Principles of starting a business
Discussion
Hi folks i am in a position which i have always dreamed of being in. Working for a telecommunications company as a field sales rep for the last 4years i have just been made redundant and have some money to invest/start a business. I was succesful at my job but i always complained about my unfulling career in endless discussions about business ideas and the constant yearning to be independent. Now that i am free i seemed to have arrived at a point of 'entrepeneurial block' and haven't a clue of what to do? Is there any principles i need to think about when getting into a business apart from the fact it will be lucrative? for eg should i be getting involved in a venture i have no insight into but think i can rapidly pick up or a business relied entirely dependent on skills of staff? your insight and direction would be of great value....Many thanks! 
How long can you live for with no income? There can be a heck of a lag between starting up, finding a prospect, selling them something, completing it, invoicing them and the cheaque arriving. It will be a hell of a jolt after being used to the usual comfy BACS transfer arriving in your account every month on time to the day.
This is not meant to be negative, but it explains why I'm still taking the money from my employer and delaying starting my own business, after having been self employed for 5-10 years before...
I'd advise you to work out how much you need to survive first, including the tax you'll have to pay. Let's start low and say £36K = £3K/month, so you take home maybe £2250-ish as an absolute minimum, offset by your joy and optimism that you'll be a millionaire soon
Now assuming you only work 5 days a week, then every day you have to find £130 profit. So if you buy and sell things, what profit can you make per item, and how many can you sell in a day? If your gross margin is £10, can you sell 13 every working day?
If you're offering a service, can you charge £16.30/hour EVERY HOUR OF EVERY WEEK OF EVERY MONTH?
Obviously, if you're aiming for ten times these numbers, multiply everything by ten. And if you need equipment, a flash car (of course!), business premises, employees and their pay & NI contributions, liability and premises insurance, business rates, accountants, bank charges, advertising, travel expenses, cost of borrowing etc then factor this into the cost.
It's actually quite daunting when you look at the numbers like this, it's called a business plan, and many people would have to work very hard to match what they can get as an employee. Plus you get healthcare, contributory pension scheme, paid holidays, paid sick day, work colleagues, subsidized lunch, free coffee and various other perks.
Ultimately, the advice of someone who's done it and is willing to advise you is invaluable. Someone who will look at the numbers and tell you if you've missed anything. Then decide if you're a risk taker, or risk-averse.
The UK is not exactly kind to small businesses, I suspect cash-in-hand would change the maths a bit (not that I'd advocate tax avoidance), working from home, having a network of family & mates & business friends to help you.
Good luck if you decide to go ahead.
I'd advise you to work out how much you need to survive first, including the tax you'll have to pay. Let's start low and say £36K = £3K/month, so you take home maybe £2250-ish as an absolute minimum, offset by your joy and optimism that you'll be a millionaire soon
Now assuming you only work 5 days a week, then every day you have to find £130 profit. So if you buy and sell things, what profit can you make per item, and how many can you sell in a day? If your gross margin is £10, can you sell 13 every working day?
If you're offering a service, can you charge £16.30/hour EVERY HOUR OF EVERY WEEK OF EVERY MONTH?
Obviously, if you're aiming for ten times these numbers, multiply everything by ten. And if you need equipment, a flash car (of course!), business premises, employees and their pay & NI contributions, liability and premises insurance, business rates, accountants, bank charges, advertising, travel expenses, cost of borrowing etc then factor this into the cost.
It's actually quite daunting when you look at the numbers like this, it's called a business plan, and many people would have to work very hard to match what they can get as an employee. Plus you get healthcare, contributory pension scheme, paid holidays, paid sick day, work colleagues, subsidized lunch, free coffee and various other perks.
Ultimately, the advice of someone who's done it and is willing to advise you is invaluable. Someone who will look at the numbers and tell you if you've missed anything. Then decide if you're a risk taker, or risk-averse.
The UK is not exactly kind to small businesses, I suspect cash-in-hand would change the maths a bit (not that I'd advocate tax avoidance), working from home, having a network of family & mates & business friends to help you.
