Start a

Business
an easy guide
 Business
contents

an easy guide
Start a

were here to help

Invest NI has produced Start a Business to encourage and support people like
you. This guide is just one of the services we provide for new businesses.

three pages explaining how to use

Start a Business, telling you more
about us and how we can help you 2

useful contacts 76

laying the groundwork

could you be an entrepreneur? 5

researching your market 8 why I wanted to set up
pricing your product or service 14 my own business 6
marketing your business 20 
how I researched my
market 10


setting the whole thing up

financing your business 25

forming your business 31 how I raised finance for
your legal obligations 37 my business 28
setting up your first 
communications and IT system 44 how I set up my
firms IT 48


youve got your first customers

effective selling 51
simple book-keeping 58 how I sold to my first
credit control 63 customers 54

the essential plan

writing your business plan 69

how I wrote my business
plan 72

Content by BHP Information Solutions
Design by Ben Wuersching
Photography by Harrison Photography
Printed by Warwick Printing Ltd
BHP Information Solutions Ltd 2011. All rights reserved. No part of this publication may be
reproduced or transmitted without the written permission of the publisher. This publication is for
general guidance only. The publisher and expert contributors disclaim all liability for any errors or
omissions. Consult your local business support organisation or professional adviser for help and advice.
Provided by Invest Northern Ireland and part financed by the European Regional Development Fund
under the European Sustainable Competitiveness Programme for Northern Ireland.


were here to help

If youre looking to start a business, Call 0800 027 0639 or visit
youre looking in the right place. This our website at www.goforitni.com
guide is just one of the services the to find out more about the
Invest Northern Ireland business- Go for it programme.
support network offers to people
like you every day. So if you want to
know how to start up a business or
how to make it grow, get in touch
with us.

2
starting up?
go for it!
You can join the thousands of
people who are already making
a success of their business in
Northern Ireland, providing goods
and services to both domestic and
international markets.
If youre planning to start a
business, Invest Northern Ireland
is dedicated to helping you. We
provide advice and support through
the Go for it programme and weve
produced this guide because its
our job to encourage and support
people like you to start and grow
successful businesses.
Weve also produced The
No-Nonsense Guide. It sets out the
rules and regulations that apply
when you start up in business, and
how to comply with them.
Starting a business isnt easy and
you need all the support you can
get. This guide points you in the
right direction with easy-to-read,
no-nonsense advice on a range of
topics essential to starting your
business.
The quality of this advice should
give you a flying start. Weve made
sure all the major issues you want
guidance on are here, including:
our mission
Invest NI provides businesses
in Northern Ireland with a
single point of contact and with
expert advice and high-quality
programmes of support. Our role
is to grow the economy by helping
new and existing businesses to
compete internationally and
by attracting new investment to
Northern Ireland.
Am I suited to starting and
running a business?
What market research should I
carry out?
What are my legal and tax
obligations?
How much do I need to sell each
month to break even?
Whats the best way to keep my
books?
how to use this
guide
You can use this guide in two
ways. If youre considering making
the leap and creating your own
business, you can read it through
to get a clear idea of all the areas
you have to cover.
And if you do decide that running
your own business is for you,
the guides logical, practical
structure means you can use it
as a reference companion every
step of the way from identifying
the niche your business will fill to
the best ways of winning your first
customers and writing that all-
important business plan.
If you require a copy of this
document in an alternative
format (including Braille, disk,
audio cassette or in minority
languages to meet the needs
of those whose language is not
English) then please contact
Invest NIs Equality Team on
028 9069 8273; Textphone
028 9069 8585 or email
equality@investni.com
And our commitment to you
doesnt end on the last page of
this guide. In fact, its only the
beginning. Were confident the
guide will be useful, but we also
realise it wont solve all your
problems. Thats where Northern
Irelands business-support network
comes in, with specially trained
business advisers who know
how to deal with the issues that
confront start-up businesses.
The business-support network in
Northern Ireland is made up of a
number of partner organisations.
The support available for new
businesses can be broken down
according to the market you intend
to serve:
global: if you have potential
sales of 1 million (including
30 per cent in export markets),
contact our Global Start Team
global@investni.com
export: if you are planning to
sell outside Northern Ireland,
including into Britain and the
Republic of Ireland, contact
Invest NI 028 9069 8000;
enquiries@investni.com
local: core support and advice
is provided through the Go for
it programme contact 0800
027 0639; www.goforitni.com
3

tailored support
If youre starting a new business
or just thinking of it the Go for it
programme can provide you with a
range of support tailored to your
business needs.
Call the Go for it helpline on
0800 027 0639 or visit
www.goforitni.com
If you're already in business but
want to grow, then contact our
Regional Business Team who may
be able to help.
Call Invest NI on 028 9069 8000
or visit www.investni.com
knowledge is
power
The Business Information Centre
at Invest NI provides access to a
wealth of published and electronic
business information to help
businesses develop and grow
confident theyre basing their
decisions on sound commercial
intelligence.
Using carefully selected resources
and support from fully trained and
4
experienced staff, the Business
Information Centre gives you
information on:
Key markets around the world
Company profiles worldwide
Sourcing of key components and
raw materials
Sales leads
Business opportunities
Agents and distributors
Funding information
EU legislation and updates on
EU policies and programmes
EU public tenders information
The Business Information Centre
also holds a contract with the
European Commission to host
Enterprise Europe Northern
Ireland part of a network of
some 500 centres in Europe and
beyond. Through a dedicated email
system, the network provides vital
local knowledge within a short
timescale.
For more information contact
the Business Information Centre
and Enterprise Europe Northern
Ireland, based at Invest NI's
headquarters:
Bedford Square, Bedford Street,
Belfast its open
Monday 11am-5pm;
Tuesday-Friday 9am-5pm. To
make an appointment to use the
resources at the Information
Centre, or if you have a query,
please call 028 9069 8000 or
email bic@investni.com
our partners
Invest NI works closely with its partners to ensure that services are tailored
to your needs. Among the organisations we work with are:
Enterprise NI/Local Enterprise Agencies
Princes Trust NI
Advantage NI
Trading Standards
Local councils
Department of Agriculture and Rural Development (DARD)
NI Chamber of Commerce and Industry
InterTradeIreland
Womens networks
Association of Northern Ireland Colleges (ANIC)
JobCentre Online

1
all about you and
your team
1.1 You will need determination,
total faith in your business
idea and confidence you
can turn it into reality.
1.2 You must have an
independent spirit.
1.3 You must be determined
and motivated.
1.4 You will need flexibility and
humility.
1.5 You must be responsible and
reliable, paying attention to
detail and applying yourself
to tasks you may not enjoy.
1.6 You must have stamina and
be willing to make sacrifices
and work long hours.
laying the groundwork
could you be an
entrepreneur?
Running a business can be exhilarating, liberating and rewarding. But it
isn't for everyone. There are millions who have done it successfully, but
there are many who have found that it isn't as simple as they thought.
You need to consider seriously whether starting a business is right for
you by honestly appraising your strengths and weaknesses and what
making the move would mean to you, your family and your friends.
This section covers:
The personal qualities needed to run and own a business.
The factors that can make the difference between success and failure.
At this stage, its all about you. There are key qualities that every successful
entrepreneur has. Some might come naturally to you, others you might have to work
at. Youll need to check youve got at least some of these attributes before you start.
You cant be half hearted. You must be able to show others that you are
confident too.
But as your business grows, you must be ready to share responsibility and to
build and lead a team.
For more information, visit www.nibusinessinfo.co.uk/leadershipskills.
Running your own business can be lonely. Youll need to be a good networker
and find the people out there who can support you.
Have you got the inner resources not only to survive but to thrive?
You will have to keep going when times are tough. Have you got the grit to
make things happen even when they are not going your way?
You must learn from mistakes and make changes if you discover a better way
of doing things.
Are you happy to ask questions when you're unsure? Are you happy to ask
questions even when you're sure? And are you comfortable taking advice?
Just because you will be boss wont mean you can put off work or decisions.
Also, you dont have to act on your own without getting advice, but once
youve made important decisions, can you stick with them?
Make sure you understand the effect that starting a business will have on
your personal life. Be prepared for change.
For more information, visit www.nibusinessinfo.co.uk/worklifebalance.
www.nibusinessinfo.co.uk/startingup 5
why I wanted
to set up
my own
business
Lorraine McAleer is owner
of Learning SPACE, an
award-winning retailer of
toys and educational
support aids. She set up
the business to provide
easier access to toys,
games, software and
books that help and
support learning. Now
selling online and through
a retail outlet, she says
that the business has
transformed her life
Ive always been aware that some
children need extra support when
theyre growing up. My sister
Emma has Sotos syndrome a
genetic condition where children
grow too quickly in their first two
to three years which can lead to
physical, communication and learning
difficulties and I was always trying
to find suitable resources to help her.
While I was teaching in London
for six years, I was aware that
both teachers and parents were
frustrated when looking for products
to meet the needs and interests of
children. I thought there had to be
a quicker more convenient way to
get suitable products. I saw a niche
in the market, was intrigued and
started my research. In the back of
my mind, Id always known I wanted
to go into business in one way or
another. And Id always loved working
with children. So creating a business
that involved mixing the two together
was the perfect solution.
I came back home and completed
Invest NIs Start a Business
programme in 2006. It was great
it made me really focused. As soon
as I came up with the concept I knew
it was vital to keep the ball rolling to
6
Sock it to 'em: Lorraine's
educational toys are a business hit
make Learning SPACE a reality.
I was constantly talking to people
about starting the business, getting
others opinions and ideas. I used
other teachers, therapists and
support organisations like Autism NI
for advice and as sounding boards.
And I had a business mentor to
bounce ideas off and got practical
support from Women in Business.
Id worked in a toy shop while I was
supply teaching because I wanted to
get some experience of working in a
toy shop. The more research I did,
the less of a gamble it became. I had
to make sure it was a viable business
idea before I started not least to
persuade the bank manager!
Becoming my own boss was a big
learning curve. At the initial stages,
you have to be absolutely everything
the accountant, the marketing
person, the sales team. Its hard,
but exhilarating. And now Ive got my
sister, Mary, on board as assistant
manager, its a lot easier. The
business has grown and I can finally
delegate some of the responsibility
and concentrate on strategy and
business development. I couldnt do it
alone and theres plenty of support
out there from people like Invest NI.
Youve just got to go and get it.
Starting and running my own
business has made an enormous
difference to my life. Its incredibly
satisfying to do something that
supports so many people. It really is
something I love doing its fun to
come to work every day. And theres
not many people who can say that.
Lorraines tips
1 Be passionate about your idea
2 Research as much as you can
3 Ask for advice and support
Learning SPACE
11a Fountain Centre
College Street
Belfast BT1 6ET
Tel: 028 9031 9360
www.learningspaceni.co.uk
laying the groundwork :: could you be an entrepreneur?
1.7 You will need to be
resilient, patient and
realistic. Success isnt
usually easy or quick.
1.8 If youve answered Yes to
most of these questions,
youre in with an excellent
chance of success so
read on.
2
the right
circumstances
2.1 Check you have the support
of family and friends.
2.2 Make sure you can afford
any financial risk.
2.3 Be sure you are thinking of
running your own business
for the right reasons.
2.4 Once again, if the answers
are positive, youre on the
right lines.
3
facing up
to doubts
3.1 You may have a fear of
failure. This is perfectly
natural it can happen.
3.2 You may be worried about
the implications of business
failure on your career.
3.3 Dont worry if you dont
have all the qualities listed
above.
3.4 You shouldnt be worried if
your knowledge of the finer
details of running a business
is not great thats what
this guide is about.
You will need to face obstacles with renewed strength and determination,
have the energy to bounce back and the long-term vision to see setbacks as
isolated incidents.
Are you realistic enough to realise you wont make millions overnight? Can you
nurture the business over a long period of time to make it work?
If your responses are mainly negative, you have a number of barriers to
surmount. You should talk to a business adviser to help you assess how these
can be overcome.
For more information, visit www.nibusinessinfo.co.uk/startingup and
www.nibusinessinfo.co.uk/goforit.
You may be the right kind of person to run a business, but this doesnt
necessarily mean that its the right thing for you to do. There are other
factors you should carefully weigh up.
It helps if family and friends have the same faith in you and your business that
you do. Will they support you every step of the way?
You are probably thinking of committing your own money or assets. Can you
afford to lose this investment?
What is more important to you safeguarding the money and security or
seeing the business grow?
If you place others at risk, have you considered the implications for them?
Are factors other than a determination to go it alone affecting you?
Its not enough to be fed up with your existing job you have to be actively
prepared to take on the challenge of running your own business.
But if serious questions remain, youll need to persevere and do more work
and thinking before creating your own business.
Starting a business may be a challenge and you may understandably be
apprehensive. But its worth acknowledging any doubts before you proceed.
You will need to accept that risk is part of starting and developing a business.
If so, you are thinking of failure before you start, which doesnt bode well.
Besides, your business will be your career. If youre worrying about this, it
may not be right for you.
It is essential that you recognise your weaknesses and any other obstacles in
your way.
It is likely you will need support in areas where you are lacking.
Once again, dont be afraid to ask for advice. Family, friends, banks and
business-support organisations such as Invest Northern Ireland, your
Local Enterprise Agency, Princes Trust NI and Advantage NI all will have
experiences and expertise you can draw on.
Few people know everything about running a business when they set out.
Remember: talk to friends, family and people who have been involved in
business to gather information. And read on.
www.nibusinessinfo.co.uk/startingup 7
 laying the groundwork

researching your
market
When youre setting up a business, researching your potential market
is essential. Although time-consuming to acquire, a thorough and
reasoned knowledge of the market is invaluable to the future of your
business.
With a true picture of your potential customer base, you can
realistically assess the viability of your venture. Resist the temptation
to rush ahead, analyse your results hurriedly or cut down the amount
of research it can be the difference between make and break.

This section explains:

How to decide what you need to know.
How to exploit existing information sources.
How to conduct market research.
How to analyse and act on the results.

1
what you need
to know
1.1 Your intended market or It is likely that you have an instinctive idea of who your customers could be.
sector.
If you wanted to start a retail business selling childrens hair accessories, the

main targets would be mums or young girls.
If you were setting up an ironing service, single business people or busy

parents would be two possible market sectors.

If you do not have a clear idea of the market for your business, your research
will have to be more broad-ranging to find one. A potential business without a
defined customer base is a failure waiting to happen.

1.2 Who your potential
customers are.
If you will be selling to individuals, you need to know their sex, age, marital
status, occupation, income and lifestyle.
If you will be selling to businesses, you need to know their size, industry type,
product-buying patterns and service requirements.
You also need to know what characteristics are common to all your
customers and who makes or influences the buying decision.
For more information, visit www.nibusinessinfo.co.uk/valuablecustomers.

1.3 What they buy and in what A printing firm should understand whether its customer base will want a

quantities. thousand postcards or a million brochures.
A successful sandwich shop will predict its top-selling sandwiches and how

many of each they expect to sell every day.

1.4 When they will buy.
Customers of a toy manufacturer will buy more towards the end of the year
so that they are fully stocked for the pre-Christmas trading period.
A taxi firm will usually expect more business on Saturday evening than
Monday evening.
For more information, visit www.nibusinessinfo.co.uk/seasonalbusiness.

8 www.nibusinessinfo.co.uk/marketresearch
laying the groundwork :: researching your market

1.5 Where customers prefer to A bookseller will know that while many customers like visiting a shop, some

buy. also buy books over the internet.
Do a hairdressers customers want to come to the salon, or would they

rather have their hair done at home?
You also need to make a decision on a specific location in terms of access,

passing trade or cost, for instance.
For more information, visit www.nibusinessinfo.co.uk/saleschannels.

1.6 Why and how customers Every new business has to know why customers will buy from them rather
will buy your product or than the competition. This will become your unique selling proposition (see
service. Marketing your business, p20).

Your research should test how effective this is. If you are starting a sandwich

shop, are you sure your potential customers will prefer the taste of your
sandwiches to those sold in supermarkets? If you are going to manufacture
jewellery, do retail jewellers think the designs will sell to their customers?
If you are going to manufacture office furniture, you need to know how often

your target customers will want to renovate their offices, and how regularly
they need replacement equipment. You also need to know about the health of
the business-property sector if the economy was shrinking and businesses
giving up property, you might find your customers have no need to buy from you.

You have to understand the needs of your customers and the position of the
market you are going into.

2
your own The research technique you use will depend on whether you need numerical

research information about peoples attitudes or a deep understanding of their views

and motivation.

2.1 Quantitative research The answers provide key statistical

is the type of survey in
which every participant is
asked an identical set of
questions.
2.2 Qualitative research
explores peoples feelings
and attitudes by letting
them discuss things (eg
Why do you like playing
tennis?).
information.
For example, a survey by a tennis
club developer may find that 22
per cent of local adults play tennis,
7 per cent are already members of
a club and 8 per cent would like to
join a club. Using this information,
the developer can decide where to
build a new club and how large it
should be.
The questions can be answered in
a focus group usually six to eight
people or in one-to-one interviews.
The tennis club developer might
discover that most people join tennis
clubs to make new friends and so
decide to add a bar or caf to the
building plans.
Insights like this can give you
a significant edge over your
competitors.
common
mistakes
Failing to do any market
research.
Carrying out market research
once and never finding out
how things changed afterwards.
Being unclear about what
you are trying to find out or
asking questions in the wrong
way and getting the wrong
information.
Cutting costs by using small
samples or just asking a
couple of friends and getting
misleading results.
Interpreting statistical
information wrongly and failing
to see when one or two
opinions distort the overall
picture.
Drawing optimistic conclusions
from information to support
your preconceptions.

www.nibusinessinfo.co.uk/marketresearch 9
how I
researched
my market
Shane Meehan spent
12 months researching
the market and refining
his business plan before
launching Media Lightbox
with his business
partners. As a result, the
firm which offers online
storage and collaboration
tools for businesses
launched from day one as
a service that customers
really value

The idea for Media Lightbox came to

me when I was working for a local
authority as a marketing manager. I
often spent much of my time digging
out images for press and other
departments and thought Wouldnt
it be great if there was a way to
make these centrally available and
save all the hunting around?
Future vision: Shane researched
his customers and competitors

that some people didnt like emailing

I discussed the idea with the
people who are now my business
large files to multiple recipients, so
we added a feature that lets you
email multiple recipients a secure link
to the file held on the system. This
means the recipients can download it
directly when they choose, taking the
pressure off everyones network.
research to start a business
finding out exactly what your target
customer requires means you can
build your business specifically to
meet those needs. And then back
that up with comprehensive data to
make sure theres a viable business
in the idea. Its certainly worked
for us. Weve now got clients from
all over the world, from startups
through to some of the biggest

partners, Anthony Kieran and Cecil
Hetherington theyre the people
who had the technical knowledge
about how we could achieve it. And
12 months later, we fully launched
Media Lightbox. For a monthly
subscription, the system lets you
securely store, catalogue and
manage your digital assets from
anywhere youve got an internet
connection.
At the start we spent a lot of time
talking to peers in the corporate and
government sectors, identifying the
problems they had in managing and
sharing their digital files (like images,
artwork, presentations and PDFs).
Once we had a clear idea of what the
issues were for potential customers,
we built the system to answer those
issues. For example, we found out
Initially we focused on the advertising corporate names.
and marketing sectors, as we found
that these types of businesses have
the greatest need to share and move
around large files.
Once we defined our target market,
we did a lot of desk research. We
looked online at industry reports, Shanes top tips
checked what sort of services our
competition was offering, carried out 1 Research customers with
a detailed price analysis and made different skills and opinions
sure we understood the trends in the
market and what they meant. Invest 2 Benchmark what youre offering
NIs Business Information Centre was
really useful for this. 3 Get support from Invest NI or
And then we did product testing and your local incubation centre
refined the product as a result. We
used focus groups and one to one Media Lightbox
sessions so we got a real feel for how Greenshoots Centre, Ballinacraig Way
customers could best use the system. Newry, Co Down, BT34 2QX
Thats definitely the best way to use www.medialightbox.com

10
laying the groundwork :: researching your market
2.3 Find a sample of your
target market, get them to
try your service or product
and give their opinion.
3
analysing data
fairly
3.1 Keep your distance from
any research.
3.2 Do not take any negative
comments personally.
4
low-cost
research
4.1 Make use of existing data
which is freely available.
4.2 Specialist market research
reports are available.
To find out if people would use your product or service, you could contact
relevant businesses and arrange a morning event for people to drop in for
a coffee and a demonstration. At the very least you will be making new
contacts. Otherwise you could offer to drop in and see them.
Approach potential retailers about test marketing. They may agree to put a
prototype of the product in-store.
It is important to be objective to avoid interpreting the results unfairly.
Do not base market research only on the opinions of friends and family. You
risk hearing what you want to hear, rather than honest opinions.
Record any comments given in a focus group or you may forget criticisms
that would enable you to improve your product or service.
If possible, hand the analysis over to someone who is not immediately involved
in the project.
You can often learn more from criticism and improve your business because
of it.
Trade associations collect data from their members which they often publish
on their websites. Visit www.taforum.org to search a database of UK trade
associations.
Invest Northern Irelands Business Information Centre and Enterprise Europe
Northern Ireland provides free access to the Directory of British Associations
and similar directories. Call 028 9069 8135 or email bic@investni.com for
details.
If you use internet search engines such as www.google.co.uk or
www.yahoo.co.uk, check that information you find is the most recent available.
Government-run sites usually provide a wide range of free and easily
understood information.
Visit the websites of National Statistics Online (www.statistics.gov.uk) or the
Northern Ireland Statistics and Research Agency (www.nisra.gov.uk) for
searchable databases of statistics.
Trade publications often collect useful data from their subscribers. The
Invest NI Business Information Centre and Enterprise Europe NI subscribes
to numerous trade publications and also offers access to directories of
worldwide trade publications (028 9069 8135; bic@investni.com).
A wide range of material is available in Belfast Central Librarys Business
Library, which you can contact on 028 9050 9105.
The Invest NI Business Information Centre can provide you with access to
a number of specialist market research sources, including Mintel, Keynote,
Datamonitor, Frost and Sullivan, AMA Research and Cobra (call
028 9069 8135 or email bic@investni.com).
These agencies produce reports which analyse market trends, purchasing
habits and consumer attitudes.
www.nibusinessinfo.co.uk/marketresearch 11
 laying the groundwork :: researching your market

4.3 Company databases are The Invest NI Business Information

a useful source of
information.
4.4 Your local enterprise
agency can provide advice
on specialist sources of
research.
5 does not like your product or
the competition
5.1 Check out what your
competitors have to offer.
5.2 Consider if the demand for
the product or service will
change over time.
Centre can give you access to
searchable company databases
including Kompass, FAME,
AMADEUS and Dun & Bradstreet's
Global Reference Solution (GRS)
these can be used to find out
about customers, suppliers and
competitors in your sector
(call 028 9069 8135 or email
bic@investni.com).
To find your nearest enterprise
agency, call Enterprise Northern
Ireland on 028 7776 3555 or visit
www.enterpriseni.com.
Try the competitions products or
services. It is the easiest way of
understanding the market and what
you will face when you become part
of it.
Carrying out a detailed analysis of
their strengths and weaknesses will
give you an idea of what you can do
to establish a niche in the market.
Look at the potential the competition
has to improve its service or
upgrade its product. Work out how
you can stay one step ahead.
Invest NIs Business Information
Centre and Enterprise Europe NI
(028 9069 8135) can provide
you with access to a range of
searchable company databases to
help you find out about potential
competitors.
Be aware that selling a must-have
product cheaply might be a success,
but if it has a long lifespan then
customers will not return frequently
enough.
Make sure customers will have a
need to keep coming back this
could be because the product has
been updated, the old one has run out or worn out or because it is so good
they want more.
Could the market be affected by external factors, such as the economy or
legislation? Are there any protective measures you could put in place?
Look ahead to possible problems you may be able to develop your product
to appeal to a wider selection of markets, increasing your chances of survival.
open/closed
questions
When asking people to comment
on your product or service,
there are a few useful tips to
remember.
Asking a closed question will
gain a limited response. Did you
like X product? is likely to be
answered with a simple yes or
no. While these answers are
easier to collate, they are not
as useful in determining why
the potential customer does or
service.
Asking an open question is
likely to get a more detailed
response. What do you think
can be improved? will be
interpreted as a request for
more than a one-word answer.
Open questions will allow
you to find out more useful
information. It is beneficial to
learn if they found the product
or service useful but it is
more useful to find out why.
Consider how you want to use
the answer to a question when
forming it. For example, if you
are thinking of opening a high-
street flower shop, stopping
people and asking them Would
you like to see a flower shop
here? may provide you with a
high positive response rate. But
asking If there were a flower
shop here, how often would you
use it? will provide much more
valuable results.

