Presentation for Royal Signals June 2019

Starting in Business AGENDA

• Types of Business • Legal Structures • How to start – minimum costs • Questions you need to ask yourself • Attributes you need to have • Risks – what can go wrong • Running a Business in Practice • The Rewards – valuation • Summary • Further information • Q&A

Who am I?

• Michael Rogers-Nash • COO United Konsultants Ltd., • www.unitedkonsultants.com • Michael.Rogers@unitedkonsultants.com • 07795300346 • Grants – Funding - Finance

http://www.unitedkonsultants.com/

Setting up a business

Types of Business

Design

Manufacture

Sell

PRODUCT

Provide

Sell

SERVICE

Design Advice

Sell

SETTING UP A BUSINESS

Types of Business

Design

Manuf

Sell

PRODUCT

Provide

Sell

SERVICE

Design Advice

Sell

I N V E S T O R

SETTING UP A BUSINESS Legal Structures

1. Sole Trader You are self employed, on your own Simple – just start (tell HMRC within 3 months) You are personally liable (some insurance available)

2. Partnership You are self employed, but in a team Quite Simple – extra tax return (SA800) to do You are all jointly and severally liable which could include personal

3. Limited Liability Partnership (LLP) Register LLP at Companies House – separate legal entity limits liability Members are self employed – no shares – Partner Agreement critical

4. Limited Company Register LLP at Companies House – separate legal entity limits liability Shares - Shareholder Agreement

SETTING UP A BUSINESS Types of Business

1. Product Businesses (Make things)

a) Design (of the product) b) Build c) Sell / market

2. Services Businesses (Do things) a) Design (of the service) b) Provision (of the service) c) Sell / market

3. Advice Businesses (don’t Make or Do) a) Relies on individual expertise

SETTING UP A BUSINESS

Structure

Design

Manuf

Sell

PRODUCT

Provide

Sell

SERVICE

Design Advice

Sell

L I M I T E D C O M P A N Y (start your own , buy one , or invest in a share of one)

SOLE TRADER

PARTNERSHIP

L L P

SETTING UP A BUSINESS How to start – minimum costs (ref spreadsheet)

1. Different for each legal structure a) How concerned are you about liability? b) Do you want to work in partnership with others?

2. Areas of potential cost (expect min £1-3K setup + £3K pa) a) Legal fees b) Companies House (or agency) c) Data Protection GDPR d) Web site: domains, design, hosting, email e) Stationery f) Telephony g) Premises h) Insurance i) Seed capital

SETTING UP A BUSINESS

Questions you need to ask (and answer) before setting up What is your vision of ‘success’ ?

• What do you want from this business ? • What do you need from this business – how much can you afford to lose? • Is this a ‘lifestyle’ business ? • When and how will you exit ?

What is your ‘offer’ ? • To whom ? • Why will they buy from you ? • Where will your first order come from ? • What will the business be called – name available? • How will you sell & in what geographic region ?

SETTING UP A BUSINESS

Questions you need to ask (and answer) before setting up (2) Competition – who else is already doing this ? Is the market for your ‘offer’ growing ? Is anybody making money doing this currently ?

Are you going to set up with others ? • Draw up a contract • Do your partners really share your vision ? • How well do you know them ?

Will you have an office or work from home ? Think hard about these questions. Include the answers in your

Business Plan. Now ask ‘Is this Plan realistic?’

SETTING UP A BUSINESS What should you put in your Business Plan ?

Your Business Plan is your route map to your goal • It needs to be a living document, i.e., one you constantly refer to. • Keep it as clear, concise, short and factual as possible. • It must be well researched – allow enough time.

Include at least: • Your vision and goals for the company – state them clearly • Your offer – be very clear what product or service you will supply, where • If it is a new idea how will you protect it ? Registered trademark. Patent • If it is not a new idea:

Who else is already offering this in your target region ? How will you beat them ?

• P&L: Sales, margin, overheads and net profit targets by quarter • Balance sheet: cashflow forecast • Key risks

SETTING UP A BUSINESS

Key Success Factors You have thought long and hard You have a good idea and have clearly defined the offer You have researched the market and created a solid business

plan You understand the risks and can afford to take them You have decided on a legal structure & if you will partner or not SWOT analysis WHAT ELSE DO YOU NEED ?