Good luck if you decide to go ahead.
Ordinary Bloke said:
This is not meant to be negative, but it explains why I'm still taking the money from my employer and delaying starting my own business, after having been self employed for 5-10 years before...
I'd advise you to work out how much you need to survive first, including the tax you'll have to pay. Let's start low and say £36K = £3K/month, so you take home maybe £2250-ish as an absolute minimum, offset by your joy and optimism that you'll be a millionaire soon
Now assuming you only work 5 days a week, then every day you have to find £130 profit. So if you buy and sell things, what profit can you make per item, and how many can you sell in a day? If your gross margin is £10, can you sell 13 every working day?
If you're offering a service, can you charge £16.30/hour EVERY HOUR OF EVERY WEEK OF EVERY MONTH?
Obviously, if you're aiming for ten times these numbers, multiply everything by ten. And if you need equipment, a flash car (of course!), business premises, employees and their pay & NI contributions, liability and premises insurance, business rates, accountants, bank charges, advertising, travel expenses, cost of borrowing etc then factor this into the cost.
It's actually quite daunting when you look at the numbers like this, it's called a business plan, and many people would have to work very hard to match what they can get as an employee. Plus you get healthcare, contributory pension scheme, paid holidays, paid sick day, work colleagues, subsidized lunch, free coffee and various other perks.
Ultimately, the advice of someone who's done it and is willing to advise you is invaluable. Someone who will look at the numbers and tell you if you've missed anything. Then decide if you're a risk taker, or risk-averse.
The UK is not exactly kind to small businesses, I suspect cash-in-hand would change the maths a bit (not that I'd advocate tax avoidance), working from home, having a network of family & mates & business friends to help you.
Good luck if you decide to go ahead.
thanks ppl and some great jewels of wisdom there ordinary bloke leaving me with some very valid points to think about...I think im going to have a good ponder while im on garden leave and i'll let you know if i end up chicken-ing out of setting up a business!I'd advise you to work out how much you need to survive first, including the tax you'll have to pay. Let's start low and say £36K = £3K/month, so you take home maybe £2250-ish as an absolute minimum, offset by your joy and optimism that you'll be a millionaire soon
Now assuming you only work 5 days a week, then every day you have to find £130 profit. So if you buy and sell things, what profit can you make per item, and how many can you sell in a day? If your gross margin is £10, can you sell 13 every working day?
If you're offering a service, can you charge £16.30/hour EVERY HOUR OF EVERY WEEK OF EVERY MONTH?
Obviously, if you're aiming for ten times these numbers, multiply everything by ten. And if you need equipment, a flash car (of course!), business premises, employees and their pay & NI contributions, liability and premises insurance, business rates, accountants, bank charges, advertising, travel expenses, cost of borrowing etc then factor this into the cost.
It's actually quite daunting when you look at the numbers like this, it's called a business plan, and many people would have to work very hard to match what they can get as an employee. Plus you get healthcare, contributory pension scheme, paid holidays, paid sick day, work colleagues, subsidized lunch, free coffee and various other perks.
Ultimately, the advice of someone who's done it and is willing to advise you is invaluable. Someone who will look at the numbers and tell you if you've missed anything. Then decide if you're a risk taker, or risk-averse.
The UK is not exactly kind to small businesses, I suspect cash-in-hand would change the maths a bit (not that I'd advocate tax avoidance), working from home, having a network of family & mates & business friends to help you.
Good luck if you decide to go ahead.
alsheikh said:
thanks ppl and some great jewels of wisdom there ordinary bloke leaving me with some very valid points to think about...I think im going to have a good ponder while im on garden leave and i'll let you know if i end up chicken-ing out of setting up a business!
That statement shouts that it's not going to be right for you.I think you need to take ordinary blokes post with a pinch of salt TBH. I have had a very succesful first years trading (year end 1st April), but nearly every penny that's been generated by my efforts and the business has ended up being pumped back through the business to keep it growing and firing on all cylinders.
