1. business and industrial

Guide
to
Starting
a
New Business
___________________________________________________________________________________________ How to start a New Business Page 1 of 26 INDEX CHAPTER 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. CONTENT 50 Bootstrap Marketing Ideas for Start‐up Businesses 21 ways to be positive in your business What are the dangers of overtrading? How to squeeze 26 hours out of your day ‐ time management tips Why finding your own niche can lead to business success Don’t slash and burn in the drive for cost savings Guide to raising finance to buy a franchise 10 useful resources to help steer your business through the downturn Why price cuts don't work in business Tips to make your business more efficient in 2009 How to deal with stress in your business PAGE 3 8 10 11 13 15 17 19 20 22 24 ___________________________________________________________________________________________ How to start a New Business Page 2 of 26 50 Bootstrap Marketing ideas for start‐ups Your new business will live or die by its sales. You can have the best product or service in the world, but if someone won’t give you money for it, it’s worthless. And to drive your sales you need good marketing. You need to find a way to attract people’s attention to your business and its products, and help them make a conscious decision to purchase from you. If you’re on a budget, that can be tough. It’s possible to spend a small fortune on marketing. The alternative is to bootstrap it. This means marketing your new business on a very small budget. It’s about using creativity rather than cash to shout about what you’re doing. Bootstrapping has practically become a culture, as a way to build and market a business without risking a huge amount of cash. There are websites and free books dedicated to it. 50) Give your knowledge away: The stuff you “just know” in your business is potentially valuable information to others. With the exception of trade secrets specific to your company, freely give knowledge away. Write articles on your website or approach content sites such as Bytestart. Tell people exactly how you will help their business and don’t be afraid to reveal tools of the trade. Only a handful will steal that knowledge and try to do it themselves, and they’ll never do it as well as you. Education marketing is powerful. 49) Run topical themes: Steal this idea from retail outlets. Have themes that hook into events that are happening and how people feel about them. In winter, give free hot chocolate away. In summer, build a beach in your office. Watch out for event movies and cash in on their marketing spend. Try to relate themes to your business. 48) Offer a discount card: These are the cheapest way to reward your existing customers for their loyalty, as you only give free product away to your very best customers. When they buy your product five or six times, they get the next one free. What a great way to say thank you. Copy big companies; Café Nero and McDonalds have stamps and tokens when you buy coffee, to encourage you to drink there regularly. Remember to ensure your tokens aren’t easily forged, and that your loyalty card stamp is locked away every day! 47) Have outstanding customer service: Nothing attracts customers more than positive word of mouth from other customers. Customer service is your biggest weapon against rivals, especially those run by big corporations. Make it a central part of your business. If it’s important you are seen to answer the phone quickly, promise to do it within three rings or your service is free. You’ll soon make that a priority when you start losing money! 46) Launch a competition: It’s cheap for you to give your services or products away, so do it regularly. Plug the competition on your website. Or better still, contact the relevant media that talks to your potential customer base and ask if they’d be interested in a giveaway. Be aware many media outlets have a minimum competition stock value. 45) Stuff your website with new content: Glossing over all of the complicated Search Engine Optimization guidelines, Google broadly rewards websites that consistently do two things: keep the ___________________________________________________________________________________________ How to start a New Business Page 3 of 26 content up‐to‐date, and add new content regularly. You don’t need lots of specialist knowledge about search engine marketing. Just keep adding new pages with fresh content. Make a commitment to adding one new page a week and you will be surprised by how much extra traffic you get after a few months. 44) Blog: If you can’t think of articles to write for your website, why not blog. It’s a simple way to get relevant content onto your site. A good blog can help to brand you and your business as experts in the field. Much of the most popular blogging technology, such as Blogger or WordPress is free. 43) Use the back of business cards: Ever found a business card given to you a few months before, which says “Bob Smith, director, Bob Smith Associates”.. and wondered what Bob Smith does? Use the empty space on the back of your business card to list your services or position your business. It’s cheap and will attract clients. 42) Use your stationary: Same with your letterheads and compliments slips – use them to get your marketing message across. And get your message on the envelopes too. 41) Get on YouTube: The video website gets a huge amount of traffic… and best of all; it’s easy and free to get on! Getting noticed on YouTube is often more about creative ideas and executing them well than just spending money. Don’t forget to put the video on your own website. 40) Invest in credibility: If there are accreditation schemes or professional qualifications for your industry, spend the money on them. They might not be cheap but as a long‐term investment, can help to make sure your business is the automatic choice for years to come. 39) Get them sold on hold: If you put callers on hold, make sure they are listening to a sales message rather than Beethoven’s Fifth. 38) Give away unusual freebies: Pens with your logo are boring and forgettable. Thanks to powerful digital printing techniques, there are literally thousands of things that your logo can go on. Would potential clients better remember an underwear company that gave them an edible gingerbread man with tiny pants to remove and keep? Maybe, maybe not, but it’s different and people will talk about it. 37) Seek and use testimonials: People feel more confident reading about other customers who have had a good experience. 