5.3 Your research will have But be aware that new markets will attract competitors if they see you are on

given you an idea of how to a winner.
many potential customers
are out there.

12 www.nibusinessinfo.co.uk/marketresearch
laying the groundwork :: researching your market
6
professional help
6.1 For any kind of market
research, but particularly
in the case of surveys,
consider using a market
research company or a
marketing consultant.
6.2 An alternative to using a
marketing company is to
employ an individual to do
the work for you.
6.3 Industry associations can
offer further advice on
using professionals.
7
what does it all
mean?
7.1 Effective market research
will show you if you can
gain a viable share of
the market. But the
preparation doesnt end
here.
7.2 Once you are up and
running, continuing your
research will allow you
to keep on top of your
customers needs and
ahead of the competition.
Specialists have the time and the expertise to do a good job.
Customers sometimes find it difficult to voice complaints to the supplier of the
product and may also worry that you are trying to sell them something.
You may find it difficult to be impartial.
You might ask someone suitable to carry out a telephone survey, for example.
This approach will only be successful if the survey questionnaire is simple and
well thought-out.
Provide a clear brief and agree on a budget. Make sure the person fits the
image you want to convey to potential customers.
The Market Research Society is the largest trade association for the market-
research industry and acts as a regulatory body. It keeps a list of market
researchers which you can search online at www.rbg.org.uk.
The Chartered Institute of Marketing provides guidance on using marketing
consultants. Visit www.cim.co.uk/resources.
Your market research is one of the most important first steps. The amount
of time you spend doing research depends on the type of business you are
starting.
Dont set a rigid timeframe your research will only be finished when you
have a clear understanding of your market and where you intend to position
yourself in it.
Keep looking out for new areas of growth, whether this is improvement of
your product or potential new markets.
www.nibusinessinfo.co.uk/marketresearch 13

1
cost and price
versus value
1.1 Successful businesses
maximise their profits by
matching their pricing with
the value customers put on
their products or services.
1.2 Product pricing is often
built on a cost-plus basis
(see 4), while service
pricing is generally created
on perceived value (see
68).
14
laying the groundwork
pricing your
product or service
Now you've got a clearer picture of your potential customers, how
much are you going to charge them for your product or service?
Getting your pricing right is vitally important if your business is to
succeed.
Many start-up businesses work out a cost figure for each product and
add a modest mark-up known as cost-plus pricing. While this method
is common, it is not the only way to arrive at a price. Think seriously
about your pricing methodology at an early stage it can pay big
dividends later.
Pricing is based on four critical points:
What your product or service will be worth to your customers its value.
What it costs you to produce your product or provide your service.
The price your competitors charge.
Market research review your pricing policy regularly and be prepared to
react to market conditions.
The cost is the total outlay required to create a product or service.
The price is your financial reward for providing the product or service.
But the value is what the customer believes the product or service is worth
to them.
The cost for a plumber to fix a burst pipe at a customer's home may be 5
for travel, materials costing 2.50 and one hour's labour at 10. But the
value to the customer is far greater than the 17.50 cost, so a plumber may
charge up to 50. Computer printer ink cartridges can cost less than 5 to
manufacture. However, to the user who can't print anything without them,
their value is much higher. And so is the price.
For more information, visit www.nibusinessinfo.co.uk/pricing.
Both methods require a comprehensive understanding of costs (see 2) and
the competition (see 3).
www.nibusinessinfo.co.uk/pricing
laying the groundwork :: pricing your product or service
2
building a cost
structure
2.1 Divide your costs under
two headings: variable and
fixed.
2.2 As long as the price you
sell at is higher than the
variable cost, each sale
will make a contribution
towards covering fixed
costs and making profits.
2.3 Based on this cost
structure, the company can
assess the consequences
of different price levels.
3
checking the
competition
3.1 Phone your rivals and ask
for a price quote.
3.2 Use this information as a
framework.
4
marking up
4.1 Cost-plus pricing is a
traditional method, usually
based on two elements:
4.2 Ensure all your costs (see 2)
have been factored in before
applying the mark-up.
Your cost structure provides a basis for what you need to charge. However, it
will not necessarily show you what you can and should charge.
Variable costs will increase when your sales increase goods and materials,
extra labour, transport and so on.
Fixed costs remain largely constant, regardless of how much or little you sell.
For example, rent, salaries and business rates.
For example, a car dealership has variable costs of 9,000 per car sold and
total fixed costs of 200,000 a year that must be covered. The contribution
required depends upon the volume of sales. If the company sells 80 cars
each year, it needs a contribution of at least 2,500 per car (ie 200,000
divided by 80) to avoid making a loss.
Selling the cars at less than 9,000 (the variable cost per car) is suicidal.
The more you sell, the more money you lose.
Selling 80 cars at 9,000 will mean a loss of 200,000 per year, as none of
the fixed costs will be paid for.
Selling cars at 11,500 will result in breakeven, assuming the target 80 cars
are sold.
Selling cars at 12,000 will result in a profit, assuming 80 cars are sold.
If more or fewer than 80 are sold, profits will be correspondingly higher or
lower.
It is certain that you will face competition in some form. This gives you an
opportunity to benchmark your potential pricing.
If your competitors know you, get someone else to call.
It is probably unwise to set your prices much higher or lower without good
reason.
Too low and you will be throwing away profit.
Too high and you will lose customers, unless you can offer them something
not available elsewhere.
The mark-up you must add to the cost to make the desired profit.
The mark-up used by competitors.
The mark-up is usually expressed as a percentage of the cost.
If the final price looks uncompetitive, review the size of the mark-up. But never
obliterate the mark-up to make the price competitive try to change the cost
base rather than give up potential profit.
www.nibusinessinfo.co.uk/pricing 15

4.3 Different products and
businesses apply hugely
different mark-ups. For
example, typical retail
mark-ups include:
5 aware of its potential pitfalls.
margins
5.1 Margins indicate the
percentage profit a
business makes on a sale
after applying a mark-up.
5.2 Margins are good
barometers of how
important particular
products or services are
to the profitability of your
business.
6 lower margins.
value-based
pricing
6.1 Convenience.
6.2 Brand.
6.3 Fashion.
6.4 Monopolies.
6.5 Pure perceived value.
6.6 Supply and demand.
16
laying the groundwork :: pricing your product or service
Fridges: cost plus 25 per cent.
Branded clothing: cost plus 135 per
cent.
Jewellery: cost plus 250 per cent or
dangers of
more. cost-plus pricing
While cost-plus is the model
employed by many start-ups, be
Cost-plus pricing ignores the
image and market position you
For example, if a business buys a
will be aiming for.
product for 10 and marks it up by Cost-plus pricing ignores
50 per cent, thus selling it for 15, demand.
the margin is 33 per cent (the value Some hidden costs are usually
of the mark-up, divided by the selling forgotten, so true margins may
price, x 100). be lower than you realise.
Common oversights include
The higher the margin, the more
holiday pay, depreciation and
lucrative it could be. the costs of handling waste.
Low-margin, low-volume products
Cost-plus pricing assumes that
should not occupy large chunks of you will achieve a sales target
your time or storage space at the to break even or better.
expense of higher-margin products. Alert competitors can lower
prices to win business from
you, either through having a
lower cost base or working on
Under this model, employees
The alternatives to cost-plus pricing have little incentive to control
focus on what customers are willing
to pay. This perceived-value pricing
costs.
takes a number of forms.
A late-night convenience store can
charge much more than a supermarket for a pint of milk.
There may be little to choose in technical terms between a branded and
an unbranded product, but big spenders will go straight for the expensive
product if the brand is well marketed.
Some people will pay a premium for hot items, such as the latest trainers,
cars or toys.
If one company exclusively supplies a product or service, it can set its own
prices.
Fine art is a good example. A sculpture is priced at 20,000 or 60,000
based on its estimated value to the purchaser, rather than simply the cost of
its creation.
Tickets for top-level sports events can be highly priced as there will be more
committed potential customers than available seats.
Higher prices can give you fat profits. But beware they may also alienate
customers and draw in new competitors who fancy a share of the spoils.
www.nibusinessinfo.co.uk/pricing
laying the groundwork :: pricing your product or service

7
flexible pricing
7.1 Should you use different You may want higher margins on products with low unit costs or slow

margins for different items, turnover, and on products that take up a lot of space.
as department stores do?

7.2 Is demand seasonal? For example, it costs more to travel to holiday destinations in the summer

and over Christmas than it does in March.
For more information, visit www.nibusinessinfo.co.uk/seasonalbusiness.

7.3 Will some customers pay a This strategy can be extremely profitable.
premium?
For example, a plumber may offer low daytime prices (to ensure a full

workload), but charge heavily for emergency call-outs (when customers will
pay significantly more).

8
vanishing Some goods and services are valuable today and worthless tomorrow.

opportunities Your pricing should reflect the situation. For example, who wants to buy a
Christmas tree on December 28?

8.1 Perishable goods are If you sell off goods cheaply, ask yourself whether the same customers would

worthless after their sell-by have bought full-price items.
date.

8.2 Many products become

obsolete as improved
models become available or
as fashions change.

8.3 If you have to sell off goods Offer the goods at special prices to your regular customers first to generate

cheaply, explain the reason goodwill.
for the special offer. If Review your pricing and business strategy if you are always having a sale.

your story is plausible,
your customers will still
have faith in your everyday
pricing.

9
aim high
9.1 It is easier to reduce prices If in doubt, start-up businesses should try higher prices first.

than raise them. Be prepared to lower prices if the required sales volume is not achieved and

your cashflow is under pressure.

9.2 Low prices often go hand- Some businesses can win more customers (as well as boosting their margins)

in-hand with poor quality by setting higher prices.
and service. Is this the
image you want to create?

9.3 For a start-up, competing
on price is often a mistake.
Low pricing is more often a
strategy of big companies
that cannot compete on
service.
What you will be able to offer is a string of benefits such as convenience,
personal service, speedy delivery and specialist skills. That is why customers
will buy from you.
Many small firms underprice in order to build up sales. Aim to build up
profits instead the buying decision is rarely made purely on price.

www.nibusinessinfo.co.uk/pricing 17
 laying the groundwork :: pricing your product or service

10
special tactics There may be times when the right price is dictated by factors other than
cost or perceived value. Tactical pricing can be used to achieve many different
objectives.

10.1 Odd pricing. For example, the retailer's habit of selling something for 9.99 instead of 10.

This signals price awareness and is useful in creating a favourable impression

to cost-conscious customers.

10.2 Loss leaders. Selling some products cheaply to win new customers.

You may include a couple of zero mark-up products in your range for this

purpose; or
You may offer lower prices to new customers, reverting later to normal

prices.

Make sure you comply with the

relevant legislation on this.

10.3 Price war. Deliberately undercutting rivals to

discount
win market share from them. with care
Will it hurt you more than it hurts
Offering too many discounts
them? If you are a start-up, the can lead customers to question
competition may have deeper your full-rate pricing. But, used
pockets than you. sparingly, discounting can work
Will your new customers stay with
if it achieves one of the following
you when the prices go back up? objectives:

10.4 Skimming. Selling a unique product at a high
price until all customers who need it
have bought it.
10.5 Penetration. The opposite of skimming.
This tactic involves starting a
product at a low price and getting
the market sewn up before
competitors can catch up with you.
With significant market share under
your belt, you find ways to raise
prices later.
11
Capturing big orders with a bulk
discount.
It may cost you little extra to
process a much larger order.
Persuading customers to buy
during your quiet period with
an off-peak discount.
Encouraging your customers to
stick to one supplier through a
cumulative discount (also called a
retrospective discount).
Your records should show a
rolling total, indicating how
much each major customer has
bought.

trading up Matching the competition

11.1 Work out realistically how
your customers would
react to higher prices.
11.2 Sell yourself.
Would you lose volume or
customers? Remember, lower
volumes at higher margins can still
magically improve profit.
Discuss it with customers
beforehand. The key to success is
having a good relationship with them
in the first place.
Make sure customers know why
Beware of customers who take
they are buying from you rather than
a competitor.
perhaps by offering the
standard trade discounts.
Getting rid of old stock (and
improving cashflow) with
clearance discounts.
Encouraging early payment with
discounts for cash or payment
within 30 days.
your prompt-payment discount
and still do not pay on time.

18 www.nibusinessinfo.co.uk/pricing
laying the groundwork :: pricing your product or service

11.3 Explain the reasons behind Remember to attribute part of your price to the cost of providing high-quality

your prices. back-up and after-sales service.

11.4 Unreasonably high prices Customers soon start looking for new sources.

can destroy goodwill,
especially if the customer
has no immediate
alternative supplier.

12
other
considerations
12.1 Would more marketing Would sales rise if you increased prices by 5 per cent and spent the extra

muscle help? revenue on promotional activity?
For more information, visit www.nibusinessinfo.co.uk/marketing.

12.2 Control your variable costs Are there cheaper supplies elsewhere?

(see 2.1). Would the suppliers you have already lined up be prepared to drop their

prices?

12.3 Can fixed costs be pared Can you negotiate savings without reducing your performance?

down? Can you renegotiate your lease or save money by moving to less central

premises?
Would increased use of IT reduce the cost of running your business? For

more information, visit www.nibusinessinfo.co.uk/ebusiness.

12.4 Should you alter your If you will not be able to make enough profit on a product, consider
product mix? dropping it.
Should you sell something else instead?

www.nibusinessinfo.co.uk/pricing 19

1
the ingredients
1.1 You must have a clear
picture of your product or
service, and the benefit
your customer will gain
from buying it.
1.2 The price you attach to
your product or service will
also be essential to your
marketing programme.
1.3 You should already have a
clear, detailed picture of
your target market (see
Researching your market,
p8).
20
laying the groundwork
marketing your
business
People sometimes think of marketing in terms of the promotional tools
it employs, such as advertising, direct mail or exhibitions. But its much
more than that. Its a comprehensive process in which four elements
are combined in whats called the Marketing Mix:
Product (the product or service that you offer).
Price (its cost to your customer).
Place (who and where your customer is).
Promotion (getting your message across effectively).
Your marketing and sales operations will be dependent upon customers
understanding the benefit. This is what the customer buys, not the product.
For example, a consumer doesn't want to buy a drill, they want the holes the
drill creates.
A computer promotion should show a customer the tasks they can complete
with a computer, not how it is manufactured.
Working out what to charge is discussed in Pricing your product or service,
p14.
You should know by now who your most important customers are going to be.
Be careful to focus on the section of your customer base you are most likely
to be able to sell to. If a number of sectors seem promising, consider them
objectively and then prioritise them.
Concentrate on the 20 per cent of customers who will make up 80 per
cent of your business. Other peripheral customers will take up a lot of your
time for little reward. For more information, visit www.nibusinessinfo.co.uk/
valuablecustomers.
www.nibusinessinfo.co.uk/marketing
laying the groundwork :: marketing your business
1.4 Once you have a firm
grasp of your product,
price and place, a
thorough evaluation of
your competition and the
anticipated strengths
and weaknesses of your
business (see 2 below) will
lead to the construction of
your promotion and your
marketing plan (see 3).
2 product or service may seem
you and your
competition
2.1 Every business will face
competition.
2.2 Decide what will make a
customer buy from you and
not your competitor. What
benefit or value are you
offering your customer?
This is your unique selling
proposition (USP).
2.3 Assess your weaknesses
honestly and acknowledge
these limitations rather
than ignore them.
You may be the only Thai restaurant
in town, but you still have to
compete with every other restaurant
and takeaway in town.
USPs can be most easily identified
by completing the phrase:
'Customers will buy from me
because my business is the only...'
For example, the only baker in
town who exclusively uses organic
ingredients could focus on being the
only natural option.
If a rival baker goes organic you
would then identify a further USP,
such as value for money or a
delivery service.
Offering the lowest price for your
product or service can be a USP,
but it is dangerous to compete on
price alone.
Your established competitors may
have deeper pockets and start
a price war to keep you out of
the market. Find another USP to
concentrate on, if possible.
With careful and creative thought,
you can turn many competitive
weaknesses into strengths.
For example, many small businesses
find it difficult to compete with large
companies on price. But the small
business can make a virtue of the
personal service it can offer ahead
of the larger business, and therefore
justify a higher price.
www.nibusinessinfo.co.uk/marketing
powerful PR
Positive press coverage can
provide an invaluable boost for
a start-up. At an early stage,
effective PR can help let the
world know that your product or
service is there, generate leads
and establish a position in your
market.
To the outside world, your
unexciting, so it is worth trying
to find a connection that will
link it to something more
interesting. For example, you
could invite the mayor or a local
celebrity to the launch of your
business, or offer prizes to the
first few customers.
Stories in trade and technical
magazines would concentrate
on how your new business is
doing something different in
your sector.
If you tell your target newspaper
or magazine in good enough
time and make the editor feel
he or she would be excited by
or interested in the news you
are on the way to creating
some successful publicity.
Send a written press release
followed by a phone call to the
news editor.
When approaching the media
always think of the story from
their perspective be able to
tell them immediately what it is
in your story that will interest
their readers or listeners.
Although you need to be aware
of potential costs, it may
be worth considering using
a freelance PR agent to do
specific tasks, such as writing
and distributing a press release.
21

3
building the
marketing plan
3.1 Your product or service.
What are the most
important elements?
3.2 Your target customers.
Who are they?
3.3 Your pricing.
3.4 Sales.
You need to know who will
do the selling.
3.5 Distribution.
How are you going to
deliver your product or
service to your customers?
3.6 Promotion.
There are four basic
categories of promotion.
Most start-ups will want to
use a combination.
22
laying the groundwork :: marketing your business
You understand the market, you have worked out your strengths and
weaknesses, you know who your potential customers are and you know what
the competition is like. You are now ready to work out a marketing plan.
Your marketing plan is a useful document in its own right. It will clarify how
you intend to sell to your customers and promote your business. It will also be
an important part of your total business plan.
The plan should be clear, easy to understand and cover the following points:
Which features provide the benefits your customers want?
What is its USP?
Your potential customers should be divided into groups, with the most
promising and relevant groups at the top of your list.
For example, a start-up car dealership may split its customers into large
corporate fleet, small corporate fleet and private buyers.
If you have already set your prices, you may want to revise them as a result of
the competitive analysis undertaken to create your marketing plan.
Don't be afraid to do this but don't slash prices just because you can see a
niche in the market at that price point.
Strong marketing can overcome customers' objections over price (see Pricing
your product or service, p14).
Any marketing strategy is useless without an effective sales capability to back it up.
Make sure you and any staff know everything your customer would want to
know about your business and how to communicate it effectively.
Personal selling, mail order or a website if you are selling direct; wholesalers,
retailers or agents (who sell on your behalf) if you are selling indirectly.
Work out which is the most suitable for your product or service. Your
research should have told you how your target customers prefer to buy.
For more information, visit www.nibusinessinfo.co.uk/saleschannels.
Advertising and public relations are useful for building awareness of your
business. But make sure the media you are advertising in will reach your
target customers.
For example, if you are opening a cake shop, the food and drink page of your
local newspaper may be a useful place to advertise. An advertisement in the
local business magazine is unlikely to be as effective (see box, right).
An important form of advertising for small businesses can be buying an entry
in a directory such as Yellow Pages. To advertise in Yellow Pages, contact
0800 328 0028; www.yelldirect.com.
A direct mail campaign can spread your message to potential customers.
While the costs of design, print and mailing can be high, it can be a useful
tool if your business is built around high sales volumes.
Names and addresses of consumers or businesses can be bought from
a range of companies many are registered with the Direct Marketing
Association (020 7291 3300; www.dma.org.uk).
Exhibitions can provide a direct route to customers, particularly for businesses
selling to other businesses. Make sure your target customers will attend.
Check with the organisers about previous attendance statistics. It is also worth
asking your competitors who have previously exhibited most will tell you.
Email marketing is a fast and effective way of getting your marketing message
across. You can instantly target customers without the delay and expense
associated with printing.
Many companies promote themselves on the internet. This is a particularly
useful method if your business has limited face-to-face contact with its
customers. Sales can also be made via websites. The cost of setting up and
maintaining a website has come down significantly in recent years.
For further information, visit www.nibusinessinfo.co.uk/marketing.
www.nibusinessinfo.co.uk/marketing
laying the groundwork :: marketing your business

3.7 Your after-sales service.
Demonstrate how you will promote your business to existing customers after
you start trading. For example, you could use regular mailings, telephone
contact, special offers for existing customers or a discount scheme.
Retaining customers is essential for any business. It is cheaper and easier
than finding new business.

