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Posts for March 2012

10 signs that your business is heading for trouble

March 30, 2012 by Bryony Thomas

Business heading for trouble{{}}Running a business is hard work. There’s never a time when there’s nothing to do. So, it can be hard to stand back and get some perspective on whether or not you’re on the right track. If any of these tell-tale signs ring a bell, then stop, take a moment and think about where you’re heading.

1  One client could sink the ship

If your business is overly dependent on one big customer, it’s not really your business – it’s theirs. You’re at the mercy of their decision-making rather than your own. Take a look at your customer mix, if more than 60% of your income comes from one client, you need to get your thinking cap on to reduce your dependence on them.

2  One employee could sink the ship

Is there someone in your business whose mind is the resting place of your most valuable business information? If there’s a key person in your company, you need to take steps to ensure their work is shadowed and their knowledge is captured.

3  There’s a hole in your bucket

Winning new customers is expensive. Even if you don’t spend vast sums on marketing, there’s always time gone into securing a new deal. If new customers slip through your fingers, by not staying with you for long enough to make a profit, you’re throwing good money after bad.

4  There’s only one tap running

How do you generate new customers? If you’re mostly or wholly reliant on one source of new business, then there’s cause for concern. Imagine that tradeshow stops running, your telemarketer goes off ill, a key referrer goes out of business or your Adwords suddenly jump in price… Whatever the source, having just one is a risky strategy. You don’t want your business drying up because someone turned off the tap.

5  Busy doing nothing

How much does your business earn for every hour you and your team put in? Understanding what people are doing with their time is essential to maintaining profitability. Are you using expensive people to do cheap jobs? A little analysis of what people do with their time can help you make sensible decisions about training needs, job allocation, and outsourcing.

6  Busy doing anything

Are you doing the right kind of work? Lots of small businesses keep themselves afloat by being a bit of a ‘jack of all trades’ – but this can mean that you end up becoming known for the kind of work you don’t actually want to do, or isn’t particularly profitable. If you can’t describe the wrong, and the right, type of work for your business you’re unlikely to be able to find more of the latter.

7  No numbers or know your numbers?

I know, I know – you’re a creative soul… But are you paying the bills? Getting on top of your numbers is essential in addressing all of the points above. If you can’t immediately bring to mind your business’s vital statistics, then you can’t make informed decisions.

8  Yo-yo new business dieting

Is marketing something you do if and when you find the time? Many small businesses find themselves head down delivering client work, and whilst doing so they don’t find time to promote their company. This means that when one project is finished they hit a dry patch. It’s the marketing equivalent of a yo-yo diet, and is about as good for your business health as it would be for your body. If you find yourself staring down an empty sales pipeline each time to lift your head to breathe… then you need to work on finding a low level set of marketing techniques that just keep going come what may.

9  Duvet days

A sure fire sign that something’s not right is a spike staff sickness. They could be working too hard, demoralised by work they don’t enjoy, or they could be bored of twiddling their thumbs as they wait for the next project to land. Either way, if a few of your team start going off sick, it’s time to ask some questions about how your business is running.

10  Got that Monday feeling?

Now, it’s not scientific, and I can’t put a metric on it… but if you, the business owner, hate Mondays more than you used to, there’s something wrong. Running a small business is hard work. But, if you get it right, it’s also exciting and rewarding. If you’re not feeling this, it’s time to get some perspective.

Recognising the warning signs enables you to do something about them. So, if any of these look familiar it doesn’t mean you’re on the inevitable path to failure. It means you have the power to change it. The business-owner who is able to acknowledge and address a tricky issue is in a much better position than the one who can’t – or won’t – see the signs.

Bryony Thomas is a marketing consultant, speaker, and author committed to helping small businesses make their marketing pay. Her first book – Watertight Marketing – will be available Summer 2012.

There's more great advice available on the Donut business survival guide.

When is it best to accept defeat and close down your business?

March 30, 2012 by Elaine Clark

Business accept defeat{{}}The past few years have been tough for most businesses and even highly experienced business people have suffered. Many a good business that in more prosperous times could have been successful has gone to the wall, with failure often being outside of the owner’s control.

So, when should you accept that things are not going to get better?

Unfortunately, there will not be one clear sign that tells you it’s time to pull the plug – it will be a combination of factors. The important thing is to be looking for early warning signs.

Early warning signs

The build up to failure maybe slow, with a combination of unmanaged factors leading up to the final nail in the coffin, including:

  • customers taking longer to pay – a day or so each month
  • stock holding increasing – meaning cash is tied up in stock that may not sell
  • stock is becoming obsolete and too out of date to be sold
  • worse still, stock is being  damaged in the stock room because of the quantity being held
  • having to sell at a loss or only just covering the cost of stock and direct costs such as delivery
  • not being able to pay bills within the agreed payment terms.

By this time alarm bells should be well and truly ringing, but the key is to put effective management reporting systems in place so that each month you are checking these figures and managing things BEFORE they get out of hand.

It’s too late

Even with effective management systems in place showing the business is going off course, the emotional attachment that the owner has can mean that the warning signs are ignored. Before they know it the business is beyond recovery and it is too late.

The tell-tale signs that this may be the case are:

  • needing to pump personal funds into the business to keep it afloat
  • continually drawing on money set aside to pay VAT, PAYE, income tax or corporation tax
  • bills mounting up that cannot be paid – in fact, envelopes remain unopened
  • the bank refusing to extend your overdraft.

The writing is on the wall and in all likelihood the owner is at the end of their emotional tether. Even if a solution was available, many business owners are so stressed at this point that they are unable to function effectively.

Quitting and closing the business is probably one of the hardest business decisions anyone ever makes. The success comes when the business owner recognises that this is the best route to take and puts the steps in place to close everything down.

How do you close a business?

Closing any business that does not have debts is quite simple. If it is a sole trader or unincorporated business all you have to do is complete the accounts, file the final returns, pay outstanding taxes, inform HMRC of the closure and physically close the business down.

A limited company must take a few more steps, including advising Companies House via a special form, telling shareholders, directors and so on.

However, if a business has debts it gets more complicated and expensive to close down the business – madness given in all likelihood there will be no funds available.

When there are debts involved there is a legal process to follow and it is best to seek specific advice from a specialist who can advise the best route – especially if you operate as a sole trader or have personal guarantees on loans through a limited company.

Using 20 years’ experience spent working at some of the UK’s leading businesses, award-winning chartered accountant Elaine Clark is the founder and managing director of, an online accounting service aimed at small businesses with big ambitions.

There's more great advice available on the Donut business survival guide.

The Apprentice: Lesson two - know your numbers

March 29, 2012 by Rachel Miller

BBC Apprentice - Maria sleeping{{}}It’s the design task — perhaps one of the most excrutiating challenges on The Apprentice.

