Startup Guidance

Let’s put something on the table straight away, having business debt is not necessarily a bad thing. As far as a startup business is concerned, some form of debt is pretty much guaranteed unless for some rather strange reason you either haven’t taken on any investment or the investment you have taken on has been written off and is owned outright by the startup business.

Business debt for a variety of reasons is a necessity. The majority of startup businesses for instance will take a loan out to help them in the short term of their business initiation. This investment is then used to purchase stock, manage overheads and of course, to settle any startup costs. Business loans are quite often a long term liability, so in terms of paying it back; this is a long term debt that the business will for quite a while be tied to. Slightly shorter term debt include that of taking a line of credit or even using a business credit card to pay for your short term expenditure.

In terms of looking at your liability for these debts, for instance as a business or as an individual, we must look at how your business functions and what type of legal entity it is. We will look at the two of the main types of business entity and summarise how their debts are allocated in terms of liability.

Sole Proprietorships

This is the simplest form of a business entity but also shares arguably the highest risk in terms of liability. As you may be aware, a sole proprietorship is not a separate legal entity and any debt is secured by personal liability, i.e. you as the business owner. Therefore, all profit and losses that a business accrues are exclusively held by the business owner. With that in mind, any such debt is the responsibility of the business owner to ensure is paid. Failure to do this will ultimately result in your personal assets being implicated and potentially taken as payment for your businesses debt.

Limited Company / Limited Liability Company (Ltd or LLC)

The major difference here is the company is a completely separate entity from a sole proprietorship. The company is a legally separate entity and therefore eliminates most personal liability for any debts that are owed by the business. There are two situations that are worth mentioning that could mean you are personally responsible for the debts owed by the company and they are; 1) you guaranteed the debt or personally guaranteed that any debt the company accrued would be covered by you personally. 2) That your creditors (those who you owe money to) can prove that your business was trading as a sole proprietorship and therefore there was not a separate legal entity. The second is fairly rare and as long as you are using separate bank accounts and ensuring all transactions/operations are within the limited company and not you personally, it can be avoided fairly easily.

Now that you are aware of your liability, if you should run into debt it is important to manage it and not allow it to get out of hand, whether you are a sole proprietorship or a limited company it makes little difference, a debt is a debt. There are a number of business debt consolidation organisations who specialise in helping you get out of debt so don’t be afraid to stop in for some free advice from time to time should you find your business debt is spiralling out of control. All debt can be managed, if managed correctly and not avoided that is.

As an entrepreneur, weaknesses aren’t always easy to identify, especially when you have a hundred other things to be doing with your time. However, when you have a chance to reflect on your own performance, perhaps on a Sunday afternoon or at the end of a long day, it is important not only to assess your organisations performance but also your own.

When you are working on your own and in theory have nobody but yourself to answer to it can be difficult to assess and monitor your own performance. The reason why it is difficult is simply because your time is usually filled with the actual “doing” of a given task, not mulling over your performance levels and whether you could have done something differently. This is a mind frame that you actually need to get out of and fast! Just as if you were answering to a superior, your role as an entrepreneur is to ensure that you, as your own boss, are performing at your very best and getting the most from every opportunity. After all let us just remember that you are the boss and it is ultimately you who can affect performance.

The average entrepreneur probably won’t admit that they have a weakness, at least not publically, we are rather proud individuals. It’s important however to consider where your performance could be improved, especially in the first few years as your own boss. Just like a business plan is vital, measuring your own performance and improving upon your assessment is part of the iterative process that entrepreneurs must implement into their daily lives.

A lot of your professional development can be maintained quite easily through the iterative process that I described above. Using the self-assessment formula and approving upon it is probably one of the very best methods. Taking this process one step further you could consider sales training since the majority of organisations will have a sales related task. Sales management courses can be an excellent source of improving all aspects of your personal performance. For instance, your communications and interpersonal skills can be developed to enhance your relations with future and present clients. You could also improve your leadership and project management skills if you are managing a team or just trying to improve your own skills.

Whilst as an entrepreneur it is near impossible to be the all-round complete business guru, you can improve your own performance and develop your skills by analysing your own performance with the scrutiny you would as if it were an employee. Make a difference today by looking at what you have done today, and how you could have improved it.