4
avoid common Check through your marketing plan and make sure you are avoiding some of

mistakes the most common mistakes.

4.1 Aim for customers you For example, a start-up printing firm can get business from smaller local firms but
have a good chance of is unlikely to get the entire print contract for a multinational company in year one.
selling to and not those you
cannot hope to win.

4.2 Make it easy for customers For example, don't call your business 'A2B' call it 'A2B Delivery Services'.
to understand what you do.

4.3 Offer your customers what Ensure your research has proved there is a gap for your product and service
they want not what you and check it is exactly the gap you are filling.
think they want.

4.4 Be realistic in your growth
targets.
4.5 Remember the market is
always changing.
Do not presume you will sell 100
cars in year one and 1,000 cars in
year two. Cautious planning ensures
your business will survive; exceeding
realistic targets is a bonus.
If you conducted your research a
year ago, the competition may have
changed. Keep up to date with who
is doing what in your sector.
buying
advertising
It pays to make sure the media
you use are getting to the right
people. Look at where your
competitors are advertising as
well as where they dont to
help focus your thinking.

5 Local paid-for and free

setting targets
5.1 Set realistic targets to
measure your performance
against.
5.2 Investigate missed targets.
5.3 Continuously review your
marketing plan.
Marketing is a continuous process.
To keep track of your progress and
how the market is changing, you will
need yardsticks and milestones that
mean something to you.
What sales do you expect in your
first 12 months for each customer
or each type of customer?
What sales do you expect from each
type of product or service?
What sales growth should you aim
for?
How much should you spend on
marketing, month by month?
Has something gone wrong, or have
circumstances changed?
What can you do about it?
As the market changes, so should
you. A marketing plan is a working
document; it is not set in stone.
newspapers and community
magazines have the
geographical focus needed
for shops or local services.
They are also inexpensive per
advertisement and useful for
test-marketing.
National newspapers are often
the right choice for high-volume
consumer sales and direct
response selling (eg air tickets).
Trade and technical journals
and club and society magazines
may be suitable if you supply
businesses or specialist groups.
There are a large variety of
publications offering accurate
targeting of well-defined and
committed readerships.
Lifestyle magazines and hobby
magazines are particularly
useful for promoting consumer
goods, especially for mail order.

www.nibusinessinfo.co.uk/marketing 23

6
everyday
marketing
6.1 You or your staff are the
company as far as the
customer is concerned.
Everything you say or do
creates either a good or
bad image.
6.2 Make sure that you are
self-marketing.
6.3 Make a point of asking
each new customer how
and where they heard
about the company.
6.4 If you are advertising or
sending out promotional
material, keep it consistent
with your customers
requirements and the image
that you wish to portray.
7
keep ahead of
the game
7.1 Small businesses can
often capitalise on change,
adjusting quickly before
larger competitors react.
7.2 Whatever your line of
business, look out for
niches in areas where you
have strengths.
24
laying the groundwork :: marketing your business
Your marketing becomes an integral part of your business once you are
operational. Every time your business has contact with a customer, you are
marketing your business.
Make sure you and your employees are sufficiently skilled and trained to deal
with each customer professionally and courteously.
Customers are the lifeblood of your business and it is many times more
expensive to attract new ones than retain existing ones.
The more people you talk to about your business, the more sales you could
generate. Everyone is a potential client or contact.
This will help identify the most successful marketing tactics.
If you manufacture diamond-set jewellery, your brochures and advertisements
will probably need to be glossy and stylishly designed.
But if your business offers a keenly priced window-cleaning service, a simple
black-and-white flyer will be sufficient.
For further information, visit www.nibusinessinfo.co.uk/marketing.
What are the trends in your market? The more you know about your business
environment, the more you will be able to anticipate change and turn threats
into opportunities.
For example, small fashion retailers can source and sell summer clothes if
the sun starts to shine in April.
High street store chains will still have to wait until they receive their scheduled
delivery in June.
Small companies can exploit niches and fragmented markets (eg gluten-free
foods, body-piercing) where large companies cannot make a profit.
Building or acquiring new strengths by recruiting appropriately skilled staff,
for example can be a part of your business' growth strategy.
www.nibusinessinfo.co.uk/marketing

1
how much do
you need?
1.1 Draw up a budget based
on your business plan (see
Writing your business plan,
p69).
1.2 Identify how much financing
you require and when you
will need it.
1.3 Allow for some contingency
funding. How much extra
finance might you need?
1.4 Plan to arrange all your
financing. Even if you dont
need all the money at
once, dont wait until your
need for the extra finance
becomes urgent.
setting the whole thing up
financing your
business
A solid financial base is essential when you are starting up a new
business. The right financing package will carry you through any
temporary difficulties yet still allow you to make the most of growth
opportunities when they arise.
This section focuses on four areas:
Deciding how much money you need.
Investment finance.
Different forms of borrowing.
Other sources of help.
The budget shows your forecast sales, expenditure and, most importantly,
cash position for each month.
The forecasts must be realistic.
Inexperienced business people invariably make over-optimistic forecasts.
Sales turn out to be lower and later than expected, getting paid takes longer
and costs are higher.
For more information, visit www.nibusinessinfo.co.uk/budgeting.
Start-up businesses typically spend more than they earn for some time. The
finance needed may rise during this period before a profit is recorded.
For example, millions of people owned mobile phones and the networks
became known internationally long before they made a profit.
Many businesses have seasonal sales patterns that lead to predictable
cashflow peaks and troughs.
For example, a toy manufacturer faces heavy raw material costs in the
summer producing a large stock of toys but may not receive cash from
sales until after Christmas.
Consider sensitivity analysis including worst-case scenarios to help you decide
how much finance you should have available.
What if a product launch is delayed, you lose your best customer, costs
overrun or interest rates go up?
How accurate is your forecast? If you are unsure, you may need to set up
substantial contingency funding.
For example, borrowing 20,000 in January and then asking for 20,000
more in April may alarm your bank manager.
Let the bank know the total amount in the first place even if you ask to
borrow it in stages.
www.nibusinessinfo.co.uk/finance 25

2
investment
finance
2.1 Some will usually be your
own capital.
2.2 You may be relying on
family and friends who
are willing to invest in your
business.
2.3 Your business may attract
outside investors.
3
bank finance
3.1 Many businesses need
overdraft finance from
time to time.
Overdrafts are useful
for financing temporary
or fluctuating cash
shortages.
3.2 Loan finance is often the
best way to finance a
longer-term business need.
26
setting the whole thing up :: financing your business
It will be difficult to borrow money from a bank unless you can point to an
adequate financial base of money invested in the business.
You may have cash you have saved or investments you can sell.
Taking a mortgage on personal property, then lending the money to the
business, can be a cost-effective way of raising finance.
Mortgage rates are below business lending rates, and some lenders will advance
significant percentages of a personal property's value.
However, you should proceed carefully and take professional advice. If things
go wrong, you risk losing your property.
Some mortgages have flexible repayment arrangements that can help reduce
the risk of defaulting.
Make it clear that they should only give amounts they can afford to lose.
Show them your business plan and give them time to think it over.
Discuss several what-if scenarios. For example, what if you go bust or want to
pay yourself a big salary or expand or relocate or take risks or hire staff?
Put the terms of any agreement in writing.
Consult a solicitor.
You are unlikely to interest outside investors unless you can show a strong
track record and a credible business plan.
Investors who purchase an equity stake in the business will expect to be
offered high potential returns to compensate for the risk they are taking.
Invest Northern Ireland can facilitate access to venture capital funding, equity
investment and loan capital for global and export starts. Further information
on this and other sources of finance is available from Invest NI
(028 9069 8000; www.investni.com).
InterTradeIrelands Equity Network can help Northern Irish businesses identify
sources of finance, including venture capital firms and smaller private investors
known as business angels (028 3083 4100; www.intertradeireland.com).
Other useful sources of information and advice are The British Private Equity
and Venture Capital Association (020 7420 1800; www.bvca.co.uk) and the
Irish Venture Capital Association (00 353 1 2764647; www.ivca.ie).
If you use a broker to find private investors you should expect to pay between
50 and 350 in fees plus a percentage of any money raised.
An outside investor whose personal investment in a business qualifies under
the Enterprise Investment Scheme enjoys special tax treatment.
After your own family, the most likely source of borrowing is the bank.
You pay interest only on the amount you are overdrawn each day.
Exceeding your overdraft limit is costly. The bank may bounce your cheques,
damaging your credit with suppliers. You can also incur bank charges.
The bank could, in principle, demand repayment in full at any time, usually at
24 hours' notice.
Your overdraft limit is usually agreed for six to 12 months, after which it must
be extended by negotiation. However, the limit can be reduced if the bank
decides this is necessary.
Most loans are for a fixed period of one to ten years. Mortgages and some
other loans may be for as long as 25 years.
Repayments are agreed in advance.
Paying equal monthly instalments of capital plus interest is a common choice.
You may be able to arrange a repayment holiday to allow time for your
cashflow to pick up before the first repayment is due.
Loans are more suitable than overdrafts for longer-term finance.
www.nibusinessinfo.co.uk/finance
setting the whole thing up :: financing your business

Both you and the bank make a

commitment to the business, based
on an understanding of your long-
term plans and forecast cashflows.
Your bank can advise you on what
information is required and how
figures should be presented when
seeking a loan.
3.3 Bank finance costs can The interest rate for overdrafts and
vary widely. loans is usually set at a margin over
the bank base rate, which can vary.
Margins on loans can differ
depending on how risky the bank
thinks the loan is.
An arrangement fee is usually levied
when an overdraft facility or loan is
set up.Typically the fee is between
0.5 and 2 per cent of the facility
requested.
A renewal fee is sometimes charged
when an overdraft facility is extended.
You may incur costs arranging
security (see 5).
valuing your
business assets
Banks will value your assets
conservatively when you use
them as security for borrowing.
A bank will usually lend only 50
to 60 per cent of the value of a
business property.
Short leaseholds offer little
security.
Equipment will only be valued
at its resale price usually its
price at auction.
Specialised equipment that is
difficult to sell and equipment
which becomes obsolete quickly
(such as a computer) will
provide little security.

A bank may lend up to 60 per

4 debts (see also 4.3).
other finance Trade credit (paying your suppliers
after 30 to 60 days) and bank finance
may be all a small business needs. But
other options are worth considering.
Leasing, HP and factoring can enable
a business to raise more money than
would be possible through traditional
bank finance, although the costs may
often be higher.
cent of the value of your trade
Small debts which are difficult to
collect, old debts and any other
doubtful debts will have no value.
Any existing financing
arrangements such as other
loans, factoring services or leasing
arrangements will reduce the
amount of security you can offer
the bank.

4.1 Leasing is used to finance
equipment you do not need
to own.
Instead of buying the item, you rent
it usually for three to five years.
Payments are spread out over the period, helping your cashflow.
You get full tax relief on lease payments (however, cars must meet a CO2
emissions requirement for this relief to apply).
Leasing can be an attractive way of financing a vehicle.
In addition, there is the option to fix maintenance costs as part of the
agreement (contract hire).

4.2 Hire purchase (HP) is used You buy the equipment, but payments of capital and interest are spread over

to finance the purchase of a fixed period usually three to five years.
equipment. You can claim capital allowances on the equipment, and the interest payments

receive full tax relief.

4.3 Factoring provides you with
finance against invoices
that customers have not
yet paid.
You can receive up to 90 per cent (typically 80 per cent) of the face value of
each invoice immediately and the balance (less charges) when the invoice is
paid by the customer.
It may be difficult to extricate yourself and switch to normal bank finance later
on when this might be more appropriate.

4.4 Stock finance, where

cash is raised against the
value of stock held by a
manufacturing company,
may also be a possibility.

www.nibusinessinfo.co.uk/finance 27
how I raised
finance for
my business
Peter Rafter runs one
of the leading veterinary
practices in the Belfast
region. Peter had more
than ten years experience
as a vet, and after
spotting a need in the
local area decided to set
up the business from
home, a former farm.
Heres how he found the
50,000 he needed to fill
his financing gap

I made the decision to start my own

business soon after my first child,
Aisling, was born but I didnt have
enough money of my own. However,
I was confident Id get the backing
because I had a strong local reputation
Planning pays: good groundwork
clinched Peters mortgage

right through the first six months

of the business. But I still had a
long way to go before I reached my
We kept spending to a minimum and
bought secondhand equipment when it
became available. We arranged good
terms with our suppliers and negotiated
with the drug companies. All this helped
reduce our start-up costs so we didnt

and was addressing what I felt was a
sure-fire business opportunity.
To work out the amount of money
I needed I went along to my local
enterprise agency, which helped me
formulate a business plan. It was
extremely helpful making me think
about all the hidden costs such as
insurance. I worked out that I needed
50,000 to build a new veterinary
surgery and kennels, 2,000 for
drugs and 8,000 for extras.
By starting the process early I
managed to secure a 750 start-
up grant* after completing some
training provided through the
Northern Ireland Business Start
programme, which is similar to the
Go for it programme which runs now.
I took the eight-week course at Ards
Business Centre in Newtownards
before setting up the business. They
paid me the grant in instalments
and in return I got their ongoing help
target. After discussions with our overrun our budget.
bank we didnt want to be burdened
with huge monthly loan repayments.
I felt it was more important to
ensure my monthly outgoings were
as low as possible during the first
few years while the business got
on its feet. So I decided to extend Peters top tips
my mortgage instead by 50,000,
which attracted a much lower rate 1 Negotiate with your bank
of interest than a personal loan.
We got quotations for the building 2 Write a business plan
work and furnishing and arranged
an appointment with my mortgage 3 Try to own business property
lender. We had a two-hour one-to- rather than rent
one meeting with the manager. I was
very nervous because this was my main Peter the Vet
plan. I was confident in my business 59a Gransha Road, Kircubbin
idea and had done a lot of research Newtownards, Co Down BT22 1AJ
prior to the meeting, but I needed to Tel: 028 4273 9011
show the bank manager that. A few
*The Go for it Programme continues to
days later I was told the bank had provide advice and business support to start-up
agreed to extend my mortgage by companies in NI but no longer provides the start-
50,000 so I was in business. up grant, which was withdrawn in April 2008.

28
setting the whole thing up :: financing your business

4.5 Credit cards are the most
widely used type of credit.
They can be issued to
employees, with a spending
limit you can approve.
4.6 Assessing your options.
5 For working capital, use an
security for
Credit cards offer a period of credit,
usually up to a month, before the
bill has to be settled. To avoid
interest, you must pay the bill in full.
If you choose to repay the minimum
amount each month, you will be
charged interest, usually at a high
rate, on the balance.
Comparing the cost of different forms
of finance is complicated. Key factors
are fees, the period of the finance,
interest rates and the tax position.
Seek your accountant's advice.
Focus on your cashflow first, as
this is most important. Only if your
cashflow is healthy should you try to
save money by relying on overdraft
finance. For more information,
visit www.nibusinessinfo.co.uk/
financereadiness.
For any borrowing you need to show
the matching
principle
It is usual to match the type of
finance to the purpose it is used
for.
For development, and to finance
start-up losses, use investment
finance.
You cannot guarantee you will
have the profits to pay interest
on any kind of loan.
For equipment and vehicles, use
fixed-term loans, leasing or hire
purchase.
The term of the loan should
match, or be shorter than, the
expected life of the asset you
are acquiring.
overdraft or factoring.

borrowings that you can afford the capital and

interest payments.
In addition, a bank usually wants
security to ensure the loan is repaid
if things go wrong.
You should always seek professional
advice before offering security on
your property.
There are a number of different
possibilities.
Working capital is the cash you
need to cover the delay between
paying suppliers and receiving
payments from customers.
For property, use a long-term
mortgage.
If you are buying a lease, the
mortgage must be repaid
before the lease ends.

5.1 A personal guarantee Directors of limited companies are

is a guarantee from an
individual this can be you
or a third party who will be
liable to pay the debt if you
default.
Using the wrong type of finance
often asked to provide personal
guarantees in case the company fails.
Sole traders (and partners) are
already personally liable for all
business debts.
If a personal guarantee is supported
by a legal charge over your personal
assets, these assets (including
your house) can be at risk if the
guarantee is called upon.
can be disastrous.
For example, if you use your
overdraft facility for buying
equipment to increase
production you will have no
short-term finance available as
your need for working capital
increases.

5.2 The Enterprise Finance
Guarantee may also
provide a source of
security.
Ask your bank manager whether you are eligible and what is involved in the
application process.
The Enterprise Finance Guarantee is a Government guarantee for business
loans (including conversions of overdrafts) of between 1,000 and
1,000,000.
Businesses that receive a loan under the scheme pay a premium to the
Government for the guarantee it provides.
Total costs may be slightly higher than for an ordinary loan.

5.3 You may need to take out This will also protect the bank if you are unable to work.
insurance that will pay out You should seriously consider how much you are prepared to risk on the
if you suffer an accident, business. Could you really afford to lose your home or savings?
sickness or death.

www.nibusinessinfo.co.uk/finance 29

6
working with
your bank
6.1 Before lending you any
money the bank will want
to see a viable business
plan.
6.2 Once your business is
operational, provide
the bank with regular
management information
summarising sales,
margins and costs.
6.3 Warn the bank if you
expect to run into any
financial difficulties.
7
government and
other help
7.1 Check what is available
before you start trading.
There are a number of
Northern Ireland sources
of small business loans and
grants.
7.2 Government support can
be accessed in different
ways depending on the
market your business is
targeting.
30
setting the whole thing up :: financing your business
A good relationship with your bank is worth the effort it involves. At some
stage, you may need the bank's support either for expansion or to help you
through a difficult patch.
See Writing your business plan, p69.
Draw up a table of figures comparing what you actually achieved with your
budget and with the previous year.
Add comments to explain any differences and mention key events you are
expecting (such as an order you think you will win).
Teach the bank to trust you, your data and your judgement. Avoid surprises.
A wide range of schemes provide help and finance for start-up and small
businesses. Government support for start-up businesses is provided primarily
by Invest Northern Ireland and its partners in local government and the
enterprise agency network.
The Enterprise NI Loan Fund can be accessed through your local enterprise
agency. Call 028 7776 3555 or visit www.enterpriseni.com to find your local
enterprise agency.
The Princes Trust can provide financial assistance to start-up businesses.
Contact it at 028 9074 5454; www.princes-trust.org.uk.
The Department of Agriculture and Rural Development (DARD) operates a
number of financial-assistance schemes. Contact it at 028 9052 4999;
www.dardni.gov.uk.
The Rural Development Programme offers a wide range of support to
businesses and communities in rural areas. Visit www.rdpni.info.
Credit unions can be a useful source of low-cost finance. Contact either the
Irish League of Credit Unions (00 353 1 614 6700; www.creditunion.ie) or
the Ulster Federation of Credit Unions (028 9030 1204; www.ufcu.co.uk).
If youre dealing with the Northern Ireland market, contact Enterprise NI at
028 7776 3555 or visit www.enterpriseni.com to find your local enterprise
agency. Or visit the website of the Go for it programme at www.goforitni.com.
If youre dealing with markets outside Northern Ireland, including Great Britain
and the Republic of Ireland, contact your local Invest NI office. For telephone
and email details, see Where to go now, p76.
www.nibusinessinfo.co.uk/finance

