STARTING YOUR OWN BUSINESS

For most people, deciding to go into business or to become self-employed is a big step. Like all big steps in life, it has to be thought about carefully and in some detail. Unfortunately a high proportion of new businesses fail in the first twelve months. So here are some of the points you should consider before making that important decision.

Firstly, your personal aims. Do you just want independence? You may be content with a secure and adequate income, but if you want a financial jackpot it will involve hard work, long hours and financial risk. Do you want to satisfy a creative urge? If so, you will probably have to initially accept much lower rewards than you could earn in employment in order to follow your chosen role.

Secondly, assess your personal qualities for tackling the start-up. Have you dedication, a personality that will give the customer confidence, skills that will market the product, manage finance and manage people? Have you a willingness to learn, decision-making ability, and enthusiasm (especially when the going gets rough)? Have you got the support of your family?

To start, you need to set out in writing your Business Plan...

The result of all your thinking and desk research must be a Business Plan. Here is a checklist of the minimum it should contain:

• What type of business do you intend to run? Sole trader - partnership - limited company - a co-operative - a franchise?
• Does a market exist for your product or service? Who are your customers? What is the size of the market? What is the competition? What is your strategy for selling?
• Should you buy an existing business rather than starting up a new one? Have you budgeted for all the capital needed to start - (most people under-estimate this) and how will you raise that capital?
• Do you need a Licence to trade, and will you need a Consumer Credit Licence? For more information you can contact one of the organisations mentioned later in this leaflet.
• Have you made plans for premises? Trading from home has the advantage of low costs, but your title deeds or tenancy agreement must be checked to see if business trading is allowed, and planning permission may be needed for change of use from residential to business use.
• Then you need to plan for laying on services, buying or leasing equipment, buying materials, employing others, and providing working capital to finance the amount credit customers owe you. Experience shows that some customers will always take longer to pay than the terms of trade allow.
• Have you a realistic target for annual sales (money and volume)? Have you budgeted for all the costs and expenses involved? These include allowances for replacement of equipment, a wage or salary for yourself with a reasonable profit and surplus to expand and develop the business.

Finance

You may need to open a separate business account. Do you understand bookkeeping and will you keep your own accounts? All self-employed people must present annual accounts to the Inland Revenue. They must operate PAYE if they employ other people.

Should you register for VAT? A trader has to register if the annual turnover of the business is above the limit – (£54,000 with effect from 1.4.01).

Have you considered your Tax and National Insurance position? Minimum NI contributions are payable by self-employed people (Class 2 contributions are £2 per week with effect from 6.4.02). Additionally, Class 4 contributions have to be paid if your earnings are above a certain limit (7% of profits or gains between £4,614 and £30,420 with effect from 1.4.02). If earnings are likely to be below a certain limit (£4,025 with effect from 6.4.02), the Small Earnings Exception (SEE) can be applied for.

It may be advisable to engage an accountant at an early stage to advise you on these points.

You may need extra Insurance – eg for public liability, employee liability, cover for your premises and business use of your car/van. A personal pension, life assurance, and cover for sickness or personal accident must also be considered.

Grants may be available to certain types of business from charities and trusts.

Free information, assistance and advice is available from:

Sussex Enterprise 01444 259259 West Sussex County Council Business Information (01243) 777614

SUSSEX BUSINESS HELPLINE (Local Call rate) 0345-83-0345

Classes in Bookkeeping and Computing in Business are available at Forest Community School (Horsham 261088).

Further reading: (available in Public Library)

Business Advice Guide and "Get Going in West Sussex" Starting Your Own Business (Consumers Association)

You are welcome to ask for further information and advice n all the points in this leaflet from the CITIZENS ADVICE BUREAU