FAQs


1. Should I start a small business?

2. What are the benefits of starting my own business?

3. How do you start your own business?

4. What are the different types of business?

5. How do I register my business?

6. What are the basic survival skills you need to run a business?

7. Can I operate a small business from my home?

 

1. Should I start a small business?

Yes, provided you know what you are getting into and provided you feel comfortable with your state of knowledge about the business you have chosen. You should also have a strong drive to succeed even when the hours get long and the decisions difficult. All types of people make it in small business and all types fail.

There is no personality type or educational level that qualifies or disqualifies anyone from succeeding in small business. Hundreds of thousands of people do it every year. It is an individual choice that should be made only after serious study, self-examination, and counselling. Your individual preparation is your key to success....that’s where we can help !

 

2. What are the benefits of starting my own business?

Starting a business can be scary. But great rewards await entrepreneurs lucky enough to create successful small businesses - benefits you may miss out on if you remain a wage earner for the rest of your life. Although only you can decide if you're ready to quit your job and plunge into running your own business, here are some of the rewards of going out on your own:

Independence and Flexibility. You’ll have more freedom and independence working for yourself. And once your business is firmly established, you'll probably have the flexibility to make sure you don't miss the moments and events that matter most to you in life.

Personal Fulfilment. Owning and running your own business can be more satisfying and fulfilling than working for someone else. Many successful small business owners find they enjoy the respect they earn from their peers for having the courage to go out on their own.

Power. Don’t be surprised if power is one of your goals. When it's your business, you can have your employees do it your way. If power is important to you, think about how to use it in a constructive way.

Money. The risks of forgoing a steady paycheque can pay off when you own your own business. You can get rich in a small business, or at least do very well financially. Although most entrepreneurs don't get wealthy, some do.

 

3. How do you start your own business?

Whether you decide to start up or not, it is always advisable to begin with a feasibility study. A feasibility study requires you to answer the following questions:

 

• What am I going to do?

• How much money and what kind of skills are needed?

• What will the return be in terms of money and satisfaction?

 

It is also important to learn all you can about your new business before you actually make the decision to start up. You need to have a thorough understanding of the business environment, including the market, your target customers, the competition, pricing practices, profit margins, sources of supply and anything else that might help you fully understand the nature of the business.

A useful way of learning about the business is to talk to business owners in similar businesses or work as an employee for a time in such a business. Suppliers, who sell to the type of business you are entering, can also provide useful information. In addition to this, trade publications and magazines dealing with your chosen business are valuable sources of information.

The research will tell you whether your business idea is viable. After this a business plan that details the start up of your new business is necessary. Before you start, the money, equipment, people, and other things you need must be available. It is not advisable to start before all this is in place.

 

4. What are the different types of business?

If you have definitely made your mind up to go ahead then you will need to get to grips with the various types of business and their legal requirements. Setting up your business in the right way can keep your costs down and help prevent your working relationships turning sour.

There are four main choices for your business's legal forms:

 

1. As a sole trader, you are self-employed with no special legal structure,

2. As a partnership (two or more people working together) you share the profits and losses,

3. As a limited company, this is a separate legal entity distinct from its shareholders, directors and employees,

4. A limited liability partnership is again a separate legal entity and can continue despite the resignation or death of some of its members.

 

Strengths & Weaknesses

Sole trader Most small start-up businesses find that setting up as a sole trader is the best option. Setting up as a sole trader is easy but you must tell the tax and VAT authorities

Strengths

Weaknesses

You can keep simple un-audited accounts

You are personally liable for all your business debts

National Insurance is low

You are entitled to fewer social security benefits e.g. if you stop trading, you cannot claim unemployment benefit

Unless your earnings are high, total tax payments can be lower than if you had formed a limited company

You have limited options for raising money

You can form a limited company later and transfer the business to it

It is harder as a sole trader to sell the business or pass it on


Partnership

A partnership has similar advantages and disadvantages to a sole trader, but there are two other factors to take into account; 1. Each partner is personally liable for all the business debts of the partnership (other than tax on profits) even if the other partner has caused them. 2. You may be able to raise money by introducing new partners. You can set up most partnerships with very few formalities.

Limited company

Advantages

Disadvantages

A limited company has more credibility

Buying or forming a limited company will cost you between £100 - £350

Usually your liability is limited to the amount you agree to invest in the company by buying its shares

Annual accounts are generally more complicated

It is easier for you to raise large sums of money or to sell a part of the business

National Insurance payments are higher

There can be tax advantages for high earners through keeping money in the business or making pension payments

If you decide to cease trading it can be more difficult and expensive to wind up



Limited liability partnerships

It is now possible to set up a limited liability partnership which, despite the name, is a corporate body with its own legal identity and capacity. It has the organizational flexibility of a partnership and is also taxed as a partnership. A limited liability partnership must be registered at Companies House and again you may want to use an accountant, solicitor or registered agent to deal with these formalities for you.

Buying a franchise

Buying a franchise allows you to set up your own business without starting from scratch. You use a tried and tested formula and benefit from the experience and support of the company offering the franchise. Successful franchise operations have a much lower failure rate than completely new businesses and you can make a good living if you make the business work.

 

Advantages

Disadvantages

A franchise is usually based on a proven business idea

The cost may be more than meets the eye e.g. a continuing management fee to pay

Financing the business is likely to be more straight forward

You have to operate within certain restrictions e.g. not change the business

A good recognised franchise operation will give you comprehensive support

You are exposed to risks outside your control e.g. the franchisor going 'bust'

You usually have exclusive rights in your own territory

 

 

5. How do I register my business?

There is a lot of confusion with this requirement when starting up a business. Often start-ups will ask: 'How do I register my business?' If you intend to trade as a sole trader or partnership, you do not need to register a business name. However, if you decide to form a limited company you must register the business with:

Companies House
Crown Way
Cardiff
CF14 3UZ

Tel: 029 20388588

The only other form of 'registering' the business is when you inform the HM Revenue & Customs.

 

6. What are the basic survival skills you need to run a business?

The basic survival skills include a working knowledge of basic record keeping; financial management; personnel management; market analysis; break-even analysis; product or service knowledge; tax knowledge; legal structures; and communication skills.

 

7. Can I operate a small business from my home?

Many types of small businesses can be run from the home. With improving technology in communications and computers, many small business owners choose to avoid the expense of a separate business location. Thought should be given to your neighbours in making this decision. If your business activity will bother them or be objected to because of noise, odours, parking, or other issues, perhaps you should not do it.

Your personal home situation should also be seriously considered. Can you effectively allocate your time between personal and business matters? Will family members object? Home based businesses are becoming increasingly popular. For many new business start-ups, they are a good idea.