Overtrading is where a business takes on a lot orders without having sufficient capital to fulfil them. This often happens when suppliers or deliveries are delayed, which can create serious cashflow problems. It can be easy to fall into the trap of taking on more orders than you can fulfil. In balance sheet terms, your liabilities outweigh your assets (ie debt outweighs cash in your business).
The business will likely be viable, with lots of interest in services or products, but without sufficient working capital, the business experiences a serious problem. Working capital is actual cash or funding you have in the business, minus whatever you owe to suppliers, bank, etc.
The idea is that if you’re selling more, you’re making more money. But are you actually receiving payments from customers? You must get your invoices out on time and keeps tabs on late payers. Always ask yourself if there is enough working capital within your business.
Overtrading tends to affect start-ups in particular, because finance can be very tight in the beginning. Businesses wishing to expand can also face problems if too many orders are taken without sufficient funding being in place.
If cashflow is a problem, look at ways to cut costs in the business. If you’re experiencing VAT or PAYE problems, agreeing a Time to Pay deal with HMRC is worth considering, because it can enable you to spread payments.
If your business needs restructuring and is running up too much debt, a company voluntary arrangement between the company and creditors could be the best solution. It’s a great option for viable businesses that need additional finance or just some extra help to restructure. Always seek legal or insolvency advice before going ahead with a restructure or insolvency procedure.
Copyright © 2014 Keith Steven. Keith Steven of KSA Group Ltd has been rescuing and turning around companies since 1994. He is the author of insolvency and turnaround website www.companyrescue.co.uk and has been nominated as Turnaround Practitioner of the Year at the Insolvency and Rescue Awards 2014.
At the Labour Party Conference in September, panellists from the world of business and politics told the audience at the Student Entrepreneurs Question Time (SEQT) event that technological advances meant today’s entrepreneurs have more available opportunity than ever. However, to succeed they must be prepared to fail, remain ambitious without spending beyond their means and seek expert advice when faced with more complicated challenges.
The event was hosted by the National Association of College & University Entrepreneurs (NACUE) and Santander, to enable would-be entrepreneurs to discuss key issues and challenges. Similar events were later scheduled for the Conservative Party Conference in Birmingham and the Liberal Democrat Party Conference in Glasgow.
According to research by Santander, some 80,000 UK university students combine studying with running their own business (“earning while learning”), with a quarter of these hoping to generate a wage for themselves from their business after graduating.
Students at SEQT appealed for increased practical support from the government and their universities, for example, through mentoring schemes. Other suggestions included making vacant office buildings available to university start-ups and for extra-curricular entrepreneurial activity to be assessed as part of degree courses.
Johnny Luk, NACUE chief executive said: "More students are setting up businesses and choosing to be self-employed than ever before. They’re engaging in activities beyond the classroom, such as entrepreneurial societies, and developing their soft skills, which is not always reflected in an exam grade. Students often find it difficult to engage with politicians. We work to advocate for these students, the dreamers, the strivers and the innovators, opening up more meaningful engagement channels between young people and politicians.”
NACUE directly supports more than 200 entrepreneurial societies at universities and colleges throughout the UK, while organising national events for students, educators and professionals, and seeking to influence government policy.
Many fantastic businesses continue to be born and supported on campuses throughout the UK. Post-graduate student Katerina Kimmorley, co-founder of Pollinate Energy, is the reigning London School of Economics Student Entrepreneur of the Year. Her fledgling social business provides solar lighting and other sustainable, affordable products to people living in urban slums in India, where more than 300m people live without access to energy.
Selected from a pool of 2,000 students and alumni, Pollinate Energy was commended for its impressive growth during its first 18 months. According to LSE: “A strong commitment to sustainability and inspiring entrepreneurial potential in others was also noted: local people are employed as ‘Pollinators’ to run their own mini enterprise and sell various products in their own communities.”
Katerina said: “LSE has supported Pollinate Energy from when it was just an idea to today when we are providing solar lights to people in more than 500 urban slums. It’s empowering to have the support of LSE. This year we’ll be replicating our model in a second Indian city to show it can be done in the 53 other cities in India that have more than one million inhabitants. Winning this award is a wonderful demonstration of LSE’s commitment to the practical application of research at the nexus of two of the world’s greatest challenges – poverty and climate change.”
The Apprentice is back for its tenth series and up for grabs is investment worth £250k and the chance to go into business with Lord (formerly ‘S’ralan’) Sugar.
The most likely question on many viewers’ lips during the first few minutes of the first programme might have been which of the 20 candidates is the most annoying and immediately dislikeable.