Traditionally, this task sees the two teams struggling to agree on the product they should develop. It’s not unusual to see team leaders throw out the results of market research to go with their gut instinct instead. There’s usually a multi-functional aspect to at least one of the designs.

And so it comes to pass.

The challenge is to design a new product for the home. The girls (team Sterling) come up with two ideas for the bathroom led by team leader Jane McEvoy. One is a splash screen to prevent children from flooding the bathroom. The other is a Tap Cosy — a concept that opens up all sorts of possibilities for a previous no-go area — the tap end of the bath. Well, two possibilities anyway — you could lie your head on it or rest your feet on it.

The splash screen is the simpler idea —until the girls throw more uses for it into the mix —­ it’s a toy, it’s a drawing board, it’s a storage device for both toys. More is more, right?

But what will sell? To find out, Katie Wright leads a sub-team to meet with a mother and toddler group. The splash screen gets mixed reactions, but they love the Tap Cosy.

But Jane is worried about the design — how do you create a product that fits all taps? It’s a fair point but she doesn’t give it much of a chance. The splash screen — Splish Splash — is born.

Meanwhile on team Pheonix, the boys back Azhar Siddique as team leader. They’ve got two ideas up their sleeves as well — Duane Bryan comes up with a bin that compacts food waste. Meanwhile, Adam Corbally has a brainwave — rubber gloves that have sponge scourers attached to them to make washing up easier — Magic Hands. Ta da!

In the focus group at a catering college, the Magic Hands get the thumbs up. But the other boys are having none of it — the bin is the thing.

So it’s on to the pitches, where both teams will present their ideas to Amazon and Lakeland. And it’s the girls’ pitch to Amazon that can only be described as a total car crash.

We’ve all seen Apprentice candidates stuffing up the numbers. This time, they not only flounder and get them wrong but they propose an outlandish deal to the online retailer. They suggest that they buy one million units. One million! At a cost of nine million quid! Words fail me.

Back at the boardroom, the results are in. The girls have sold 7,500 units to Amazon and none to Lakeland. The boys sold 3,000 to Amazon and 10,000 to Lakeland. Lord Sugar is amazed that the girls got anything from Amazon. “They must have felt sorry for you,” he says.

Jane brings back Maria O’Connor (with the crazy purple eyeshadow) and Jenna Whittingham (numbers girl) into the boardroom for a grilling. Their crimes? Maria under-delivered (she fell asleep in the car) and Jenna messed up the numbers while presenting to a prospective client.

Lord Sugar is furious. “This is diabolical,” he says. “Basic business principles went right down the drain on this task,” he fumes. “And the product sucks. I am disappointed with all of you to be honest.”

The girls fight for their survival with Jane even resorting to mentioning her son crying on the phone. Lord Sugar dismisses her “sob stories” but gives her another chance as he points his finger at Maria.

It just goes to show that the biggest mistake a candidate can make on The Apprentice is to do nothing.

Next week: The teams must make and market a new condiment.

Find out more about the candidates on the BBC Apprentice website:

How do you get going when the going gets tough?

March 29, 2012 by Rachel Miller

Businesses get tough{{}}Difficult trading conditions call for difficult decisions. When markets are contracting, it’s no time to put your head in the sand. But what do small firms need to do in order to survive?

We asked some small business owners, including our followers on Twitter and Facebook, what they do to get going when the going gets tough.

“Don’t delay making difficult decisions. If something is not working respond quickly and do something about it,” says Neil Westwood founder of Magic Whiteboard. “Only spend money if it’s going to add value to the business. Keep a close eye on your margins and remember to make a profit.”

“Don’t compete on price — you can’t, and you will just devalue your brand,” advises Hayley Chalmers founder of clothing retailer Short Couture. “If your product or service is worth what you are charging for it, then your challenge is to target the right customers who are willing to pay that price, and do a good job of selling to them. If you keep reducing the price you are eating into your profit and not necessarily increasing sales – just changing who your customer is.

“I try never to lose sight of the back office costs,” adds Hayley. “I keep re-evaluating processes and sometimes I can make something more efficient — sometimes it’s by using a different product/supplier or by doing it differently.”

Being adaptable is important says Denbigh Army Surplus. “We have several selling channels so if one of them is quiet the other usually takes up the slack. Ultimately, it's a giant game of chess and you have to use your instincts, drawing on the knowledge and experience you have in your industry.”

Many long-standing businesses have been through hard times before. Rich Brady reveals how his family business got through a previous downturn. “Some lean periods are difficult to plan for. Twenty years ago we purchased the unit we're in now and after moving in we had the worst January, February was no better, sales continued to drop in March and April and we were really beginning to panic.”

Spending was cut drastically, as Rich reveals. “There were several months when we didn't pay ourselves anything.” Cutting back can help he adds — “You don't buy any new stock, marketing budget is massively reduced or scrapped. Often your competition, though, will be suffering the same fate and that creates opportunities. Perhaps a collaboration or investing more in marketing while the rest of your sector is holding back may help you to stand out. But first and foremost you should position yourself so that you can cope with a lean spell.”

But starting up during a downturn can be a good thing, says Julia Lowe of Farm Toys Online. “I was told that it is always a good idea to start a business in a recession. That way you have to concentrate on every aspect of the business from the word go and if you can make a success of a start-up in a recession — things can only get better!”

Make sure your business is visible on social media sites, recommends Sharon Bassett, co-founder of coaching firm A-Star Sports. “Don’t underestimate the value of social media, even if it looks daunting. If what you deliver is up there with the best, don’t be afraid to let people see that and they will start talking about it. Embracing social media over the last few months has been crucial for us to develop our customer base, find suppliers and open up PR opportunities.”

There’s no end of advice and support from fellow entrepreneurs out there thanks to Twitter. Here are some of the tweets that we’ve received about business survival:

  • “Take a step back and look at why things are tough. Then tackle it head on.” @EmmaWalker01
  • “Look harder at your ideal customer — can you do better business with them? You may have to adapt, refine, grow, niche.” @BronwynDurand
  • “I remind myself that if I don't get going, the going will get tougher and tougher. Then I try something new.” @shortcouture
  • “Good effective targets and clear objectives should enable anyone to ‘get going’ — when they become unrealistic or unclear it gets hard.” @Craig_McKenna
  • “Look for potential partners to collaborate with to strengthen offering, marketing power and skills mix #collaboratetoaccumulate.” @beindemand
  • “In a B2Bbusiness, be careful who you give credit to — customers not paying invoices is a big problem. And cut costs not corners!” @hcnewhouse
  • “Enjoy being the best you can, growing, learning and giving the best to amazing customers.” @BWebZoe
  • “Get inspired, think big, stay in your flow, don't lose track of why you do what you do and what makes you great.”

Sandy Banfield agrees. “I think it is all about the mindset that is needed and having clear goals as to why you are doing it and what you are working towards,” says Sandy. “There will always be ups and downs with finance and cash-flow. But what keeps you going and moving forward is down to your why, your motivation to keep going when those tough times hit.”