In terms of startup finance, perhaps the most popular question that I am ever asked is whether or not an accountant is essential to maintain your books and submit tax returns and so forth. Firstly, the answer I give usually always depends on the circumstances of the business owner. For instance, I would ask questions such as; how long they have been in business, what sort of industry they are in and how much revenue, roughly, their business is turning over. Since this is a question quite regularly asked, here are three of the most frequently asked startup accounting queries:

How important is maintaining up to date records?

Extremely! In order to comply with the legislation laid out by HMRC (for the UK) and the IRS (in the US) businesses must keep regular and accurate business records. Complying with the law aside, how do you intend on keeping account of how much money you are making without proper accounting methods in place? It’s a no brainer that regular accounting is a must for ALL business owners.

Do I need an accountant or can I do it myself?

It’s quite rare for an entrepreneur to have an accounting or finance background at their disposal but for those that do, lucky you, the chances are you’re going to save a great deal of money! - For those of us who haven’t the matter of bookkeeping and maintaining accounts is a serious one that will need adequate provisions planned.

Do I need an accountant straight away?

This depends entirely on your circumstances and the industry your business operates in. Certainly if you have some important decisions to make with regard to the structure and tax operation efficiency it wouldn’t do any harm at all to seek professional advice in the form of an accountant or legal advisor. As an entrepreneur myself I went a long time without an accountant and therefore saved myself hundreds of pounds in fees because of it. That isn’t to say that you will be the same, it depends entirely on your circumstances but the fact is you don’t always need an accountant straight away.

As a small business startup, the chances are you have attended a trade exhibition of products and suppliers pertinent to the marketplace your business operates within. You could be on either side of the spectrum as either a supplier of products or a buyer of products – either way, trade shows and exhibitions present a lucrative opportunity for all businesses. If you haven’t yet attended an exhibition, you would be strongly advised to do so sooner rather than later.

Why are trade exhibitions important to your business?

As a buyer:

• An opportunity to network with other buyers and potentially discuss & agree business deals.
• Lucrative opportunities to meet suppliers and product vendors from across the globe face to face, see product demonstrations, discuss pricing and product specifics and agree business deals.
• A chance to advertise your own business, exchange business details with buyers and sellers and take publications and pricelists away with you.
• Experience an industry standard trade exhibition made up of industry professionals and your competitors.

As a supplier:

• Much like buyers, this is your opportunity to showcase your products to a massive audience of targeted buyers from countries across the globe.
• An excellent opportunity to meet buyers face to face, discuss possible deals and make sales or agree future business arrangements.
• A chance to meet other suppliers, spy on your competition and compare the market or perform market research.
• Get your name about by giving away promotional material, samples or business cards. Also a chance to offer your stock-list/price-list to qualified buyers and gain their trust and contact details in exchange.
• When you have an opportunity as good as this to attend a trade exhibition (many are free entry if you book in advance) it is vitally important to ensure that you are prepared and have everything you need with you so that you can make the most of your visit.

How can I be best prepared when attending a trade exhibition?

Top Tips for Buyers & Suppliers:

• Revisit your business plan, make a list of products that you are actively trying to source, a list of products that you may wish to research and identify key areas where your knowledge is limited and you perhaps wish to find more information on.
• Consider what direction your business is going into, try to foresee which areas you could develop into and consider products either related to, or applicable to your current range.
• Prepare your contact information and ensure that you have it available to your potential suppliers. Ensure that you leave enough time to produce business cards and brochure printing, leaflets (if applicable) and so forth.
• Have a clear plan and idea what your objectives are at the exhibition. Never attend a show without a plan of action, aimlessly wandering around will prove ineffective and frankly is a waste of your time.
• Consider your startup finances before attending exhibitions where the objective is to place bulk orders with suppliers or manufacturers. You will need to have a clear idea of how much capital you have available or have access to in order to foresee what sort of quantities or range of products you can potentially purchase. Clearly there is no point in discussing purchasing goods that you can neither afford nor effectively distribute as a business.
• Get the most out of the experience. Pick up every leaflet, pricelist, supplier/buyer contact you can (within reason). Arrive early, leave late and get a good night’s sleep the night before. Consider your travel arrangements if you are travelling overseas or require a hotel to attend multiple venues or days.

So you’ve got a fantastic small business startup running alongside your career job and you’re considering packing the career in to take your startup business to the next level. Before you do, you want some re-assurance that you’re doing the right thing and making a sound decision for both your future and your families. No doubt you’ve had the conversation with your family or perhaps just considered it in your own mind or through physical planning.

