easy-to-use guide has everything you need to know, from the moment you’ve had that flash of inspiration (but aren’t sure what to do next), right through to the basics of setting up and running your business… and making it a success. It’s all in one place for you to dip in and out of whenever you need to.
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Contents
Part 1 Before you begin: making plans
Part 4 Useful contacts Who they are, what they do and how they can help you.
Whether you’ve just had that lightbulb moment or are about to get started, here’s how to plan your business.
Part 5 Jargon buster
Part 2 Getting started: all your business needs
Business-speak made crystal clear.
Index
The lowdown on the practical side of getting started and running your business: from managing your cash
Terms and Conditions
and marketing to getting great staff on board and protecting your business data, we can guide you in the right direction.
Notes
Part 3 How we can help you Whatever stage you’re at, we have business banking solutions designed to help you every step of the way.
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Before you begin: making plans Starting your own business is an exciting time. But going solo is a big decision, so you need to be certain that it’s what you really want to do – and that you’ll be able to see it through. We’re here to help you do just that. This section will help you plan how to start your own business. It’ll run through the steps you need to take, from assessing your great idea to getting your business plan sorted. It’ll also be a useful recap if you’ve just set up and are keen to know you’ve covered the basics. Where to find what you need: Strengths and weaknesses
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Looking at your business idea.
Nuts, bolts and business plans
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The first steps: research and planning.
What’s in a name?
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Tips on how to choose a great one for your business.
Home or away? Your business location
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Where to find the right place to set up your business.
Owning a business: The choices
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The ways you can buy and own a business.
Starting up: Help when you need it What you’ll get as a Barclays business customer.
There’s no business like yours 16
At every stage, we’re here to give you the practical advice and support you need for your business to grow. For expert advice, and to make an appointment with a Local Business Manager, just call 0800 515 4621 or visit www.barclays.co.uk/localbusiness
1: For terms and conditions, please turn to page 87.
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“I’ve got the idea, skills and energy to start my own business. I just need a hand to put it all together�
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Before you begin
Strengths and weaknesses
Your passion and enthusiasm will go a long way to making your business idea flourish. Here are some other practical steps you can take before you start your business to develop your idea further. Time for homework
What’s a SWOT analysis? A SWOT is a quick way of finding out how workable a business idea is by analysing its internal strengths and weaknesses (S and W) and matching these to its external opportunities and threats (O and T). Putting these facts and ideas into one place will let you see the bigger picture at a glance. Here’s a step-by-step guide how to do it:
Researching your idea and potential competitors could make all the difference when you launch and market your business later. So think about: • How many other businesses offer the same service or product? A flick through your local directory will give you a basic idea, or visit www.yell.com • Is it practical to pursue your idea? • Has your idea already been developed by someone else?
1. Create a template on a page like the one above, labelling each section: strengths, weaknesses,
• How is your idea original or better than existing
opportunities and threats.
products or services? 2. In the top left section, fill in all the strengths of your
Preliminary planning: do a SWOT
idea, yourself or your workforce. Think about
Now it’s time to look at your idea in a bit more depth.
questions like:
What might help you at this early stage is to create a simple, clear snapshot of what you can deliver, and to find out if others will be as enthusiastic about your idea as you are. You can do this with a SWOT analysis.
• What are you best at? For example, are you strong on customer service? • What’s unique about your idea? • Is your product or service exclusive to you? • Have you got access to a skilled and innovative workforce?
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Part 1
3. In the top right section, write down your
The results of your SWOT
weaknesses, or areas where you think your business
Now you’ve got your SWOT profile, spend time thinking
may be exposed. Think about these types of issues:
about how to make the most of the positives and
• Will you or your workforce be adequately skilled from day one? • Are your resources sufficient? For example, people, money and assets.
mitigate your weak areas or threats (for instance, training to improve your skills). The next section on researching your competitors, customers, and your product or service will help prepare you for writing your business plan so you
• Will you be able to provide strong leadership? • Will your marketing make your product or service
can get stuck in to the practical side of setting up your business.
stand out from the competition? 4. Next up is opportunities. These are the factors that define how successful your business could be. So, in the bottom left section, note your thoughts on things like: • Can you see an existing demand for your product or service? • What niches have you spotted that your competitors have missed? • Is there room for a new player? 5. And last of all, in the fourth section, list any threats to the success of your business: • Could new competitors come into your market? • Is your product or service likely to become out of date? • Are you based in an area with a high concentration of competitors? • Is there a danger your customers could bypass you and go direct to your suppliers?
There’s no business like yours Just think: you could be the proud owner of a successful business all because you pursued your great idea. And we’re here to help you. For business advice and to make an appointment with a Local Business Manager, simply call 0800 515 4621 or visit www.barclays.co.uk/localbusiness 1: For terms and conditions, please turn to page 87.
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Before you begin
Nuts, bolts and business plans
Starting your own business is exciting, and it’s tempting
Your competition
to jump in and do it as soon as you can. But to maximise
Visit your competitors’ shops and websites, or ring them
your chance of success, it’s key to do your research and
up (or get a friend to do it for you). Note their prices and
have a solid business plan in place first. Approach an
the service you receive, and check out whether they’re
accountant for advice so you know you’ve covered all
prepared to offer you any deals in order to win your
you need to.
business as a customer.
Research: The lowdown
Trade publications, industry organisations and market research companies These can help you find out the size of your market and
Research will form the basis of your business plan.
whether it’s growing or in decline. Your local library and
Once you know your product or service and your
the Internet are also great places to look for current
competitors and customers inside out, you’ll be closer
information on your market.
to understanding how to make your business a success. There are plenty of resources out there to get you the
The Internet
information you need. Take a look at our tips below.
You can also use the Internet to find customer comments on a specific product or service. Website users often post reviews online about the service of a
Why research? Research will get you to focus on: • your product or service • your price • your market and your competitors
particular business, which can give you a valuable insight into what your potential customers like (and don’t like) about your competitors. Local business support organisations For instance, Business Link or Enterprise Agencies can also give you lots of useful facts. See our list of Useful contacts to find out how you can get in touch
• your customers
with them.