There's more great advice available on the Donut business survival guide.

10 more reasons why start-ups fail

March 28, 2012 by Mark Williams

So what are the other key reasons why many new businesses fail to survive their first two years of trading and why do more established businesses go under? Once again, in no particular order…

1 Poor cashflow management

Inability to manage cashflow is the most common reason businesses fail. Many profitable and seemingly successful businesses have gone ‘belly-up’ because they haven’t had enough cash to pay their bills on demand. Lack of access to working capital is a major business killer.

2 Attitude to risk

Some owners are overly cautious, which can hinder their new business’s chances of getting off the ground. In other cases, taking too many risks can quickly lead to disaster (see 6). If in doubt, when it comes to big decisions, it’s probably best to err on the side of caution (well, most of the time…). 

3 Poor customer service

No matter how great their products are or attractive their prices, successful businesses prioritise customer service. Get it wrong and potential customers will vote with their feet. Offering superb customer service is one way to set yourself apart from competitors large and small.

4 Wrong employees

Small firms can’t afford to carry baggage, especially in the early days. Each team member must add value, excel at what they do and their commitment to the cause must be beyond question. Recruiting the wrong people usually proves to be a costly mistake.

5 Poor marketing

Successful businesses know who their customers are and what they want. Their products are tailored perfectly to their customers’ tastes. They also know how best to let customers know about their products and services and the channels through which they need to sell.

6 Inability to sell

If you or others you employ don’t have the skills to sell, your business will fail. Simple. Selling doesn’t come naturally to everyone. If you can’t do it, find someone who can and pay them to do it for you.

7 Wrong location

This can affect all business to an extent, but for those that rely on footfall, picking the wrong location leads to disaster. Sometimes poor decisions are made to save money, when paying more for a better location could deliver more sales.

8 Underestimating competitors

If you don’t believe you have any competitors – think again. And the bad news is some of them will have been open a lot longer than you, which means they will already have customers. You should know who your main competitors are and what they offer, but – underestimate them at your peril.

9 Poor financial management

Not everyone has a head for figures, but if you don’t control your business’s finances you’re asking for trouble. Common misdemeanors include not getting invoices out promptly or chase them when overdue; failing to separate personal and business expenses; borrowing money out of the business for personal use; not properly keeping track of expenses; failure to keep accurate or up to date books. At all times you should have a good idea how much your business owes and how much it is owed.

10 Other reasons

Poor day-to-day decisions by people who aren’t cut out to run a business. Partnerships that don’t work. Inability to communicate ideas. Unwillingness to listen. Fear of success or failure. Too much or not enough confidence. Procrastination. Rash decisions. Inability to cope with pressure. Domestic distractions. Failure to learn from mistakes. Poor time- and task-management. Market conditions and wider economy. Bad luck.

In your experience, why do so many new businesses fail and what survival advice can you offer to start-ups?

There's more great advice available on the Donut business survival guide.

10 reasons why start-ups fail

March 28, 2012 by Mark Williams

Why start ups fail{{}}Opinions differ greatly over the exact survival rate of new businesses in the UK, but without doubt the failure rate remains depressingly high. Some claim that more than half of small businesses fail in their first year, while 90% don’t last two years. So what are the key reasons why they don’t make it and why do more established businesses go under? In no particular order…

1 No real demand

The ‘build it and they will come’ approach to starting up isn’t advised. You should only start up if you have firm evidence of demand. Start-ups that don’t have products people want to buy usually come to an end when the owner’s savings run out.

2 No business plan

One of the best ways to prove the viability of your business model is to put together a sound business plan. There are no guarantees, but if your numbers are realistic and your idea can be shown to work on paper, at least you’re not dealing with wholly unrealistic assumptions. Fail to plan and you plan to fail.

3 Lack of funds

If your new business is ‘under-capitalised’ from the start and your sales fail to live up to expectations, you’ll soon run out of money, which is likely to spell the end for your business (and don’t expect the bank to help). What if you don’t make any sales for months – will your business survive?

4 Wrong attitude

Just because you want to start a business doesn’t mean you’ll be good at it. Knowledge and skill can be gained, but if you lack drive, commitment, won’t make sacrifices and you’re lazy, running a business won’t be for you. That said, hard work and determination alone is not enough to succeed in business.

5 Lack of advice

If you’ve never ran a business previously, there will be many times when you won’t know what to do. Fortunately, others can help. Access as much free reliable advice as you can. The bad news is, there’s a lot of bad advice out there, too, so beware.

6 Growing too fast

Performance in your first year might exceed your expectations, but investing heavily to try to grow at the same or even a higher rate can leave your business overstretched and with bills it can’t afford to pay.

7 No plan B or C or D

Your initial ideas might not bring the results needed to keep your business afloat, so you must remain agile enough to make changes where necessary until things begin to work. In business it pays to have other options up your sleeve.

8 Inability to forecast or budget

These are important skills that can enable you to produce a business plan and spot when a potentially serious cashflow problem is heading your way.  Failure to accurate forecast sales can lead you to make terrible decisions based on false assumptions.

9 Underpricing/overpricing

Successful businesses get their prices right. Go too low and you won’t make as much profit as you could. Furthermore, you could struggle to increase your prices. Go too high and you’ll put off potential customers. When setting prices you’ve got to know your market.

10 Excessive start-up costs

These create an unnecessary burden from the off, by making it much tougher to turn a profit. It’s reckless to waste money on things your business doesn’t need. You must minimise your start-up costs and remain lean and efficient as your business develops.

In your experience, why do so many new businesses fail and what survival advice can you offer to start-ups?

There's more great advice available on the Donut business survival guide.

How to survive your first two years in business (part 2)

March 27, 2012 by Mark Williams

With few new UK businesses surviving to reach their second birthday, we asked followers of @StartUpDonut, @MarketingDonut, @TaxDonut, @LawDonut and @ITDonut on Twitter and members of our Facebook network for their advice about how to make it through your first two years in business…

Via Twitter

@JudithMorgan: Head down. Hard work. Plough on.

@JigsawCare: Support of family. Thick skin, hard work, endurance and remaining excited/positive that your service can have positive impact.

@rachelperry01: Networking & marketing. Not expecting customers to flood to you just because you're open for business...

@hcnewhouse: #Cashflow – without a doubt IMO. If you don't have cash everything dries up.

@CrtivCornerCafe: Determination. Commitment. Help. Hard work. All clichéd, but all true.

@EmmaWalker01: Strong back bone, it's really hard. And lonely. But you got to just keep going at it.

@Rileyandcoltd: Key to survival = cashflow, flexibility, stamina, understanding the market, including competitors, USP.

@enhance_me: Good customer care, if you can build up a customer base prior to launch even better! Have key goals, too!

@CharlieMoos: Sticking to your original idea. Biggest problem when I first started was I would do anything anyone asked – it nearly killed me!