Prior to even thinking about packing the day job in, you’ve been experiencing good levels of success with your own startup business, sales have been growing month by month and the challenges have remained fresh and interesting. Your profits are increasing as your sales tally and are starting to provide a very nice residual second income. You have also planned what you would do with the small business startup and where you would take it should you be doing it full-time. All that remains is making that last choice over whether you’re going to go for it and pack the career job in and go it alone or whether you are going to continue as you are by using it as a secondary source of income. Sounds familiar? ..

The law states that you are perfectly entitled to run a small business - or any size business in fact - alongside your career job just as long as you declare the income you are making to the relevant tax authorities. For the UK that would be the Inland Revenue through the self-assessment system. If you haven’t done this already and have been running a business for longer than three months, you are actually breaking the law and are strongly advised to consult with HMRC immediately and ensure your business is registered for self-assessment. So the question still remains over whether you are willing to risk it all and go it alone or stay employed and have the security of a long term job. But then, the flip side of that argument is just how secure your so called career job actually is given today’s financial climate? For arguments sake let us say that your job is secure and your small startup business is booming - where next?

Firstly, avoid telling your boss at all costs that you even have a small business running alongside your day job let alone that your planning on dumping him for a sweeter deal elsewhere. The chances are he/she will not share the same enthusiasm that you do and it may even lead to more problematic circumstances. It’s difficult to keep something from your employer, especially if you have a good relationship with them but you have to keep it to yourself and stay under the radar at all costs.

Secondly, don’t take the decision to tell your boss too lightly. Once you have told him/her the chances are you are going to become pretty unpopular pretty quickly, so avoid saying anything at all until you decide its time to leave. In fact, you don’t even need to tell them the reason you’re leaving. I guess it depends just how much respect you have for your employer, the chances are most wouldn’t divulge the real reason anyway!

Once you’ve told your boss that you have your own small business and are considering going it alone, there is no turning back. Consult our Small Business Startup Checklist before you think about making that call.

Your family are the most trusted and reliable people in the world, at least that’s what we hope to think they are. Consider this – your family are part of your everyday living and they are there for you every step of the way while you are growing up. Now put this into a business perspective and see if you can see the same pattern of growth and neutering that you see when you are coming of age.

If you have already started a new business, the chances are you have used you family at some stage for either advice or help running the daily operation of your startup venture. If you haven’t used your family at any stage during inception, maybe you are one of the lucky ones that has so far, not needed their help. If that is the case, kudos, the future looks bright for you.

For those of you who are yet to start a new small business, in this article we are going to discuss why family can be so useful during the startup phase.

Tip #1 - A great source of advice

The chances are your parents, grandparents or distant relatives have either operated their own small business or know somebody that has. As with anything else in life, you can use their knowledge and experiences to your own advantage by seeping every bit of it from them. During the startup and development stages of starting a new business you will need questions answering, you will need advice on certain issues and family is usually great for all of that.

Tip #2 - A source of startup finance

Although it may make some of you uncomfortable to take a loan from your parents or close relatives, you would be surprised just how many of us do it. Your family can be a great source of low cost and flexible startup finance, incomparable to regular high street offers. If you need a few hundred to a few thousand pounds/dollars to get your startup plans in motion, present your business plan to your family members and ask them outright for their investment. The chances are they will accommodate your proposal and support you with your endeavours.

Tip #3 - A source of labour

Despite the slightly flippant choice of sub-title above, your family can be an excellent source of cheap labour. Let’s face it, who in their right minds would help you pack boxes for half the day for cleaning their car? – You get the idea. Whether you have spouses, brothers, sisters or even parents who have a little spare time from their own chores, they will help you should you need it. If you’re on to a good thing and making some money, share the gold and don’t always assume that your family shouldn’t be paid.

Don’t underestimate just how useful and cost effective using your family is during the inception and development stages of your small business. When it comes time for taking on employees, where normally you would have to pay for each and every task that they do, you will be grateful what your family would otherwise have done for free. Don’t be afraid to ask for help, your family are there if you need them.

Finding a business angel investor that is both reliable and right for your business requirements is certainly no walk in the park. With many established business angels now having a fully pledged online presence, the search has certainly got a lot easier, but that said, how do you know who to trust since the web is often referred to as a faceless community?