As usual, the first programme began with the candidates’ frankly laughable summaries of their skills and suitability for the role, which are intended to impress, but leave many of us cringing on our couches. “I get the job done. I walk the walk. I talk the talk. I dance the dance,” said one wannabe.
“There’s no ‘i’ in team, but there are five in individual brilliance,” stated another, this from someone who somewhat bizarrely describes himself as a “mix between Gandhi and the Wolf of Wall Street”. One female candidate opined: “The future belongs to those who believe in the beauty of their dreams”. Yuck.
As expected, many of the candidates couldn’t in fact “walk the walk”, after being tasked with selling hotdogs, T-shirts, potatoes and lemons on the streets of London, with company director Chiles (yep, Chiles) Cartwright the first to be fired.
Upping the ante this year, when Lord Sugar welcomed the candidates to the boardroom, he warned: “Now, this is the tenth year, so I’m going to start things off a little bit differently. What I’ve decided to do is to kick off with 20 candidates – 10 boys and 10 girls. That’s the good news. Here’s possibly not such good news. The process will still last 12 weeks. That means that I may decide to dispose of more than one candidate at a time. Be prepared.”
There’s no doubt that The Apprentice is mostly sheer pantomime bordering on farce, with the editing encouraging us to see the characters in a certain light. It’s intended primarily to entertain and hook us so we become willing travellers on a 12-week journey, during which time we’ll laugh, get angry, embarrassed and experience many other emotions. Whether we learn much about running a business is debatable, but who knows, we might even get to like some of the candidates.
But The Apprentice and Dragons’ Den could both be accused of perpetuating the ultra macho, hard-nosed, somewhat 1980s myth of business that encourages us to believe that the only way to get ahead is to trample over others in ruthless pursuit of profit and success at all costs. It also seems that everyone is or should aspire to be “an entrepreneur”, even if, in reality – they’re just someone who runs their own small business (nothing wrong with that, of course).
Many people have become totally turned off by the idea of “business”. Much of business reality TV would have you believe it’s a world inhabited entirely by cold, hard, self-obsessed egomaniacs. This seems to be supported by a recent YouGov poll into attitudes towards “the world of business”. Commissioned by business growth consultancy, Caffeine On Demand, the poll is based on responses from more than 2,000 members of the UK public.
Just 7% of respondents wanted their children to “go into business”, with 20% describing it as “corrupt and dishonest” and only 3% saying “it attracts nice people”. Almost half (47%) of respondents described “the world of business” as “dog eat dog”, with just 3% believing it to be “caring and responsible”. Almost a third were “singing from the same hymn sheet” when they described it as “full of jargon” too.
Apparently, Welsh people are most likely (60%) to view the world of business as “dog eat dog”. Scots were four times (12%) more likely to describe it as “a force for evil” than people in the South East (3%), with 19% of full-time students agreeing with the “force for evil” tag, compared with the national average of 6%, and 3% of 55-and-overs.
David Kean of Caffeine On Demand comments: “The results send a clear message to us as a nation. We need to revive a national belief that ‘good’ business is good business. For only 3% to believe business attracts nice people is extremely worrying – it means that the very thing that feeds the national purse is despised.
“We have all, but particularly younger people, been ravaged by Dragons and soured by Sugar. A generation of bright, decent people has been put off going into business because they believe you have to be a ruthless, fictitious stereotype.”
Blog written by Start Up Donut editor and freelance start up and SME content writer Mark Williams.
When you’re feeling the pinch and money is tight it’s easy to assume that everyone is feeling the same way. You transfer your money beliefs over to your potential customers, by thinking: “Surely they won’t pay that” or “They can’t afford those prices”.
And your mind reinforces these beliefs by adding little comments such as: “Who do you think you are, charging those prices?” and “They’ll see through me and realise I’m not as good as they think”. This is what happened to someone I was chatting to recently. Instead of positioning herself as the true expert and brilliant coach she is, she made it into a money issue.
There are loads of business owners who feel uneasy when they’re discussing price and who subsequently charge a fraction of what they’re really worth. And assuming their customers have the same money beliefs as themselves is just the start.
They don’t know who their ideal customers are and, as a result, don’t understand the huge value they bring to them. They have a “spray and pray” approach to marketing, where any customer will do, and then they end up competing on price. Bad place to be.
Let’s face it, when you get into the “competing on price” game you’re always focused on being the cheapest. If you only attract people who want the cheapest, you will always have to offer more for less, just to keep up. It’s a hard way to make a living.
But do you really want to be the cheapest? People looking for “the cheapest” probably won’t be loyal. They don’t really care about you. They just want a commodity at the lowest possible price. Which is fine if you’re selling baked beans or toilet rolls.