@AgnesCserhati: Cashflow, determination, resilience, support by coach/mentor, ability to identify/focus on priorities and sense of humour.

@Change4Life_UK: Having great passion for what you do, and being successful at it, generates word of mouth and many referrals.

@nicholabates: A great network of other entrepreneurs around you. Good to have like-minded people to share your successes & failures with.

@HeathersNet: Decide your target buyer & go 4 it. Master your cashflow and network, network, network. Have enough money put by for ur 1st yr.

@jmbratley: Key to survival: business plan; control costs; accurate & up-to-date accounting records; self-believe; determination.

Via Facebook

Debbie Oldham (self-employed at TanTastic): Consistent methods and working hard 24/7.

Yiannis Gedeon: Don’t get disappointed by mistakes. You’ll make lots. It is normal and it will pay off in the long run.

Cat Moyle: Give yourself a day off every now and even though there is a temptation not to (space helps creativity), look after yourself (without you there is no business), be prepared to question but never compromise your values (they are what make you and your business you-nique). Smile as much as possible.

SuperTollFree: Make sure you put yourself and your company out there. If people don't know who you are, you won't be able to grow. Especially in your first year, it's important to build up even a small set of loyal clients.

Sian Lenegan (managing director at Sixth Story): It's all about clarity... defining why you do what you do, what you do and linking that to your customers' pain. If you can clearly articulate what you do in your brand communications it'll make for a strong foundation. Also invest in your brand identity – it's showing your attitude and claiming your stake in the world, it shows people how you value yourself, so take it seriously!

Antonia Chitty (director at ACEInspire): Persistence – don't give up, because you'll face many hurdles. Be prepared with a good support network, both practical and emotional, to help you leap over each one.

Mandy Hemingway: Wine.

We’d like to hear from you, what tips do you offer to new owners who are trying to survive their first two years in business?

There's more great advice available on the Donut business survival guide.

How to survive your first two years in business (part 1)

March 27, 2012 by Mark Williams

With low two-year survival rates for new firms, we speak to business owners who have made it past this important threshold and ask what words of advice they offer…

Ling Valentine{{}}Ling Valentine of LINGsCARS

“Stop trying to get grants and support; don’t focus on mentoring, events and networking – get on with real work of making profit. And don’t spend a penny more than is necessary. Avoid borrowing. Charge as much as you can and ask for fast payment. Try to build a cash buffer in the bank of three-months, just in case sales slow down or stop. There’s no excuse for not making money in your first year, contrary to what some would have you believe. Businesses fail because they run out of cash. Business survival is the game – making money is the aim. Monitor your cash position religiously.”

Fay Martin{{}}Fay Martin of Fay's Studio

“One of the best pieces of advice I was given in my first two years of business was 'there’s no point winking in the dark'. In other words, if you have a great product or service you must take every opportunity to promote it. Word of mouth is so important for a fledgling business and it often leads to great things.”

Adam Ewart of Karacha and Sendmybag Adam Ewart{{}}

“Don't get too bogged down in the details, go out and get selling. Whenever I meet someone who has spent six months writing a business plan and hasn't sold anything it makes me want to bang my head against the wall. Invest as little as possible and pay your bills on time. In your first two years you are small; you can work from home; work all the hours of the day. Not being burdened with large premises overheads enables you to test the core concept of your business. If you can't make it profitable on a small scale, you won't be able to make it work on a big scale. Negotiate hard with all your suppliers, too.”

Alex Astell{{}}Alex Astell of Manage My Website

“Create an attractive brand, high-impact website and strong online presence. Focus on customer service and don’t let your standards slip. Collect customer feedback and act on it. Don’t overspend during the good times, because you may need the money to get you through at other times. Keep your accounts up to date, set aside your tax money, pay your suppliers on time and send invoices out promptly. Don't give up. Early on it would’ve been easy for me to lose hope, as I was bringing in so little money. You must remain positive. Never waiver from the belief that your business will be a success – but it takes hard work, patience and time.”

Ruth Lopardo{{}}Ruth Lopardo of loveitloveitloveit

“Be brave. There’ll be times when you question whether you've done the right thing, whether you'll be able to pay your bills and worrying can keep you awake at night. Keep going. Trust your instincts. Have faith in your ideas and be passionate. Also know when to ignore your business plan, because the reality of running a business is different to the theory. Building a business involves a degree of obsession, part of which requires ploughing virtually every penny you make back in to the business to make it bigger and better.”

Sean Price of iBox Security Ltd

“The most important thing is to keep an eye on is your costs. It’s easy to ‘start a business’, get some credit or a loan and buy new equipment, software and an office straight away without being aware of ongoing costs and that you’ll most likely struggle to make ends meet for an undetermined length of time. Marketing yourself is the next crucial task and that doesn’t mean spending a fortune in magazines or online advertising, networking in local business networking groups can often be very worthwhile. Beat expectations; perform your job to your best ability. Show that you really care about your customers, it will help ensure you have a business that will grow and customers to grow with it.”

Jennie & Sarah of Clevercow Cakes

“Start small and grow a bit at a time. All too often, new businesses try to run before they can walk. Don’t try to complicate things either, keep things simple – especially your proposition, that way you’ll sell more. Try to be different, too – you must set yourself apart from your competitors. Find your niche and stick to it. And make the most of all free methods of publicising your business.”

Jake Xu{{}}Jake Xu of Xcetra Media

“You must remain realistic – that’s the best advice I could give. Realistic when taking the plunge, realistic about the market you’re targeting and your products and services. Know your strengths but most importantly your weaknesses. Also, you mustn’t try to not to out-grow yourself and let the ambition get the best of you – or to be too cautious and limit the potential growth of your business.”

Naomi Kibble{{}}Naomi Kibble of ROCKTAILS

“Make sure you have the time and the money to launch your business. You can’t have one without the other – and one can’t be substituted for the other. Make sure you plan every step of your start-up journey. If you miss a stage or go about things in the wrong order it could cost you dearly. But remember – a plan is useless without action. Also, I think it’s important to have fun. It’ll be harder work than you imagined, so make sure you’re enjoying it or you’ll never survive.”

Griff Holland{{}}Griff Holland of Friska Food

“Having a clear focus, identity and USP is crucial because it’s one of the key ways you’ll increase your visibility and voice as a new player in the market. It’s also important to use your ears and eyes just as much as you use your mouth. Shout about what you’re doing but be prepared to listen and observe your customers and prospective customers’ behaviour and react in a measured way to this. The first two years is all about making your big mistakes and turning a business plan into a living business, as such you’ll need to tweak your offering to make it more commercial.”

There's more great advice available on the Donut business survival guide.

10-step business survival guide

March 26, 2012 by Mark Williams

1 Size up your problems

You won’t be able to create a survival plan unless you know how much of a problem your business faces. Assess your cashflow for the next 12 months. How do your costs compare with your likely income? Are there any times when your business will face serious cash shortages? If your business is to survive, it must be able to overcome short-term cashflow crises.