Well, before you even consider looking for an angel investor you should have exhausted all other routes for startup finance. As I have said before but will say again, your family and friends can be a great starting point for startup finance, not only from a cost effective point of view but they will usually give you one of the best market rates available. (i.e. incomparable to regular high street lenders).

The first route I would always advocate for external investment from a business angel is contacting one of the many business angel networks that operate across the UK and overseas. The British Business Angel Association (BBAA) matches investors and companies from across the country. There are several other examples, Envestors.co.uk and AngelsDen.com to name just two. These angel investors are part of a syndicate of wealthy businessman and women who provide competitive funding for small business investments for up to £2 million.

The process of securing investment is relatively straightforward but depending on how you and your business perform, that may not be entirely true. You must plan and detail your business plan (thoroughly), then send in a preview of your opportunity for the investors to consider. If the angel investor requests for more details then you would normally turn up for an interview and a formal meeting. It is usually the “getting through the door” stage that most small businesses struggle with since angel investors have no shortage of applications for funding each and every week. Think yourself lucky for even getting a response from them!

The most important thing to get right before you even consider going to an angel investor is your business plan. The business plan has to be squeaky clean and secure enough to withstand a barrage of questions and queries from your potential investors. If you have seen the BBC television series Dragons Den, you will know exactly what I am referring to when it comes to having a solid business plan. You need to know your business inside out and have all the important figures to hand at a moment’s notice.

You should be prepared to have your business and personal life questioned inside out by an angel investor. I mention this as for some reason some small business owners walk into an investor and feel these questions are inappropriate or aren’t worthy of a proper answer. You have to remember that the investor isn’t just funding your business, they are funding the people behind the business too. Try and put yourself in their shoes before refusing to answer their questions. Refusal to answer will often lead to your funding application being tossed out straight away. They will want to nail down to who exactly is going to be running the business, how they are going to run it, and what your projections are for success and expansion. This should all be in your business plan, but if it isn’t, make sure it is come interview time.

The above isn’t an exhaustive list and certainly aren’t the only things that should be top of your list when you are trying to secure business angel investment but they are a start. Remember, the business plan is key.

What are business angel investors?

Business angel investors are usually extremely wealthy individuals who invest in new startup businesses or companies looking to expand in return for equity in the business. Business angels quite often operate on their own, but also occasionally work in large conglomerates or an investment syndicate to either share the risk of investment or to combine funds for a large scale investment.

Who are business angel investors?

Most typically, business angels have already made their money through their own business ventures and are now looking for opportunities to invest in other businesses to get a return on their own capital. Statistics say that most business angels are men and aged between 40 and 60. With the expansion of the technology industry, specifically the Internet, those statistics are without doubt subject to change. Surprising enough, 40% of all business angel investments are lost due to business failure. Therefore it isn’t uncommon to see many venture investors sharing the risk with other angel investors rather than chasing high returns which, statistically have depleted chances of coming to fruition.

What can they offer small business startups?

Venture investors can usually provide an instant injection of capital for a small business startup. Business angels are an obvious alternative to bank loans or friend/family investment. They are most commonly associated with being a source of equity finance, in other words they retain a stake in your business in exchange for the capital injection.

How much finance do venture investors typically offer?

The amount that business angel investors invest in your business will of course differ depending on your situation. No two situations are the same in the business angel game. Typically, investments ranging from £10k to £250k are most common. Quite often as previously discussed, the higher the investment, usually the more investors that are involved in the funding of the deal. Larger investments (£100k plus) typically take place through syndicates.

What else are business angel investors useful for?

It should be stressed that business angels aren’t just cash injection providers, they can usually offer unrivalled business experience or provide lucrative contacts within specific industries that can either expedite product/brand development or bypass various channels. (I.e. expedite market entry, provide direct access to suppliers/brands etc).

In part two of this article, we will look at how you can find business angel investors and how to secure a deal with them - Don’t miss it! [Part Two is now available. Follow straight on from this article here: Finding Business Angel Investors for Startup Business Finance.]

In a previous post we covered how to choose a name for your business. In this, part two of that article, we look at how you can check for its originality and ensure that you aren’t thinking of choosing a name for your business that already exists.

Why do you need to search for the availability of a business name?

There are a number of reasons why a startup business would want to perform a few checks before choosing a business name. The most common reason is that as a new business, you wouldn’t want to have the same name as an already existing business. Firstly this would be confusing for your customers to potentially see two companies with the same name and secondly, you may be encroaching on another company’s right by using their trademark. As simple as it sounds, you couldn’t start a new business and call yourself, Google Inc, as clearly this is against the law.

