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Starting your own business
The Upside
- If you start a business and it really takes off, you can end up with a massive salary, much more than you can earn in a regular job****. Growing a company and making money from it can be lots of fun, and you get to do your own thing.
- There can be a real sense of personal freedom. If it all goes well, there is a great sense of achievement that you can't get anywhere else. The Downside
- Many businesses fail in their first year. If you have run your own business, having to go back to a corporate job can be miserable and you might never feel like you fit in there again. It is financially risky setting up on your own - you could lose everything you have, including your friends.
- This is not for somebody who likes working a regular nine- to-five job; expect to be working evenings and weekends most of the time. A seventy-hour working week is not unusual. What type of business? A) So you want to start your own business. What sort? Sole Trading The simplest and most common way to set up in business on your own is to set up as a sole trader. You need to notify HM Revenue and Customs (HMRC). Tax is rarely simple, but if you are going to set up in business, being a sole trader is probably the most straightforward route for income tax, and it is relatively easy to set up and shut down. Financing it on your own can be difficult, and you are liable for everything if you get into debt, so your personal assets can be at risk.
Partnership Partnerships can have full partners (who work in the business) or sleeping partners (no hanky panky, they just put in money and take a share of any profits). Working this way means that you can have more start-up money, more skills, and there is usually shared responsibility - if you are sick someone should be able to take over your work temporarily. The downside is that if the business fails and one partner runs off, the other partner has to pay all the creditors back on their own, although these days there is the option of a Limited Liability Partnership (LLP) which could help reduce some of the risk. Limited Company These are the businesses with 'plc' and 'ltd' after their names. Setting one of these up means there is limited liability, so your personal assets can be separated from your business assets in most cases. You need at least one director to register the company. Then you must provide the following details to the Registrar of Companies: your company name, registered office, shareholders, directors, and company secretary. It is more legally complicated than sole trading or partnership, taxation is different, and there is public access to accounts. B) Existing Business Instead of starting a business by yourself, you can buy one that is already up and running. The assets, employees and customers are already in place, and a track record often makes it easier to raise finance. Don't believe everything the business seller and broker tell you, get all the facts checked independently, and make sure the business will pay you a living wage. C) Franchise This is where you buy the right to market a company's goods or services. A good franchise gives an instant market position, a
to start a business with no more money than you spend on a Saturday night and end up eventually becoming a multi-millionaire.
- Don't get me wrong about this - becoming rich by setting up your own company is not a get rich quick system. Running your own business is harder work and requires longer hours than having a 9-5 job. It's not an "easy option". The point is that you CAN become immensely rich, not that it's easy. However, if you hate being poor, the extra work required to become rich may be worthwhile.
- The essence of running your own business with success is a matter of good planning. It is a strategic planning philosophy which works best, as seen in the Direct Drive idea. You plan what you're going to do, work out what kinds of things might go wrong, and test the ideas out to see what's practical. If you play chess, apply that chess-playing logic to life and money, and you are likely to be a success. _ Determination is important. It's best to have an attitude of being persistent in working on your business._* You have to keep on at it even though it's hard work and doesn't have any immediate reward.
- Accounting. It's not boring. There are two types: Tax accounting and Admin accounting. Tax accounting is done as follows: Collect all important-looking financial paperwork and put it all into a large bag. Look after this carefully and give it to your accountant. (There are two types of accountants: Those that work for YOU and those that work for the Tax Office. Make sure you select the right type). Admin accounting is something you do yourself, where you work out on the back of an envelope how much money you are getting in and how much money you are spending. Every part of your business has to make sense financially. So, if you're manufacturing something, it has to sell for more than the cost of all the parts (sounds silly, but I have seen businesses where this was not so!). _ This idea of "Admin accounting" is important and extends into having a knowledge of the way money works._* If you have a cash register/till with £1000 in it, a person with no capitalist sense may tell you that you have made £1000. You've got to know this is not true. Your takings might be £1000, but if your stock costs you £800, then you've only "made" £200. Minus your overheads.
_ Overheads are the cost of running a business, such things as electricity, property maintenance, insurance, fuel, the type of things that still cost money regardless of how much business is going on. Watch out for overheads very carefully. Keep them to a minimum if possible._* I've seen companies that take in huge amounts of money and yet still go broke because their overheads are too big. But this is no secret threat that can creep up and bite you. You can quantify overheads and work out exactly how much money your company needs to make to cover them.
- Open a bank account but try to avoid paying "business rates" for it. Most banks have some kind of special offer on free banking with a current account. You don't need to pay for the privilege of paying cheques in, or any kind of monthly fee generally. If you can't find a bank account that's free, run your business from a building society account!