2 Seek advice – now

You might not be able to come up with all of the answers, especially if you’re under pressure and lack experience, but other people can help you. First explore sources of free support and advice, but don’t rule out paying for tailored advice from an accountant if necessary. When trying to save a business, often it’s wise to seek dispassionate professional advice from the outside. With their help, your problems might not turn out to be as insurmountable as you thought.

3 Cut your costs

If you fail to eliminate unnecessary costs, you’ll significantly hamper your chances of survival. Assess every area of your business and find ways to eradicate waste and inefficiency. Rule nothing out. Often survival involves having to make tough decisions. Try to negotiate better deals with all of your suppliers. If you can save money, explore cheaper alternatives but be warned: cutting too much or in the wrong places can make matters worse, so your decisions need to be well informed.  

4 Tighten up your credit control

Having an effective credit control system can help your cashflow to remain positive, as well as lessening the chances your business will be affected by bad debts. Overtime, credit control can become slack, so look for ways to improve your system. If you are to avoid any nasty surprises, you must remain aware of your cash position at all times. Explore alternative sources of finance such as factoring and invoice discounting, because these might offer you a cashflow solution.

5 Improve your offer

Are there any no-cost ways to enhance what you’re offering? Perhaps you could enhance, update or otherwise improve your products to provide better value for money. Maybe you could introduce new products/services, but only if it won’t place even more demands on your time. Don’t rule out trying new things. As other business fail, there could well be new opportunities for your business.

6 Assess your prices

Could you justify increasing your prices? Even a small price increase can make a big difference. If you can’t, try to reduce your costs. And even if you’re desperate, don’t slash your prices. Don’t even decrease them unless you’ve worked out whether your business can afford it. You must protect your margins.

7 Refocus your marketing

Cutting cost doesn’t mean stopping all your marketing activity, but it does mean stop wasting your time and money on things that don’t deliver enough sales sales. Reassess your marketing strategy. If you haven’t already done so, explore no-cost and low-cost ways to publicise your business, including social media websites such as Twitter and Facebook. Find ways to ensure your own website is more effective Ash yourself whether even going back to basics (eg sticking cards in local shops or carrying out a door-to-door leaflet drop) would bring additional sales.

8 Sell more to existing customers

Selling to new customers is more difficult and according to some as much as eight-times more expensive than selling to existing punters. Try to find ways to sell more to your existing customers, maybe through offering new products/services or discounts for spending more. You could offer them rewards for recommending your business to new customers? Building greater customer loyalty could help your business out of the mire.

9 Stop doing things that don’t make money

You and any employees cannot afford to waste your time doing things that ultimately do not bring any money into your business – especially when times are tough. Look for ways to boost efficiency and productivity so all team members can maximize their contribution to your business.

10 Get full support

Survival is a team game. If your business has employees, you need their full buy-in if your business is to survive – you can’t do it all by yourself. Ask your people for their ideas on how you could cut costs and make more sales. Crucially, you need to make sure employees remain focused and well motivated. Communication between yourself and your employees must be good. You should also be in touch with your accountant for advice while trying to ensure the survival of your business.

Many ‘business turnaround’ experts condense survival strategy into three key stages. The first is to work out exactly how bad things really are. The second is to solve the business’s immediate cashflow problem. The third is to address the fundamental issues that created significant problems for the business.

There's more great advice available on the Donut business survival guide.

The Apprentice: Lesson one - how to get yourself fired

March 22, 2012 by Rachel Miller

BBC Apprentice - Candidates 2012{{}}Lord Sugar is persistent, I’ll say that for him. Here he is again looking for another apprentice — or what he calls a “so-called entrepreneur” — that can help him make lots of money.

Sixteen Apprentice candidates are lined up in the boardroom. We’ve heard the usual posturing from them about how great they are, but now they’re looking nervous as they listen to the law according to Lord Sugar. “This is my boardroom and by the way this is my money. I’m not looking for a friend. If I wanted a friend, I’d get myself a dog.”

Woof woof.

Lord Sugar also said he’s looking for a “Lennon to his McCartney”, a “Marks to his Spencer”. And it will take 12 weeks of tasks to sort the winner from the wannabes.

This week’s task is simple. Take some unadorned items – t-shirts, bags, teddy bears – and print a design on them. Then sell them for a profit. As usual at this stage in the competition, it’s boys versus girls.

It’s quite telling that none of the boys want to be project manager. You would have thought from their interview tapes that they would all have been clamouring for the job. But no, they all look down like a bunch of schoolboys who haven’t done their homework.

In the end, Nick Holzherr steps forward and with the name Team Pheonix, they start to plan their strategy.

Meanwhile, the girls call themselves Team Sterling and Gabrielle Omar puts herself forward as leader, based on the fact she’s planning to set up a print business.

There is talk of margins on both teams but it’s only the boys that figure them out before they buy the goods. The girls make their order and then try to make the numbers work.

When it comes to print and design, though, the girls are way ahead thanks to the secret weapon that is Jade. She does some lovely animals sketches. Nick Hewer, not one to bandy complements about, says: “Her design is smashing.”

But there’s red ink all over the place where the boys are trying to print pictures of London buses onto bags. There are great blobs of red ink all over the bags – making them only fit for the bin.

So it’s swings and roundabouts until we come to the selling. The boys do well until they have to give a shopkeeper a refund for selling her a bunch of bags that are covered in ink stains.

But there’s another unhappy retailer in London. The girls try and sell their remaining goods to a North London store and practically reduce the shopkeeper to tears. The poor woman says she won’t buy under pressure and still the girls berate her, all talking at once. Eventually, they leave but not before they get a good telling off from a chap that turns up to defend the shopkeeper. Quite right, too. Nick Hewer sums it up: “She couldn’t stand being cornered by a pack of baying hyenas.”

And so to the boardroom where we discover that the boys have blown the girls out of the water. They made a profit of £616.20 while the girls only managed a measly £214.80.

Like many a project manager on The Apprentice, Gabrielle hedges her bets by taking two very different people back into the boardroom with her – quiet Katie Wright and talkative Bilyana Apostolova.

What follows is absolutely fascinating. Bilyana basically fires herself.

She just doesn’t read the room. It’s obvious that Katie is for the chop. Even Lord Sugar says: “the person leaving may not feel they had enough time to show themselves”. Clearly, he means Katie.

But Bilyana will not stop talking. At one point Lord Sugar says “stop” ten times in a row. Moments later he tells her to “listen” nine times. In her attempts to save herself she actually makes Lord Sugar change his mind. He warns her that she’s not doing herself any favours. But she won’t listen. Bilyana is fired.

Find out more about this year’s bunch of Apprentice hopefuls.

