Blog posts in Business planning

How the over-50s can help start-ups and SMEs

Over-50s unemployment is an increasing problem. In fact, the increase in the unemployment rate for this group is growing twice as quickly as the rate for the widely lamented 18-24 year olds.

My colleague, Kay Gorman, and I founded skilledpeople.com when we retired. We had amassed a wealth of invaluable skills and experience we realised was of most value to SMEs and start-ups. Both can benefit enormously from instant experience and know-how.

We believe that the over-50s can help galvanise the economy if small businesses know they are available and how they can connect with them. The concept behind skilledpeople.com is a particularly good one for SMEs, because small business owners simply don’t have the time or resources to train poorly educated young people.

The over-50s come ready packaged with a quantifiable skill base, a good education and a willingness to put their experience to good use. Unfortunately, the issue of the unemployed over-50s has gone largely unnoticed by the press. Youth unemployment, it would seem, has taken precedence and as a result in the public mindset. However, the problem is real and it’s getting worse. There are many initiatives to get Britain’s youth working but besides skilledpeople.com I can’t easily name any for the over-50s.

In February, Office of National Statistics unemployment figures revealed that vacancies and skills demand is increasing. It is well documented that one of the biggest hurdles facing SMEs and start-ups is finance. The feedback we have received from our site members is that this directly affects recruitment, with many small businesses unable to afford salaried employees despite needing their skills.

Skilledpeople.com has a reservoir of talent that SMEs can tap into at very economic rates. We offer a unique service supporting both business growth and getting experienced people back into productive employment – a true “win-win”.

Our ‘Project Assignment’ service covers short project work (1-20 days), where SMEs can take advantage of the skilled specialist services of candidates to help them with activities such as HR, marketing and business planning, but without employing them full time. This makes it viable for small firms to get the right skills at low costs.

Small businesses need support if they are to help the UK out of recession. We are also in danger of losing a tremendous amount of knowledge and experience from professional people aged 50-plus who find themselves out of work.

David Hiddleston is chairman of skilledpeople.com, which connects small businesses who want to expand and improve with skilled, experienced people, typically 50+ who add value and quickly become productive. Contact them on Twitter – @skilledpeople

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10 signs that your business is 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.

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How do you get going when the going gets 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.”
 @fionahumberston

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.

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10 reasons 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.

• Find out how to carry out basic market research.

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.

• Find out how to produce a start-up business plan.

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?

• Find out about start-up funding options.

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.

• Ask yourself this – Is running a business really for you?

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.

• Find out about sources of support for start-ups.

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.

• Find out about budgeting and sales forecasting.

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.

• Find out how to set prices.

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.

• Find out more about how to limit your start-up costs.

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.

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

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 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 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 

“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 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 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 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 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 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.”

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.

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Small businesses respond to the 2012 Budget

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 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

“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

“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.co.uk

“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

“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 www.loveitloveitloveit.co.uk

“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 small business coverage on the Donuts
• Budget Forum: What did you think?
• Budget 2012 summary - Key points for small businesses
• Budget 2012 doesn’t go far enough to help struggling small firms, say business groups
• ‘Turnover tax’ for smallest firms in “Budget for business”

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Lessons to take forward into 2012

I don’t think that I am alone in thinking 2011 was a difficult year. In fact, I’d go as far as to say it was flippin’ hard work. So what have I learned from my experience during 2011 that will benefit me in 2012?

1 Don’t trust Government pronouncements…

I seem to remember the Royal Wedding being declared as an event that would stimulate growth and now it is being blamed for a poor second quarter!

There are two more big occasions in 2012 – the Queen’s Diamond Jubilee and the Olympics. The first gives us another four-day-long weekend, which isn’t great for employers because we have to pay staff for another day off. However, I say smile and take it with good grace – and use the opportunity for a themed promotion or sale.

What benefit will the Olympics bring to small firms? It could be two weeks of utter misery as everyone watches the telly and I’ve already got people queuing up to book time-off for the games. Again, you can market yourself around an Olympic theme, make it work for you, start planning what you will sell, how you will go to market and use the opportunity to boost your sales. Don’t forget to also think ‘against the flow’ by trying to appeal to those who are fed up with the Olympics.