• your location.
Your customers Before your business is up and running, ask your potential customers what they think about your product
Research: Where to look
or service. And remember that your competitors will be
Barclays Business Opportunity Profiles
vital that you have your finger on the pulse.
checking out what their customers think as well, so it’s
These give you all the latest information on almost any market you can think of. To get your free copies, just visit www.barclays.co.uk/localbusiness or ask one of our Local Business Managers.
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Part 1
Your business plan: an overview
Expanding on what you’ve covered in your SWOT
You might want to be a market leader or just earn
analysis, here are some questions to think about when
a good living doing what you enjoy. Writing a business
you write your business plan.
plan will get you to work out your goals and will be a regular basis. Plus, it’s crucial to have one when you’re
Making your product or service stand out
talking to potential business advisors or backers,
• Do you stand out from your competitors?
useful monitor to check your progress against on a
especially if you’re looking to borrow money. • What makes your product or service better? • Are you targeting consumers or other businesses?
Why is a business plan essential? • It’ll help you to set out clear goals and how you can achieve them. • It’ll help you to live and breathe every detail of
Deciding your price • How much will you charge? • Are you aiming to be the cheapest around?
your business idea and make sure you cover all you need to get off to the best possible start.
• Are you looking to be more exclusive and expensive? • What do your competitors charge? It’ll give you an idea of what your customers are willing to pay.
Focus on your business plan Once you’ve done your research, take a look at the business plan template we’ve included at the back of this guide. The questions set out over the next two pages will help prepare you to fill it out.
Insider knowledge When you write your business plan: • Be clear about your objectives – why are you writing it and who are you writing it for? • Keep it short and to the point, and use research to back it up • Get it checked – ask a family member, business
• Can you compete with them on more than price alone? Your customers will be looking for quality as well as value.
Knowing your market and the competition • How much do you know about your market? • How much competition will you face? • Is this market growing or is demand declining? • Have you researched your competitors, what they offer and how much they charge? • What do you think their weaknesses are?
partner or business advisor to read it and point out if anything’s unclear
• Have you called them up and checked out their premises to see what their customers see and the
• Write an action plan – prioritise what you have to do to achieve your goals • Be flexible – what you want to achieve might change, so be prepared to adjust your plan as your business idea develops.
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service they receive?
Before you begin
Your customers
People
• Who do you want to sell to?
Whether or not you need to employ people as soon as
• How many will you need to cover costs and make a profit?
you set up will depend on the size of your business and what it does. Employing staff will increase your initial costs but, on the other hand, the right people can make
• How will you reach them?
all the difference to your success.
• What do you know about them and their needs
You’ll also need to be familiar with employment law
(age, gender, what they earn, what they like,
on areas like tax, equal opportunities and National
their personality)?
Insurance. You can find more information about these in Getting started. Your Local Business Manager can
What else do I need to think about? Money
also put you in touch with local specialists, such as a
You may need some cash to get your business off the
outs of employment law. Our Barclays Business
ground. We can help you to factor everything in (like
Essentials packages and Barclays Business Manager
your existing financial commitments) to work out what
software can help you, too. For more info, just turn
you’ll need. There are several options to fund your
to page 68.
solicitor, who can advise you on the technical ins and
business. These range from grants, loans or even money from your friends and family. You can find more about these on page 24.
Did you know? With Barclays, you get access to free professional
Once you’re up and running, another vital aspect of your business finances will be managing your cash flow. Doing your sums will help you figure out what money is coming into and going out of your business. You’ll find more about cash flow on page 31. And remember: we’re
advice with our Team of Experts, which includes accountants, solicitors and marketing consultants. They can get you up to speed on the issues you’ll need to think about when you run your business. Just ask a Local Business Manager for details.
here to help you, too. If you need advice on the best way to fund your business, we’re with you all the way.
There’s no business like yours If you need a hand filling out the business plan template, just ask one of our Local Business Managers. To make an appointment, call 0800 515 4621 or visit www.barclays.co.uk/localbusiness 1: For terms and conditions, please turn to page 87.
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Part 1
What’s in a name?
Coming up with a name makes starting your own business feel real. The name you choose will put across the kind of image you want your business to have, and it needs to stick in your customers’ minds.
Naming a limited company If you run your business as a limited company, there are certain restrictions on the business name you can use: • You can’t register the same name as another company, so check the index of company names held at Companies House or search on their website
Here are some ideas to help you choose a name • Make sure that the name you choose is easy to pronounce • Be careful that it doesn’t already belong to another business in your market. Look in the Yellow Pages or Thomson Local, and type it into www.google.co.uk and see what comes up • Try out the name(s) you’re weighing up on your
company names. Using certain words is restricted, and you can’t use a name that might cause offence • You must display the company name outside all premises so that it can be easily seen and read. It also needs to be printed on all company publications, including business letters, cheques, invoices and notices. The company’s place of registration and registered number must also be displayed on business letters and order forms. The
friends and family – think of them as your potential
company’s directors and secretary could be fined
customers. This should help guide your decision
if the business name is displayed incorrectly
• How does it look? Imagine it on your business cards, signature and stationery – does it still work? • Does it translate well in other countries? If you eventually take your product or service to markets outside of the UK, you don’t want to end up saying something you really shouldn’t • Make sure that the name you choose doesn’t restrict any potential future growth. For example, if it only reflects a specific product or service it might be difficult to successfully introduce a new product or service to your business • Think about how it could work as a web address (for information on how to set up a website, turn to page 57).
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(www.companieshouse.gov.uk) for existing
• The letters ‘ltd’ or the word ‘limited’ must be displayed after the company name. If your business is a company limited by guarantee, you can choose not to include ‘limited’ in its name, but you’ll need to state that it’s a limited company on business letters and order forms. Welsh companies can use the Welsh equivalents • Any business can use a trading name that is different to its registered name, but the registered name must be disclosed on company stationery such as letterheads and invoices. Turn to page 15 for more information on setting up a limited company.