Small businesses respond to the 2012 Budget

March 21, 2012 by Mark Williams

We spoke to a range of small firms throughout the country to find out their reaction to announcements made in the 2012 Budget. Here’s what they said…

Neil Westwood from Magic Whiteboard{{}}Neil Westwood of Magic Whiteboard

“Any budget that focuses on lowering taxes for working people has to be a good thing, so increasing the personal allowances gives a strong positive message.

"Also, lower Corporation Tax for businesses will be welcomed. Freezing vehicle duty for haulage companies will also help lower costs for businesses. Simpler tax processes for lifestyle businesses will also be beneficial.

“Apart from that, I didn’t get a feel this was a budget for small businesses (or large businesses). Will it help create jobs for one million young people? To encourage employers to take the risk and employ people National Insurance contributions should be reduced by 1% for every person they employ for the first 10 people.

“Another good idea would be to offer entrepreneurs loans for young people who don’t want to go to university but want to set up their own new business, up to £2000. New businesses spend money and create jobs in the economy; more needs to be done to encourage this. Marks out of ten? 6/10”

Helen McAvoy of ROCKTAILS{{}}Helen McAvoy of ROCKTAILS

“The National Loan Guarantee Scheme is another Project Merlin, big plans and big figures (£20bn) but it’s a damp squib. A 1% point reduction on loan interest isn't much use if the majority of SMEs can't get the bank loan approved in the first place. Enterprise Loans – if they're properly managed and rolled out – should see significant success. Young people may even get a better return on investment compared to investing in a university education.

“The integration of NI and income tax should be pushed ahead ASAP. It will help reduce confusion and admin for companies starting the daunting process of hiring their first member of staff. No mention of the NI holiday as yet, which has been an encouraging initiative.”

Andrew Milbourn of Kiss the Fish Ltd{{}}Andrew Milbourn of Kiss the Fish Ltd

“Reducing Corporation Tax is a welcome break and it will help to provide income with which small businesses such as mine can more easily employ staff. I’d have liked the Chancellor to have dropped the rate by more and faster than promised.

“Simplifying tax for low turnover businesses is a sensible move, although we’ll have to wait and see how it works. Certainly merging income tax and national insurance is sensible and should cut down on time spent on administration.

"The freezing of any further increases in fuel duty is a good, I think it could have been very damaging if he’d increased it by any amount. I’m not unhappy with this Budget. The chancellor has helped my business – although not by much.”

Elaine Clark of CheapAccounting{{}}Elaine Clark of

“After cutting through the puff and noise from the 2012 Budget speech, what did it really contain for our micro business clients being those who, in the main, have a turnover below £250K? The most leaked budget to date is leaving me wondering why on earth I spent an hour listening for what results in no immediate changes for the micro business – we already knew what the tax rates were from April 2012, see our recent blog.

“So what of the proposed cash accounting system for businesses with turnovers of less than £77,000? Yes this could mean some simplification of the accounts preparation, but my guess is that many already operate a cash accounting system. How many would know what the accrual system is if you asked them?

"Plus, as usual, it’s jam tomorrow – a promise on something that may or may not happen following a consultation that could take months or years and could end after the term of this Government anyway.”

Ian Sharland of Baby Sensory{{}}Ian Sharland of Baby Sensory

“The Chancellor alluded to a scheme whereby young people starting a new business will be granted access to loans.  Hopefully these loans will be as readily available and similar to those attending university and thus only repayable when their business can afford it. Many people leaving university can’t find jobs and therefore they can’t repay their loan. A similar loan to someone who starts their own business will place the recipient in a job where they will be learning and paying tax long before they would complete a university education. The more successful young entrepreneurs will also in many cases create jobs.

“Young entrepreneurs who are uncertain about what business opportunity to pursue could take on a franchise where they will, in many cases, be supported while they develop business skills that will serve them well throughout their working lives. Loans for young entrepreneurs should not be subject to more rigorous inspection than loans to students. Some new businesses will fail, but the entrepreneur will learn and the loss will be no greater than that of a student who is unable to find a job.”

Ruth Lopardo of LoveitLoveitLoveit{{}}Ruth Lopardo of

“My initial reaction, before the full details are winkled out, is that this budget is a damp squib for small businesses. It’s a relief to see that children's clothing remains VAT-exempt. I’m disappointed that there's no real stimulus for small business growth. More details are needed on tax simplification and the expansion of the Enterprise Finance Guarantee.

"Changes to child benefit could be bad news for small business-owners with children – the self-employed have no access to childcare vouchers. For sole traders, it will be interesting to balance the increase in personal tax allowance against the reduction in corporation tax to see if an accelerated move to incorporate may be worthwhile.”

More on the Budget 2012

Budget 2012 summary - Key points for small businesses

March 21, 2012 by Tom Whitney

The Chancellor announced a raft of measures affecting small firms in the 2012 Budget, which he said “unashamedly backed business” so that firms could “innovate and be the best”.

Key points for small businesses at a glance are:

Enterprise and finance summary for the 2012 Budget

  • National Loan Guarantee scheme launched offering £20 billion guaranteed bank finance
  • The Enterprise Finance Guarantee scheme is to be expanded
  • UK export finance support is to be expanded
  • Detail of the Government’s national infrastructure plans — road, railway and air development initiatives — will be published this summer
  • £70 million development fund launched to attract new businesses and jobs in London
  • Government support for £150 million of tax increment financing, from 2013-14, to help local authorities promote local development
  • Enterprise Zones offering enhanced capital allowances for start-ups in the London Royal Docks Enterprise Zone, three Scottish Enterprise Zones in Irvine, Nigg and Dundee, and Deeside in North Wales
  • A Green Investment Bank to open next month
  • The Government is considering introducing Enterprise Loans to provide funds to young start-ups

Red tape cuts featured in the Budget

  • The previous Government’s carbon reduction commitment is overly bureaucratic and is therefore under review. If red tape can’t be cut, it will be replaced with a new scheme in the autumn
  • Details of the overhaul of planning regulations to be announced next week — planning regulations will be cut from 1,000 pages to 50 pages in the “biggest reduction in business red tape ever undertaken”
  • Sunday trading laws will be suspended for eight Sundays during the Olympics and Paralympics starting 22 July and ending 9 September
  • Firms will pay tax on the cash passing through their business for those with turnover up to the VAT threshold of £77,000 — providing simpler tax returns for up to three million small firms

Budget summary for research and tech support

  • £100 million support launched for new university research facilities
  • The Government is aiming to turn Britain into Europe’s technology centre — with corporation tax relief for video games, animation and high-end TV production industries
  • The Government has set a target for 90% of the UK to have superfast broadband. Funding has been announced to ensure ultrafast broadband in ten of UK’s largest cities and a further £50 million for broadband development in smaller cities