Forget flash cars - you'll be driving a 106 diesel if you care about keeping your business on it's feet in the first few years. I've now got a healthy bank balance and an enviable turnover but I'm still re-investing heavily and daren't take too much out of the business.
I may be in the position to buy a decent car this year but it'll be on HP and I'll make bloody sure the business can afford it before I do it
Forget the concept of evenings, weekends, family time, holidays etc. It just won't happen if you are starting from scratch.
That's all the negatives - now a few positives. You will be your own boss. You will be accountable for everything in your business and all the people in it. You will have ultimate control and responsibility. You have the ability to grow the business how you want it. Do you want to aim for business value, or would you like a company that funds a lifestyle? For example...
Make sure you do something that you can do yourself if it really does go pete tong. Always have a 'turn to shit' plan for every decision you make. ie; What happens if this doesn't go the way I want it to?
Good luck, and if you want any more questions answered fire away. We're a friendly bunch in the business forum and there's masses of knowledge available from the members here
Both what OB and Richard have said has merit IMO but go into business with the knowledge that the government doesnt particularly want you to be self employed and will throw hurdle after hurdle in your way.
The administrative burden placed on small business alone is preposterous, we must have one of the most complicated tax systems in the world.
If you've always wanted to do it then do it, without hesitation or thought. If its something you've casually considered because people have told you that 'you will never be rich working for someone else' then consider your motives for setting up.
Whatever you decide, best of luck with it, if its a life goal its an epic feeling.
The administrative burden placed on small business alone is preposterous, we must have one of the most complicated tax systems in the world.
If you've always wanted to do it then do it, without hesitation or thought. If its something you've casually considered because people have told you that 'you will never be rich working for someone else' then consider your motives for setting up.
Whatever you decide, best of luck with it, if its a life goal its an epic feeling.
KingRichard said:
I think you need to take ordinary blokes post with a pinch of salt TBH. I have had a very succesful first years trading (year end 1st April), but nearly every penny that's been generated by my efforts and the business has ended up being pumped back through the business to keep it growing and firing on all cylinders.
So why the "pinch of salt", aren't we agreeing? My own business was similar, I earned almost nothing (<£10K some years) and couldn't afford to pay into a pension, it was only after 4 or 5 years that I started to earn what I could have got as an employee.Anyway, I agree with everything you wrote. There are many reasons why I will start my own business again in a few years, it's just that I get paid every month right now (without chasing creditors) so I'm in no hurry to jump in.
If you have a passion, understanding friends & family, and a business plan, go ahead!
Personally I would stick with what you know if at all possible, I wanted to own my own company for years but was afraid to do so because I was on such a good wage.
However when the time came and I lost my job which was about 3 pm, I drove home had a coffee and a cry and then got back into my car and searched for cheap premises, dont underestimate the advantages of keeping your overheads low.
The following day I met an accountant, choose my company name and within about 10 days the company was founded, my advise would be dont hang around !
Some good points made by others about what you need to make each and every day, sometimes I can go 3-4-5-6- days without getting an order but then one can come in for 10K with 50% profit, personally of your selling small values with small profits it would be very hard to survive.
However when the time came and I lost my job which was about 3 pm, I drove home had a coffee and a cry and then got back into my car and searched for cheap premises, dont underestimate the advantages of keeping your overheads low.
The following day I met an accountant, choose my company name and within about 10 days the company was founded, my advise would be dont hang around !
Some good points made by others about what you need to make each and every day, sometimes I can go 3-4-5-6- days without getting an order but then one can come in for 10K with 50% profit, personally of your selling small values with small profits it would be very hard to survive.
KingRichard said:
alsheikh said:
thanks ppl and some great jewels of wisdom there ordinary bloke leaving me with some very valid points to think about...I think im going to have a good ponder while im on garden leave and i'll let you know if i end up chicken-ing out of setting up a business!
That statement shouts that it's not going to be right for you.Being an employee means that your company is selling you for more than it pays you. The difference is called profit. It all depends if you think you're above average or not.