Before you begin
Home or away? Your business location Once you’ve got the ‘what’ of your business, you need to think about the ‘where’.
Working away Here are some tips for when you’re checking out potential locations: • Make sure it suits the purpose of your business
Working from home
(for instance, that it has enough space for displaying
Starting your business at home could be the easiest and
your wares or enough customer parking)
least expensive option, but you’ll need to make sure that it’ll work for you. You may need willpower to resist distractions. Also, remember you’ll need to find out from your mortgage lender, home insurance provider, landlord or local authority if there are any restrictions on running a business from your home.
Insider knowledge If you’re working from home, set yourself goals every day and reward yourself if you complete them – say, pay
• Choose a location that customers, suppliers and staff can get to easily • Work out what your running costs will be each month (rent or mortgage, phone, electricity, etc) • Look out for competition in the area • Check whether any grants are available for the area you’re looking in. For more on grants, turn to page 25 • If you’re going to buy premises, read Property and
yourself a bonus or take an afternoon off at the end of
your business, our free guide to buying a business
each month. It’ll keep you motivated and help you to
property. To get a copy, just ask one of our Local
work more efficiently.
Business Managers • Get legal advice before you enter into any agreement
Did you know?
to rent or buy premises.
Once you’ve got your premises sorted, we can give you the insurance cover you need to protect it. Just ask one of our Local Business Managers for details.
Did you know? We’ve linked up with professionals in lots of different areas so we can help you get the know-how and skills you need to make your business a success. For instance, we run seminars where you can get practical advice from the experts. Turn to page 66 to find out more, or go to www.barclays.co.uk/seminars
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Part 1
Owning a business: the choices What kind of business will yours be: completely new or based on one that already exists? How will you run it – as a sole trader or through shared ownership? In this section we’ll go through the key facts, pros and cons of the different ways you can own a business. For more advice on what’s best for your business, talk to an accountant.
Buying an existing business The attraction of buying a business that’s already set up is clear: the structure will already be in place, you’ll know how it was run in the past and it’ll have an established customer base. You might need more money upfront to buy it, but a lot of the legwork will have been done for you. However, when you buy a business, you buy its existing reputation – good or bad. So, make sure you know what people think of the business before you buy (survey existing customers, for example) so you understand the best way to approach your marketing.
Starting from scratch Building your own business from the ground up can be
Buying a franchise
incredibly satisfying. But while you’ll have the freedom
Becoming a franchisee is an increasingly popular way
to do exactly what you want, the downside is that you
of going into business. You have the support and
might not have other people around to bounce ideas off
reputation of an established company behind you, and
of. Plus, there will be more work for you to do at the
to some degree you’re your own boss. The downside
outset than if you buy an already established business.
is that often you won’t have the freedom to change the product or service. And bad publicity surrounding any other franchise will have a knock-on effect to your business.
Did you know? You can find more information on how to buy a franchise in our free guide Franchising and your business. To get a copy, just speak to one of our Local Business Managers.
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Before you begin
Choosing how to own your business Sole trader
Limited company
Put simply, this is a business owned, developed and
personally responsible for your business debts, as a
managed by one person. You might employ other
company is a separate entity from its owners. This
people, but the business is yours and doesn’t exist as a
means that your personal assets won’t be at risk if
separate entity (like a limited company does; see right).
you can’t pay back the debt. Plus, you can also take
Some of the advantages of being a sole trader are that
advantage of tax breaks, and you’ll pay yourself a salary
you don’t have to register your business at Companies
just like any other employee. You might need to ask an
House, which saves time and money, and all the profits
accountant to help you.
made by your business will be yours. The disadvantages are that you’ll be personally responsible for any debt you incur, and you’ll also need to tell the income tax and social security authorities that you’ll be working for
As a director of a limited company, you won’t be
On the downside, it’ll cost more to set up at the start, as you’ll need to register as a company with Companies House and submit regular financial statements (see www.companieshouse.gov.uk for details).
yourself – you’ll be taxed on your annual profits. If you’re going to work on your own, becoming a sole trader could be your best option.
Partnership If there are other people involved in your business idea,
Steps to set up a limited company Usually when you set up a limited company you’ll go to a specialist, such as an accountant or incorporation agency, to help you. But if you want to do it yourself, here are some of the steps you’ll need to take:
you might look into setting up as a partnership. It’s similar to being a sole trader, except that all of the
1. Download the documents you need to fill out
costs and profits are shared between the partners.
(Memorandum of association, Articles of association,
A partnership can also mean that the work and
Form 10 and Form 12) from the Companies House
responsibility are equally shared, which can take some
website (www.companieshouse.gov.uk).
of the pressure off you. It’s a smart move to draw up a partnership agreement, though, so that you protect
2. Complete the documents – a solicitor or accountant can help you.
your own interests as an individual. A solicitor can help you do this (see page 54 for tips on finding a solicitor).
3. Send them in to Companies House with the fee (currently £20). Or, if you’re registering a new company, complete and submit them online; the company will be set up within 24 hours, whereas it can take five or six days using paper forms. 4. Once the documents have been checked (including that none of the prospective directors are on the Disqualified Directors Register), the Registrar of Companies will issue a Certificate of Incorporation and your company can start trading.
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Part 1
Starting up: help when you need it Now it’s time to put everything together and get your business up and running. We’re here to make the whole job of getting your business started easier for you from the day you set out, and we can keep helping you for as long as you need it. Our comprehensive range of business banking and support packages is designed to give your business a solid foundation. To find out more, turn to the How we can help you section.