2 Recession, bankruptcy, Euro zone collapse, blah, blah, blah…

These seemed to be the overriding media stories at the end of 2011, and this sort of stuff can really get you down. You can’t ignore it because it is important and if one thing is for certain – 2012 will be even worse – according to our leaders.

Robert Peston and Faisal Islam will be looking lugubrious on the BBC and Channel 4 news respectively and making hefty pronouncements, but I say – don’t let the b******s grind you down. Life will continue and people will still buy stuff, so stay focused and keep working. You might need to move out of your comfort zone and think ‘out of the box’, but both can be good things for business owners?

3 Christmas is a time to relax…

I’m an absolute idiot and a disgrace to my profession. I run an online business and have always considered the Christmas shutdown to be just that. We have a skeleton staff on and do enough business to justify opening the warehouse. In 2011, it was pointed out to me that Boxing Day is the busiest online shopping day of the year. So we held a warehouse clearance sale over the holiday and increased our turnover by five times. In 2012, I am going to be really looking forward to the Christmas break and will definitely NOT allow just a skeleton staff to be on duty.

So there you go, three opportunities for the coming year. The bigger picture on the economy is that small business closures – although climbing – aren’t climbing exponentially. Interest rates are non-existent and likely to stay that way. The Government can’t really cut much more. In fact, the only thing it can really do is tinker at the margins and try to make life better for us wealth and job creators. We are constantly told that we are the backbone of the nation – let Government forget that at its peril!

John Sollars, MD of printer ink retailer Stinkyink.com

Read more of John's published posts on his Google+ page

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Championing real-life entrepreneurs

It was depressing to see Business Secretary Vince Cable quoted as saying that the economy was in worse shape than under the previous administration and that a double-dip recession was a distinct possibility.

While the opposition immediately seized upon his comments, it could be argued that this was rather hypocritical as the current debt crisis and poor bank regulation were a direct result of their own policies.

The feeling of most entrepreneurs is that government is essentially powerless to influence the economy at the grass-roots level. Rather than decreasing regulation as they always promise, any intervention on their part, however well meaning, always seems to create even more obstacles to enterprise.

The solution to our economic challenges is clear. Rather than sit on our hands and complain, now is the time for entrepreneurs to get out there and sell our way out of the recession, bringing the rest of the UK's economy along in our wake.

But this will need to be the UK's real-life entrepreneurs, not the get-rich-quick chancers we see in the media, an image actively fostered by offensive and unrepresentative programmes such as Dragons’ Den and The Apprentice.

And while it is always a joy to inspire young people into a path of entrepreneurship, this is a long-term policy rather than the immediate help that the UK's economy needs.

Real-life entrepreneurs first felt the effects of the recession in 2008. Those that have survived followed the best practice that all businesses should follow. This includes the banks, which are always quick to criticise small businesses for their lack of planning.

Successful entrepreneurship involves reducing risk wherever possible by concentrating on the core business of the organisation and, wherever possible, finding the most profitable niche or vertical market. While cost-savings are important, the main focus should be on generating revenue and reducing the length of the sales cycle.

Rather than chasing brand new customers who promise big orders from exotic locations, the place to find immediate revenue is always your existing customers. They may be equally affected by the recession but willing to discuss mutually beneficial outcomes with people they trust.

It is also a myth that there is no money out there. This is the strong message I have received across the spectrum of industry, from private equity and venture capital companies, angel investors and those companies who have managed to grow successfully in the last few years.

You only need to scan the regularly published lists of fast-growth companies to see which industries have thrived in a recession; all of these companies and others like them have money to spend with the right suppliers.

I am also determined to do my bit to help the UK's entrepreneurs. Starting on November 1st in Essex, I will be presenting at twelve branches of the Federation For Small Businesses (FSB), events that are open to everyone.