1
legal form
1.1 There are four main
choices for the legal form
of your business.
1.2 You may have to register
your business.
1.3 It is possible to change the
legal form of your business
after you have started
trading. But any change will
take time and money.
setting the whole thing up
forming your
business
Once you have made up your mind to go ahead, you need to get to grips
with the legal requirements for forming a business.
Setting up your business in the right way keeps costs down. It can also
help prevent your working relationships turning sour, one of the major
causes of business failure.
This section covers:
Deciding whether to operate as a sole trader, a partnership or a limited
company.
Choosing a business name, and other legal requirements.
Agreements between business partners.
If you are a sole trader, you are self-employed, with no special legal structure.
In a partnership, two or more self-employed people work together as partners
and share the profits (or losses).
A limited company is a separate legal entity, distinct from its shareholders,
directors and employees.
Unlike a sole trader or partnership, it is not the same as the individuals who
own or run it. For example, it can sue or be sued in its own name.
A limited liability partnership has some of the advantages (and disadvantages)
of both a company and a partnership.
For example, it is a separate legal entity and can continue despite the
resignation or death of some members.
Other legal forms can be used in specific situations. For example, a co-
operative belongs to the employees, while Community Interest Company (CIC)
status gives social enterprises the flexibility of the limited company form.
You can employ people whether you are a sole trader, partnership,
limited company or limited liability partnership.
Limited companies and limited liability partnerships must be registered with
Companies House. For further information call 0303 1234 500 or visit
www.companieshouse.gov.uk.
If you have registered for VAT, you will have to tell your local VAT office within
30 days of the change.
Your accountant can give you advice on other tax-related issues.
The advantages and disadvantages of each legal form are explained in 2, 3, 4
and 5.
www.nibusinessinfo.co.uk/legalstructures 31

2
sole trader
2.1 There are several
advantages.
2.2 The disadvantages are
relatively few, but could
have serious implications.
2.3 Setting up as a sole trader
is quick and easy.
3 What happens if one person
partnership
3.1 A partnership has
similar advantages and
disadvantages to a sole
trader. But there are three
other factors to take into
account.
3.2 You can set up most
partnerships with a few
formalities.
32
setting the whole thing up :: forming your business
Most small start-up businesses find that setting up as a sole trader is the
best option.
You can keep simple, unaudited accounts. You do not have to file returns with
Companies House.
Unless your earnings are high, total tax and National Insurance payments can
be lower than if you formed a limited company.
Remember that if you are a sole trader
with employees, you will have to pay
employers National Insurance
contributions.
You can form a limited company
later and transfer the business to it,
though some stamp duty may have
to be paid.
You are personally liable for all your
business debts. This means that
your own assets all of them are
at risk.
You are entitled to fewer social
security benefits, including benefits
and pensions linked to National
Insurance.
Your options for raising money are
limited.
If you are a sole trader, it is harder
to sell the business or pass it on.
Tell the tax and VAT authorities
(see 8.3).
Each partner is personally liable
for all the business debts of the
partnership (other than tax on
profits), even if another partner
caused them.
You may be able to raise money by
introducing new partners.
The partners can share their
expertise and spread business risks.
To avoid disputes, it is vital to have
a comprehensive agreement drawn
up by a lawyer and agreed by all
partners (see 6.1).
www.nibusinessinfo.co.uk/legalstructures
get it in writing
A shareholders' agreement helps
all the people involved in starting
a new company know where they
stand, just like a partnership
agreement (see 6.1).
It should cover key issues for
the business and likely 'what-if'
scenarios, including:
Investing money.
Who contributes how much and
in what form (eg as shares or
as a loan), for what reward?
What happens if more capital
is needed next year? How
much will the company need to
borrow, and on what terms?
Withdrawing money.
What dividends, directors' fees
and salaries will be paid?
needs to take out extra money?
Responsibilities.
Who makes decisions? Who is
responsible for each business
area? How will progress be
monitored?
Growth.
How fast will you expand? Into
which areas of business? How
much risk are you ready to
accept?
Split up.
Can you buy each other out?
Can you split the company up?
How? And how will the shares
be valued?
Discussing and settling these
issues is vital from the start. It
minimises the risk of people feeling
they are putting in too much time
and effort for too small a share of
the rewards.
setting the whole thing up :: forming your business
4
limited company
4.1 The advantages of having a
company tend to increase
as your business grows.
4.2 The disadvantages are
associated with greater
costs and obligations.
4.3 A limited company must be
registered at Companies
House.
5
limited liability
partnerships
5.1 It is possible to set up a
limited liability partnership.
Despite the name, this is
not a partnership.
5.2 A limited liability
partnership must be
registered at Companies
House.
A limited company has more credibility.
Normally, your liability is limited to the amount you agree to invest in the
company by buying its shares.
However, there are still circumstances where personal liability may arise. For
example, by giving personal guarantees or security on company borrowings,
the company trading wrongfully or fraudulently, or in certain other cases.
It is easier to raise large sums of money for the business or sell a part of the
business.
There can be tax advantages for high earners through keeping money in the
business or making pension payments.
Annual accounts are generally more complicated.
If your turnover climbs above 6.5 million or your business has a balance
sheet total of more than 3.26 million, an independent audit is compulsory.
This will usually cost you at least 2,000.
National Insurance payments are higher.
You will have to pay employers as well as employees' National Insurance
contributions on salaries (including those of company directors).
Other rules can make running a limited company more difficult.
If you decide to cease trading, it can be more difficult and expensive to wind
up the company.
The standard registration process costs 20 and takes up to five days to
complete. Same-day registration is available for 50.
You can use a reputable company formation agent to handle the process (for a
fee) the less you pay for this kind of service, the more paperwork you have to
do.
Alternatively, you can ask your solicitor or accountant to buy you an off-the-shelf
company and to provide advice on all the details.
Contact Companies House on 0303 1234 500 or visit
www.companieshouse.gov.uk.
It is a corporate body with its own legal identity and capacity.
Members can limit their liability for losses (although personal liability can arise
in circumstances similar to those applicable to limited companies).
It has the organisational flexibility of a partnership.
The members' agreement is confidential.
It is taxed as a partnership tax is charged on all the profits, whether or not
they are distributed to members.
Annual accounts must be prepared and filed.
There are other filing requirements with strict time limits for compliance.
Withdrawals may be clawed back if the limited liability partnership is declared
insolvent within the next two years.
It is important to have a suitable members' agreement drawn up (see box).
You may want to use an accountant, solicitor or registration agent to deal
with these formalities.
www.nibusinessinfo.co.uk/legalstructures 33

6
working
relationships
6.1 In the case of a business
trading as a partnership
(see 3), it is normal
practice to draw up
a formal partnership
agreement, which everyone
signs. This should include:
6.2 The founding shareholders
in a limited company (see
4) often overlook the
problems that can arise.
6.3 The members of a limited
liability partnership
should have a members
agreement. Take advice
on the best form for the
agreement.
7
your business
name
7.1 You can trade under your
own name, or choose a
different business name.
34
setting the whole thing up :: forming your business
If a business is going to have more than one owner, the owners must
determine what their working relationship will be. It is vital to discuss the main
issues and write down an agreement.
The names of the partners and the name of the business, and what it does.
The date the partnership starts and how long it will last (if not permanently).
The capital each partner is to contribute.
How the profits (and losses) are to be shared and how much money each
partner can draw from the business.
How the business is to be run.
For example, how much time each partner is to put into the business and a
limit on the value of cheques which require only one signature.
Details of holiday entitlements.
What to do if partners die, become ill or want to retire or reduce their
involvement.
What the arrangements will be for introducing new partners.
Once you know what you want, a solicitor will be able to draft a suitable
agreement.
Although the company's memorandum and articles cover some areas, the
shareholders should have a separate written shareholders' agreement (see
box, p32).
A sole trader can use his or her own name or a business name. For example,
Peter Smith could trade as Peter Smith, P Smith or Peter Smith Services.
A partnership can trade under the names of all the partners or a business
name. For example, Peter Smith and Lisa Jones might trade as P Smith and
L Jones or as S & J Services.
A limited company or limited liability partnership can trade under its
registered name or use a different business name.
If you buy an off-the-shelf company you can apply to change the registered
name.
To further protect your business name from use by others you can
register it as a trade mark, or a domain name (for your website and email
addresses), or both. For more information, visit www.nibusinessinfo.co.uk/
nameandtrademark.
To check web domain names quickly and free of charge, search at a
registration service such as www.netnames.co.uk.
Always check you are not infringing any trade marks with the name you pick
(see 7.2).
If you trade under any name other than your own or your registered business
name you must disclose the ownership of the business and an official address
on your stationery, on a sign at your premises and to any business contact
who asks for it.
www.nibusinessinfo.co.uk/legalstructures
setting the whole thing up :: forming your business

7.2 Certain names are not
allowed. The name must
not be misleading or likely
to cause confusion with an
existing business. Names
judged to be offensive are
also banned by Companies
House.
7.3 Certain words are
restricted by law. For
example, British, Irish,
Royal and Bank.
Check the name you want to use, or
one close to it, is not being used by
another business in a similar line.
Check the Companies House index
of company and limited liability
partnership names at
www.companieshouse.gov.uk/info or
use a company registration agent.
The fact a name is not in use does
not necessarily mean you will be
able to use it.
An agent can also check for names
that are already registered as
trademarks. But unless this is part of
a company formation or limited liability
partnership registration deal it will
probably cost you around 50.
Only limited companies can use the
word Limited or Ltd in their names.
Other words may need to be
justified. For example, international.
Only limited liability partnerships can
use Limited Liability Partnership or
LLP.
Ask your solicitor or download
guidance notes from the Companies
House website
(www.companieshouse.gov.uk).
whats in a
name
Choose a name that will create a
positive impression and help your
marketing.
For example, suppose Peter Smith
and Lisa Jones set up a delivery
business based in Belfast. They
might consider several names.
Action Deliveries sounds like
a dynamic delivery business.
It would come near the top of
any alphabetical list, such as
in Yellow Pages, and is easy to
remember.
Belfast Deliveries would tell
people what the business does
and where it does it.
Smith Jones provides no
information on its product or
service, so could leave potential
customers none the wiser.
S&J Deliveries sounds like a
small and perhaps amateurish
delivery business.

8
other legal
requirements
8.1 You may need some form Some licences, such as the licence to sell alcohol in a pub, are personal. You

of licence (to run a nursing cannot assume you will get a licence because a previous owner had one.
home or a betting shop,
for instance). Contact your
local authority for guidance.

8.2 Do you have adequate If you have employees, you must have employers' liability insurance.
insurance? There is no obligation to insure your business against any damage it may
cause the public, but it is advisable.
Public liability insurance covers claims against incidents involving your
premises, staff or business property.
Product liability covers claims against incidents caused by the products you
sell or repair.
For more information, visit www.nibusinessinfo.co.uk/businessinsurance.

8.3 You must get your tax,
National Insurance and VAT
affairs organised.
Contact HM Revenue & Customs for information on business education and
support (0845 603 2691).
If your sales will quickly reach the VAT threshold (70,000 in 2010-11), ask
your accountant when you should register for VAT. For further information,
contact HM Revenue & Customs at 0845 010 9000; www.hmrc.gov.uk/vat.

www.nibusinessinfo.co.uk/legalstructures 35

8.4 You must ensure your
premises comply with
property regulations. For
home-based businesses,
the main issues are:
8.5 All businesses have to
comply with health and
safety regulations, even if
they are home-based.
8.6 Make sure your new
business is not going to
fall foul of environmental
regulations.
36
setting the whole thing up :: forming your business
Do your title deeds, mortgage or tenancy agreement prohibit business
activities?
You may need planning permission if there is a change of use.
Will your home cease to be 'essentially residential'? Will the business
generate traffic or visitors or disturb neighbours? Check the position with your
local council.
If any building work is involved, check with your local authoritys building
control department (www.buildingcontrol-ni.com) to see if planning permission
and building regulations approval are required.
If part of your home is treated as non-residential, there may be tax
implications.
You may also have to pay some business rates. Contact Land & Property
Services at 101 or 02891 513101; www.lpsni.gov.uk.
Check with the Health and Safety Executive for Northern Ireland
(0800 0320 121; www.hseni.gov.uk).
See Your legal obligations, p41.
For more information, visit www.nibusinessinfo.co.uk/health_and_safety.
Your business can be held responsible for any environmental damage it
causes, whether accidental or not. You should consider environmental issues
before you start trading.
Information is available from the environmental health officer in your local
council, the Northern Ireland Environment Agency (0845 302 0008;
www.ni-environment.gov.uk) and your local enterprise agency.
See Your legal obligations, p42.
For more information, visit www.nibusinessinfo.co.uk/ecompliance.
www.nibusinessinfo.co.uk/legalstructures
 setting the whole thing up

your legal
obligations
Anyone starting a business must have a working knowledge of the
relevant legal issues and requirements, ranging from tax and National
Insurance to VAT and employment law.
But you should get professional advice to put yourself in the best
possible position and to stay on the right side of the law.

This section outlines, in simple terms:

Basic tax law.
VAT.
Employment law.
Workplace regulations.
Insurance.
Intellectual property.

1 ES/FS1, Employed or Self-employed

(www.hmrc.gov.uk). Alternatively,
on the previous year's tax liability.
A balancing payment may then be
your employment contact the Taxes Helpline (0845 due on the following January 31, to

status 300 0627) or visit www.hmrc.gov.

To use the correct tax regime,
you must know whether you are
employed or self-employed in the
eyes of HM Revenue & Customs.
1.1
HM Revenue & Customs will usually
treat you as self-employed if you
are going to be your own boss as a
sole trader or in a partnership, have
more than one customer, bear an
element of business risk personally
and control what work you do and
where and when you do it.
1.2
If you are going to trade as a
limited company, you as a
shareholding director are an
employee of the company. You are
not classed as self-employed.
1.3
If you are a sole trader or in a
partnership, you are likely to be
treated as an employee if you have
only one customer, do not bear an
element of business risk or do not
control where and when you work.
1.4
Check with an accountant or read
the HM Revenue & Customs guide
uk/employment-status.
2 2.3
tax for the
self-employed
2.1
If you are self-employed, you pay
tax on your profits, not on your
drawings.
For example, if you make a 30,000
profit, the whole amount is treated
as a taxable sum, subject to personal
and other tax allowances even if
you have only drawn 10,000 as
salary and have retained the other
20,000 in the business.
Profit is revenue, less allowable
expenses, excluding your salary.
There are complex rules governing
what you can claim as expenses
(see 4.1 and 4.2).
2.2
You usually pay tax on the profits of
a 12-month accounting period. HM
Revenue & Customs' tax year runs
from April 6 to April 5.
You must usually make two
payments on account, on January
31 (during that tax year) and July
31 (after the end of that tax year).
These initial instalments are based
adjust the difference between the
amounts paid and the tax due as a
result of your actual profits.
A self-employed person can pay
tax later than employees. If a self-
employed person has an accounting
period which ends, say, on April 30,
they will pay tax on January 31 and
July 31 the following year, with a
final payment six months later based
on actual profit.
2.4
You have to make flat-rate National
Insurance contributions throughout
the year. These are called Class
its not all bad
The legal requirements for
businesses can look daunting
at first sight, especially when
presented altogether. However,
a calm and methodical approach
can make the process of
complying with the law a
relatively painless experience.
If you invest time early on and
build your business on the right
framework, you can largely avoid
legislative and regulatory worries
on a day-to-day basis.

www.nibusinessinfo.co.uk/taxes 37

2 contributions. You then have
to make an additional National
Insurance payment related to your
profits (Class 4 contributions) which
is collected with your tax.
2.5
Self-employed people pay less
National Insurance than employees
but receive fewer benefits.
3 living expenses; entertaining clients
tax for limited
companies
3.1
If you set up a limited company
and are therefore an employee of
the company you pay tax on your
income every time you are paid. This
is called PAYE Pay As You Earn.
3.2
You have to deduct tax and National
Insurance from your salary through
your company's payroll, which you
have to set up. You also have to
pay employers' National Insurance
contributions for you and any other
employees.
3.3
Your company's profits each year will
be liable for corporation tax, which
you will have to calculate.
Your profit is your sales income less
your expenses (see 4.1).
Companies with profits of more
than 1.5m pay corporation tax in
quarterly instalments, while other
companies pay nine months after
the accounting year-end.
3.4
You cannot count the cost of
purchasing premises and equipment
as an expense. This is handled by
capital allowances (see 4.2).
4 depending on total taxable income but
accounting for
tax
4.1
Care needs to be taken when
calculating expenses. HM Revenue
& Customs has strict rules
concerning what can and cannot
be counted as a business expense
38
setting the whole thing up :: your legal obligations
when calculating profits. Ask an
accountant or HM Revenue &
Customs for detailed advice.
Allowable expenses include the costs
of any goods or materials bought
as stock and then resold, rent
and running costs for premises,
marketing costs, financing costs and
general running expenses such as
postage and telephone. Costs which
are not allowed include personal
expenses such as travel to work;
and fines such as parking tickets.
4.2
When working out your profits, you
will not be able to count the cost of
purchasing premises and equipment
as an expense. For equipment, you
claim a capital allowance instead,
which is deducted from your profit
in the same way as an allowable
expense.
The Annual Investment Allowance
allows you to deduct the cost of
investments in plant and machinery
(excluding cars) from your profits,
up to a limit of 100,000. If you
spend more than 100,000 a
more complex system of capital
allowances allows you to deduct a
percentage (usually 20 per cent) of
the value each year.
4.3
When selling a business or using
proceeds from its sale to fund your
retirement, you will need to be
aware of capital gains tax. This
tax may be payable if you sell assets
such as shares, property or the
goodwill of a business for more than
you paid for them.
Capital gains tax will not usually be
payable on the sale of your own
residence.
Limited companies pay corporation
tax on any capital gains, as they are
treated as a part of the company's
taxable profit.
Self-employed people pay capital gains
tax at 18 per cent or 28 per cent
this may be reduced by allowances
and exemptions. An accountant or
HM Revenue & Customs can help.
If you plan to sell your business
quickly, take advice from an
accountant or other specialist
adviser to minimise your capital
gains tax liability.
4.4
Provided you have informed HM
www.nibusinessinfo.co.uk/taxes
Revenue & Customs that you have
started a business, you can claim
expenses incurred before you start
trading (such as research costs) as
allowable expenses in your first year.
Keep a record of all your receipts,
invoices and bank statements
related to the business before you
start trading, so you can claim the
cost later.
There are exceptions: training
courses and the cost of forming a
limited company are not allowable.
5
VAT
VAT is a transaction tax on sales
of goods and services. It is not
a tax on profits. If your business
sells products or services worth
more than an amount set by the
Government, VAT registration
with HM Revenue & Customs is
compulsory. The threshold for the
2010-11 tax year is 70,000.
5.1
Businesses collect the tax on the
Government's behalf.
All businesses pay VAT on most
purchases. This is called input tax.
Registered businesses charge VAT
on their goods and services. This is
output tax.
The registered business pays HM
Revenue & Customs the difference
between the output tax it has received
and the input tax it has paid.
5.2
Businesses with a turnover
below the threshold can register
voluntarily. This decision should be
made carefully. If your customers
are not VAT-registered, you will
in effect be raising your prices to
them, as they cannot claim the
tax back.
5.3
There are detailed and complicated
regulations surrounding VAT,
covering different rates for various
types of products or services and
when the tax has to be paid.
Fines for late payment or procedural
failures can be severe.
Take professional advice from an
accountant if you expect to register
your business. For information about
VAT from HM Revenue & Customs,
visit www.hmrc.gov.uk/vat.
setting the whole thing up :: your legal obligations
6
you and your
people
Once your business recruits
its first employee, a range of
legal obligations begin to apply.
Employment law is a complex area
and full of pitfalls. While getting it
right is time consuming, getting it
wrong can prove costly. Take as
much specialist professional advice
as you can. For more information,
visit www.nibusinessinfo.co.uk/
employingpeople.
6.1
Recruitment
Do not allow any prejudice
or discrimination to influence
recruitment decisions (see 6.5).
Avoid unnecessarily personal
interview questions, such as asking
about people's background, out-of-
work activities, health, children or
childcare arrangements.
The candidate could claim you have
discriminated against them on
these grounds if you do not offer
them a job.
Maintain records, so you can
demonstrate why you chose
one candidate over another as
candidates can request to see any
notes you made during the interview.
Remember a contract of
employment exists once a job has
been accepted, either orally or in
writing. For more information, visit
www.nibusinessinfo.co.uk/recruiting.
6.2
Terms and conditions
You must provide written terms and
conditions within two months of the
employee starting work.
The document must cover specific
items including pay, working hours,
holiday entitlement, job title or
description and place of work.
Reserve the right to change the
employee's place of work, in case
you need to relocate the business.
Once issued, you cannot make
major changes to terms and
conditions without the employee's
consent. For more information,
visit www.nibusinessinfo.co.uk/
writtenstatement.
6.3
Wages and working time
You must comply with statutory
advice and information
All your legal obligations should be carefully checked at an early stage
to prevent problems later. There are a number of sources of advice and
information.
Contact Invest Northern Ireland on 028 9069 8000 for practical
information and advice.
Accountants and financial advisers can help with tax and VAT matters.
Further information is available from HM Revenue & Customs
(www.hmrc.gov.uk/contactus) and The Chartered Accountants Ireland
Ulster Society (028 9043 5840; http://ulster.charteredaccountants.ie/).
Solicitors can help with employment law matters. Further information is
available from the Department for Employment and Learning
(www.delni.gov.uk/er), the Labour Relations Agency (028 9032 1442;
www.lra.org.uk), or the Equality Commission for Northern Ireland
(028 90 890 890; www.equalityni.org).
The Health and Safety Executive for Northern Ireland provides information
on health and safety requirements for businesses (0800 0320 121; www.
hseni.gov.uk).
The Northern Ireland Planning Service (028 9041 6700;
www.planningni.gov.uk) can provide information on planning permission.
Your local authoritys building control department can advise on complying
with building regulations (www.buildingcontrol-ni.com).
The Equality Commission for Northern Ireland (028 90 890 890;
www.equalityni.org) can advise how to run your business so it complies with
equality legislation.
The Law Society of Northern Ireland (028 9023 1614;
www.lawsoc-ni.org) can help you to find a solicitor to provide advice on any
legal matters.
For data protection issues, check if you need to register with (notify) the
Information Commissioner (0303 123 1113; www.ico.gov.uk).
The Intellectual Property Office (0300 300 2000; www.ipo.gov.uk)
regulates and grants patents, trade marks and design registration.
The Trading Standards Service (028 9025 3900; www.detini.gov.uk/
deti-consumer-index) can offer advice on fair practices and trading and
consumer protection legislation.
requirements on pay and working you can take into account any incentive
hours. or performance-related payments, as
There is a minimum wage of 5.93 well as bonuses. Tips do not count
for employees aged over 21, 4.92 towards the minimum wage.
for those aged 18 to 20, 3.64 for For more information,
those aged 16 and 17 and 2.50 visit www.nibusinessinfo.co.uk/
for apprentices under 19 or aged minimumwage.
over 19 and in the first year of their Employers' National Insurance
apprenticeship. contributions must be paid on
The minimum wage applies to anyone employees' wages and benefits.
you employ but not to self-employed You must deduct employees' tax
people or contractors. and National Insurance contributions
When calculating the minimum wage, from their wages and pay them to
www.nibusinessinfo.co.uk 39

