Start Up and Run Your Own Business

The Essential Guide to Planning Funding and Growing Your New Enterprise

Jonathan Reuvid

• Publisher: Kogan Page
• Year: 2011
• ISBN:
  9780749461133
• Edition: 8
• Topic: Business
• Subtopic: Entrepreneurship
• Index: Business

Starting your own business is one thing, but running and keeping it going is another. Annually, there are around 400,000 start-ups in the UK, but in a single year 300,000 businesses also fail. You owe it to yourself, your family, and your own ambition to make your business one of the success stories. This book helps you do just that.More than a "how to" book, Start Up and Run Your Own Business brings the skills of experienced blue-chip consultants to bear on your enterprise. Now in its 8th edition, the book lends you both the authority and experience you need to make the right decisions to ensure your business survives and thrives beyond the critical first few years.Author Jonathan Reuvid gives expert advice and commentary on all the key issues you need to address to make your business successful - from business definition, marketing and raising finance, to procurement, accountancy, IT, taxation and HR issues. This 8th edition is also fully revised and updated to cover all the ramifications of the current "credit crunch" conditions and economic downturn for growing and fledgling businesses.Combining best practice advice with cogent strategies for growth and expansion, Start Up and Run Your Own Business has earned a deserved reputation for reliability and authority. This new edition continues this tradition, helping you make the most of your business venture.

Part One

From Concept to Starting

PART ONE CONTENTS

01 Identifying the Opportunity

02 Researching the Market

03 Developing Your Business Plan

04 Funding Alternatives

05 Raising Capital

06 Think Again or Full Steam Ahead

Chapter One

Identifying the Opportunity

Where you are now

The first question for you to answer is: where are you coming from? Why are you thinking about starting your own business now and why are you reading this book?

In previous editions I have suggested that everyone in employment should carry a ‘Plan B’ in their backpack in the expectation that sometime in mid-career you will be faced with an opportunity or driven to consider the possibility of starting up in business on your own as a result of:

• premature retirement;
• inadequate pension;
• restructuring of your employer’s business that limits your career prospects;
• frustration with your job;
• losing your job;
• leaving school or university with no job prospects;
• joining a family business.

The circumstances differ widely and so, probably, will your motivations. Let’s review them individually.

Premature retirement and inadequate pension

Perhaps you have taken early retirement on favourable terms as a part of your employer’s programme to reduce staff. Perhaps your employer has changed the company pension plan so that you will no longer enjoy a defined benefit related to final salary or that your pension contributions have been raised, and this prompts you to walk away with your accumulated pension rights. In either case your pension income, if you are eligible, is unlikely to be adequate and you will have a clear idea of the additional income that you need to generate to maintain your and your family’s standard of living. Earned income now is probably more important than the future capital value of a new business. Alternatively, if you are already a pensioner you may find that you cannot manage on an income whose purchasing power is reduced.

Limited career prospects or frustration with your job

You have two options: soldiering on while looking for better and more satisfying employment, or striking out on your own. If you have an entrepreneurial itch, you will examine the latter while looking for a new appointment.

Losing your job

Whatever the circumstances, redundancy or disagreement with your employer, you are now unemployed and the experience will be unsettling. The good news, if you have handled your exit skilfully, is that you will have received a lump sum in cash. That cushion will give you a little time to plan your future.

Do not take a Micawber attitude that ‘something will turn up’ and rely on finding another job quickly. In today’s employment market, finding a new job is more likely a matter of luck rather than judgement. You must focus on self-employment alternatives, including starting your own business.

Leaving school or university without a job

You may have begun to plan for starting your own business before you left school or while still at university. With the poor job outlook, you would have been wise to do so and, hopefully you will find much in the first two parts of this book to help you start that process.

Joining the family business

You are in a different category from those in the other situations described above. However, you may have similar reservations in taking up the opportunity to those who are fed up with their current jobs, and prefer to explore the alternatives rather than making such a family commitment. Perhaps you dislike the kind of business in which the family is engaged or see no long-term future for it; perhaps you do not relish the idea of working under a dominant member of your family. Again, if you are a self-starter and have inherited an entrepreneurial gene, starting your own business may be more attractive.

As you begin the evaluation process, you need to decide at quite an early stage whether the way forward for you is self-employment as a sole trader (a ‘one-person business’), forming a partnership with one or more colleagues, or starting up and running a company. The decision you take will be partly a function of your business experience, particular skills and qualifications, and partly a reflection of your personal preferences and ambitions. We will return to this question shortly in the context of the type of business that you have in mind.

The small business start-up scene in the UK

Whatever your motivation for wanting to strike out on your own, you should be aware of the overall small business start-ups and closures record before beginning to plan your own venture. The most recent statistics are reported in the November 2009 Bulletin of the Office for National Statistics (ONS) for the births, deaths and survivals of enterprises in 2008.

Of the 2.4 million businesses completing VAT returns in 2008, new businesses accounted for 11.6 per cent. This birth rate was the same as for 2006 but below those for all other years since 2002. Conversely the death rate of businesses failing was 9.4 per cent, at 219,000, also the same as in 2006 and lower than every year since 2000. Taking births and deaths into account, the total number of small businesses increased each year by between 31,000 (2000 and 2001) and 58,000 (2006).

At the time of writing there are no official statistics available for 2009, but we know already that the fallout from the financial crisis and recession has impacted business births strongly. In July 2009, a spokeswoman for Bureau van Dijk, the electronic data publisher reported that 395,327 new businesses had been registered at Companies House. This rate of more than 1,000 new businesses a day is higher than any year in the last 25 years except for 2006–07, the high point of the last boom. It is also significantly higher than the rate over the similar period of the last recession in 1992.

The possibility of launching businesses on the internet has also been a key factor, enabling entrepreneurs to build and run businesses from attics and spare bedrooms.

The chances of survival

More interesting than the absolute numbers are the records for one-year to five-year survival rates of business that were born between 2003 and 2007. Table 1.1 shows the following survival rates from this database.

Table 1.1 Survival rates of new businesses

Births	2003	2004	2005	2006	2007
One year survival	92.6	94.2	94.3	96.5	95.5
Two year survival	78.0	78.7	79.8	80.7	–
Three year survival	63.6	65.3	64.7	–	–
Four year survival	54.3	54.7	–	–	–
Five year survival	45.6	–	–	–	–

Somewhat depressingly, it appear...