Comprehensive products Access a wide range of competitive products to help you get started, as well as for your everyday business banking needs. Plus, you can get up to 12 months’ free day-to-day banking transactions2 and business loans (subject to application and status) to give your business a funding boost. Even more advice and support • Free 45-minute marketing consultation with an Enterprise Agency advisor • Free 45-minute consultation with an accountant • Free 30-minute consultation with a local solicitor
Business Start-up package
who specialises in business law
With our Business Start-up package you’ll get the support and flexibility you need to run your business the way you want:
• Access to our nationwide series of exclusive seminars and events
Support dedicated to your business
• Free 24-hour legal and tax helpline3
You’ll get your own Local Business Manager. Based
• Helpful market information through our free
locally, they know the area and marketplace, as well
Business Opportunity Profiles and Business
as the ins, outs, ups and downs of starting a business.
Information Factsheets.
A helping hand Our Local Business Managers are backed up by our dedicated Local Business Support team outside working hours and if your Manager is with a customer. Flexible business banking Bank exactly how and when you want to – in a branch, online or by phone.
2, 6: For terms and conditions, please turn to page 87.
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Before you begin
Barclays Business Essentials
Barclays Business Essentials Plus
Based on the tools and services that successful
Barclays Business Essentials Plus is a business banking
businesses use, our Barclays Business Essentials
and services package that offers you even more benefits
package can help you lay down the best possible
to help you develop your business and skills, giving you
foundation for your new business.
the best chance of success.
You’ll enjoy all the benefits of our Business Start-up
The package includes tools worth more than £1,200 ,
package, with free everyday banking transactions
as well as free everyday banking transactions for up
2
extended to 18 months and more than £700 worth
4
to 18 months2.
4
of essential business software and services that will make running your business easier and more efficient. What you’ll get • All the benefits of our Barclays Business Start-up package • Free banking extended to 18 months2 • QuickBooks SimpleStart or Sage Instant accounts software • Business Planning software • Marketing Planning software • Business and software skills courses
What you’ll get • All the benefits of our Barclays Business Start-up package 2
• Free banking extended to 18 months • Business Planning software • Marketing Planning software • Business and software skills courses and videos
• QuickBooks Pro book-keeping software • Free face-to-face software training.
and videos.
There’s no business like yours We’ve linked up with thousands of professionals in the community who can give you practical advice and support to help get your business off to the best start. For details, talk to one of our 1
Local Business Managers, call 0800 515 462 or visit www.barclays.co.uk/localbusiness 1, 2, 4: For terms and conditions, please turn to page 87.
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Part 1
Barclays Business Manager Barclays Business Manager software combines all the
Come and talk to us
benefits of our Barclays Business Start-up package to
We want to work with you to see your business
give you an all-in-one business banking solution. With
as you see it, and to make sure it reaches its
5
more than £2,000 worth of essential business software
potential. A Local Business Manager will meet
and services, it’s designed to give your business the very
with you to talk about what you want from your
best support and boost its performance.
business so that we can understand what’s important to you and give you the right support.
What you’ll get • All the benefits of our Barclays Business
You’ll discuss: • how you want to do your banking and what
Start-up package 2
• Free banking extended to 18 months • Business Planning software • Marketing Planning software • Business and software skills courses and videos • QuickBooks Pro or Sage Line 50 book-keeping software
• Employment and Health & Safety compliance service
your financial needs are (to find the right loan, savings accounts and insurance, for example) • how you want to make business purchases and receive payments • how you want to keep track of your business finances • what advice you expect to get, and when you expect to be able to get it • how you want help with marketing; to win customers; to get the best deals from your
• Free face-to-face software training.
suppliers; to keep track of stock; and to attract and hire top-quality staff.
Insider knowledge When you come in to open a new bank account, remember to bring in the necessary ID and paperwork so we can check who you are. What you’ll have to bring depends on the type of business you own – turn to page 73, go to www.barclays.co.uk/localbusiness for details or call 0800 515 4621. If you’re an owner of a limited company, involved in a limited liability partnership or a company registered outside the EU, contact Barclays to find out what you’ll need to produce by calling 0800 515 4621.
1, 2, 5: For terms and conditions, please turn to page 87.
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Before you begin
“
Becki Train, managing director of event and conference
Real-life story
management company Events Northern, and category
After 27 years as a florist, Lila McKnight decided she
winner of the Handbag.com and Barclays Business Plan
wanted a change and opened her own patisserie. She
Awards, gives her top 10 tips for starting a business:
found the help of her Local Business Manager invaluable.
2 Consider working two jobs while you become established, to help solve money worries
She says: “I talked to friends in the restaurant business and got some great advice from them, but Andy Robson, my Local Business Manager in the Southwark
“
1 Think long and hard before taking the plunge
branch, has been wonderful. He helped me find book-
3 Spend time researching the market, your competitors, potential clients and customers, etc 4 Write a thorough business plan – and try to update it regularly
keeping services, as well as the money I needed to
make it happen. It’s taken about two years to set up my new business, and without Andy it would have been so much harder to achieve. I believe in talking to my bank manager face-to-face, and that’s what I got from him.
5 Get professional advice from Business Link and other
He’s always available when I need to see him or speak
business support agencies, as well as accountants,
to him. Even now, if I have a financial question or
solicitors, etc
problem, he takes care of it.”
6 Talk to people about your ideas and plans – never miss an opportunity to network
Lila McKnight, winner of the Business Plan Awards 2005 and Barclays business customer, Southwark.
7 Set up a website and email address straight away – many people will rely on the Internet to find you and it looks more professional 8 Try and secure as much press coverage and interest locally through a marketing push to announce that you’re in business 9 Stay positive and enthusiastic – what could be better than being your own boss and doing something that you enjoy? 10 However busy you are, always remember to take some time out – take a weekend off from it all or even just have a bath and chill out at the end of the day!
There’s no business like yours We’re here to make sure that your business stays on the path you want it to. Call 0800 515 4621 or visit www.barclays.co.uk/localbusiness to make an appointment with one of our Local Business Managers. 1: For terms and conditions, please turn to page 87.
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20
Getting started: all your business needs By now, you’ve got a taste of what’s in store for you when you set up your own business, and it’s time to put your plans into action. Or perhaps you’ve already set up and you want to help your business start to grow. Either way, we can help. In this section, you’ll find the practical information you need to make your business a success. From taking care of the financial side of running your business and making the most of networking to being aware of your tax and legal obligations, it’s all here to help you when you need it.