The FSB recently launched a new initiative “Championing The UK's Real Life Entrepreneurs”, which focuses on the key issues facing its members. These include increasing the routes to finance, improving cash flow, adopting a new approach to regulation, reducing and simplifying business tax, incentivising job creation and opening up export markets.

The FSB's Head of Policy and Public Affairs, Andrew Cave explained to me that the campaign is designed to galvanise the small businesses in the UK to take a forward-looking and positive attitude towards the economy by increasing their revenue and taking on staff, especially the increasing number of unemployed young people.

He argues strongly that the opportunities and skilled, hard-working people are out there; all it needs is a positive attitude.

Originally published in The Financial Times. Copyright ©Mike Southon 2011. All Rights Reserved. Not to be reproduced without permission in writing. Mike Southon is the co-author of The Beermat Entrepreneur and a business speaker.

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The one-page business plan

The one-page business plan enables anyone who has been labouring for some time over massive forms and spreadsheets to simplify matters. This simple plan should unclog it all, and should not take more than twenty minutes to complete. You will need to be able to fill in the numbers to establish whether your business is likely to work.

Step 1: How much do I want to earn each year? _________

Step 2: A realistic expenditure per customer/visit/transaction/project is: _____

Step 3: A realistic number of customers/visits/transactions/projects is:

_________ per day

_________ per week

_________ per month

_________ per year

Step 4: How much money will this frequency generate?

£_________ per day

£_________ per week

£_________ per month

£_________ per year

Step 5: Now deduct all costs from the £ per year figure:

Per year total: £_________

Minus costs: £_________

Remaining: £_________

(If your salary is included in these costs, then make sure it equals the figure in Step 1. If it doesn’t, see Step 6.)

Step 6: The figure remaining should equal or exceed the figure in Step 1. If it doesn’t, change something.

Changes

Step 1: State how much you want to earn. You might think: “How can I decide when I haven’t done the plan yet?” That’s the whole point. Most business plans are unhelpful because they build an income or profit figure from a set of hypothetical variables. That doesn’t help you to work out whether your business will sustain you.

Step 2: Now take a stab at a realistic cost per customer, visit, transaction, project, or whatever the appropriate description is for your business. For example, if you want to run a coffee shop, you might put in £5 per visit. If you think your customers will only buy one cup of coffee, it might be just £1. If you think they will stay for breakfast, it might be £5. If visitors come in for hours and work on their laptops, it might be £10. Or, if your business is installing boilers, the price might be £2,000 per installation with a £250 mark-up on each sale. The point is that no one would be selling boilers at the same frequency or price as cups of coffee, so work out the parameters that apply to your market and choose an appropriate average price per transaction.

Step 3: The number of customers/visits/transactions/projects will depend on the nature of your business. Look at it by day and then multiply by the number of days in a week, month or year you will be trading. In the case of a coffee shop, the business might sell 20 cups of coffee per hour in an eight-hour day. Assuming a five-day week, allowing four weeks a month, and one month off for holiday, the maths looks like this:

• 160 per day (assuming 20 per hour, and an eight-hour day)

• 800 per week (assuming five days a week)

• 3,200 per month

• 35,200 per year (assuming one month off for holiday)

Every variable is critical. If your pricing is wrong, so is the whole model. If you open for an extra day per week or hour per day, what happens to the figure?

Step 4: Once you have completed step 3, it is a simple matter to multiply your figures by the price per customer, visit, or transaction that you settled on in step 2. In this example, it is:

• £800 per day (assuming £5 per visit)

• £4,000 per week

• £16,000 per month

• £176,000 per year (assuming one month off for holiday)

Step 5: This total income figure is not profit. It is what the business takes in. Now you have to work out what your costs will be, either by:

1. Subtracting from the expenditure per transaction every element of cost needed to fulfill that transaction. What’s left is the margin. If there is nothing left, your pricing is wrong or the business plan is fundamentally flawed. For example, if you have a 20 per cent margin on every coffee shop transaction, then for each one £4 is cost and £1 is margin.