Tax rates

  • From 1 April 2012, the VAT registration threshold will be increased from £73,000 to £77,000 and the deregistration threshold from £71,000 to £75,000
  • Details of government plans to integrate income tax and National Insurance will be published shortly
  • VAT loopholes to be closed on fast food and other items — but exemptions remain for food, children’s clothes, newspapers and books
  • Taxes on profits from patents to be cut - a reduced 10 per cent rate of corporation tax will also apply to similar types of intellectual property from 2013
  • A new personal tax statement will be introduced in 2014-15, so people can see where their taxes are spent
  • Research and Development tax credits will be increased above the line from April 2013 with a minimum rate of 9.1% before tax - loss-making companies will also be able to claim
  • The Enterprise Management Scheme, which helps small firms recruit and retain staff, is to be reformed to help start-ups access the scheme — doubling the individual grant limit to £250,000
  • The main rate of corporation tax will be cut by an additional 1% from this April to 24%; and cut again to 23% in 2013 and 22% in 2014
  • Income tax — top rate of tax will be cut from 50p to 45p per pound from April 2013
  • Personal tax allowance raised to £9,205 from April 2013, making 24 million people £220 per year better off
  • From April 2013, small unincorporated businesses with receipts of up to £77,000 will be able to use a simpler, cash-based way of working out their tax

More on the Budget 2012

Budget 2012 small business coverage on the Donuts

March 21, 2012 by Mark Williams

Throughout the day Start Up Donut will be covering the key points from Budget 2012 affecting small businesses:

  • We’re tweeting about the Budget from the Start Up Donut Twitter account. Tweet along with us and let us know your response to the Chancellor’s announcement.
  • We’ll be posting blogs written by small business experts – please add your comments and responses.
  • After the Chancellor’s statement we’ll be posting our Budget 2012 summary for small businesses and in our news section we’ll be gauging reaction from small firms and their representatives.
  • Join in with your tweets and blog comments to let us know your thoughts about the UK Budget 2012.
  • Have your say in our forum post: Budget 2012 – What do you think?

Budget 2012

We’ll update the list above with the latest Donut coverage on Budget 2012 as it goes live.

Should your business offer guarantees?

March 20, 2012 by Paul D Foster

When a potential customer considers purchasing from your business, are there a number of risks to completing the purchase? Will the product or service solve the problem they have? Will it meet the needs or wants of the customer? Will the benefits outweigh the costs?
When you provide a guarantee, you remove the risks to the potential purchaser and make it easier for them to buy from you.

It is reasonable to assume that if you reduce the risks and make it easy to buy, more of your potential customers will convert to actual customers and make the purchase. This is a good thing.

Here are five tips to developing a great guarantee:

1 Position it clearly and boldly to potential customers

The worst guarantee is one that customers don’t know about. This may sound ridiculous, but as a small-business advisor I often discover businesses that have a guarantee but didn’t tell their customers about it at the time of purchase. This means the guarantee was not needed for the purchase. Some of those who didn’t buy might have thought it was too risky to make the purchase without a guarantee – even though they would have got one.

2 The stronger and bolder the guarantee – the better

A watered-down guarantee doesn’t work. Make it big and bold. The idea is to get more customers to buy confidently, so big and bold gets more attention in the marketplace. I often see big resistance to make it bold. This is typically because of the fear the market will take advantage of your guarantee. The reality is that a very small percentage probably will, but the percentage is typically less than 1 per cent. The profits from the other 99 per cent of new customers will be more than the cost of dealing with the unsatisfied 1 per cent.

3 Be specific how you define the “claim”

As the business that is developing the guarantee, you get to determine the rules for a claim. While the guarantee needs to have some meat and be easy to use, you control the details. Make it ‘if this, then that’. For example, ‘If this tree doesn’t live for one year from purchase for any reason, we will replace it for no charge.’ In this example, the claim was not cash but a free replacement, which costs less to the business that a full refund.

4 Test it first

If you are worried about how the guarantee will work and if anyone will abuse it, test it in a controlled manner. You can offer it to a limited group of potential customers to see how it works, then you can tweak it based on how the test works out.

5 Research guarantees in other industries

The design of a great guarantee does not have to come from your industry. There is no need to re-invent the wheel. If you just focus on the current purchase decisions you may be making yourself, you can experience how and if a guarantee affects your risks of making a purchase.

The Apprentice 2012: What are entrepreneurs made of?

March 19, 2012 by Rachel Miller

Yay! The Apprentice is back on Wednesday 21 March on BBC1. Sixteen would-be entrepreneurs are champing at the bit to show Lord Sugar, Karren Brady and Nick Hewer — and us — what they are made of.

And to whet our appetites, the BBC has published short clips of each of the candidates setting out their stall. But the question is — do they sound like Britain’s next big entrepreneur? Here’s a little preview:

Adam Corbally: “I’m a funny guy. I’m a nice guy. I’m a people person. I’m a buyer, I’m a seller, I’m a manager, I’m a planner.”

Bet you’re humming the tune to “I’m a Joker” right now…

Duane Bryan: “I want to be a whole new breed of winner. So what that means is that I have to be harsh, it means I have to be kind. I have to be both sides of the coin.”

Gabrielle Omar: “I will say yes to everything. I do have a competitive streak in me. You don’t need to babysit me. I’m ready now.”

Tom Gearing: “I’d say I’m pretty assured, confident, charismatic and some people say I’m quite good-looking as well.”

Jade Nash: “It’s about status, it’s about money. What I really want is to be able to retire when I’m 45 but really, being a workaholic, I’ll probably carry on until I’m 80.”

Stephen Brady: “I’m a true believer in that if you sit on the fence the only thing you’re going to get is obviously not very comfortable. I’m in my business prime and what I mean by that is I’m somebody now who’s ready to take off.”

Jane McEvoy: “I genuinely believe if you work really hard and you put everything into it then you can win. You don’t have to play any nasty games or lie or cheat.”

Laura Hogg: “I’m definitely not here to make friends. Business is business as far as I’m concerned. I’m going to be one of Scotland’s next big exports and, you know, Lord Sugar is not going to want to miss out on that.”

Michael Copp: “My first rule in business is to make money — loads of it. I wasn’t born with a silver spoon in my mouth. Everything I have got and I’ve achieved I’ve worked damn bloody hard for. In a couple of years’ time I’m going to be a multi-millionaire.”

Bilyana Apostolova: I’m completely self-made. I left Bulgaria when I was 17. My home was a run-down communist block of flats and now I’m on the 27th floor of the Gherkin. I mean wow what a journey. I don’t really tolerate idiots and my strategy with them is just to ignore them.”

Jenna Whittingham: “I’m quite a likeable person. Not a lot of people dislike me. What frightens me is not being successful.”

Katie Wright: “I can be your best friend or your worst enemy. I’m really irritating. You’ve got to be in the right mood to put up with me. I’ve got a fantastic business idea that’s going to make Lord Sugar lots of money if he comes on board. If he doesn’t I’ll just make a lot of money myself.”

Azhar Siddique: “The aim in business for me is to avoid any form of confrontation, the reason being is that it affects your credibility, it affects your reputation in business and more importantly bad news travels a lot further than good does.”