SETTING UP A BUSINESS Key Success Factors

You have thought long and hard You have a good idea and have clearly defined the offer You have researched the market and created a solid business

plan You understand the risks and can afford to take them You have decided on a legal structure & if you will partner or not WHAT ELSE DO YOU NEED ? Ability to sell Expertise Determination

Risks

THE RISKS – WHAT CAN GO WRONG Most businesses fail within 3 years, because: THEY RUN OUT OF CASH Therefore: => watch the cashflow forecast weekly => Do not spend the VAT and taxes due to HMRC => Get customers to pay promptly => Think really hard before agreeing to Personal Guarantees => Understand the business profitability – monthly P&L review

Beware Banks offering overdrafts If the Bank senses trouble they may demand immediate repayment

Internal disagreements Sales not achieved, action to reduce costs too slow

Budgets & Planning

WHEN THE BUSINESS IS RUNNING

If you don’t enjoy accounts / record keeping => Hire a Book Keeper ( a few hours / month)

At the start of each year create a detailed budget for each month Every week:

=> Review the cashflow forecast for next 16 weeks: take action => Take time to contact your customers (however briefly)

Every month: => Review P&L performance, at least: Sales, Gross Profit, Overheads => Drive hard to achieve P&L targets each and every month => ALWAYS strive for GP > overheads => Update the forecast for the following 3 months

Every Quarter: => Review Business Plan and Risks

SETTING UP A BUSINESS THE REWARDS – WHAT YOUR COMPANY MIGHT BE WORTH

Valuation depends on: market and company performance, eg

Net Profit (NP) Rule of thumb: Value = (3 to 7)*NP (annual)

Gross Profit (GP) Rule of thumb: Value = (1 to 5)*GP (annual)

High market share in growing market Rule of thumb: Value = (1 to 10)*sales (annual)

Example: company with sales of £900K, GP of £500K, NP of £300K might fetch: Approx. £1.5 Million

Tax incentives Government Incentives – be sure to ask your accountant

1. The Seed Enterprise Investment Scheme (SEIS)

a) Income tax relief of 50%, and CGT relief (28%) £150K of investment in the company.

b) For new start-ups – Needs approval from HMRC. c) Keep shares for 3 years – no CGT on disposal

2. The Enterprise Investment Scheme (EIS) Similar to SEIS, not as generous in terms of taxation relief Can apply to established companies also.

3. Government Grants 1. £25.000 per person as a loan 2. R&D grants depending application Innovate UK

SETTING UP A BUSINESS

• The percentage game? What is it

• 100 • 20 • 5 • 1

SALES/ORDERS FUNNEL

L E A D S

&

M A R K E T I N G

T E L E P H O N E

C O N T A C T

V I S I T S

D E M O S

Q U O T E S

O R D E R S

THE MARKETING FOCUS

People – trained and motivated

CUSTOMER NEEDS What they want And do not want

PRODUCT AND

SERVICES

CUSTOMERS & PROSPECTS Information and

Controls LITERATURE, PR

Advertising and Website

PRICING

FEATURES AND

BENEFITS

COMPETITION INFORMATION

PRODUCT DEVELOPMENT

U.S.P. Sales Proposition

SETTING UP A BUSINESS

SUMMARY – we have covered

• Types of Business (product, service, advice, investment) • Legal Structures (sole trader, partnership, LLP, Ltd Co.) • How to start – minimum costs (£1-3K + £3K pa) • Questions you need to ask yourself (goals, offer, why you) • Attributes you need to have (expertise, sales, determination) • Risks – what can go wrong (cash, profits, sales, disputes) • When the Business is running (regular reviews, GP>ohds) • The Rewards – valuation (can be very significant) • Further information – Business Link, HMRC, Co House WCIT mentors ready to support you:

http://www.itcmentoring.com/

Word of Warning

• Do not try and do it all. • Take advice and get professionals

• Marketing • IT • Accounts • Sales • Engineering • Social media

• You are the best at what you do.

How can we help you

We are a team of: • Professional bid writers

• Monitoring officers appointed by the

government for their projects

• We assess government grants

• Very experienced IT & telecoms PMs

SETTING UP A BUSINESS

Questions ?

Who am I?

• Michael Rogers-Nash • COO United Konsultants • www.unitedkonsultants.com • Michael.Rogers@unitedkonsultants.com • 07795300346 • Grants – Funding - Finance

http://www.unitedkonsultants.com/

BACK UP SLIDES

SETTING UP A BUSINESS Profit & Loss (P&L) definitions:

Sales: value of goods/services you sell to customers Gross Profit (GP): the price you sell an item at less the cost Overhead costs: other costs, eg salaries, facilities, utilities Net Profit (NP): Gross Profit minus overheads

Buy @ £1 each Sell @ £2 each GP = £2 - £1 = £1 each ( Gross Margin = GP/sales=50% ) Overheads = £1,000 / month (Your Company Ltd.)

Supplier

Customer

£ July 2018

Actual Plan

Sales £86,000 £79,000

GP £41,000 £34,500

overhds £21,000 £21,000

NP £3,000 £2,500

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