But you’re a small business. Your business is a huge part of your life, filled with your passion, energy and time. So it’s better to find those ideal customers – people who really value you, love what you do, for whom you make a real difference. They aren’t looking for cheap. They’re looking for the best fit for them. There’s a big difference. Leave cheap to the others.
Value what you do. Price it so you make a decent profit. Get clear on how you make a difference to your ideal customers. Then, only market yourself to your ideal customers, not people looking for “cheap”. It will make a huge difference to both your bottom line and brand value.
Copyright © 2014 Claire Mitchell. Marketing expert Claire Mitchell runs The Girls Mean Business, a 60,000 strong global coaching community of women business owners, where she shares marketing and business advice.
Never sit back and admire what you’ve achieved – always look forward to what’s next. Innovation is progress and progress leads to further success, so don’t put a lid on your ideas and goals – however successful your current business. Continually evolve your offering, responding to clients’ needs and aspirations to keep clear water between you and your competitors. Regularly step back to view your business from your customers’ perspective and always seek to exceed their expectations.
In the early days, cashflow was a major issue for us and we felt like we were hitting brick walls, one after the other, in our search for a bank to allow us BACS and direct debit capabilities. We knew we needed them for the development and scalability of the business and were determined not to give up. We finally found a bank to say ‘yes’ when all the advice around us urged caution. If you believe in something and know it’s right for you – stick to your guns.
Any business is only as good as the people in it, so you need to get your recruitment right. Recruit on attitude not qualifications on a piece of paper; have fun together; introduce a strong culture of reward and recognition; and – importantly – pay more to attract the very best.
When we started out in 2000, a time when outsourcing was seen as the preserve of larger businesses, we were considered to be bucking the trend by providing our service almost exclusively to start-ups and small firms. At that time, for larger businesses to even think about outsourcing their telephone answering function was virtually unheard of, so we faced many sceptics.
Listen to your clients, communicate well and think about what you need to do to reach new markets. Pre-empt. Don’t be afraid to be different. Stand out, so that it’s easier for prospects to make a choice. Get your name out there; get people talking about you and build fantastic relationships. Don’t just concentrate on new acquisitions; look after the ones you already have, too.
As a business owner, I constantly remind myself of the age-old adage: “Turnover is vanity; profit is sanity; cash is reality.” At my start-up, whether we’re riding a wave or encountering a turbulent period in our growth, one question is always raised whenever a management meeting takes place: “How can we tighten our belt and cut out unnecessary expenditure?”. Here are my tips:
When starting out, be very modest with your workspace. Share space with other new and established businesses to keep your costs down. A shared workspace enables you to explore ways of sharing costs beyond rent. You can consider things such as promotional initiatives. We’ve enjoyed great success with sharing stationery, printers, secretarial support and we’ve even produced co-branded press releases with complementary businesses, sharing knowledge and the results of surveys, etc.
It’s a competitive job market out there. As a business owner, you can use this to your advantage by welcoming smart students and recent graduates into your fledgling empire. It costs a little, and the benefits are tremendous. Many organisations can help you find talented and ambitious candidates who can give your business extra bandwidth.
From past experience, I’d recommend being as specific as possible when writing out a person/job specification. Define the role as clearly as possible and take the time to train your ambitious upstart properly. Pay your interns well, it improves the experience for all parties and creates confidence in the relationship.
Leverage as much as possible from your first 100 customers. It’ll prevent spending a lot of money on hit and miss advertising. We were a firm believer in making all our early adopters feel a part of our journey. The benefits are endless: word-of-mouth referrals, feedback on product and creating a loyal army of brand advocates.
Likewise, always try to share value and knowledge where possible. Start a blog, dive into relevant social media conversations, contribute to other like-minded websites and become a thought leader in your industry. These are low-cost routes to building buzz and attention for your business.
Whether you need stationery, office space, foreign exchange or help with your website or marketing, run a competitive process and seek at least three bids. Not only will you get better product, but you’ll also make significant savings. Always distinguish between purchases that are nice to have versus those you must have.
Many businesses lose lots of money each year unnecessarily when making international money transfers to overseas costumers or suppliers. When paying overseas suppliers, beware of the “we offer 0% commission” marketing gimmick. There is rarely a ‘free money transfer’ offer out there. The devil is in the detail and most banks and currency brokers make money by applying high profit margins to the rate of exchange. Always remember: the difference between a good and bad money transfer deal will be within the rate of exchange. Try to obtain multiple quotes on every transfer. It pays to shop around.
Copyright © 2014 Daniel Abrahams. Daniel is CEO of CurrencyTransfer.com (“the world’s first international payment marketplace”).