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Part 2
Where to find what you need: Finance Money
24
To get your business going
Books
29
31
51
Staying legal
53
Rules and red tape
35
Forecasting profit and loss
Stock
Insurance Keep your business safe and sound
Planning and managing your cash flow
Doing the sums part two
48
Prepare for what’s ahead
Keeping the paperwork in order
Doing the sums part one
Admin Tax
Trading licences
55
Will you need any?
36
Trademarks and copyright
Taking control
Keep it unique
People Marketing
Technology 38
Getting up to cyber speed
40
The future Business health checks
56
57
Go on, be a show-off
Customers How to keep them coming back
Suppliers
60
Keep an eye on success
42
Setting up great relationships
Finding the right staff
43
All together now
Networking
45
It’s all about who you know
There’s no business like yours With Barclays, you get the help of a Local Business Manager at every step. Just call 0800 515 4621 to make an appointment or visit www.barclays.co.uk/localbusiness 1: For terms and conditions, please turn to page 87.
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Finance
Part 2
Money: to get your business going When you start and run your own business, you’ll be thinking about money. It’s the lifeblood of any business, and we’re here to help you take control.
• Are there any other costs you’ll have to cover straight away, like solicitor’s fees, company registration and marketing costs? How much will they be? Will they be ongoing? • What tax will you need to pay? Just how much will
How much will you need?
depend on your business status (ie whether you’re a
Firstly, figure out how much money it’ll take to get your
sole trader, limited company, etc). You can find out
business off the ground and to keep it running. Ask
more about this on page 48.
yourself the following questions.
Sources of funding Your business costs
When you’ve worked out how much you need, you then
• How much of your own money do you have to
need to work out the best way to get funding. Some of
invest in the business? • What equipment do you need to buy and how much will it cost? • Will you run your business at or away from home? Remember, if you run it from home your house
the main sources of funding are: 1. personal savings 2. grants and awards 3. borrowing.
expenses, like electricity and phone, will go up, so
In this section, you’ll find an outline of each and their
work out the cost of your monthly overheads.
pros and cons, as well as a summary of some of the
• Do you need to employ people? How much will it cost you each month?
other options available. If you’re not sure what some of the words and phrases mean, our Jargon buster can help you.
• Do you need a vehicle to run your business? Remember to factor in the monthly cost of servicing, insurance and tax, as well as the cost of petrol. • Are your annual sales going to be over the VAT threshold? If they are, you’ll need to be VAT registered and put money aside each month to cover the cost of the bill. Turn to page 49 for more on VAT.
Did you know? You can find more about how to get the right
• How are you going to manage your books? If you
funding for your business in Finance and your
opt for a book-keeping software package or an
business, one of the free guides in our Efficient
accountant, make sure you budget for fees.
Business series. To get a copy, just ask your Local Business Manager.
24
Getting started
1. Personal savings
2. Grants and awards
You can use your own money, from savings or
Grants are usually one-off payments which are provided
investments for example, to invest in your business.
to fund specific costs, like marketing. Awards recognise
It can be a useful way to get your business going in the
achievement and can often give you publicity as well as
early days. Plus, investing some of your own cash will
financial support.
show people that you’re committed to your business. You should also think about whether you need to invest all your money or keep some in your savings. Having spare cash on hand can sometimes be a real help if things get tough.
Grants and awards are more often available to you if: • you’re just starting your business • you’re a younger entrepreneur • your business is in an industrial area with above-average unemployment
What’s available? It’s up to you.
• your business is in a rural area.
What’s available? The pros and cons Personal savings Pros • It’s there, waiting to be used, which will save you the hassle of looking for other investors • If you’ve got enough of your own cash to start your business, you won’t be in debt to anyone and your business will be in the black from the outset • The size of your loan might be smaller if you do need to borrow more cash to get your business going. Cons • You might lose your money if your business doesn’t do as well as you expect.
• Local support – Local Enterprise Agencies (LEAs) run a range of schemes that usually includes financial support as well as business planning and training. • Regional support – Regional Development Agencies (RDAs) give grants for regeneration in rural areas throughout England. • Government support – The Department of Trade and Industry (DTI) offers support if you’re starting a business or are involved in technology, research, development and international trade. • The Prince’s Trust – provides support if you’re starting a business, are aged 18-30, and are either unemployed or want to fulfil your potential. You can find contact details of all these organisations in the Useful contacts section at the back of this guide.
25
Part 2
The pros and cons Grants and awards Pros • Grants and awards don’t normally need to be repaid • They can give you the cash you need when
Business overdrafts Banks offer business overdrafts as a form of short-term finance through a business current account. They’re a good way of covering any fluctuations of money coming into and going out of your business. A business overdraft is best for when you need to get some working capital into your business each month.
other sources aren’t available. Cons • Grants, awards or support packages aren’t available to everyone and can be hard to get • They could be limited to projects that back up the aims of the organisation giving the grant or award.
The pros and cons Business overdrafts Pros • They’re flexible – you only pay interest on the money you use • They’re useful for your daily business needs, like buying stock.
3. Borrowing
Cons
There are several ways to borrow money to start
• You usually pay higher interest rates than
and grow your business. These are some of the
on loans
main options: • They aren’t really suitable for funding bigger • Business overdrafts
purchases, like equipment or vehicles, or
• Loans
for longer-term borrowing.
• Borrowing from family or friends
Loans Loans are designed to help you buy equipment and supplies for your business. They are best if you need to buy fixed assets, such as machinery or office equipment, where the amount you need isn’t going to change.
There’s no business like yours Your Local Business Manager can guide you on the best way to get finance for your business or arrange the actual finance itself. To make an appointment, just call 0800 515 4621 or go to www.barclays.co.uk/localbusiness 1: For terms and conditions, please turn to page 87.