HM Revenue &Customs
under PAYE.
Employees can refuse to work more
than an average of 48 hours each
week over a 17-week period. There
are special rules for night-workers.
Full-time employees are entitled to
a minimum of 5.6 weeks' paid leave
a year including bank holidays, part-
timers pro rata.
For more information, visit
www.nibusinessinfo.co.uk/
annualleave.
There are detailed regulations
on minimum rest periods during
working hours.
Fixed-term employees have the
right to be paid the same as similar
permanent staff.
Employees are also entitled to
maternity leave, parental leave and
leave for family reasons. You must
also consider seriously requests
from some categories of parents
and carers for flexible working
arrangements.
If you have five or more employees,
you must normally provide access
to a stakeholder pension scheme,
unless you already have a pension
scheme all employees can join. But
you are not obliged to pay into it.
6.4
Employee rights
You must provide a secure, safe and
healthy working environment (see 7).
Employees have the right to belong
(or not to belong) to a trade union.
Employees are entitled to a
reasonable degree of privacy.
Employees are entitled to protection
against discrimination or degrading
treatment.
Employees can report an employer's
illegal or dangerous actions without
fear of sacking or demotion.
Employees must get a payslip.
Employees with more than one
month's service are entitled to a
notice period.
In most cases, employees are
entitled to keep their jobs if the
business changes hands.
Part-time workers must be treated
the same as full-timers.
6.5
Discrimination
You must not treat anyone less
favourably because of their race,
age, sex, sexual orientation,
disability, religious belief, political
opinion or marital status. This
includes the recruitment process.
40
setting the whole thing up :: your legal obligations
special requirements
Some types of business will be affected by specific regulations. For
example, manufacturing businesses will have to be aware of particular
environmental laws and agricultural companies will have to bear in mind
food-handling regulations.
Trade associations can offer support for people looking to start up a
business within their sector. A database of trade associations is available
at www.taforum.org.
Alternatively, related government departments can also offer
information. For example, the Department of Agriculture and Rural
Development can provide information for agricultural businesses. You
can find which central or local government department is relevant to you
through www.direct.gov.uk and www.nidirect.gov.uk.
You are also responsible for any adjustments to recruitment, training
discrimination practised by your and staff benefits, buying special
employees. equipment and making alterations
Employers with more than ten to your premises. You may be able
full-time employees must register to refuse adjustments which are not
with the Equality Commission for practical, breach other legislation
Northern Ireland and submit annual (such as health and safety rules) or
monitoring returns giving details cost you more than you could afford,
of the community background especially when financial assistance
(Protestant or Roman Catholic) of is unavailable to you.
their workforce.
Businesses providing services to 6.7
the public must make reasonable Maternity and parental leave
adjustments to these services if Female employees are entitled
disabled people would otherwise find to maternity leave of 52 weeks,
them impossible or unreasonably regardless of their length of service.
difficult to access. Employers must This is divided into 26 weeks of
also make reasonable structural ordinary maternity leave and 26
modifications to ensure ease of weeks of additional leave.
access for disabled customers. If they have completed 26 weeks'
For further information contact the service by the 15th week before the
Equality Commission for Northern week the baby is due, employees
Ireland at 028 90 890 890; qualify for 39 weeks statutory
www.equalityni.org. maternity pay (SMP). You can
claim back most, if not all, of any
6.6 payments of SMP that you make.
Workers with disabilities A female employee cannot be
It is against the law for employers dismissed or made redundant
to discriminate on the grounds of because of pregnancy, maternity
disability when recruiting, employing, leave or childbirth, and has a right to
promoting, dismissing or making return to work after maternity leave.
staff redundant. You must also consider a full-timer's
Disability is defined as a physical request to return part-time.
or mental impairment which has a While on maternity leave, employees
substantial and long-term adverse normal terms and conditions of
effect on a persons ability to carry employment apply (except wages or
out normal day-to-day activities. salary).
This can include conditions such as For more information, visit
epilepsy, asthma and diabetes, as www.nibusinessinfo.co.uk/maternity.
well as progressive conditions such It is illegal for women to return to
as cancer and multiple sclerosis. work within two weeks of giving birth
As an employer you must be (four weeks for factory workers).
prepared to make reasonable Two weeks of statutory paternity pay
adjustments for a disabled employee and leave is available to the baby's
or job applicant. This may include father (or the mother's partner),
www.nibusinessinfo.co.uk
setting the whole thing up :: your legal obligations
subject to certain criteria. You can
claim back most, if not all, of any
statutory paternity pay.
When adopting a child, one of
the adoptive parents is entitled to
52 weeks adoption leave and 39
weeks of adoption pay. If they have
a partner who is working, their
partner may be entitled to paternity
leave and pay. Each parent needs
26 weeks' service to qualify.
6.8
Sickness
You must pay at least statutory sick
pay (SSP) to employees if they are
sick for more than four consecutive
days. Many companies pay higher
levels of sick pay than the statutory
minimum.
You are not obliged to pay SSP
under certain circumstances,
including if the employee is in
legal custody when their period of
incapacity starts. For further
details, contact HM Revenue &
Customs at 0845 60 70 143;
www.hmrc.gov.uk/paye.
If an employee's continued or
repeated absences are causing real
problems, you may be able
to end their employment. Take
advice before acting, as the
legislation is complex and some
is untested.
6.9
Grievance
Make sure you have a discipline and
grievance procedure in place.
You must make sure employees
know what can lead to
disciplinary action and apply the
rules consistently. Information
on disciplinary and grievance
procedures must be provided in all
businesses and internal resolution of
workplace disputes is encouraged.
Your procedures for handling
disciplinary and grievance matters
must incorporate a three-step
minimum:
Explain the problem in writing
(the employer does this for
disciplinary issues, the employee for
grievances). You must then have a
face-to-face meeting to discuss it.
If the employee is not happy with the
outcome, you must give him or her
an opportunity to appeal.
If the employee has already left,
a two-step procedure is available
where you do not have to arrange
a face-to-face meeting but the
employee must put their grievance
in writing and send a copy to you.
You must then respond to the
grievance in writing.
The Labour Relations Agency
runs an arbitration scheme as an
alternative to tribunals for settling
cases of alleged unfair dismissal.
Those using the scheme waive
their rights to take their case to a
tribunal.
Disciplinary procedures should
follow the Labour Relations Agency
guidelines. For further details,
contact 028 9032 1442 or visit
www.lra.org.uk/Disciplinary-1.pdf.
6.10
Terminating employment
If you have to terminate a member
of staff's employment you must act
responsibly and with good cause
and be able to prove it.
Good cause may include persistent
or gross misconduct, incompetence
or a legal bar to the employee doing
the job.
Inability to do the job because of
frequent or prolonged absences due
to sickness or injury may be grounds
for dismissal.
Redundancy may be grounds for
dismissal but the reasons must be
genuine and fair. You must ensure
that the role covered by the job
is no longer required, you must
undertake a consultation procedure
with the employee and must offer
suitable alternative employment if
possible. For more information, visit
www.nibusinessinfo.co.uk/
redundancy.
Employees can normally only
claim unfair dismissal if they have
completed one year's service.
Redundancy payments become due
after two years' service.
Always take advice and be sure of
your position, as mistakes can be
time-consuming and extremely costly.
contact the Northern Ireland Fire
7 & Rescue Service at 028 9266
getting the
workplace right
There are a number of legal
requirements concerning your
place of work, whether it be home,
office or even on the road.
Procedures must be in place to
7.1
Health and safety
Health and safety law, although
www.nibusinessinfo.co.uk
daunting, is often straightforward.
There are a number of obligations
for businesses.
Businesses that work with
hazardous substances or in a
hazardous industry may need to
register with the Health and Safety
Executive for Northern Ireland
(HSENI), which you can contact at
0800 032 0121; www.hseni.gov.uk.
Some businesses, such as food
businesses and services such as
acupuncture, must register with
their local authority.
Businesses which involve food
and drink are also affected by
environmental health regulations and
food and hygiene regulations.
You are responsible for the health
and safety of everyone affected by
your business activities, including
employees, visitors and customers.
If you have employees, you must
display the poster entitled Health
and Safety Law in Northern Ireland
or give employees an approved
leaflet containing the same
information. Posters and leaflets are
available from The Stationery Office
(028 9023 8451).
If you have five or more employees,
you must have a written health and
safety policy.
You must carry out a risk
assessment to establish and
improve the safety of your
workplace. For more information,
visit www.nibusinessinfo.co.uk/
health_and_safety.
Health is as important as safety
consider issues such as noise levels
and the effect on employees of lifting
heavy objects.
You must ensure your premises
meet fire-safety standards. You must
carry out a fire risk assessment,
and take reasonable steps to reduce
the risk from fire and to ensure that
people are able to escape safely if
there is a fire. For more information,
4221; www.nifrs.org.
You must make arrangements
for employee welfare, such as
providing rest areas and drinking
water. Adequate lighting, sufficient
ventilation and clean and working
toilets should also be provided.
Employees should have at least 11
cubic metres each to work in.
ensure that employees do not suffer
excessive use of computer screens
without rest breaks and that
41

workstations can be adjusted to suit
the user.
The temperature should be at least
16 degrees Celsius where staff are
sedentary and 13 degrees Celsius
where staff are active. Smoking
is against the law in enclosed and
substantially enclosed workplaces.
7.2
Your business and the
environment
Your business can be held
responsible for any environmental
damage it causes, whether
accidental or not. You should
consider environmental issues
before you start trading.
Fines of more than 5,000 are not
uncommon and there is no limit to
fines that can be imposed.
Every business has a legal
responsibility for the waste it
produces. Specialist advice is
available from the Northern Ireland
Environment Agency at 0845 302
0008; www.ni-environment.gov.
uk.You'll also find more information
at www.nibusinessinfo.co.uk/
environment.
You must store waste safely
and securely in suitable sacks,
containers or skips.
You must ensure that whoever
collects and disposes of your
waste is doing so properly check
that they are registered with the
Environment Agency. Call 028 9056
9338 or search their online
register at
www.ni-environment.gov.uk/carriers.
If your business produces, imports
or exports packaging or has
packaging waste for recycling,
special regulations apply. Check
with the Environment Agency
Packaging Waste Unit on
028 9056 9338.
If your business is concerned with
food sales you should contact your
local authoritys environmental health
officer for advice.
If your business will create more
than ordinary levels of domestic
waste water, you must obtain
consent from Northern Ireland
Water, which you can contact at
08457 440088;
www.niwater.com.
Any emissions into the air your
business creates should be
cleared with the Environment
Agency's Industrial Pollution and
Radiochemical Inspectorate on
028 9056 9296.
42
setting the whole thing up :: your legal obligations
Restrictions cover the use, storage
and disposal of ozone-depleting
substances such as CFCs, HCFCs
and halons.
7.3
Planning permission
Most building work or change of a
premises' use will require planning
permission or sanctioning under
building regulations. You should
check with your local authoritys
building control department (visit
www.buildingcontrol-ni.com) and
with your local office of the Planning
Service (www.planningni.gov.uk).
Generally speaking, permission is not
required for changes to the inside
of buildings, but internal alterations
should always be checked with the
council to ensure conformity with
building regulations.
You may require planning permission
to use your home or other buildings
as business premises if the use
alters how the building is used or
the nature of the area it occupies.
If you are planning to base your
business at home, the key questions
to ask are:
Will your home no longer be used
mainly as a private residence?
Will your business cause a marked
rise in traffic or people calling or
involve any activities unusual in a
residential area, or disturb your
neighbours at unreasonable hours
or create other forms of nuisance
such as noise or smells?
If the answer to any of the questions
is 'Yes', you will need to apply for
planning permission.
Commercial properties can often
be adapted for similar uses without
planning permission. For example,
a shop can be changed from a
greengrocer to a shoe shop without
planning permission. Check if your
proposed use will require permission
when negotiating a lease or buying a
property.
7.4
Licences
Check if you require a licence to carry
out the work you intend to do.
Local authorities issue a variety of
licences, including those for cinemas,
theatres, nightclubs, petrol stations,
private hire vehicles, street trading,
hairdressers, any business serving
food, skin piercing (including tattooing,
acupuncture, cosmetic piercing
or electrolysis), sex shops, waste
disposal and any work with asbestos.
www.nibusinessinfo.co.uk
If your business is focused on
caring for people, register with the
Regulation and Quality Improvement
Authority (RQIA), which you can
contact at 028 9051 7500;
www.rqia.org.uk. This covers nursing
homes, residential care centres and
independent clinics.
Businesses that discharge effluent
must apply to the Environment
Agency's Water Management Unit
on 028 9262 3100.
If you will be operating goods
vehicles or public service vehicles,
you must apply to the Driver and
Vehicle Agency which you can
contact at 0845 402 4000;
www.dvani.gov.uk.
You must register with HM Revenue
& Customs (0845 010 9000;
www.hmrc.gov.uk/mlr) if your
business involves bureaux de
change, third-party cheque cashing
or money transmission services.
To sell alcohol in a shop, public
house, club, nightclub, restaurant,
hotel or any gaming establishment,
you must apply for a licence to your
local county court.
Contact Consumer Credit
Licensing at the Office of Fair
Trading (08457 224499;
www.oft.gov.uk) to license your
business if it will involve lending
money, offering or arranging credit,
debt collecting, issuing credit cards,
operating a credit reference agency
or hiring, leasing or renting goods.
If your business will involve you
storing or selling firearms, you
must register with the police.
7.5
Data protection
If you hold information (whether in
hard-copy or electronic format) on
employees, customers, potential
customers or suppliers you have to
treat the data carefully. You must
only use the information for the
purpose for which it was gathered.
The individual must have consented
or been informed that you have the
data, and know what you want to do
with it.
It must be accurate and up to date
and held no longer than necessary.
The data must be kept securely.
You must provide a copy of any data
you hold on a company or individual
if they request it; and correct any
inaccuracies they report.
You have to notify the Information
Commissioner if you are using the
data for more than the day-to-day
setting the whole thing up :: your legal obligations
running of your business
(0303 123 1113; www.ico.gov.uk).
8 in a professional capacity (eg a
protecting your
business
Some insurance is a legal
requirement, while other
insurances protect against
damaging legal action.
8.1
All employers must buy employers'
liability insurance.
This covers you against claims from
employees for accidents or sickness
they may suffer as a result of
working for you.
You must have at least 5m cover.
You must display your Certificate
of Employers' Liability Insurance
at each place of work and keep it
after it has expired. All employees,
including contract staff and casual
workers, must be covered by
the insurance.
8.2
Motor insurance
You must buy at least third-party
motor insurance for all motor
vehicles your company uses on the
road and in other public places.
Third-party insurance covers your
company's liability for personal injury
to someone else or damage to
property.
If employees use their own cars for
business, check they are adequately
insured under their own private
policies.
8.3
Public liability insurance
While not a legal requirement, public
liability insurance covers damages
payments and any legal costs to
members of the public for death, bodily
injury or damage to their property
caused by your business activities.
8.4
Product liability insurance
Product liability insurance should
be considered if you make, sell or
repair products, as you could be
held liable for damage or injury
caused by defects in your products'
design or manufacture, even if you
have not been negligent.
8.5
Professional indemnity insurance
Professional indemnity cover
protects firms which provide advice
management or IT consultant).
If you are proved to have been
negligent, without cover, costs
and damages can put you out of
business, or even bankrupt you.
8.6
Buying insurance
Most small businesses buy
insurance in packages, which can
contain these insurances as well as
other common requirements such
as buildings, contents and theft.
9 Patents are concerned with the
safeguarding
creativity
Intellectual property can hold
significant value. The four key
areas are outlined below.
For more information, visit
www.nibusinessinfo.co.uk/
intellectualproperty.
9.1
Copyright
Copyright protects creators and
owners of the written word, art,
music, sound recordings and films.
It exists automatically as soon as
there is a record of the material
that has been created. But mark
anything you wish to be protected
with notification of your copyright
and the year it was created.
You must not copy anything without
a copyright-holder's permission.
Damages awards can be severe.
Use employment contracts to
ensure that the copyright to the
work employees create as part
of their duties is signed over to
your business. For example, if an
employee creates an advertisement
for your business the copyright
should be owned by the business,
not by the employee. Clarify the
position of freelance contractors.
9.2
Design right and registration
Design right protects original
designs of the shape or
configuration of a product.
It lasts ten years after the first
marketing of articles made to the
www.nibusinessinfo.co.uk
design. It does not have to be
registered to be protected.
The design can be bought, sold or
licensed.
You can register a design for
additional protection. This is
advisable if the design is exclusively
associated with your business and
can become a business asset in its
own right.
If you do not have permission,
you cannot copy anything that is
protected by design right.
9.3
Patents
Patents protect inventions and
prohibit others from making, using
or selling an invention without the
inventor's permission.
functional and technical aspects of
products and processes.
Patents must be registered;
protection lasts for up to 20 years.
9.4
Trade marks
Trade marks distinguish goods and
services and include devices such as
logos, names and slogans.
Trade marks are generally used
as a tool to enable customers to
recognise a specific company's
product. For example, a vacuum
cleaner is a product, but Hoover is a
trade mark.
You must not use other companies'
trade marks without permission.
Trade marks must be registered.
You can register your business
name as a trade mark at the
Intellectual Property Office
(0300 300 2000; www.ipo.gov.uk).
9.5
Getting advice
Business Innovation Link (BIL)
can provide financial support and
assistance for product ideas which
are marketable and of patentable
quality. Contact BIL on
028 9066 8499; www.bil-ni.co.uk.
43

1
your office needs
1.1 Consider how many
telephone lines or
extensions you will need.
1.2 If you will need more
than occasional copying,
consider leasing or buying a
copier.
1.3 For most start-up
businesses, PCs have
become the central part of
their IT system.
44
setting the whole thing up
setting up your first
communications
and IT system
Information technology (IT) is a vital part of day-to-day life in many
companies. It can transform the way a business operates, speeding up
communications and improving productivity by automating many tasks.
Every fledgling business should make certain it specifies and sources an
IT solution which meets its immediate requirements, while ensuring the
solution can be expanded as the business grows.
This section covers:
Basic requirements.
Using software.
Networking.
Security.
Budgeting and buying.
Nearly every start-up business will need basic communications technology.
Make sure you will be able to add lines or extensions later if necessary.
Consider using answering services to take calls if your lines are busy so you
dont lose business.
Shop around to take advantage of high levels of competition in the telecoms
market. You may be able to save money on calls.
If you want to use the internet, many suppliers offer special prices for
businesses that take both phone service and Internet connections.
Most businesses choose to lease, with maintenance charges at around 1 to
2p a copy. You get full tax relief on lease payments.
Ask for confirmation of the number of copies a month the copier is designed
to handle and check its expected lifespan.
You can manage large amounts of information much more effectively using
PCs rather than paper-based systems.
Look at your business and assess which activities from accounts and
personnel records to stock control and customer relationship management
could be more effectively carried out using computers.
You will need to invest in training. Remember to include training costs when
budgeting for your IT system.
A wide range of courses are available from introductory courses covering PC
basics to more structured courses, such as the European Computer Driving
Licence (www.ecdl.com).
Your local enterprise agency can direct you to suitable IT-related courses.
To find your local enterprise agency, visit www.enterpriseni.com or call
028 7776 3555.
Your local further education college may also provide IT-related part-time and
evening classes.
www.nibusinessinfo.co.uk/ebusiness
setting the whole thing up :: setting up your first IT system
1.4 The printer you choose
should be determined by
the quality, speed and
versatility you require.
1.5 Faxes can be vital for
start-up businesses dealing
with business customers.
2
networks
2.1 If you are working on your
own, the only network you
need to consider is the
connection between your
PC, phone line or cable
outlet (for internet access),
printer and possibly fax or
copier.
2.2 If you have up to six
computers, consider linking
them on a peer-to-peer
network.
2.3 When your business has
more than six connected
PCs, you should use a
network based around a
server.
Getting used to new equipment or software may mean you are less efficient
for a short period. But it should pay dividends in the long term.
The greater the use of your IT system, the greater the impact if something
goes wrong with it make sure you consider security and support (see 6).
Remember that the effectiveness of your system will be limited by your skill
at using it. Avoid buying hardware or software which is too complicated for
your needs.
If you are working on your own, you may consider a multifunction device,
which combines scanning, faxing, copying and printing facilities.
Inkjet printers are cost-effective for occasional printing. As the cost per page
can be high, they are not suitable for more than 500 pages a month.
Inkjets also offer the capability to produce short-run colour documents at an
affordable cost.
Small laser printers are cheaper to run than inkjets and are designed to
produce up to 5,000 pages a month.
Heavy-duty laser printers are suitable for larger businesses.
You can save money by using reconditioned printer cartridges.
Many computers can be used to send and receive faxes but hard-copy
documents have to be scanned before being faxed in this way.
Many plain-paper fax machines can also be used for photocopying but the
cost of print cartridges can make this expensive.
To stop receiving unwanted direct marketing faxes, register with the Fax
Preference Service (0845 070 0702; www.fpsonline.org.uk).
This should be easy to set up, as all these devices are designed to work
smoothly together. However, check compatibility with your existing equipment
before making any purchases.
Each user can access files on the other users' machines and external devices
such as printers. This may slow down some users' machines at busy times.
Peer-to-peer networks can be set up wirelessly or using standard cabling.
Unless you have a full understanding of servers and networks, you should
seek advice about how to do this (see 9).
A server is a powerful, dedicated computer that manages the network and
stores your software and files.
It allows anyone on the network to access other people's work when required.
You must take preventive measures in case the server fails. At the very least,
the contents of the server should be backed up regularly make sure your
server has a suitable backup device such as a tape drive. Ideally, you need a
server that is built to continue functioning even if components fail.
As your network grows, it will take more time to manage. For maximum
efficiency, make one person responsible for your IT and make sure theyre
suitably trained.
It is a good idea to have a fault-finding checklist and detailed network diagram
this can help you locate any faults that may arise.
www.nibusinessinfo.co.uk/ebusiness 45