2. Alternatively, look at the entire business over the whole year. Add up everything you will need to pay for. Now subtract that figure from the ‘per year’ figure in step 4.

Step 6: The figure remaining should equal or exceed the figure in step 1. If it exceeds it, you may well have a successful business model. If there is a ridiculously massive profit, check your assumptions and figures again. If it doesn’t equal or exceed your expectation, don’t panic yet, but you will have to change something, possibly expenditure per customer, number of customers, costs, the amount you want to earn each year or all of the above. If, after many attempts, the plan never generates the surplus you want, you may have to conclude that the proposed business isn’t going to work.

This extract is taken from Kevin’s recently published book – What You Need to Know About Starting a Business

Kevin Duncan – business adviser, marketing expert and author

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How to Land on the Moon

President Kennedy is famous for setting the target of getting America to the Moon by the end of the decade.

It was the swinging 60s and against all odds the US succeeded. It was a fantastic achievement, and even now, looking back it seems incredible. The key was that while the target was a stretch, it was do-able. Also, President Kennedy didn’t confuse things with a pile of other challenges.

This episode is full of lessons for business strategy. In business we need to set realistic targets too, they motivate us and they force us to focus on the things that really matter.

For targets to succeed they need to be pursued consistently over time. That means they must be really well thought through before they are set. Bad targets, or ones that get changed frequently, are of no value at all. The macho style of management that sets an unrealistic agenda and then pushes people beyond breaking point is also plain bad management. The real benefits accrue when targets are important, realistic and clear and are then pursued in a single-minded way. 

An example of a good target might be to “increase our repeat business as a proportion of sales to 40% by the end of next year”. This target is measurable and is set within a clear time scale.

Once a target is set, a plan must be created to enable it to be met. Then the whole company needs to be aligned around the target and the plan. The best way to achieve this is to involve a wide range of people in the original target setting and planning exercise.

Unlike the Moon shot, it’s not rocket science. It reminds me of the saying “blessed is he that aims for nothing, for he always hits his target!”

Are we all aiming to land on the Moon? Probably not. But having a realistic goal is the first step in achieving business success. It’s well worth some deep consideration.

Chris Barling, Actinic

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What’s your exit strategy?

Recently, I have been spending quality time with people who have been offered large sums to sell their very successful companies.

The mentoring I provide is not about the complex technicalities of a trade sale. They are already receiving the best possible advice from finance professionals, who are negotiating with the prospective buyer on their behalf whilst also ensuring the entrepreneurs’ own personal tax affairs are in order.

Rather, I help them cope with the emotional impact of selling their company, based on my own experience in 1989. We had found ourselves in this enviable position only five years after starting the company. This was a combination of our highly focused sales activity in a booming niche market, a good hiring policy and strict financial controls.

My co-founders had allowed me to ramp up revenue year-on-year, while they quietly prepared the company for a potential trade sale by hiring the best advisors from day one. When the big offer arrived, the purchasers were able to act swiftly and ethically; the entire transaction lasted no more than a few weeks.

Not everyone has had this positive experience. I have heard many tales of unscrupulous purchasers enticing their smaller competitors with promises of great wealth, only to draw out the process as long as possible before finally offering a derisory offer.

It then transpires that the real reason for their supposed interest in acquisition was to find out competitive information from the smaller company. The process of due diligence distracted the principals of the company from their day-to-day business and revenues soon suffered. This eventually made them desperate and sometimes willing to accept a much lower offer, out of desperation.

There is a much more ethical path. In the heady and euphoric early days of a potential acquisition, both sides should agree an abbreviated timescale for the process. The smaller company should also receive a non-returnable deposit on the transaction, in exchange for exclusivity of negotiation for a limited period.

This should be reasonable to any potential purchaser who should have already done their homework on the company to be acquired, putting a specific financial value to their assets of the company as well as their client base and associated goodwill.

But even such a swift and ethical acquisition will have some emotional fallout for the entrepreneur. For them, the process of selling their company can be best described as like a bereavement.

Their valued and much-loved staff will likely be upset or angry when suddenly finding themselves part of a much larger organisation, especially one who was previously a fierce competitor.