26
Getting started
The pros and cons Loans Pros • You might be able to set a fixed amount to repay each month at the outset, which makes budgeting simpler • You can sometimes take advantage of repayment holidays, which means you can use your purchase before you have to make repayments on the loan.
Monthly loan ready reckoner Use the table below to calculate roughly how much a typical loan might cost you each month: 1. Choose the relevant term and interest rate from the table and find the amount that meets between the two. 2. Multiply this amount by the amount you want to borrow. 3. Divide this by 1,000. So, if you were to borrow £15,000 over five years at an
Cons
interest rate of 8%, your monthly repayments would be
• You might need to provide security for
about: £20.28 x £15,000 / £1,000 = £304.20 a month.
larger loans • You could have to pay an early repayment charge
Monthly loan ready reckoner
on some loans if you repay before the end of the
This is how much you’ll roughly pay each month for
agreed term.
every £1,000 you borrow. Term
1 year 3 years 5 years 7 years 10 years
Insider knowledge
Rate
Keep your cash-flow projections and business plan up
5.00%
£85.61 £29.97
£18.87
£14.13
£10.61
to date so they’re available when you need to apply for a
6.00%
£86.07 £30.42
£19.33
£14.61
£11.10
loan – it should make the whole process faster and easier.
7.00%
£86.53 £30.88
£19.80
£15.09
£11.61
8.00%
£86.99 £31.34
£20.28
£15.59
£12.13
9.00%
£87.45
£31.80
£20.76
£16.09
£12.67
10.00% £87.92
£32.27
£21.25
£16.60
£13.22
11.00% £88.41 £32.77
£21.77
£17.15
£12.81
12.00% £88.88 £33.25
£22.28
£17.69
£14.39
13.00% £89.35 £33.73
£22.79
£18.23
£14.98
14.00% £89.83 £34.22
£23.31
£18.79
£15.58
15.00% £90.31 £34.71
£23.84
£19.35
£16.19
Info you’ll need to provide when you borrow money Depending on how long you’ve been in business, and whether you already bank with Barclays, you’ll normally need to show us: •
your business plan, which sets out your business goals
• three years’ trading accounts (less if it’s a new business), with profit and loss and balance sheets included • a personal budget planner showing your personal assets and liabilities
Please note: • This table is for information purposes only and shouldn’t be seen as advice or commitment of any lender to provide funding. Any figures are not a quotation; they provide an illustration of the possible repayments. • The figure provided shows capital and interest loan repayments in monthly instalments with interest applied to the loan each month. • No fees are included in the calculation.
• what you expect your business to make and spend over the next year • your personal bank statements for the last six months, if you don’t already bank with Barclays.
27
Part 2
Borrowing from family or friends
Other options
A loan from a friend or family member can be a great
Here’s a rundown of some of the ways you could get
way to get both short- and long-term finance for your
finance into your business after it’s been running for a
business. If you do go for this option, it’s a good idea
while. You can also talk to your Local Business Manager
to get everything down in writing to avoid any
about what could be available for your business.
misunderstanding later on. This is a useful option for any business, especially if you’re just starting, as it could provide the boost your business needs to give you more flexibility.
Sales ledger financing Sales ledger financing companies (also known as factoring companies) give you cash by paying you in advance any amount your customers owe you. They then charge you interest on this amount, and collect the
The pros and cons Borrowing from family or friends
outstanding money from your debtors so they can be
Pros
Leasing or hire purchase
• They’re less likely to need security to guarantee
Here you make regular payments, for a fixed period
that you repay the loan • Any profits your business makes will stay within your family or friends.
repaid what they’ve funded.
of time, to use something like a property, a vehicle or equipment. The difference between the two is that with leasing, you never actually own the asset, while with a hire purchase, your business owns the asset once you’ve
Cons
made all the payments.
• If there’s a misunderstanding or you don’t pay back the money on time, you could put pressure
Retained earnings
on your relationships
Retained earnings are the money made by your business
• Your family or friends could lose the money if your business doesn’t do as well as you expect • Family members or friends who help you out
after all its expenses have been paid. Instead of being given out to the shareholders, they’re kept within the business to give it extra working capital, or to buy equipment or assets.
with a loan might expect to have more hands-on involvement in your business than you’d like.
Equity or shareholder funding This is money that’s put into your business by you or external investors (for example, private investors, business angels, venture capitalists or corporate investors). If your business is a limited company, the money is exchanged for shares and is called
There’s no business like yours
‘shareholder capital’. It’s best suited to you if your
We want to help you find the right finance so your
it quickly.
business is growing or if you’re planning to grow
business can prosper. Turn to page 64 for details on how we can help make your business a success. You can also call 0800 515 4621 to make an appointment with a Local Business Manager, or visit www.barclays.co.uk/localbusiness 1: For terms and conditions, please turn to page 87.
28
Getting started
Books: keeping the paperwork in order Book-keeping helps you manage your sales, profits and cash: the three essential areas that determine whether your business is going to succeed.
Introducing balance sheets Your balance sheet is a snapshot that shows how much your business is worth at any one time. It details what assets your business owns and deducts what your business owes (known as ‘liabilities’). It also gives you
Introducing book-keeping
a good idea of how solvent your business is and how
Just as they say business and pleasure don’t mix, the
it’s financed.
same goes for your business and personal financial records. If you keep them separate, you’ll know where
Introducing wages books
your business finances stand, and it’ll make it easier to
If you employ staff you’ll need to record what you pay
complete your income tax returns.
them, as well as their National Insurance Contributions (NICs). HM Revenue & Customs (HMRC) requires all
The ‘books’ you need to keep include:
employers to calculate NICs either monthly or quarterly.
• cash books • balance sheets • wages book (if you employ people) • sales records • purchase records.
Did you know? There are different ways you can manage your books, from manual paper-based systems, to getting a
Of course, you’ll also want to know when your business
specialist to do the slog for you. One cost-effective
is (or isn’t) making a profit. You can do this using a
and simple method is to use an automated software
profit and loss forecast. See the insert at the back of
product, such as Barclays Business Manager. It’ll
this guide for more help on how to do this.
make your tax returns easy to complete and save you time. Turn to page 68 to find out more, or take a look
Introducing cash books
at https://bbm.clearlybusiness.com/
Your cash book is the place where you record receipts
businessmanager/demos to see how easy it can be.