3
office benefits
3.1 Email provides a fast
and inexpensive way
of communicating with
everyone, including people
within your business.
3.2 Word processing software
allows you to produce
professional-looking
documents and letters
quickly and easily.
3.3 Basic accounting software
can simplify book-keeping
and automate VAT returns
and similar tasks. It can also
help you to produce business
plans and forecasts.
3.4 Stock control software
allows you to predict buying
or manufacturing needs to
help drive efficiency. There
are also customer service
benefits.
3.5 The internet is a great
source of business and
market information.
4 you are unlikely to need features
connecting with
customers
4.1 Contact management
software or a simple
database allows you to
record details of customers
and suppliers and your
dealings with them.
4.2 A database allows you to
generate mailshots and
monitor the effectiveness
of marketing campaigns.
Software such as
PowerPoint allows you to
produce impressive sales
presentations for customers.
46
setting the whole thing up :: setting up your first IT system
With the right software, your IT can increase the efficiency of your business' internal
operations. Before you buy, check that software can do exactly what you want it to.
Email has become a core communication method, with many businesses
making greater use of it than post and fax.
Business-related emails should be treated as formally as a business letter.
If possible, use an email address that contains your business name.
Features such as automatic spell-checking and grammar-checking can
improve your accuracy and efficiency.
Payroll software makes paying staff easier, automating repetitive and
sometimes difficult calculations.
Consider whether outsourcing your payroll function would be more cost-
effective, particularly if you only have a small number of employees.
just buy what
you need
You can conduct research into
market trends, your customers and IT systems are advancing all the
your competitors by visiting their time, with more features being
websites. added. Its easy to be attracted
You can often save money by
by the latest gizmo. But you
sourcing and purchasing supplies should always buy what you need
online. rather than what the salesperson
says you need.
For most business purposes
such as speakers, advanced
Effective use of IT can project a sound and graphics cards
professional impression of your
business to customers and potential
or the games that are often
shipped with computers.
customers and help you manage your
business relationships more effectively. But always get as high a
processor speed and as much
You can schedule sales activities and
RAM (random access memory)
monitor progress. as your budget will allow.
Once your IT system is up and
running, don't upgrade software
simply because a new version
has been released. Establish
whether the new features would
benefit you. In any case, you will
probably be better off waiting
until any glitches have been
ironed out.
www.nibusinessinfo.co.uk/ebusiness
setting the whole thing up :: setting up your first IT system
4.3 If you decide to have a
website, your internet
presence can range
from providing simple
information about your
business through to
full online ordering and
tracking systems.
4.4 Communicating with
customers via email is
quick and efficient.
4.5 It may be useful for
customers and suppliers
to have access to your
IT systems through an
extranet.
5
away from the
office
5.1 People who spend much of
their time out of the office
should consider portable
computers, from laptops to
hand-held devices.
5.2 You can access your IT
system while off the
premises through an
internet connection.
5.3 Broadband connections
and remote-access software
allow you or employees to
work from home.
5.4 Virtual Private Networks
(VPNs) are networks that
offer secure connections
over the internet.
6
securing your
data
6.1 Physically protect
computer equipment.
A website can be used to keep existing customers up to date with what your
business is doing, as well as providing a global shop window to your business
for potential customers.
In general, the more sophisticated your website the more it will cost to build.
For more information, visit www.nibusinessinfo.co.uk/website and
www.nibusinessinfo.co.uk/ecommerce.
Email marketing is cost-effective and easy to tailor for specific customers
through a contact-management system. In most cases the law requires you
to obtain permission from recipients before sending them marketing emails.
An extranet allows customers to view files by logging on to dedicated areas of
your system.
For example, an architect may want customers to see plans as they are
being developed, saving time and management costs. Extranets can be costly,
so assess carefully whether you need one.
Laptops cost more than an equivalent desktop PC.
They can be easily stolen so make sure your insurance policy covers you in
case of theft.
You must take additional security precautions if you allow access to your
network from outside your business (see 6).
Connecting directly to your server saves time as you work with the original file
stored on the server. You do not have to worry about saving updates to the
server and the portable.
For free and impartial advice on broadband Internet connections, call
Invest Northern Ireland's E-Solutions Centre on 0800 515 319 or email
esolutions@investni.com.
VPNs are particularly useful for businesses that work from more than one
office. People who work out of the office can routinely access the network too.
Employees working from home can connect to your VPN and also use an
extranet (see 4.5).
These systems need to be carefully planned.
Stealing a PC or server is the most direct way for someone to get hold of
information and the easiest way for them to discover how to gain access to
your IT system later.
www.nibusinessinfo.co.uk/ebusiness 47
how I set up
my firms IT
When Paul Doherty set up
Urban 3D providing 3D
illustration, animation and
graphic design services to
property developers he
needed to be sure his IT
systems could do the job.
With support from an IT
specialist, the business
now uses software and
hardware traditionally
used by Hollywood
special effects houses to
create three-dimensional
animations of construction
projects

My background is in architecture,
so I had a bit of knowledge about
what I wanted my new businesss
IT systems to achieve. What we
wanted to do was provide architects
with the ability to show clients
plans and potential developments
Looking forward: Paul's IT system
develops with his business

in, we found that we needed more

computing power. With advice from
our IT expert, we got a couple of
quad-core workstations after all,
navigate around the animations
themselves, even changing wall
colours and moving furniture
around rooms. Who knows where
technology can take us, but if they
can do it in Hollywood today well
make it feasible in architecture

in 3D. After all, our eyes transmit
and process information in three
dimensions, so previewing designs
in two dimensions on paper is
increasingly outdated.
So now we can provide three-
dimensional animated films that
allow the user to preview a path
through a building before its even
built. Its a really useful technique
to help sell new property and can
help enormously with planning
applications and appeals.
Where I used to work, they had
an IT administrator who was a
contractor. Id got quite friendly with
him, and he gave me a lot of useful
help and advice at a low cost when
we were starting out.
We started off generating 3D
still images, which dont need an
enormous amount of computing
power, so we used a single dual-
core workstation at first. Once the
animated 3D work started to come
four processors work faster than tomorrow.
two and our deadlines demanded
more speed.
We never had a concrete plan
for the IT system weve simply
responded to what the business has
needed as its grown, starting small
and working our way up. Were still
working with the same IT guy.
Pauls top tips
I knew the key software packages
we needed and have generally 1 Let your business needs define
taught myself, but we do try to your IT system
use new software where it adds
something for our customers. I get 2 Plan so your system can grow
a lot of advice from fellow users on
web forums, particularly specialist 3 Dont skimp on essentials
ones like www.cgarchitect.com. reliability is key
In terms of communications, we use
email a lot and the graphic design Urban 3D
side of the business uses FTP for 12 London Street
moving files to clients and printers Derry City, BT48 6RQ
all the time. Our internet connection Tel: 028 71 279700
is one area we dont skimp on its www.urban3d.net
worth paying more for reliability.
Our next step is allowing users to

48
setting the whole thing up :: setting up your first IT system
6.2 Design your network with
security in mind.
6.3 Create a robust back-up
system.
6.4 Ensure employees
understand the importance
of security.
6.5 Make sure technical
support is available. This
can range from a suitably
qualified individual looking
after all IT issues through
to engaging specialist
support contractors.
7
setting up a
budget
7.1 Expect to spend between
300 and 500 plus VAT
for a desktop computer.
7.2 Dedicated servers typically
cost from 500.
7.3 Additional costs to
consider include:
Use passwords to restrict access passwords containing both numbers and
characters are more secure.
Focus your security on high-risk information and systems. For example,
confidential information and financial systems.
Protect computers with direct internet access. Use a firewall to control data
coming into and out of your system, and install anti-virus software that filters
destructive data. Ensure your anti-virus software is kept up to date check
for updates with your software supplier. Scan disks, USB memory sticks and
external hard drives that come into your office for viruses.
For more information, visit www.nibusinessinfo.co.uk/itrisks.
Set up a procedure for making regular partial and complete back-ups.
Store back-ups off-site. Keep them away from heat, moisture and magnetism.
Check the back-ups regularly to make sure files are being stored properly on
them by your system.
Make security a part of employees' contracts.
Implement an email and internet policy setting out guidelines for appropriate use.
It is good practice to change all passwords when an employee leaves your
business.
Work out the longest time you could work without your system before your
business is damaged and make sure your support could get the system
operational before then. For critical equipment, such as a server, consider
using a next-day on-site service contract.
For around 300 plus VAT you should be able to buy a machine sufficient for
basic office applications such as word processing, simple accounts, sending
email and surfing the internet.
For 500 plus VAT a system will be more powerful as well as having more
extensive sound, graphics and storage capabilities.
For example, this could be used for web and print design, or for stock-control
systems that juggle large amounts of data.
Costs are higher for computers with high-speed processors with lots of
memory and advanced graphics capability. High-end machines are only
necessary for businesses that depend upon processing speed, eg printing,
computer-aided design or music production. Most PCs have a life span of
around three years, so budget accordingly.
If your server use is light, a standard desktop PC could be used as a server.
For workgroups of more than six people, a dedicated server is desirable.
Ensure that the server uses an operating system compatible with your PCs
and that it has a backup device such as a tape drive.
Software.
Running and maintenance, and any warranties.
This may significantly add to the initial costs. Check what level of support you
will get and if there are other hidden charges.
Training, for you and your staff.
www.nibusinessinfo.co.uk/ebusiness 49
 setting the whole thing up :: setting up your first IT system

8
shopping around You can source your system from a number of different channels. For more
information, visit www.nibusinessinfo.co.uk/suppliers.

8.1 Online and mail order Returning faulty equipment can be time consuming.

retailers usually offer a
wide product range at
competitive prices.

8.2 At shops and stores you Retailers generally offer maintenance and support, but this can be expensive.

can try out your purchase Make sure youre getting value for money.
and take it away with you.

8.3 Buying direct from the You can generally specify how you want the system to be built.

manufacturer can be Orders can be placed over the phone or the internet.

a good idea if you know
exactly what you need and
don't require advice.

8.4 Resellers can provide a Shop around to find a reseller that clearly understands your needs and offers

range of services, from competitive prices.
single PCs to tailored
IT systems and support
packages.

8.5 Consultants can specify, This can be a good option if you lack experience with IT systems, but you

install and configure should check a consultant's references carefully.
systems for you.

8.6 Second-hand computers
can be bargains although
you have to be careful to
avoid buying something
of questionable quality or
legality.
Buying secondhand can be a good option if you don't require the latest high-
specification model.
Some manufacturers sell fully tested returns or discontinued ranges at heavily
discounted prices. For example visit www.dell.co.uk/outlet.

9
other help
9.1 Invest Northern Ireland
provides an IT advisory
service to SMEs through
its E-Solutions Centre.
Trained E-Business Advisors are available to offer impartial advice on a range
of IT issues, from selling online to using mobile devices. For further details,
call Invest NIs E-Solutions Centre on 0800 515 319 or email
esolutions@investni.com.

50 www.nibusinessinfo.co.uk/ebusiness
 youve got your first customers

effective selling

Making sales is the biggest challenge facing most start-up businesses.

But there are several ways to boost your success rate when it's just
you and the customer.
Whatever youre selling from a mobile phone to a meal the basic
approach is the same.

This section covers the four essential stages:

Making sure you talk to the right person.
Finding out your customers needs.
Selling the benefits, not the features.
Closing the sale.

1
right on target Your market research and understanding of your target customer play a
crucial part in successful selling. Before you contact a potential customer (a
prospect), run down a list of key questions.

1.1 Does this person or What specific benefits will it provide?

company need my product
or service?

1.2 Why does this customer

need it?

1.3 Do I know enough about

the customers business?

1.4 Who is the customers

current supplier?

1.5 Has the customer got Its no good selling to fellow start-ups that can't afford to buy from you.

enough money?

1.6 Can I get an introduction?

1.7 Who is the decision- In a big company, do not waste energy selling to juniors with no budget
maker? authority.
Try to get in front of someone with the power to take decisions and place
orders.
Preparation pays off. You will never get a second chance to make a good first
impression.

www.nibusinessinfo.co.uk/marketing 51

2
what are you
trying to do?
2.1 Work out the result
you want from every
conversation with a
prospect.
2.2 Even if you get a rejection,
keep building up your
information on each
prospect. It will help you
next time.
3 Provide a persuasive reason for
reach the
decision-maker
3.1 Greet the initial person.
3.2 Be open and honest.
Explain who you are.
3.3 Show knowledge of the
company, eg I would like to
discuss the garden sheds
your company sells.
3.4 Show a benefit, eg I think
Mr X will want to speak
with me because we have a
shelving product that sells
well alongside your sheds.
3.5 Ask for help, eg I
am trying to get an
appointment with Mr X.
Can you help me?
3.6 Ask for an appointment at
a definite time.
3.7 If you are asked to put
something in the post,
react in a constructive way.
52
youve got your first customers :: effective selling
Do you want to submit a quotation
Phoning to fix an appointment
or send a free sample of your
product?
Do you need to arrange a meeting?
To close a sale you need to talk to
the people who make purchasing
decisions. You may not be able to
talk directly to these decision-makers
at first attempt. But if you treat
your initial contact correctly, you can
raise your chances of speaking with
the right person.
Try to get their name early on, as
this will help you next time you call.
Just sounding polite and cheerful will
get you a long way.
Ideally, make the contact worry that
turning you away now may mean
missing an opportunity for the
company.
Explain that it would help to talk to
the right person first, so you can
send tailored information and not
just a standard pack.
www.nibusinessinfo.co.uk/marketing
getting the
appointment
need not be daunting if you take
a systematic approach.
Check you are speaking to the
right person, introduce yourself
and establish a basis for talking
as soon as you can.
Did you receive my letter?
Your friend X suggested I call
you.
Did you see the article about
our company in Y magazine?
meeting and try to confirm a
time and date.
Pick one key benefit and tailor
the way you present it to suit
the customers immediate
needs.
Start by suggesting a date that
suits you, and let the customer
come back with an alternative if
this is not convenient.
Aim to keep the conversation
moving forward. Here are some
routine brush-offs, and how you
might respond.
Let me think about it.
Of course. What is it that
particularly concerns you?
Put something in the post to
me and Ill look at it.
OK. Which type of product are
you particularly interested in?
I have to go into a meeting
now.
Fine. Ill send you a letter
following up on our discussion.
If you get an outright brush-off,
do not take it personally. Try to
pin down the reason why the
prospect is not interested.
Is it just that the timing is
wrong? Should you call back in
six months?
More appointments mean more
sales. Allow time every week to
top up the pipeline.
youve got your first customers :: effective selling
4
creating interest
4.1 When you open a sale,
establish right away that
you are not wasting the
prospects time.
4.2 It helps to start by asking
a series of questions which
can only be answered Yes.
5
do they need
your product?
5.1 Use open questions
(questions that cannot be
answered Yes or No)
when investigating potential
customers needs.
5.2 Listen carefully to what the
prospect says.
5.3 Make sure your prospects
understand their own
needs and opportunities.
5.4 Confirm that the need is
important enough to merit
taking action.
Make it clear you believe there are genuine benefits for the customer.
This creates a positive momentum and helps you involve the prospect while
progressing to the next thing you want to say.
Compare these examples:
Bad opening: I do injection moulding and I want to tell you about my services.
Response: Im sorry, Im not interested. Goodbye.
Good opening: I have a small injection moulding shop and I gather you use
plastic mouldings. Is that correct?
Response: Yes, we do.
Bad opening: I am calling to see if you need any printing done.
Response: No thanks, we dont. Goodbye.
Good opening: I am calling about your printing. I believe you send out a
catalogue every year. Is that right?
Response: Yes, we do.
Follow up with: Good, because we specialise in high-quality catalogue work...
Compare these two statements, with two different approaches to selling:
Salesman 1: This PC has lots of RAM. I recommend it.
Salesman 2: This PC has enough memory for you to handle word processing
and the management accounts. Its just what you need.
Salesman 1 is selling the product. His sales pitch will be the same for every
customer he talks to.
Salesman 2 has found out the prospects needs, so he can then sell the
benefits of his product.
He will sell many more PCs than Salesman 1.
What garden accessories do you currently sell?
Why do you buy them from Germany?
What are you looking for when you buy this type of shelving?
Top sales people talk little and listen a lot.
So when your customers buy sheds, they dont buy shelves for them. If they
did, what would the extra sales be worth?
So would you be interested in adding an extra 20,000-worth of sales a year
by stocking shelving?
www.nibusinessinfo.co.uk/marketing 53
how I sold
to my first
customers
When Fearghal McNeice
was setting up his
precision-engineering
business Blue Eagle
Precision in 1999, he
focused on one thing
his customers. From
textiles to aerospace and
pharmaceuticals, they
wanted high quality and
low turnaround times.
So he built a business
capable of delivering just
that. Over a decade, the
business has grown and
now employs 12 staff

Id been working in this area for quite

a while before I set up my business,
so I was lucky and knew what would
be important to my customers. I
Fast worker: speedy delivery is
essential to Fearghals customers

and just wait and wait until I got the

and as were located close to
our main customers we can offer
a rapid response facility for quick

think that if you dont find out 95 per
cent of what makes your customers
tick, selling to them is going to be
difficult.
The people I spoke to wanted a quick
turnaround and someone whod stick
to promised delivery dates. Some of
their existing suppliers were based
overseas and turnaround times were
up to three weeks. So I invested in
machinery that allowed me to switch
from job to job very quickly I was
able to quote a turnaround as low as
two or three days.
If youre confident you can do a
good job, its a matter of convincing
customers to give you a go. I went to
businesses I knew needed products
like mine and said to them: Just give
us one job to show you what we can
do if you like our work, great; if you
dont, then I wont charge you for it.
Sometimes it was hard getting my
foot in the door but you just have to
persevere. If I had to, I used to go
in person to a customers business
chance to talk to them. turnaround orders.
The main thing is to make sure they
know your business exists. One or
two people came back to me when
their existing suppliers let them down.
They needed last-minute help and that
gave me an opportunity to show I
could deliver quality goods to them on
time and at short notice.
Fearghals top
I also tried to find new customers.
A lot of precision-engineering firms
tips
in Northern Ireland work for one big
customer. But a customer that big 1 Learn all you can about your
with so many suppliers can keep sector and customers
prices low. So I looked for others to
sell to, and now were doing work 2 Give customers what they want
for companies in Canada, the United
States and Scotland as well as 3 Deliver on your promises be
Northern Ireland. reliable
These principles havent really
changed much over the years. Blue Eagle Precision Limited
These days, its increasingly difficult 7 Ardress West Road, Portadown,
to compete against engineering Co Armagh BT61 8LH
companies from Eastern Europe Tel: 028 3885 2741
so our main selling point to www.beprecision.co.uk
customers is not price but quality Email: info@beprecision.co.uk

54
youve got your first customers :: effective selling
6
sell the benefits
6.1 Sell the benefits, not
the features. Or, as the
marketing saying goes, Sell
the sizzle, not the steak.
6.2 Match benefits to the
prospects needs.
6.3 Quantify the benefits.
6.4 Produce evidence to back
up your claims.
6.5 Mention customers and
their comments.
6.6 Be prepared to discuss
rival products, but provide
proof of the advantages
you offer.
7
objections to the
sale
7.1 There is an established
relationship with an existing
supplier.
7.2 The customer likes your
product, but thinks it is too
expensive.
Once you know what the prospect is looking for, you can offer the solution
your product or service.
If a prospect is interested but undecided, remove any remaining doubts by
explaining why your product or service is ideal.
A feature is an attribute of the product or service, such as size, design or
simply what it achieves.
A benefit is what the feature can do for the customer. But it is only relevant if
it is something that particular customer wants.
Feature: A sleeping bag filled with duck-down.
Benefit: This sleeping bag will keep you warmer.
Feature: Teflon coating on a saucepan.
Benefit: To wash it up, just wipe it.
Feature: High-speed printer mechanism.
Benefit: It will give you improved productivity in the office.
Feature: Well designed shop sign.
Benefit: It will bring in more of the kind of customers you want.
If security is your priority, this toughened glass would be ideal for your
entrance door.
Insulating the loft would save you 500 a year. It will pay for itself in three
years.
Photos, cuttings, research reports and testimonials all help to reinforce the
point.
Ask existing customers for references and testimonials theyll increase your
credibility with potential customers.
Independent studies prove we can give you lower lifetime running costs.
Make your point strongly, but never rubbish your competitors.
You should welcome objections as a sign the prospect is taking you seriously.
When an objection is raised, listen carefully to exactly what is said.
You will soon come to recognise the common problem areas.
Gently make an opening for yourself.
If you have a good supplier, it makes no sense to change. Unless, of course,
a new one has more to offer. My customers tell me our pricing, quality and
service are very competitive. Why not try us out with one small order? You
have nothing to lose.
Explain that your product is actually good value and demonstrate why.
Often a customer whose mind is made up just wants to be reassured the
decision is right before giving you the order.
Sell the full package you offer, including your reliable after-sales service and
the fact that there are no hidden costs.
Keep stressing the benefits of your product, not its features.
www.nibusinessinfo.co.uk/marketing 55
 youve got your first customers :: effective selling

7.3 Doubts are voiced about Ask: What are the specifications you would expect us to meet?

quality and whether you Then briefly explain how your product does meet the specification, your
can achieve it consistently. companys rigorous quality control systems and good reputation, and so on.

