Is today a good time to start a business?

BUSINESS WITH CONFIDENCE icaew.com

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Is today a good time to start a business?

A presentation by Clive Lewis, Head of Enterprise


Copyright © ICAEW 2012. All rights reserved.


Presentation will cover:• Why people start a new business • Ten Tips for Start-ups • Alternative types of finance for Start-ups• Business plans for bank and outside finance

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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

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Start-up survival rates

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

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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

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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 rewardingBUT: No Merc without work

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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

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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 wrongConsider the alternatives• A part-time business• Gaining experience in chosen sector

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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

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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

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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

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Ten Tips: 4 - Build in Contingencies

• Setting up always takes longer• Think about regulations e.g. Health & Safety, Planning regs,

etc• Delays usually increase costs & add to finance requirements

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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

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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

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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

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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

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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

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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.

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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

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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’?

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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 financeHelp - a phone call away

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Sources of start-up finance

• Your own personal savings• Friends and Family• Credit cards• Credit Unions• Grants (usually for specific groups of people or sectors)• Bank finance – overdraft or loans• Hire purchase , leasing or hiring• Small scale equity finance such as Business Angels• Private equity More information available on the Businesslink.gov.uk website

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Bank finance – information requirements

• Business plan with convincing narrative• Cashflow forecasts show how much finance required and

when it will be repaid.• Past financial reports• Detail of the key people with information on their credit

histories and explanations for past difficulties. Before opening a business bank account, banks routinely credit check signatories to a bank account. They use their own records of a customer’s transaction history. New customers would be checked with the credit reference agencies. They would also do checks required by the moneylaundering regulations.

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A business plan

A business plan should include:• The management team including previous employment • Description of business including trading history• The market, your proposition, competitors, research and

marketing plans• Profit, Balance Sheet and Cashflow forecasts identifying any

borrowing requirements• Details of shareholders, other sources of finance • Security and personal guarantees available A short Executive Summary is vital

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ICAEW Business Advice Service (BAS)







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 theaccountancy and finance profession


Date post:	30-Oct-2014
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