how to write a business plan

10 things to remember when setting up or expanding a business

It’s coming to the end of the year and lots of people are wondering what 2013 might hold, some even might be thinking of a career change and becoming self-employed. Here’s a quick checklist before you make that step into oblivion….

1. Do the research, is there a market for the product/service?

Think about the whereabouts of potential customers, are they in reach?

Be clear about the decision to take this course; if it’s a hobby business treat it as such.           If you want to secure your future then be really critical.

Ask friends and family for advice.

2. Does your idea need a patent?

There are loads of valid reasons why you don’t want to register your idea, right up to the    point somebody nicks it.

If you’re looking for investment it unlikely a business angel would be prepare to back the business if the product is not secured.

3. Make sure you’re not in breach of any restrictive covenants

If you are a director or an employee of a company check your employment contract to ensure you are not in breach of any restrictive terms.

4. Do some basic costings

Figure out both selling pricing and costs, is there enough margin?

At some point you will need to complete a business plan which can be time consuming but you probably won’t get any finance unless it is completed.

5. Check if there are any grants or tax incentives available.

There are often local grants for expanding businesses or taking on new staff.  HMRC   have a number of schemes available including EIS and EFG.

6.Join industry or regional networking groups

Subscribe to Linkedin and join groups in your industry, people love to share information.

They may not always be competitors but potential customers and suppliers.

Your local Chamber of Commerce is often a great source of information

7. Figure out how much financing you’ll need and where to get it

Do a cash flow forecast for at least 3 years. The first year is about set-up and getting a   foot in the market, the second is where the momentum begins, and the third is where you start to become established.

8.Think about the legal structure of the business

The is not all about tax, there are loads of factors to consider including costs

9.Don’t forget about the taxman

Frankly the days where you can trade under the radar are long gone. Just like CCTV, he’s watching and will catch up with you. Then you’ll have to pay back taxes, fines and   interest. He will not be content with just the tax you avoided paying.

So get it right first time, register.

This is a list of taxes that may apply to you

  • Betting and Gaming Duties
  • Capital Gains Tax
  • Construction Industry Scheme
  • Corporation Tax
  • Environmental taxes
  • Excise Duties
  • Income Tax
  • Inheritance Tax
  • Insurance Premium Tax
  • National Insurance Contributions
  • PAYE
  • Petroleum Revenue Tax
  • Stamp Duties
  • VAT

10. Contact OD Financial Services

Enterprise Finance Guarantee (EFG)

There is a lot of talk about the Seed Enterprise Imitative Scheme (SEIS) and Enterprise Imitative Scheme (EIS), I’ve even written a couple of blogs about them too. Let’s be honest about it, they are very appetising. But not every SME is eligible. In the last budget they introduced a new incentive for SMEs to help them expand called the Enterprise Finance Guarantee (EFG). Strangely it is exactly the same as the Business Enterprise Scheme (BES) the government introduced a few years ago. At least the banks and the government know how it works and it is just a bit of re-branding.

That aside, it really is an excellent scheme though not generally publicised, or for that matter actively supported by the high street banks in my experience. I’m told there has been a change recently. In fact since 2009 some 18,000 SMEs have been supported to the tune of £1.8b, according to the official website.

So what is it?

“The Enterprise Finance Guarantee (EFG) is a loan guarantee scheme to facilitate additional lending to viable small and medium size enterprises lacking adequate security or proven track record for a normal commercial loan.”

The government will guarantee 75% of lending to a SME, meaning the business has a 25% exposure if the venture is not successful.

Most business sectors are eligible though not all. The borrowing can be for almost anything business related:-

  • New term loans (unsecured and partially secured) for working capital or investment purposes including R&D.
  • Re-financing of existing term loans, where the loan is at risk due to deteriorating value of security or where for cash flow reasons the borrower is struggling to meet existing loan repayments.
  • Conversion of part of all or an existing utilised overdraft into a term loan in order to release capacity in the overdraft to meet working capital requirements
  • Invoice finance guarantee providing a guarantee on invoice finance facilities to support an agreed additional advance on a SME’s debtor book, to supplement the invoice finance facility on commercial terms already in place (available for terms up to three years).
  • Overdraft guarantee providing a guarantee on new or increased overdraft borrowing where the SME is viable but has inadequate security to meet a lender’s normal requirements for the level of overdraft requested (available for terms up to two years).

The business must operate in the UK, with turnover less than £41m (where did that random number come from?) and with repayment periods for 3 months to 10 years.

What they don’t say on the website is that they will only lend to existing businesses, no new enterprises.

The SME still must have a viable business plan and must still meet banking criterion for lending. It is not a way to circumvent normal credit checks. The banks will still credit score in precisely the same manner as all other loan applications; including ability to repay and loan period. They may still ask for personal guarantees too but not on personal property.

The cost, the bank will charge their normal tariff interest and charges plus a further 2% annual premium that goes to support the scheme.