- **_Avoid PARTNERSHIPS. Especially with your friends! If you decide you must have a business relationship with someone, make sure it's all written down and everyone knows exactly what they are supposed to do.
- Limited liability. Whilst it's tempting to be a LTD company, this is often overrated and misunderstood.** The advantages and disadvantages of being Limited are mainly not to do with the snazziness of the company but are to do with investor insurance and formal management. It's often easier and less expensive to be a sole trader. In most capitalist countries, a person can declare themselves to be a company (not limited) just by stating the fact, and there is no official registration required. This is very good for business, as companies can be created ad-lib by would-be entrepreneurs and can succeed or fail on their own merits. *** There are many types of business you can set up._** I have run many businesses (with greater or lesser success) since I left university in 1982. My current business makes more money than if I had a well- paid normal job, and it is THIS WEBSITE www.zyra.org.uk , and I can go on and tell you about affiliate marketing if you like, but you'll probably have some entirely different brilliant idea for a business!
- When signing anything, always read all of it. If there's too much smallprint it's better to refuse to sign it than to sign it without reading it. Look at things I won't sign up to _ Don't have "all your eggs in one basket". If you're a supplier, don't let your business become DEPENDENT on one customer._* A well-balanced company should be able to survive the loss of any one or two customers and still survive. The problem is especially bad where a small company is a supplier to a big supermarket and sells 80% of their produce to the supermarket. It has been known for the customer to eat the company whole by withdrawing the deal, making the company go broke, and then buying the company up for next-to- nothing at the liquidation sale. To avoid this, always have enough lifeboats, such that even if the worst happens, you will not be lost without trace. _ Also, if you have a small shop, be on good terms with other small shops as much as possible but beware of the habits of some of the larger rivals. Some of the more disreputable places have been known to noble suppliers, making dodgy exclusive deals to try to cut out the small shops._* For that reason, it's best to suss the enemy before they suss you out. Wherever possible it's best to have many different suppliers who are all in healthy competition with each other, and to be in-the-know with friends, who all know who the worst offender is. Some small towns live under economic oppression and poverty because of the unreasonable business behavior of a few vested interests who "own the town".
- Another threat to a business which must be watched out for is to do with commercial rent. If you rent a building, be very careful and be on your guard for this. Some landlords have a habit of waiting for a business to be a success and then doubling the rent. To avoid this, make sure the small print is not too bad, and have options open to move to different premises if the problem occurs.
- Don't work too hard, have no fun, and catch the dreaded diabetes. Also, if you run a small business, make sure that even if you are to suffer from a sudden attack of bad health, your business will not be bankrupted. Self-employed people have no statutory sick pay
or other compassionate safety nets. Therefore, it's best to make provision to have some kind of understudy and living will! To sum it up: If you have a desire to run your own business, then you should do it! However, plan what you're doing well and have good strategy worked out in advance. if you've got a good idea, give it a try. Don't risk more money than you can afford to lose, and don't be put off by problems that occur. Listen to different people's good advice and then make your own mind up about whether they are right or not. In principle anyone who can think logically and has some determination about them can run their own business, and some of them will make money. I wish you well with it! Creating a Small Business Plan Why Write a Business Plan? It's easier to be passionate about the future if you can see where you are going and how you are going to get there. Everybody needs a map, directions, and a guide to help them get to where they are going. Your business is simply too important to leave to chance, just like your life. Be realistic when writing your business plan, because over-zealous projections can create problems later and can damage credibility to those who can see through the generous forecasts. What to Include in Your Business Plan Your business plan needn't be packed with detail. You can elaborate in your marketing and operations plans. The business plan should be short and concise. Include the following content:
1. Name, address and contact details of the business along with the business status (ie sole trader, partnership, limited company, franchise).
Before you can even consider raising funds from external sources you must make your own investment. This investment takes two main forms:
1. Financial Investment, as the name suggests, is a direct injection of cash into your business. If you operate as a limited liability company, this could take the form of share capital or a director’s loan. If you operate either as a sole trader or partnership, it will be classified as owner's or partner's capital. The decision as to which type of business to operate can be complex. There are advantages and disadvantages to operating as a sole trader or as a partnership, or as a limited liability company. From the outset you need to seek professional advice on this aspect. 2. Non-Financial Investment is the introduction of assets that you may already own, such as motor vehicles and tools and equipment. These need to be carefully valued for inclusion in your financial records. If you are introducing assets into your business in this way you are advised to seek the help of an accountant. This will ensure that your assets are correctly valued and that they comply with any Inland Revenue guidelines. Elaborated by: Jaime Ramirez Zapata Business Administration Teacher English Teacher Year - 2025
