A downtime - a good time to start a business?

A downturn - a good time to start a
business?
A presentation by Clive Lewis, Head of Enterprise

BUSINESS WITH CONFIDENCE icaew.com

A downturn – a good time to start a business?

Why start a new business?

• Have a skill, trade, profession or vocation and want to exploit
opportunities
• Have a new innovative product/ service/ idea
• Have a hobby or interest which might generate an income
• Need an income


Copyright © ICAEW 2011. All rights reserved.


Start-up survival rates

• 90% last one year
• Two-thirds last three years
• 20% still going after ten years
Based on VAT statistics




Reasons for businesses ceasing include:

• Move back to employment
• Sell business
• Merge with other business
• Retirement
• Business failure resulting in insolvency or bankruptcy
• Becomes a part-time business




Soft Issues – Positives

• Being your own boss
• Building something from scratch
• A place in the community
• An entrepreneur role-model
• Tax advantages
• Can sometimes be highly financially rewarding
BUT: No Merc without work




The Soft Issues – Negatives

• It can be lonely being the boss
• You have to be a Jack-of-all trades
• Getting out there / getting known
• Paperwork & regulation burden
• Long hours
• Fear of Failure
• Difficulty in “selling” your business idea




Being in business is not for everyone

• If you need a regular income
• If you are risk averse
• Personal circumstances/ financial situation may mean timing
is wrong
Consider the alternatives
• A part-time business
• Gaining experience in chosen sector




Two quotes from Barclays Bank „Running a business‟ survey

‘ It’s the most satisfying and liberating experience I can
imagine and a fundamental part of my life that I could not
surrender’

‘The practicalities are sleepless nights, worrying about
my staff and how I can pay them every month and where
we can find new business’




Ten tips: 1 - Do research

• Customer satisfaction - Who/ where / what / how much?
• Test product / service/ idea /price/quality
• Use feedback to refine product / service / idea




Ten Tips: 2 - Write business plan

• Use research to write plan
• Description of product or service, market
• Details of key people, experience, roles, etc
• Financials: Year 1 in detail; Year 2 quarterly
• Use plan to identify finance requirements, if any
• Update plan regularly & compare actual performance to date
with the plan.
• In light of comparison review forecasts




Ten Tips: 3 - Secure finance

Being underfinanced is often a factor in early poor performance
• How much & when
• Different types of finance
• Cost
• Obligations
• Credit history
• Friends & family finance




Ten Tips: 4 - Build in Contingencie

• Setting up always takes longer
• Think about regulations e.g. Health & Safety, Planning regs,
etc
• Delays usually increase costs & add to finance requirements




Ten Tips : 5 - Hire the best people you can afford

• If you intend to grow having people capable of taking on more
responsibility is a decided advantage.
• People will often work for below market rates if convinced of
potential for growth in role/ business.
• Being able to trust employees is vital




Ten Tips: 6 - Find a mentor

• Combat the loneliness
• Someone to bounce ideas off
• Your chartered accountant often fills this role
• Use customers and suppliers as sources of advice




Ten Tips : 7 - Information is Vital

• Financial information is not just to satisfy the taxman – use it
to inform yourself on trading performance
• Set up your records from the start
• Talk to your accountant
• Use software if you are comfortable with it
• A good book-keeper is a possible first option




Ten Tips: 7 - Information is Vital – Key Performance
Indicators – daily, weekly, monthly, annual data

• Turnover
• Gross margins
• Overheads
• Finance costs
• Net profit
• Cashflow/ Bank balances
• Working capital – stocks, debtors and creditors




Top Tips: 8 - Be alive to the possibilities

• Don‟t exclude taking the business in a different direction with the
product or service
• Keep a watch for competitors in difficulties
• Listen to customers, suppliers & staff
• Maximize the potential of the Internet- your website should be
professional looking and well designed
• Develop a marketing plan & think about advertising- leaflets, leaflet
inserts &drops, Ads in yellow pages, etc
• Work at getting personal recommendations from customers




Top Tip: 9 - Starting is a Learning experience

• As an entrepreneur you will learn a great deal & obtain new
skills.
• Learn from your mistakes – ask why did that (potential sale)
not achieve the outcome I wanted?
• Mentors - someone who has faced the challenges of starting
a business and succeeded – can help with the learning.




Ten Tips: 10 - Minimise the likelihood/ effects of failure
‘Manage the downside’

• Shorten the learning curve – have previous experience of
sector/ employ someone who has
• Appoint a chartered accountant before starting – many have a
wealth of experience with start-ups
• Manage overheads/ working capital:
- minimise investment in stocks
- finance any assets by HP/ leasing
- encourage prompt payment
- keep some balance at bank/ unused facilities for contingencies




Ten Tips:10 - Minimise the likelihood/ effects of failure

• Be prepared to recognise it‟s not working out
• Protect personal assets - if possible
• Ask „If I didn‟t do this, what would I want to do/ be doing‟?




Chartered Accountants (ACA or FCA) – the trusted adviser

• Record-keeping
• Help decide business format
• Who do I need to notify?
• Taxation compliance / planning
• Help preparing business plans
• Help raising finance
Help - a phone call away




Come to the London Region Stand

• Talk over some of your issues
• Find a chartered accountant
• Obtain a copy of “Run a successful business” publication
We‟re at Stand 284



ICAEW Business Advice Service (BAS)



Aim of the BAS

BAS is intended to provide businesses with
To offer an initial consultation for SMEs and start-
experience ICAEW Chartered Accountant free of
ups with an of talking to a chartered accountant
about business issues, so that they gain
charge
insights into the financial, management and
taxation issues involved in running a business.



Searching for BAS firms



Advantages for SMEs and start-ups

• Provides SMEs/start-ups with professional advice
• Easy to find on website and book consultation
• No long term „lock-in‟
• Initial meeting is free of charge



A world leader of the
accountancy and finance profession


A downtime - a good time to start a business?

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