Plotless Said
"The administrative burden placed on small business alone is preposterous, we must have one of the most complicated tax systems in the world".
I couldn't agree more.
Ive managed to survive 20+ years in business and made a lot of mistakes early on and probably still do now. if my advice is worth anything i would get a very got accountant from day 1 and stick with them, also set up a good efficient office with whatever systems and equipment you need for your chosen business. secondly remember the customer is always right, like it or not they are your business, keep them happy don't rip them off and give them a 100% professional service and they will continue to use you. And most importantly enjoy it! i think we only get one go at this life try not to waste it being a millionaire, ask yourself whats more important, time off, friends, family, holidays, sleep, lack of stress, health or chasing money? its a fine line and from what I've learned running a business can bring you all of these things but can also wipe them out in a flash.
Good luck and don't think about doing it to much just plan it properly.
"The administrative burden placed on small business alone is preposterous, we must have one of the most complicated tax systems in the world".
I couldn't agree more.
Ive managed to survive 20+ years in business and made a lot of mistakes early on and probably still do now. if my advice is worth anything i would get a very got accountant from day 1 and stick with them, also set up a good efficient office with whatever systems and equipment you need for your chosen business. secondly remember the customer is always right, like it or not they are your business, keep them happy don't rip them off and give them a 100% professional service and they will continue to use you. And most importantly enjoy it! i think we only get one go at this life try not to waste it being a millionaire, ask yourself whats more important, time off, friends, family, holidays, sleep, lack of stress, health or chasing money? its a fine line and from what I've learned running a business can bring you all of these things but can also wipe them out in a flash.
Good luck and don't think about doing it to much just plan it properly.
lee. said:
remember the customer is always right, like it or not they are your business, keep them happy don't rip them off and give them a 100% professional service and they will continue to use you.
I don't run my own business however, I have had many years dealing with them. One thing I always work by is 'people buy people'. Look after your customers and they will tell people and then you will have the best (and cheapest) advertising available, 'word of mouth' (just think 'friends reunited' I heard they spent next to nothing on advertising and did it all via 'word of mouth') Be careful though as 'word of mouth' can have a negative effect if you don't look after people. It's a sad fact but people are more likely to complain than to complement, thats why you have to do it better than any one else.
The other piece of advice would be 'Define your purpose'. Really understand what your are going to do and who your customers are.
And with regards to setting up, a couple of motivational quotes for you
You have the choice to be part of the steam roller or part of the road
100% of the shots you don't take don't go in
HTH and best of luck setting up
Edited by boycieboy on Sunday 27th January 11:11
Ordinary Bloke said:
KingRichard said:
I think you need to take ordinary blokes post with a pinch of salt TBH. I have had a very succesful first years trading (year end 1st April), but nearly every penny that's been generated by my efforts and the business has ended up being pumped back through the business to keep it growing and firing on all cylinders.
So why the "pinch of salt", aren't we agreeing? My own business was similar, I earned almost nothing (<£10K some years) and couldn't afford to pay into a pension, it was only after 4 or 5 years that I started to earn what I could have got as an employee.Anyway, I agree with everything you wrote. There are many reasons why I will start my own business again in a few years, it's just that I get paid every month right now (without chasing creditors) so I'm in no hurry to jump in.
If you have a passion, understanding friends & family, and a business plan, go ahead!
KingRichard said:
Some very good stuff
I echo Richard's comments. The only thing I would add is make dam sure you know what your business is about. I was watching "Dragons' Den: Where are they now?" on Dave last night and the Californian they had on a few series back said some every wise words:
"If you cant describe in a sentence what you are selling and why the need then you are making a big mistake."
I would complement his advice by adding ...what you are selling, why the need and why your company.... You wouldn't believe how many small and large company's cant answer that question.
The other option to consider is join a start up a year or so on? You are likely to get some of the benefits with some of the risks. Email me via my profile if you are interested in what we do ( http://www.cloudamber.com ). Telecoms is a lucrative area in my industry.
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