(money you’ve been paid) and payments (money you’ve paid) each day. It shows you how each of these are settled (for example, by cash or cheque). Your cash book should also match your bank statement.
29
Part 2
Introducing sales records It’s important to record all your sales to customers month by month, and to split them into ‘sales unpaid’ and ‘sales paid’. This way, you can see easily what’s owed to you and how quickly you were paid. Number your invoices in sequence so that each one is easy to identify. Here’s an example:
Date of invoice
Customer’s name
Invoice number
Net total
VAT (if charged)
Gross total
Sales paid
5.8.05
Company A
1563
560.00
98.00
658.00
8.8.05
9.8.05
Company B
1564
421.00
73.67
494.67
9.8.05
10.8.05
Company C
1565
1089.95
190.74
1280.69
17.8.05
Company D
1566
200.00
35.00
235.00
Sales unpaid
Unpaid 25.8.05
Introducing purchase records Your purchase records should have separate files for paid and unpaid invoices. This means you’ll be able to see what you owe. Always remember to ask for an invoice or a receipt for your records. Here’s an example:
Own Reference
Date of purchase
Supplier’s name
Invoice number
Net total
156
2.8.05
Company E
LB143
160.00
163
3.8.05
Company F
H1267
100.00
172
11.8.05
Company G
131-05
176
15.8.05
Company H
145-63
Gross total
Date purchase paid
160.00
26.8.05
17.50
117.50
26.8.05
25.60
4.48
30.08
11.8.05
373.35
65.34
438.69
15.8.05
Insider knowledge If your business is a limited company or partnership whose members are a limited company, you’ll need to submit balance sheets to Companies House (www.companieshouse.gov.uk), HMRC (www.hmrc.gov.uk) and any shareholders. Check out these websites for more info or get in touch with a solicitor for advice.
30
VAT (if charged)
Getting started
Doing the sums part one: planning and managing your cash flow For you to stay afloat, the money flowing into your business needs to be the same as – and ideally more than – the money flowing out. This is called cash flow,
“
Real-life story Finisterre is a growing business which provides apparel for surfers. Based in St Agnes, Cornwall, it needed help
and you can keep track of it by monitoring your ‘receipts’
to manage its finances, accounting and cash flow easily
and ‘payments’:
and efficiently. Tom Kay, founder and Managing Director of Finisterre,
“
• Receipts include money you make from selling your
product or service, bank loans, money you’ve put into
says: “We’ve been in business for a little under three
the business yourself (for example, savings), money
years and as we’ve grown, so has the complexity and
you’ve made from selling assets (like a company van),
importance of financial planning and the administration
and cash used to buy a share in your business.
that we have to undertake. We use the Barclays
• Payments include cash paid for buying supplies and covering expenses, repayments for loans, the purchase of assets (such as a computer), as well as VAT, PAYE, National Insurance Contributions and wages.
Business Manager package on a weekly basis to help control our cash flow, stock levels, and manage our customer and supplier relationships. The financial
reporting facility for a wide variety of scenarios is an
excellent tool for ongoing financial analysis, and one If the money coming into your business is less than the money leaving it, your business will fail in the long term.
we use more and more.”
Tom Kay, Barclays business customer, St Agnes.
In the short term, you need to have enough cash on hand to pay bills.
31
Part 2
How to manage your cash flow
Telephone banking
The example cash flow forecast sheet at the back of this
Another option for making payments if you don’t have
guide will help get the ball rolling. Take a look at it before
time to go to the bank. Available 24 hours a day, you can
starting to fill in the template yourself. And of course,
use an automated service to check your bank balance,
your Local Business Manager is ready to help you every
transfer funds and pay bills in minutes.
step of the way.
Card payments
Step 1: Before you start, complete the expected
Using a business credit or debit card to make payments
columns in the cash flow forecast for each month.
for most purchases is easy and efficient. For example,
The research you’ve already done will help you to do this
you could use a Barclaycard Business Card (subject to
(see the insert at the back of this guide).
application and status) for purchases, or the services of a card acceptance company, such as Barclaycard
Step 2: Once you’re up and running, complete the actual sales you’ve achieved and payments made each month. If this doesn’t match what you expected, analyse why this is and factor it in to what you expect in the following months. There’s an example of how to do this on the
Business, to enable you accept card payments as an alternative to cash and cheque. They can speed up purchases and improve your cash flow. Credit cards are more secure than cash and more reliable than cheques. For more info, visit www.barclaycardbusiness.co.uk
cash flow forecast sheet we’ve provided. Direct Debit
Insider knowledge
When you sign a Direct Debit, you give consent to a
When you do your cash flow forecast:
supplier to take outstanding payments directly from your account, which can save you time and money.
• Be realistic. You don’t want to over-commit too early but grow surely and steadily. The research you’ve
Direct Credit
done will help you to figure out the sales levels it’s
Make safe, secure and reliable one-off payments by
reasonable to expect for your product or service
electronic transfer directly into another bank or building society account, to pay wages or suppliers, for example.
• Include all your expenses. You might have some expenses that aren’t included here, so just add
Standing Orders
them in
These enable you to pay regular fixed amounts – for example, a payment to a supplier of £500 could be set up
• Budget for seasonality. Factor in your busy and slow periods so that you have enough cash to pay your
to leave your business account automatically at the same time each month.
suppliers all year round Cash • Ask for help. If you have any questions one of our Local Business Managers will be happy to help you.
Is quick, convenient and guaranteed, but it also carries a risk, whether through loss, theft or fraud. It’s best for smaller transactions, especially retail.
How do I make and receive payments? There are many ways to pay the bills and keep on top of the cash flowing into your business: Online banking
Cheques A traditional way to pay bills and receive payments from your customers, but can be time-consuming: it takes a few working days for a cheque to clear.