It would be fair to say that if you come across a business that goes by the same name as you, and this name isn’t trademarked or registered as a company and the business is located overseas or far enough away from your own operations you could potentially call your business by the same name. It is hard to choose a unique name for your business and I don’t think there is anything particularly wrong with sharing the same name as another sole proprietor, but ideally speaking, having a unique name has some serious benefits.

How can I perform a business name availability search?

• Search the Internet – Your first stop should be your favourite search engine. Type the keyword or exact name of the business you are considering and see what crops up.
• Search local and national phone books – Check your local phone directory and yellow pages directory to see if any businesses have similar or exact same names.
• Search business directories – Similar to the above, search as many business directories that you can get your hands on.
• Check with company registration websites – For the UK, you could check the Companies House website for businesses that are registered companies that may have the same name as you. For the US, you could check a site such as BizFilings.
• Search Domain Tools – Certainly under modern circumstances and the need for a web presence you should really check to see if the name you are considering for your business has a domain name available. If it does, that’s another tick in the box for your choice.

Which ever name you decide on, make sure its right for you and your business. Don’t rush the process and certainly don’t choose a name that doesn’t have longevity, you have to keep the future in mind when choosing a name for your business.

Choosing a name for your new small business startup probably isn’t the first thing that you will do, but it is one of the most important things that you will do during the startup phase. Prior to the stage where you are going ahead and choosing your new trading name you will of course have established what type of business you are starting, how you are going to start it, and when. You will then have the choice of types of businesses that you can trade as. For instance, in the UK you will have the choice of being a self-employed individual, ie; a Sole Trader/Sole Proprietorship or perhaps a Limited Company (Ltd) or Partnership. In the United States however, more often than not you will become a LLC (Limited Liability Company) or perhaps an LLLP (Limited Liability Limited Partnership). With your business entity type established, the next stage is choosing a name for your business.

First things first – To save yourself a lot of heartache and potentially wasted time down the line, reading this guide is an absolute must. Let us begin..

How important is your business name?

Perhaps the very first thing a potential customer will see is your business name and instantly an impression or opinion will be made of your organisation. I happen to believe that the name of your business, in terms of short term visibility, is more important than your sales pitch, your inventory or even yourself and perhaps employees. You may have excellent customer service skills and a fantastic product but if you get your business name wrong, a customer and a potential sale can all be lost in a moment. Under most circumstances, the name of your business tells a lot about your business to a viewing customer. Remember we discussed earlier in this article how customers make instant judgements of your business based solely on its name. They do this even before they have even seen what else you have to offer them.

How do I choose a good business name?

The first thing to think about is what industry or market sector your business is operating in;

• Are you a service or product based company?
• How important is branding to your business in the industry?
• Are you ever likely to need to be able to brand your business in a specific way?
• How crucial do you think your business name is going to be for marketing purposes?
• How about expansion? Do you believe that there are other market sectors your company may diversify into? What about expanding overseas? What are the implications for that?

It’s essential that you appeal and strike the right tone to your customers with your business name. If you think for a second about the largest and most successful brands we have in our world today. The likes of McDonalds, Nike, Google, Sony and so forth, these are businesses that have developed a brand, not just a business name, and good brands practically sell themselves.

What other considerations are there?

Over the course of running your own business you are going to get a lot of practice saying your business name and seeing it associated with your own name. You may think that it’s a no brainer to choose a name for your business that you like the sound and sight of, but keep that in mind when choosing.

Something that business startups forget about is whether another organisation has the same name as you. For obvious reasons, having the same name as another business really isn’t a good idea, especially if trademarks or other rights are involved. Always check that the name you have chosen is not already in use.

Your business name needs to be memorable. Why? Because you want customers to remember your name and directly associate it when they are looking for the products or services that you tender. Keep in mind that the longer the business name, the less likely people are to remember it. You may think that something short and unique is the way forward, certainly most successful brands are like this but let’s not go too far off the chart it becomes too unrelated to the business sector you are operating within. Don’t chase a short name and sacrifice its relevance to your organisation.

As easy as it sounds – business names should be original, concise and coherent to the sector you operate in. Choosing a name for your business can be a tricky task but take time over it, it will hopefully be with you for a long time to come!