There is a less painful way for founders to exit their companies. To grow a company past thirty people requires the hiring of industry professionals; I often call these people ‘grown-ups’. They will put in the procedures and processes required at this stage, often curbing the excesses and unprofessionalism of the founders.

These ‘grown-ups’ are usually ambitious people with the right skills to grow a company to 150 people and beyond. They also speak the same language as private equity professionals and are the right people to arrange a management buy-out or buy-in.

The inward investors will feel more comfortable negotiating with these seasoned professionals, rather than the unpredictable entrepreneur, who can make a dignified exit while still watching their ‘child’ grow into maturity from afar.

The best advice I can give to anyone thinking of exiting their business one day is to hire these ‘grown-ups’ and let them get on with growing the organisation professionally. Eventually, you will be able to sell your company to people you actually like.

Originally published in The Financial Times. Copyright ©Mike Southon 2011. All Rights Reserved. Not to be reproduced without permission in writing. Mike Southon is the co-author of The Beermat Entrepreneur and a business speaker.

• For more information, read our guides to business planning.

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The top five "must read" books which will help you grow a business

There are hundreds of business books available and many of them say the same things but I have yet to come across one which doesn’t have at least one gem of wisdom in it somewhere. However, reading them all is not really possible! After a quick poll of my Twitter followers I have compiled a short list of five “must read” books and we welcome any more suggestions below.

Freakonomics / Superfreakonomics by Stephen J. Dubner/ Stephen D. Levitt

These two books are my personal favourites and use different and interesting scenarios to look at “The Hidden Side of Everything”. I found these books very useful from a business growth angle in the way they offer a different perspective on why people are motivated or driven to do certain things. The reason why customers buy something is an extremely powerful piece of information in business. Two very easy reads and very thought-provoking.

Rules For Renegades: How to make more money, rock your career, and revel in your individuality by Christine Comaford-Lynch

This is in essence the career story of a very successful woman who didn’t always follow the conventional rules of business. It’s another interesting read and contains a lot of very easy to implement ideas and approaches if you are looking to grow your business.

The E-Myth Revisited by Michael E Gerber

This is the book that almost 75 per cent of the responses I got through Twitter recommended. Personally I found it hard work — there is a lot of stuff to take in, although there is no doubt that it makes complete sense and is an absolute must for any list such as this. The book is based on the logic that the traits that make entrepreneurs into entrepreneurs are traits that don’t make good business people and it offers systems and ideas that will help them with that transition.

Rework by Jason Fried and David Heinemeier-Hansson

This is the only book on this list that I haven’t read yet but it is on its way from Amazon as I type. It was recommended by Michelle Rodger of Tartan Cat and she knows what she is talking about. After reading many online reviews of the book I couldn’t leave it off this list. In a similar fashion to Rules For Renegades, Rework challenges conventional business rules and will make you uncomfortable with some everyday practises. To grow a business effectively in the current climate it is necessary to look outside our comfort zones. I am looking forward to the sound of this book coming through my letterbox soon.

Crush It by Gary Vaynerchuk

This is a book that came highly recommended but took me a long time to get round to as I felt it wasn’t aimed at either my client base or me. I was very wrong. It does seem to be angled at people who are unhappy in their jobs and encourages them to take their passion and turn it into a business but the principles, ideas and rationale behind them are very relevant and powerful for any small business aspiring for growth.

A massive thank you goes to all who contributed ideas for this list through Twitter including Tim Barlow of Attacat, Kevin Ashcroft of OCD, Dan Frydman of Inigo Media, Michelle Rodger of Tartan Cat and the guys at Kennedy and Co.

And finally a special mention has to go to Dr Richard Norris, his new book “Hoof it!” is certainly worth a read.

Craig McKenna is a managing partner at The Growth Academy.

You can follow Craig (@Craig_McKenna) and Start Up Donut (@StartUpDonut) on Twitter.    

• Read Matt Bird of Stinky Ink's blog post "Three start-up books you should read"

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