Maria O’Connor: I own my own business and I’m only 20 years old. Most of the other candidates are working in marketing or that sort of thing but I’ve worked in the real world. With Lord Sugar, I could wrap him round my finger, I could make him love me.”

Nick Holzherr: “I do blame others for things going wrong. I’m a technology entrepreneur that has a great idea that I can definitely deliver. My first rule of business is that every business should make a profit. I have experienced failure and success so I know how to run a business well.”

Ricky Martin: “I’m the reflection of perfection because other people look at me and they want to be me. Lord Sugar will probably find my ego a little bit difficult.”

It’s all shaping up nicely. We’ve got the usual mixture of confidence bordering on egomania and competitiveness bordering on aggression.

But the question is, will any of the candidates go on to become the next Lord Sugar or Sir Richard Branson? Is this kind of bravado what running a successful business is all about?

Sure – having self-confidence and determination is crucial. But an entrepreneur must also have a real passion for what they do. They must be able to handle the detail as well as seeing the big picture. They need to be able to take calculated risks and be prepared to learn from failure. Above all, they have to be good with people – employees, partners and customers.

And let’s not forget who won last year. Tom Pellereau, a thoughtful inventor, was hardly the poster boy for brash self-confidence.

The great thing about the Apprentice is that it is a learning experience. It’ll be fascinating to see how the candidates develop over the coming weeks.

Budget 2012 - will it help small businesses?

March 16, 2012 by Mark Williams

On Wednesday, 21 March, George Osborne will deliver his third Budget as Chancellor. It comes against a backdrop of rising overheads and ongoing tough trading conditions, wider economic woes and depressingly high unemployment, partially a result of deep cuts to public spending as the government seeks to drive down national debt.

Small businesses and their representative groups are desperate to see measures introduced in the 2012 Budget that enable businesses and their customers to feel more confident about the future. Optimism is rare, especially on the high street, with many businesses continuing to go to the wall.

Tax reductions would also be warmly welcomed, of course – and not just to the 50% rate for high-earners. Even modest tax reductions could help ease the cashflow pressures that many small-business owners face and perhaps stimulate investment (and possibly even more jobs).

The Chancellor has already said there will be no large tax giveaways (except perhaps for the high earners?), but it will be interesting to see if he does anything to ease the tax burden small firms face. Organisations such as the Federation of Small Businesses have called for a simplified ‘turnover tax’ for micro businesses.

Both the Forum of Private Business (FPB) and the Institute of Directors have said they want to see the headline-grabbing 50p income tax rate scrapped, arguing that it doesn’t encourage entrepreneurship.

Many business groups have called on the Chancellor to scrap the 3p fuel duty increase that is planned for August, arguing it is yet another burden that businesses throughout the UK simply cannot afford.

It remains to be seen whether the government can keep small businesses happy. Follow the Budget 2012 on the Donuts and find out what happens.

Budget 2012 small business coverage on the Donuts

  • We’ll be tweeting about the Budget throughout the day and inviting your comments. Follow us on Twitter.
  • We’ll also be posting blogs written by small business experts and you’ll be able to add your comments and responses.
  • After the Chancellor’s statement we’ll be posting our Budget 2012 summary for small businesses and in our news section we’ll be gauging reaction from small firms and their representatives.
  • Join in with your tweets and blog comments to let us know your thoughts about the UK Budget 2012.

You can also have your say in our forum post: Budget 2012 – What do you think?

More Budget 2012 reading

The real value of professional indemnity insurance

March 01, 2012 by Nick Green

The best way to show you why having professional indemnity insurance is worthwhile is to tell you about how it’s helped real people in real-life situations. In each example, our client didn’t make an obvious mistake. They were simply doing what they usually do best, trying to help and act professionally.

Claim 1: Here’s the proof…

Our client, Jim, runs a successful design agency. He had to produce his biggest client’s annual report – as he had done for 16 years. The project progressed well. Just one minor thing – the CEO had spotted the finance director’s name twice in the “With thanks to…” list.

Jim corrected the final proof and sent the document off to print. As previously, the CEO would visit the printer and check the first sheets coming off the press to ensure the colours were right, and the images looked good.

Some days later, as he waited to drop some sample copies off to his client, Jim realised with dread that the final text changes had not saved. Jim called his client. Quite reasonably, the CEO wanted his reports reprinted, but who was going to pay? It was partly the CEO’s responsibility to sign-off the proofs at the printers.

Faced with a crippling reprint cost, Jim called us to see if his professional indemnity insurance could help. It could. And soon we received the information we needed to get the claim started. The only issue was who would settle the £14,000 reprint bill.

The insurer suggested that the client bore some responsibility, and between them and us, we negotiated a satisfactory outcome. Within days, a cheque for £9,000, representing Jim’s agreed liability, was sent. The client got their corrected report in time for the AGM and Jim kept his client.

Claim 2: Thankless task

Architectural technician Jane was asked to design an extension for her mum’s friend who was losing her mobility and needed a ground floor bedroom adding to her home. Delighted with the plans, the customer asked if Jane knew of a good builder. She recommended Honest John, a local tradesman with a good reputation, and her client accepted his quote.

Despite chasing her outstanding design fees, six months later Jane still hadn’t heard from her client, until a letter from the lady’s solicitors arrived, detailing a claim for negligent advice and a breach of duty of care. Honest John had taken payment, started the work, but then scarpered. The claim was for the £25,000 outlay, plus £20,000 for remedial works and inconvenience.

Our advice was clear. As a professional making a recommendation, Jane had a duty of care to make sure her recommendation was sound. Because her recommendation had run off with her client’s money, there was a case to answer.

This innocent error was covered by the policy. The insurer negotiated a settlement of £35,000 with the lady’s solicitors. Jane renewed her policy – which, despite the claim, went up by less than £10 per month.

Claim 3: Numbers up

Our final tale of woe comes from this client – an accountant, who explains what it feels like to be on the receiving end of a professional indemnity claim. 

“At first, I was too ashamed to contact my broker. How could I confess to small errors that resulted in a compensation claim for £6,000? Thankfully, the broker was sympathetic. They asked for the story from start to finish, accompanied by copies of letters and emails communicating with my client. They said they would come back to me once they had spoken to my insurer.

“When I heard I was covered, I was so relieved. I received guidance on how to write to my client, requesting details of the charges they had incurred, so the claim could be assessed properly. The clients had called in another accountant to correct the issue, and they had charged extra fees for their time. The insurer proposed a substantially lower figure than that demanded, and I was shocked when my client agreed to the offer.

“The process took less than three weeks from my first call to sort out. I still find it hard to believe I made such a fuss about getting on the phone to my broker! I had always considered indemnity insurance to be a bit of a luxury, and I never really appreciated what it could protect me against – but now I reckon it’s a business essential.”

Nick Green of insurance broker PolicyBee

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