7.4 The customer pleads lack
of money.
Probe to see if this is the real objection.
Ask: If you did have the money available now, would you buy it?
Show how a credit arrangement, payment by instalments or some other
financing approach could make the deal possible.
Demonstrate the savings the customer would make - and how quickly they
would feed through.

8
handling Isolate and test the objection by asking if the prospect has any other

objections concerns about your product. Then deal with it.

8.1 Acknowledge the validity

of the prospects concern:
Youre right to ask about
the quality.

8.2 Tackle the objection directly Do not simply rehash your sales pitch.

and from the customers
perspective.

8.3 Talk about the specific Do not allow a minor objection to take on an exaggerated importance by

benefits of your product as spending longer on it than necessary.
they relate to the specific
needs of this individual
customer.

the three types

9 of benefit
closing the sale
9.1 Dont expect your
customer to do the work of
closing the sale for you.
9.2 Once you realise the
prospect is ready to buy,
stop selling.
It is amazing how often a business
person walks away from a prospect,
after considerable time and effort,
without asking for the sale.
This can even happen before you
have started delivering any sort of
sales pitch.
If you dont stop, you may go on to
talk yourself out of a sale.
Standard benefits are
provided by both you and your
competitors.
If you only supply standard
benefits, try to build some
differential ones into your offer.
Differential benefits set your
product or service apart from
those of your competitors.
These benefits are the key to
success, giving customers a
concrete reason to buy from
you.

9.3 Check and confirm what
has been agreed.
9.4 Close the sale.
So, you have chosen the blue one.
This is best done in an upbeat,
positive manner. Right! Lets discuss
the delivery arrangements.
The alternatives close is also
effective, particularly in retailing: Do
you prefer the blue one or the red?
Company benefits are those a
customer gains by dealing with
your company.
For example, if you offer a
loyalty scheme or frequent-user
discount.
Company benefits are useful if
you do not offer any differential
benefits.

56 www.nibusinessinfo.co.uk/marketing
youve got your first customers :: effective selling

9.5 Some people find it hard to The simplest way of all is to ask: Can I take your order now?

close a sale, even when a Once you have asked for the sale, resist the temptation to say any more.

customer is eager to buy. Your silence encourages the customer to think things through and reach a
decision.

9.6 When there is just one Ask: If I can guarantee to get the delivery date brought forward to meet your

objection left (eg about schedule, will you place the order now?
deadlines) and you have A hesitant buyer can often be won over by this reassurance that the one
checked that any others remaining stumbling block is now an explicit condition of the sale.
have been answered (see
8), you can use a technique
known as the conditional
close.

www.nibusinessinfo.co.uk/marketing 57
 youve got your first customers

simple
book-keeping
Book-keeping makes your paperwork easier. It provides a system
that tells you and your accountant exactly what is going on.
Bills, invoices, receipts, bank statements, paying-in slips, credit-card
statements and cheque stubs become easy to manage.
Traditional paper-based systems might look suitable for many start-up
businesses, but accounting tasks can swallow valuable time as your
business grows so its a good idea to computerise your accounts at an
early stage. But make sure you buy software that can grow with your
business.

This section covers:

How to record business income and payments.
How to use your bank statement to check that you have not made any
mistakes.
Tips for cash businesses such as shops.

1
what you You have to record all the money coming into your business and all the money

will need going out, both to keep track of your cashflow and for your tax records.

1.1 A record of every sale. Cash businesses, such as shops, will use till rolls and point-of-sale systems to

record sales.
Non-cash businesses should issue an invoice for every sale. Keep them in two

files: Sales Paid and Sales Unpaid.

1.2 Invoices or receipts for Keep two files: Purchases Paid and Purchases Unpaid.

every purchase.

1.3 Records of payments Open a separate business bank account.

into and out of your bank Ask for monthly bank statements.

account.

1.4 Records of payments made Keep receipts for cash purchases in a box file labelled Petty Cash.

by cash.

1.5 A Cash Book for A Cash Book records all the money coming into and going out of your bank

summarising the account. Your accountant can help you set up a simple book-keeping system,
information. Cash Books choosing headings to suit your business.
come in hard copy and There are a number of guides available in your local bookshop, such as The

electronic forms. Best Small Business Accounts Book which takes the reader through the
practical steps of setting up and running company accounts.
The Twinlock Complete Accounts Book (Ref: 11290) is simple to use and

includes guidance notes and worked examples. Contact your local business
stationer to order.
It is a good idea to computerise your financial records as soon as possible.

Accounting software (see box, p60) can perform the same functions as a
hard copy Cash Book.

58 www.nibusinessinfo.co.uk/financialplanning
youve got your first customers :: simple book-keeping
2
sales
2.1 Every time you make a
sale, issue an invoice.
2.2 When an invoice is paid,
pay the customers cheque
into your account, using
the paying-in book provided
by the bank.
2.3 At least once a week,
update your Cash Book or
software package.
2.4 At least once a week
check through your unpaid
invoices and chase any that
are falling due.
2.5 It all adds up.
3
non-sales income
3.1 From time to time your
business will have other
income apart from sales.
3.2 You will not receive invoices
for all of these, but they
will appear on your bank
statement.
4
purchases
4.1 Every time you make a
purchase, ask for an
invoice or a receipt.
You need a simple routine to keep track of your sales.
Give every invoice an original number (1, 2, 3 and so on) and keep a copy of
each.
File the copy invoices in Sales Unpaid.
Put the most recent invoice on top. The invoices will automatically be in date
order.
On the stub of the paying-in slip write the date, invoice number(s) and
amount(s).
Take the invoice from the Sales Unpaid file. Write paid plus the date in the
top right-hand corner.
File the invoice in Sales Paid.
Put the most recently paid invoice on the top. The invoices will automatically
be in the order they were paid.
Ignore the invoice numbers, which do not have to be kept in any order.
See 8 for cash sales.
Look through your paying-in book stubs. Enter into the Cash Book details of all
the invoices paid.
Check the Cash Book entries against the invoices in the Sales Paid file.
Put a tick against the invoice number on the invoice to show that the invoice
details have been entered in your Cash Book.
The longer a customer has owed you money, the further back in the Sales
Unpaid file the invoice will be.
Everything will match. Invoices are in the same order as entries in the Cash
Book, which is in the same order as your bank statement.
This might include:
New loans or grants.
Interest on your deposit account.
Equipment disposals.
Tax refunds.
Every month enter details of these exceptional transactions in the Cash Book
below the entries for money received from sales.
Keep a note of all purchases for which you do not have a receipt.
For example, if you have no ticket as proof of a train journey, keep a slip of
paper saying where you went and when, and how much it cost.
File the bills in Purchases Unpaid in date order, with the most recent on the top.
www.nibusinessinfo.co.uk/financialplanning 59
 youve got your first customers :: simple book-keeping

4.2 When you pay a bill, write
the date, supplier and
amount on your cheque
stub.
If you pay several invoices with one cheque, write down each amount and the
total.
Take the invoice out of the Purchases Unpaid file and write the date and
cheque number in the top right-hand corner.
File the invoice in Purchases Paid in date-of-payment order. The most recent
goes on top.
If you have a receipt, as well as an invoice, staple them together.

See 5 for cash purchases.

4.3 Update your Cash Book
or accounting programme
regularly daily or weekly
depending on how many
bills you have to deal with.
Look through your cheque stubs. Enter the details of the bills you have paid in
the Cash Book.
Check the details against the invoices in the Purchases Paid file.
Put a tick against the cheque number (in the top right-hand corner) to show
that the invoice details have been entered in your Cash Book.

4.4 It all adds up. Everything will match. Invoices will be in the same order as the entries in the
Cash Book, which will be in roughly the same order as entries on your bank
statement.

5
cash purchases Sometimes you will use cash to make small purchases.

5.1 Pay the cash out of your

own pocket.

5.2 Write details of the

purchase on each receipt.

5.3 Keep the receipts in your File them in date order.

petty cash file.

5.4 Once a month, total all the Write yourself a cheque for the total.
petty cash receipts. Attach the receipts to an A4 sheet and file in Purchases Paid.

choose your accounts software wisely

As there is a wide variety
of accounting software on
offer, it's important to choose
carefully and to pick one with
the functions and scale that you
need both now and in the future
as your business grows.
Getting this right can limit
technological growing pains.
Here are some examples:
QuickBooks offers all day-
to-day functions, along with
customisable invoicing and
supplier tracking and an
electronic invoicing and
payment facility. Three
packages are offered.
Prices for standard versions start
from 90 plus VAT, but there is a
free version for small businesses
with up to 20 customers and
suppliers (visit www.quickbooks.intuit.
co.uk or call 0800 515 319).
Sage Software offers a variety of
accounting software solutions for
many kinds of business. Sage Instant
Accounts is designed for start-ups
and small businesses.
Prices start from 115 plus VAT
(visit www.sage.co.uk or call
0845 111 5555).
The Mamut Office range can
handle tasks from invoicing
and accounting to budgeting,
debt collection and contact
management. Prices (including
updates and support) start at
59 plus VAT per year
(visit www.mamut.com/uk or
call 0800 032 5616).
Kashflow accounting software
offers an easy to understand,
online accounting system for small
businesses for 16 per month
(visit www.kashflow.co.uk or call
0800 848 8301).

60 www.nibusinessinfo.co.uk/financialplanning
youve got your first customers :: simple book-keeping
5.5 Enter the details in the
Cash Book. So, if you
spent 10 on stationery
and 5 on parking, you
would enter:
5.6 You can treat purchases
by personal credit card in
exactly the same way.
6 Book, put P by the invoice
the bank
statement
6.1 Match each entry in the
Cash Book with the entry
on the statement. Tick
them both off.
6.2 Payments made by direct
debit or standing order will
not yet be recorded in the
Cash Book. Nor will bank
charges and interest.
6.3 Make sure that every item
appearing on the bank
statement has been ticked
off.
6.4 Some items will not
yet appear on the bank
statement.
6.5 Calculate the adjusted bank
balance.
Your own name and petty cash
refund in the supplier column.
15 in the total column.
10 under stationery.
what to do
5 under travel, which includes
when
parking.
An invoice is amended:
Refund yourself the total of all the
Issue a new invoice.
business purchases with a business Write "Cancelled: see invoice
cheque when the credit card bill no. xxx" on the original invoice
arrives. and file it in Sales Paid.
Staple all the receipts to an A4
sheet. Partial payment is received:
Enter details in the Cash Book, with
Write part paid, the date and
your name and credit card refund the amount on the invoice.
in the supplier column. File a photocopy in Sales Paid
and keep the original in Sales
Unpaid.
When you update the Cash
number, eg P169.
Every month compare your bank
statement and Cash Book. After any
errors are corrected, both balances
If you issue a credit note:
Give the note a number, like an
should be the same. invoice (1, 2, 3 and so on) and
file it in Sales Unpaid.
If you regularly pay batches of When updating the Cash Book,
cheques into your bank, you need record the details as usual but
a bank column in the money in put the amount in brackets to
section of your Cash Book. show that it must be deducted
This shows the total value of money from the sales total.
paid in each day, which will match
the figures shown on your bank
statement.
Enter the details in the Cash Book below the list of entries for cheques which
have been written out that month.
Then tick off the item in the Cash Book and on the bank statement.
Money paid in by you but not yet cleared (eg customers cheques).
Cheques you have sent to suppliers which have yet to be paid into their
accounts.
The adjusted bank balance is what the bank balance would be if all the money
paid in and all the cheques paid out were shown on the bank statement.
It equals the end-of-month balance showing on the bank statement plus
money paid in but not on the statement, less cheques written but not on the
statement.
www.nibusinessinfo.co.uk/financialplanning 61
 youve got your first customers :: simple book-keeping

6.6 Reconcile the bank Write down the adjusted bank balance at the start of the month.

statement. Add the total sales revenue paid in and other income for the month (taken

from your Cash Book).
Deduct the total payments for the month (taken from your Cash Book).

This should equal the adjusted bank balance at the end of each month.

When the figures agree, you have successfully reconciled your bank account.
If the figures do not agree, there is an error.
If the difference is 5.25, look for a sales invoice, other income, or payment
entry for 5.25. It should not take too long to find it.

7
VAT If your business registers for VAT you will need to make some changes.

7.1 There will be very few You must issue VAT invoices.

complications on the sales You should enter the details of the VAT in a separate column in the Cash

side. Book.

7.2 The golden rule is that you Enter the details of the VAT in a separate column in the Cash Book.

must have a VAT invoice for Enter the total under total in the Cash Book and enter the total less VAT

all purchases. under the individual heading (eg stationery).

Contact HM Revenue & Customs for information on every aspect of VAT

(0845 010 9000; www.hmrc.gov.uk/vat).
If in doubt, ask for advice VAT mistakes are costly and never work in your
favour.

8
cash businesses If, like a shop, you sell for cash as opposed to allowing customers to pay
after a credit period (usually 30 days) the basic principles are much the
same.

8.1 Shops face two particular If you take cash (from sales) and spend it (eg on wages), it is easy to lose

problems. track of what is going on.
The tax office (and the VAT office, if you are registered) will always be more

suspicious of cash.

8.2 However, there are simple
steps you can take to avoid
any complications.
Keep your till rolls or EPoS cash summaries. Use them like sales invoices in
your book-keeping.
Keep a separate record (like your Cash Book) of all money going in and out of
the till. Reconcile this record daily or weekly to check that the amounts add
up to the actual cash you have.
If you use money from the till for a purchase, put the receipt in the till
immediately.

62 www.nibusinessinfo.co.uk/financialplanning

1
checking for
credit
1.1 You can now get online
credit ratings fast enough to
use them as a basis for real-
time business decisions.
1.2 Ask your customer to give
you names of suppliers
you can go to for trade
references.
1.3 Another way to check credit-
worthiness is to apply,
with a customers written
permission, for a reference
from his or her bank
(costing about 10).
youve got your first customers
credit control
Credit control is a vital part of running any business and especially
any new business with limited cash resources.
Businesses can get into difficulty or even go bust because of credit
control problems. Many are profitable, but are owed money by
customers. Unable to pay their own suppliers, they are eventually
forced to cease trading.
This section focuses on four key areas:
Deciding what credit to give a customer.
Everyday credit control.
Chasing debts.
Coping with other companies bad habits.
Is a customer likely to go out of business, leaving you unpaid? Will a customer
delay payments, wasting your time as you chase up the money? Checking
references lets your customers know you are serious about credit control.
This can cost as little as 10 to 12.
Even a highly detailed payment and credit report should not cost more than
around 35.
These ratings can be obtained from credit reference agencies.
Beware of being fed tame suppliers that the customer knows will provide
good references.
Ask the referees:
To confirm your potential customers trading name and address.
How long they have dealt with the customer.
What credit period they give the customer and whether they get paid on
time.
What credit limit the customer has and how much is currently outstanding.
Whether they are in any way associated with the customer, other than as an
arms-length trade supplier.
Most references will be given in writing.
Telephone the suppliers to thank them for their help, and ask them if there is
anything they can tell you over the phone that they could not put in writing.
The response will take time and you will need to know how to interpret it, so
this may not always be the best option.
Tell the bank exactly what credit you plan to offer (eg 500 limit, payable
monthly).
Ask if the bank knows of any outstanding writs (demands for payment made
through a court).
www.nibusinessinfo.co.uk/promptpayment 63
 youve got your first customers :: credit control

Bank references use coded

phrasing, so you may have to seek
clarification or read between the
lines. As a general rule, the longer
the reference, the more you should
worry.
2 Drop in and form your own
setting credit The credit limit you set for a
delving deeper
The larger the amount of credit
a customer asks for, the more
checks you must make. As well
as checking references, you can:
impressions.
Ask an agency (eg Experian

limits customer is a matter of judgement.

As a start-up, you may not be able
to afford the luxury of only dealing
with blue-chip customers. You
have to decide how much you are
prepared to risk.
Northern Ireland, 028 9145
7270) for a credit report.
Check the information available
to you in your own business.
What do your colleagues know
about the customer?

2.1 Set an upper credit limit A customers credit limit should be

for any customer an
amount you are prepared
to risk.
2.2 If anyone exceeds your
limit, review the situation
carefully. It may indicate
problems.
2.3 Set a minimum order size
for credit accounts.
2.4 Do not let greed overrule
your judgement.
based on references and your own
checking.
It is worth giving small customers
credit?
If a customer wants to buy more
than the credit limit allows, get cash
for the extra.
Otherwise, what seemed like a
bumper sale may turn into a bumper
bad debt.
Keep up with events affecting
customers.
Bad luck, or bad business,
can mean a customer who is
creditworthy now is close to
bankruptcy in six months time.
If a limited company requests a
high credit limit, ask to see their
latest accounts.
Or get them from Companies
House (0303 1234 500), at a
cost of 1.
Remember, the accounts at
Companies House may be 12 to
15 months old.
Your accountant can tell you
if the accounts show your
customer to be a bad risk.

3
your credit
terms
3.1 Make sure every customer Agree the terms, then ask the customer to sign a copy of the agreement.

understands your credit
terms.

3.2 Set out the maximum How many days after the invoice date is payment due?

credit period. Or should the customer pay on a fixed day of each week or month?

3.3 Have a standard sales Consider including such terms as:

contract (your lawyer or
a trade body can help with
the wording).
You still own the goods, after delivery to the customer, until they are paid for.
Check whether your insurance covers any goods damaged on customers
premises.
The customer must tell you within a set time if a delivery has not been
received.
A clause like this helps to avoid disputes.

64 www.nibusinessinfo.co.uk/promptpayment
youve got your first customers :: credit control

3.4 You can offer a discount Beware of customers who take prompt payment discounts and still pay late.

for quick payment to
boost cashflow, but always
remember to cost this
properly (see Pricing your
product or service, p14).

3.5 A settlement rebate for You may give regular rebates to customers who have paid on time, based on

good payers can often a percentage of the value of their purchases.
be more effective than
discounts.

3.6 Imposing penalties for
late payment used to be
virtually unenforceable.
Now it is provided for in
law. All businesses can
claim interest on late
payments, and in many
cases, can claim for debt
recovery costs.
Once payment becomes overdue, you may charge interest at the Bank of
England base rate plus 8 per cent. The interest must be calculated on a daily
basis for each day payment is overdue.
If you think you may decide to charge interest, tell customers in writing, and
draw attention to your right to do so in your terms and conditions. This does
not oblige you to collect interest.
Charging interest is not something you should do lightly. It might make it
difficult to do business with the same customer again.
Remember also your own obligations under late payments legislation.
For more information, visit www.payontime.co.uk.

4
everyday credit
control
4.1 Invoice promptly. The Quote the purchase order number and any other details the customer needs

sooner you invoice, the to know.
sooner the payment is due.

4.2 Call the customer to To avoid delivery-related disputes, keep signed delivery notes until payment is

confirm each delivery has received.
arrived and that no goods
were missing or damaged.
Confirm the payment
details.

4.3 Keep unpaid sales invoices

in date order, so you can
see at a glance which ones
are the oldest.

4.4 Set aside a regular time The largest debts, followed by the oldest.

each week to chase Customers you guess may have problems.

outstanding invoices,
focusing on:

4.5 If a customer exceeds

your credit limit, insist
the excess is paid before
accepting any more credit
orders.