Bank when it suits you, day and night, rather than when the bank is open. It’s a hassle-free way to check your balance, transfer money, manage your Standing Orders and Direct Debits, and even apply for business
For more information on ways to make and receive
overdrafts and loans. You can reconcile your books
payments, ask your Local Business Manager.
online with your Barclays business account, too. 32
Getting started
Managing payments from your customers When customers owe you money they’re known as
Expert guidance from a Local Business Manager
your debtors. If you want to build a good relationship
If you’re having problems with your cash flow, try
with good customers, it can be a good idea to offer
these easy ways to help you take control:
them a period of time to pay. Talk to an accountant
1. Use online or telephone banking to monitor your
about how to do this.
day-to-day business finances. It’ll enable you to settle your books automatically.
Here are some tips on what to think about when deciding on your credit policy: • How much time can you afford to give your customers so that you have enough money coming in to pay your bills, make purchases, etc? Take into account credit terms you have from your own
2. Use book-keeping software included in packages such as Barclays Business Manager to tackle two or three problem areas at a time – it can really help you to run your business better. 3. Talk to your Local Business Manager or
suppliers. For example, if you have two weeks to pay
accountant as soon as you notice any problems.
your suppliers, but you let your customers have four
They’ll be able to help solve them as quickly
weeks, you could have problems with your cash flow.
as possible.
• How much will your customers be able to pay? Factor in whether changes in their market will affect this (or whether they can pay at all).
Late payments It’s inevitable: some people just won’t pay when you
• What credit terms are your competitors offering? It
ask them. But if you have a plan in place to chase late
could sway your customers when deciding who to
payments, it’ll make the process faster and easier (and
buy a product or service from.
less embarrassing) to deal with, because it’ll stay strictly
• Do you want to take out invoice insurance to cover cash lost if your debtors don’t pay? Ask your Local
professional. Sending out a series of letters at set intervals is a good way to deal with these situations.
Business Manager for information on how you can
You could also back up each letter with a phone call –
get this cover.
after all, they’ll be harder to ignore than a letter. But don’t be too forceful too early: you want to come across as reasonable as well as businesslike, serious and firm.
Insider knowledge Search out credit references on a customer if you’re thinking of giving credit for a larger amount. You can get these from their bank or other suppliers, or a credit reference agency (you can find these by searching on the Internet). If your customer’s credit history isn’t perfect, or they don’t have a track record, you might decide to limit how much credit you give them.
33
Part 2
Your working capital
Insider knowledge
Your working capital keeps your business going. It’s
Keep records of all correspondence and
made up of debtors, creditors, stock and cash. One of
conversations that relate to your business finance.
the reasons that businesses fail is because they run out
It’ll help you to avoid any miscommunication and
of working capital, so we’ve put together a list of what
protect your payments.
you should look out for. Warning signs • You have customers that can’t pay you – this
Did you know?
will restrict the flow of money coming into
We want you to use your money on the things
your business.
you really need for your business in the early days it’s up and running. That’s why we’ll give you a
• You have customers that don’t pay you on time –
a business account. Just ask a Local Business
contract, right from the start. If you’re unsure, get
Manager for details.
it checked out with your solicitor. • You don’t know the timing of invoices and payments – using a book-keeping package can help you to send invoices promptly and to know when payments are due. • You’re relying too heavily on your business overdraft facility – they can be a useful way to get by, but your account should be in credit most of the time. • You’ve bought too much stock – holding stock can eat into the cash you have available and increase the risk of having to sell off at a discount, or even loss. • You don’t have a collection process in place – make sure that you invoice the right person at the right address so you get paid swiftly. • You haven’t got a plan in place for quiet periods – seasonality affects some businesses more than others, but always remember that you’ll still have to pay your fixed costs, like rent and heating, no matter how many sales you make.
34
period of free business banking when you open
make sure you set out clear terms of trading in a
Getting started
Doing the sums part two: forecasting profit and loss When it comes down to it, your business will need to
How to chart your success
make a profit to succeed. Profit isn’t the same as cash
There’s no magic to it: the basic calculation to work out
flow, though – even when your business makes a profit,
how much you’re making (or your profit margin) is to
it won’t necessarily mean you have cash to pay for what
subtract what you’ve spent from what you’ve sold. If
you owe in the short term.
the total is a positive amount, you’ve made a profit. Try
The profit and loss forecast sheet, like the one included with this guide, will help you to calculate what your profit will be, month by month.
filling out the sheet yourself, or you can always talk to one of our Local Business Managers about our range of software packages that make it even easier to track your profit and loss.
35
Part 2
Stock: taking control Whether it’s dollhouses, hammer and nails or hair dye,
What’s the best way to control my stock?
your business will need stock to operate day to day. All
Choosing the right stock control method for your
the stock you hold – whether it’s finished items or parts
business will depend on several things, including the
that you’ll put together – represents real money. So it
amount and value of the stock, how far ahead you need
makes sense to learn how to manage it efficiently.
to order and when you need to deliver to your customer.
What does holding stock cost your business?
For example, you can use a software package, such as
• Bulky items take up storage space, which costs money. • Perishable items (like food and flowers) or valuable
your stock. This type of software logs goods going into and coming out of your business and handles all other stock control issues, like inventory reports and reordering. Go to https://bbm.clearlybusiness.com/
stock (like machinery) might need specialist storage,
businessmanager/demos for an online demo to see
such as refrigeration and security, which will
how easy it is to take care of your stock.
increase costs. • Your cash flow could be restricted if your assets are tied up in stock.
What’s good stock control? Aim to have enough stock on hand to meet customer demand without tying up too much of your space and cash. Also, different stock items will take longer to be delivered to you than others. It’s important that you manage the way you order them from your suppliers so they arrive at the appropriate time.
36
Barclays Business Manager, to automatically monitor
For more information on the options available and what might be the best stock control option for your business, just talk to a Local Business Manager.
People