4.6 If a customer has not Is the company going bust? If so, try to get any money you are owed as soon

bought from you for six as possible.
months, or orders fall below If customers do not want to buy any more, cancel their credit.

your minimum, find out why.

www.nibusinessinfo.co.uk/promptpayment 65

4.7 Every month check the
total credit outstanding
across your whole
business.
4.8 In a seasonal business you
may be unable to chase
debts during your busy
period.
4.9 If you find credit control
difficult, take advice.
5
delayed
payments
5.1 Call the customer just
before payment is due to
confirm that it will be on
time.
5.2 If a customer makes a
part payment (payment
on account), acknowledge
receipt and ask for the
remaining balance.
5.3 If a customer queries
one item, insist on full
payment for the rest of the
order. Sort out the query
separately.
5.4 If a cheque is incorrect
(unsigned or for the wrong
amount), call to point out
the error.
5.5 If a cheque bounces, dont
jump to conclusions.
5.6 Keep records of all the
problems you have with
each customers payments.
66
youve got your first customers :: credit control
How many days sales does this represent?
For example, in a business with sales of 1,000 a day (annual sales of
365,000), total credit outstanding of 44,000 represents 44 days sales.
If the days sales figure rises, you are being paid more slowly. Investigate and
correct the problem.
Consider making use of a debt-collection agency or a specialist solicitor.
The Northern Ireland branch of the Institute of Credit Management can
provide information and advice. The meetings it runs open to non-members
offer a good learning opportunity. For further details, visit
www.icm.org.uk.
Customers will often try to delay payment. This may be a danger signal or it
may just be because they want to improve their own cashflow at the expense
of yours.
Negotiate a practical payment scheme (eg post-dated cheques).
Stop all credit until the debt is paid off.
Ask for a new cheque immediately or
payment by another method, eg
BACs. warning signs
Your customer may be getting
Call the customer, say what has
into difficulties if the pattern of
happened and ask how the money payment behaviour changes.
will be paid.
Hold on to the cheque as evidence.
Watch out for common
symptoms.
If customers use delaying tactics, let
Delays in payment get bigger.
them know that you know what they The customer tries to make
are doing. payments on account, only
Warn customers that they may
paying part of the bill rather
be put on stop (ie you will supply than the full amount.
nothing more to them until the debt
is paid). In other cases, the signs of
Make sure your employees have
trouble may be more clear cut.
access to an up-to-date stop list. Discounts are taken when not
For more information, visit
allowed.
www.nibusinessinfo.co.uk/ Penalty charges incurred are
promptpayment. not paid.
www.nibusinessinfo.co.uk/promptpayment
youve got your first customers :: credit control
6
chasing debts
6.1 Telephone any late payers
after a week to ask the
reason for the delay.
6.2 Cultivate a contact in the
accounts-payable office
someone you know by
name.
6.3 If a customer makes an
excuse, ask when you can
expect to be paid.
6.4 If you cannot get through
on the phone, try different
times of the day.
6.5 If you are still making
no progress, consider
employing a debt-collection
agency.
6.6 If legal action seems likely,
you should send a letter of
claim. This begins the legal
process.
6.7 Decide if the debt is really
worth chasing any more.
6.8 After this, you may take
legal action.
The phone is the most effective debt-collection tool of all. A letter can be put
to one side, but a telephone call will often lead to an agreement.
If payments are overdue, chase them up on the phone. Be consistent and
firm but not hostile.
Keep a written record of all your calls.
Send reminders to anyone you do not call.
If a customer has a fixed or weekly or monthly payment date, call again just
before that date.
Speak to him or her personally and be thoroughly reasonable, but persistent.
Suggest a payment on account and stress that you need cash too to pay your
suppliers.
If cheques are in the post, ask customers to check the relevant payment
records. Then ask for the cheque numbers.
Speak to the managing director, perhaps by calling his mobile phone.
Do not accept Ill call you back.
If the amount is large enough, arrange to call to collect the cheque in person
and be prepared to wait.
The commission charged is usually 8 to 10 per cent for commercial debts.
Charges for consumer collections vary more, between 3 per cent and 15
per cent.
Unlike solicitors costs, these charges are not usually reclaimable from the
debtor.
Collection agencies should be registered with the Office of Fair Trading and,
ideally, belong to the Credit Services Association.
They are especially useful if you do not have the time to collect the debt
yourself.
The letter says that you plan to sue if overdue bills are not settled by a fixed
date (usually after ten days).
Write this yourself. You do not need to pay a solicitor to do it.
Unless your debtor is determined to see you in court, the letter will often
produce results.
The costs involved may make it better just to write off the debt, forget about
that customer.
For larger claims, you may wish to check with your solicitor before taking
further action. Often a solicitors letter will do the trick.
For claims up to 2,000 you can use the fast-track small claims court. You
can do this online at www.courtsni.gov.uk.
www.nibusinessinfo.co.uk/promptpayment 67
 youve got your first customers :: credit control

7
working with big Many start-ups, especially those selling services, find their early customers

companies include big companies or public-sector bodies.

Because getting cash in is so urgent for a small business it can be hard to
realise how different the culture of these larger customers may be.

7.1 You need to know where Your invoice may need to be sent for authorisation to the buyer you deal with.

invoices must go. Alternatively, invoices may have to be sent to the customer accounts manager

or the bought ledger department.

7.2 Large organisations Send statements as early as you can in the month, every month.

may decline to pay your
invoice until they receive a
statement.

7.3 Your vital invoice may Call the buyer to ensure it has been signed off and put into the payment

be gathering dust in system.
someones in-tray. Then phone the accounts office to confirm it has been received.

7.4 You must not miss the Many organisations will only print cheques once a month.

cheque run. Find out the date and call a few days before the cheque run to ask for

confirmation that you will be paid.

68 www.nibusinessinfo.co.uk/promptpayment

1
executive
summary
1.1 The executive summary
highlights the most
important points. It should
sum up six areas.
1.2 When deciding whether
to back a start-up, bank
managers and investors
often make provisional
judgements based on the
executive summary.
2
the business and
the product
2.1 Explain the background
to your business idea,
including:
the essential plan
writing your
business plan
A business plan clarifies your main business idea and defines your long-
term objectives. It provides a blueprint for running your business and a
series of benchmarks to check your progress against. It is also vital for
convincing your bank or business support organisation and possibly
key customers and suppliers to support you.
This section explains:
How to structure a business plan.
What information to include.
How to present your financial forecasts.
The executive summary outlines your whole business proposal. Although it is
the last section to be written, it goes on the first page of the business plan. It
will be read by people unfamiliar with your business, so avoid technical jargon.
Your product or service and its advantages.
Your opportunity in the market.
Your management team.
Your track record to date.
Financial projections.
Funding requirements and expected returns.
The main body of the business plan (see 2 to 9) is then read to confirm the
initial decision.
The appendices at the back of the plan (see 10) carry detailed information to
support the main text.
The length of time you have been developing the business idea in its present
form.
Work carried out to date.
Any related experience you have.
The proposed ownership structure of the business.
www.nibusinessinfo.co.uk/businessplan 69

2.2 Explain, in plain English,
what your product is or
what your service offers.
Make it clear how:
2.3 Explain any key features of
the industry.
3
markets and
competitors
3.1 The market. Focus on the
segments of the market
you plan to target for
example, local customers
or a particular age group.
3.2 The competition. What are
the competing products
and who supplies them?
3.3 Unless there is a viable
market and you know how
you are going to beat the
competition, your business
will be vulnerable.
4
sales and
marketing
4.1 How will your product
or service meet your
customers specific needs?
4.2 How will you position your
product?
70
the essential plan :: writing your business plan
It will stand out as different from other products or services.
Your customers will gain through buying your product or service.
The business can be developed to meet customers changing needs in the
future.
It is important to cover any disadvantages or weak points you feel the
business may have.
Be frank about these it actually inspires confidence.
For example, special regulations, effective cartels or major changes in
technology.
Indicate how large each market segment is and whether it is growing or
declining.
Illustrate the important trends and the reasons behind them.
Outline the key characteristics of buyers in each segment, such as age, sex
or income.
Mention customers you have already lined up and any sales you have already
achieved.
List the advantages and disadvantages of all your competitors and their
products.
Explain why people will desert established competitors and buy from you
instead.
Show that you understand your competitors reaction to losing business and
demonstrate how you will respond to it.
You must show you have done the market research needed to justify what you
say in the plan (see Researching your market, p8).
This section is crucial. It often gives a good indication of the business
chances of success.
Why should they buy from you and not a competitor?
Whats your unique selling proposition or USP? (See Marketing your business,
p20).
This is the place to show how your price, quality, design features, response
time and after-sales service will compare with competitors.
Quote minimum order figures, if appropriate.
www.nibusinessinfo.co.uk/businessplan
the essential plan :: writing your business plan

4.3 How will you sell to For example, by phone, through

customers?
4.4 Who will your first
customers be?
4.5 How will you promote your
product?
4.6 What contribution to
profit will each part of your
business make?
your website, face-to-face or
through an agent.
Show how long you predict each
sale will take.
Many new businesses
underestimate the time involved
in winning each order. In year one
you may spend most of your time
making contacts and selling.
Will you be able to make repeat
sales?
If not, it will be hard to build up
volume.
Show which customers have
expressed an interest or promised
to buy from you and the sales they
represent.
How will you identify other potential
customers?
Unless you can demonstrate that
you have a clearly defined pool of
potential customers, starting your
business is likely to be a struggle.
For example, using advertising, PR,
direct mail or via email and a website.
Most businesses need more than
one product, more than one type
of customer and more than one
distribution channel.
Look at each in turn. Examine your
likely sales, gross profit margins and
costs.
Identify where you expect to make your profits and where there may be
scope to increase either margins or sales.
keep it real
Sales forecasts produced for
start-up businesses are often
wildly over-optimistic. Here are
some important reality checks.
How soon can you start selling?
Will potential customers hold off
for a year before they take you
seriously and place an order?
How often will you be able to sell?
How many days a year can you
spend selling?
How long will each lead take to
line up?
What percentage of leads will
turn into sales?
How much will you be able to
sell?
What will the average sale value
be?
Will most people give repeat
orders, or must you find a new
customer for every sale?
How long after a sale will it be
before you can collect payment?
In the light of all this, how much
income can you realistically expect
each month?

4.7 Services and intangible

products (such as computer
software) require a different
marketing approach you
need to focus on customer
service.

5
management People reading the business plan need to be given an idea of why they should
have faith in the management of your start-up operation.

5.1 Outline the management
skills within your team.
Define each management role and who will fill it.
Show your strengths and outline how you will cope with any weaknesses.
Describe the background and experience of each team member.
Clarify how you intend to cover the key areas of production, sales, marketing,
finance and administration.
Management information systems and procedures should be outlined. For
example, management accounts, sales, stock control and quality control.
Show how many mentors and other supporters you will have access to.

www.nibusinessinfo.co.uk/businessplan 71
how I wrote
my business
plan
Christine Swail set up
People Management
Solutions, a partnership
that provides outsourced
HR services to small
businesses, in March
2001. The Belfast-based
firm has since opened a
second branch and is one
of the leading HR service
providers in Northern
Ireland, offering clients
support on their premises
and over the phone. But
such progress wouldnt
have been possible
without a business plan

My business partner and I had both

been working in human resources
for about five years. We saw a
gap in the market for a Northern
Ireland-based firm that could provide
outsourced HR services to small
and medium-sized businesses
and decided to set up People
Management Solutions.
People power: Christines plan
kept her HR firm on target

Ireland law are very different.

We also looked at our target
markets and where we saw the
firm going. We initially identified our
customers as businesses with fewer
than 200 staff in the manufacturing
Christines
top tips
1 Read another small
organisations business plan

2 Update your business plan at

We wrote our business plan with the
help of another small business. They
advised us on how to lay it out and
the sections we should include.
While drawing up our business plan
we spent a lot of time looking at our
competitors both the advantages
we had and the disadvantages we
faced in comparison to them. They
were all competitive on price, so
undercutting them wasnt an option.
But unlike some well-established
firms where the partners pitch for
the work and junior consultants carry
and IT sectors. We have since least once a year
moved into different areas and
quite a few of our clients are now 3 Dont panic if you dont meet
in the public or voluntary and early sales targets and adjust
community sectors. your plan accordingly
Writing the plan was really
worthwhile. It took the equivalent
of five days work and the final
document runs to 25 pages.
To begin with we consulted it every
month to see how things were going.
We now update it annually and still
find it a very useful tool in helping
us to move forward and continually

it out, we do the work ourselves, so
really understand each clients needs.
Being Northern Ireland-based was
a real selling point. Although some
of our competitors offered access
to advice hotlines, they were based
in England and aspects of Northern
develop the business.
People Management Solutions
PO Box 1157
Belfast BT1 9HE
Tel: 028 9040 2596
christine@peoplemgtsolutions.com
www.peoplemgtsolutions.com

72
the essential plan :: writing your business plan

5.2 How committed are you? Banks and any other potential investors will want to be sure you are

committed to the business.
Show how much time and money each of the management team will
contribute, and what your salaries and benefits will be.

6
operations Explain what facilities the business will have and how it will deliver the product
or service to the customer.

6.1 Location. Show the pros

and cons of the site.

6.2 Facilities. Indicate the Consider any potential limits to production capacity.

equipment and machinery If you are going to manufacture or distribute products, show how and where
you will need to start. you are going to warehouse them and for how long.
Some start-up businesses
only need a desk and a
phone.

6.3 Employees. Provide a

listing of the relevant roles
and the skills required to
fill them.

6.4 Suppliers. Show how

you have selected your
suppliers.

7
financial Your financial forecasts translate what you have already said about your

forecasts business into numbers.

A small, simple business may only need to do a sales forecast and a cashflow
projection. An engineering firm starting up with 20 employees would need to
do the full set of forecasts.

7.1 A realistic sales forecast Break the total sales figure down into its components (eg different types of

forms the basis for all your products or sales to different types of buyer).
other figures.

7.2 Your cashflow forecast Demonstrate that you have considered the key factors affecting cashflow,

shows how much money such as the level and timing of sales revenue and wages.
you expect to be flowing Show when there will be more money coming in than going out (cash-

into and out of your bank positive).
account and when. For more information, visit www.nibusinessinfo.co.uk/cashflow.

You must show that your
business will have access
to enough money to
survive.

7.3 Your profit and loss
(P&L) forecast gives a
clear indication of how the
business will move forward.
Summarise the annual P&L forecast for each of the first two or three years
of trading.
Calculate the turnover you need to breakeven:
fixed costs
breakeven = /% gross margin x 100
If your gross margin is 25 per cent, your sales must be four times as large
as fixed costs to breakeven.
Compare the breakeven level of sales with the sales you are forecasting.

www.nibusinessinfo.co.uk/businessplan 73

7.4 If you are launching a
larger start-up, you will
also need projected
balance sheets.
7.5 Do not get too protective
about your forecasts. You
may need to revise them.
7.6 How would your forecasts
be affected if anything went
wrong?
8
financial
requirements
8.1 Say how much finance you
will want, when and in
what forms.
8.2 State what the finance will
be used for.
8.3 Confirm that you will be
able to afford it.
9
assessing the
risks
9.1 Look at the business plan
and isolate areas where
something could go wrong.
9.2 Consider a range of what-if
scenarios.
74
the essential plan :: writing your business plan
These will show you the financial state of your business on day one and at
each year end, perhaps for the first two or three years.
For every forecast list all the key assumptions you have made, such as prices,
sales volumes and timing.
You should test your assumptions with key advisers and potential lenders and
suppliers make sure they are accurate and robust.
Contact a small business adviser at your local enterprise agency or an
accountant for help with putting together your forecasts. To find your local
enterprise agency, visit www.enterpriseni.com.
You need to build into your financial forecasting a range of possibilities, from
best to worst. For instance, consider what-if scenarios for different levels of
sales (see 9.2).
The cashflow forecast will show how much finance the business needs. Your
assessment of the risks will determine whether or not you need to arrange
contingency financing.
For example, you might want a fixed-interest loan and an overdraft facility.
Show how much will be for buying equipment and how much for working
capital (financing stock and debtors).
For example, if you want a loan, will your business generate the cashflow to
make the capital and interest payments?
Assessing risk clearly will help you minimise problems. It will also help build up
your credibility with any investor or bank that is considering providing finance.
For example, if you see possible technical problems in developing your
product, try to show how you could minimise the risk.
Identify things that might go wrong and what you would do if they actually
happen if your main supplier closes down or you are affected by bad
weather, for instance.
For example, what happens to your cashflow if your sales are 20 per cent
lower, 40 per cent lower or 15 per cent higher than forecast?
If there are serious risks, you can:
Arrange contingency funding to cover the finance you may need.
Decide that the business is too risky and abandon the whole project.
www.nibusinessinfo.co.uk/businessplan
the essential plan :: writing your business plan

10
appendices A simple business plan may not need appendices. Everything can be included
in the main text. A more complex business plan may summarise information in
the main text, putting the detailed data especially figures at the back.

10.1 Detailed financial forecasts Include a detailed list of assumptions.

(monthly sales, monthly For example, the profit margin on each product, debtor collection period,
cashflow, P&L, any balance creditor payment period, stock turn, interest and exchange rates, funding
sheets) should usually be injections, equipment purchases.
put in an appendix.

10.2 You may want to give other
relevant information.
Detailed CVs of key personnel (essential if you are seeking outside funding).
Market research data.
Product literature or technical specs.
Names of committed or target customers.
A list of external data sources used in your research will add credibility to the
information.

11
presenting the The more solid information you can gather for your own use, the better the

plan business plan will be. But a banker or other outsider will not have time to
read through all the details.

11.1 Keep your business plan Most business plans are too long. Cut out the waffle and stick to the point.
short. Focus on what the reader needs to know.

11.2 Make sure you include all The amount of detail required in your business plan will vary depending on the

necessary information. complexity of your business idea.
Find out what your reader needs to know different organisations may want

to see different levels of detail.

11.3 Make it professional. Put a cover on the business plan and give it a title. For example:
XYZ Limited Business Plan
For Mr Bank Manager, ABC Bank 11/07/10
Include a contents page.

11.4 Test it. Re-read it yourself. Would reading your plan give an outsider a good feel for

your business and a grasp of the key issues?
Show the plan to friends and expert advisers and ask them for comments.

The time you spend rewriting and polishing the plan now will save you time
later, when you are arranging finance and launching your business.

www.nibusinessinfo.co.uk/businessplan 75
where
to go
now
You have reached the end of
Start A Business An Easy
Guide. We hope it has given
you an insight into what
running a business will really
be like and inspired you to
go for it.
You will probably need some
further help and advice along
the way and there are many
people you can turn to. Help
is available from professional
advisers such as accountants
and solicitors and from a
range of business support
organisations.
And of course Invest
Northern Ireland and its
enterprise partners are
always here to help. Your first
port of call when setting up a
business should be our
Go for it Helpline on
0800 027 0639.
76
Invest Northern Ireland
Bedford Square
Bedford Street
Belfast BT2 7ES
T: 028 9069 8000
F: 028 9043 6536
E: info@investni.com
W: www.investni.com
Go for it Helpline
0800 027 0639
W: www.goforitni.com
expert contributors
Invest NI would like to thank
the expert contributors to this
publication:
Liam Jordan (ICONI, 028 9031
9300)
Joe McCoubrey (Down Business
Centre, 028 4461 6416)
Jim Basker (Basker Research,
023 9273 4224)
Invest NI regional offices
Kevlin Buildings
47 Kevlin Avenue
Omagh BT78 1ER
T: 028 8224 5763
E: wo@investni.com
The INTEC Centre
36 East Bridge Street
Enniskillen BT74 7BT
T: 028 6634 3942
E: wo@investni.com
Drumalane Mill
The Quays
Newry BT35 8QS
T: 028 3026 2955
E: so@investni.com
Oracle Conference Centre
Southern Regional College
36 Lurgan Road, Portadown
Craigavon BT63 5BL
T: 028 3839 0140
E: so@investni.com
Thomas House
32E Thomas Street
Ballymena BT43 6AX
T: 028 2564 9215
E: neo@investni.com
Fifth Floor
Fifth Floor Timber Quay
100-114 Strand Road, Londonderry
Co Londonderry BT48 7NR
T: 028 7126 7257
E: nwo@investni.com
Jenny Covey (Javelin Marketing
Services, 01543 256551)
Claire Forbes (Advertising Standards
Authority, 020 7492 2222)
Amanda Galashan (EmployEase,
0845 1233 741)
John Gammon (Hawkshead
Management Consultants,
020 8567 6835)
Cecile Gillard (Jordans company
and limited liability partnership
formations and corporate and other
legal services, 0117 923 0600)

business support
organisations
Enterprise Northern Ireland
T: 028 7776 3555
W: www.enterpriseni.com
Northern Ireland Chamber of
Commerce
T: 028 9024 4113
E: mail@northernirelandchamber.com
W: www.northernirelandchamber.com
Princes Trust NI
T: 028 9074 5454
E: webinfoni@princes-trust.org.uk
W: www.princes-trust.org.uk
Advantage NI
T: 028 9335 6730
E: info@advantage-ni.com
W: www.advantage-ni.com
local authorities
To find your local authority, visit
www.direct.gov.uk
Roy H Hill (Institute of Business
Advisers)
Peter Hingston (Hingston
Publishing, 01981 251621)
Dr Jacqueline Jeynes (Opal
Services, 01905 428733)
John Leppard (Leppard Development
Services, 01494 672226)
Max McKeown (Maverick and
Strong, 0113 252 6216)
other useful numbers
VAT
HMRevenue & Customs
T: 0845 010 9000
W: www.hmrc.gov.uk/vat
Skills and training
Department for Employment and
Learning
T: 028 9025 7777
W: www.delni.gov.uk
PAYE and National Insurance
HMRevenue & Customs
T: 08457 143 143
W: www.hmrc.gov.uk/paye
Health and safety
Health and Safety Executive for
Northern Ireland
T: 0800 0320 121
W: www.hseni.gov.uk
Employee rights and relations
Department for Business,
Innovation & Skills
T: 020 7215 5000
W: www.bis.gov.uk/employment
Equality Commission for Northern
Ireland
T: 028 90 890 890
W: www.equalityni.org
Simon Macaulay (Anglo Felt
Industries)
Natasha Mitra (HSBC,
020 7991 4916)
Liz Morrison (Tactics Management
Consultants, 07860 637449)
Peter Neall (Neall Scott Partnership
training consultants,
01525 222600)
Steve Newton (Galatea Training
Services, 01706 351389)
Labour Relations Agency
T: 028 9032 1442
W: www.lra.org.uk
Business registration and records
Companies House
T: 0303 1234 500
W: www.companieshouse.gov.uk
Environmental regulations
Northern Ireland Environment
Agency
T: 0845 302 0008
W: www.ni-environment.gov.uk
Arena Network Northern Ireland
T: 028 9046 0606
W: www.bitc.org.uk
Copyright, trade marks and
design protection
Intellectual Property Office
T: 0300 300 2000
W: www.ipo.gov.uk
Consumer rights
Trading Standards Service for
Northern Ireland
T: 0300 123 6262
W: www.detini.gov.uk/
deti-consumer-index
State benefits
Department for Social
Development
W: www.dsdni.gov.uk
John Shea (Shea & Co chartered
accountants, 020 8699 3243)
Richard Shooter (Henstock
Shooter chartered accountants,
01530 833 396)
Frank Thaxton (Thames Valley
Partners business advisers,
020 7637 1727)
Geoff Wightwick (Baker Tilly
chartered accountants,
0161 834 5777)
Bedford Square
Bedford Street
Belfast BT2 7ES
T: 028 9069 8000
F: 028 9043 6536
W: www.investni.com