36) Give a guarantee: If you truly believe in your product or service, guarantee it. Offer money back if they’re not 100% satisfied. Yes, a few people will abuse your guarantee, but you’ll attract more business in the first place. 35) Get friendly with local radio DJs: Send them free stuff. Ring in to take part in their competitions. Text replies to their on‐air questions. Be nice to them but not sycophantic, and you will get on‐air mentions. 34) Answer phone message: If someone calls in after hours, your answer phone message is a chance to sell. Instead of “we’re not here, leave a message”, how about “we’re so exhausted from giving great customer service we need a little sleep. Leave your number and we’ll call you back at 9.05am exactly.” 33) Set up a referral programmes: If your suppliers and clients are happy to give you work, why not formally thank them for it. There’s nothing better than getting a £50 voucher as a thank you for referring a new client. ___________________________________________________________________________________________ How to start a New Business Page 4 of 26 32) Campaign to change something: What’s annoying people in your marketplace? Start an awareness campaign. If your business is part of the solution, even better. 31) Dress differently: If you have a very relaxed office, why not have a dress up Friday. If you run a retail outlet, get your team to wear themed costumes. This fits in well with suggestion number 49. 30) Do a talk: Seek out the networking groups where your potential customers meet, join them, and offer to do a free talk at some point. It may take some time to get a slot, but you will effectively brand yourself as an expert. Don’t be too worried about being a polished speaker; concentrate on great content 29) Network everywhere: Wherever potential customers or referrers meet, be there. Good networking is about farming contacts not hunting out deals… don’t expect results on day one. You need to work at it and be seen regularly. 28) Write a white paper: Sounds dull, but it’s a great way of stating your expertise. Put white papers on your website and make it easy for people to download them to read at their leisure. 27) Increase prices: Increasing prices will help your customers perceive you as a premium provider. Yes you may lose a little business, but you will make more profit from a slightly smaller customer base. And many businesses find that it is the lower value clients that are the most hassle. 26) Start a newsletter: Use a regular email newsletter to keep in touch with your existing clients (and upsell or cross sell to them), plus as a way to keep your business front of mind with potential customers. Printed newsletters are more likely to get past gatekeepers such as PA’s and reach the bosses of big companies. 25) Change how you answer the phone: Give your staff freedom to experiment with exciting ways to answer the phone. They’ll enjoy it and your customers should too. Just remember that the phone can be the first contact with a business; be aware of answering the phone in such an odd way that it puts callers off 24) Use promotional people: You can hire good promotional temps at very low cost to hand out flyers or otherwise spread the word. Dress them well, make sure they know your business inside out and ensure they are well motivated not to just dump the flyers and bunk off! 23) Cross promote products and services: What else could your customers buy from you? Once they have bought from you once, they are in a relationship with you, and are much more likely to buy something else. 22) Sell gift tokens: Everyone loves picking their own gift; if you sell products to consumers make sure you do this. The best news for you is that £1billion of vouchers are never used. 21) Do something unexpected: How amazing would it be if your supplier rang to say they had dropped their prices by 10 per cent, for no reason. Or the owner rings to say thanks for your continued business. In the internet age, business can be so anonymous, that even picking up the phone now and again can be seen as unexpected. 20) Send out a press release: A bootstrap marketing essential. A press release with a good story suggestion could get you valuable free publicity in your target media. That in turn will boost your reputation and could even generate sales leads. ___________________________________________________________________________________________ How to start a New Business Page 5 of 26 19) Join organizations: Get involved with local networking and business groups, trade organizations, and even consider joining your local Round Table. 18) Sell on your invoice: If you sell to small businesses, it could be the decision maker who deals with the paperwork. Why not get a rubber stamp made up with a marketing message, and stamp every invoice? Your stamp could even be as simple as “thanks for your business, we look forward to payment”. 17) Issue a catalogue: A classic way to reach people who are interested in browsing your products. To keep costs low, print colour pages from your website, or look at professional digital printing, which can give you small quantities of catalogues at a high quality. 16) Pick up the litter: Or clean the windows of the local charity shop. Or donate something to the Scouts. Get your business involved in the community. And use company clothing plus press releases to ensure everyone knows you’re doing it. 15) Use case studies: Just like testimonials, case studies demonstrate expertise and happy customers. Well‐written case studies are also ideal ways to position your people as experts in dealing with specific kinds of clients or solving certain types of problems – perfect to promote your most profitable work. 14) Do some fun guerrilla marketing: Leave sandcastles on the pavements with little flags promoting your summer sale. Or beam your logo onto the council building at night. Just be careful not to go too far. 13) Write to your local paper: Small newspapers often struggle for decent letters. Get in the habit of buying the local paper regularly, and write to the editor about issues you genuinely feel passionate about. If they are problems your business can fix – perfect. 12) Focus on how your staff represent your company: People will judge your business on the people within. Use mystery shoppers to work out what the experience is like. Incidentally, a member of your family can’t be a mystery shopper. They are too close to the business even if they don’t work in it. 11) Do what the others can’t or won’t: Analyze your competitors and pick the things you think customers demand but no‐one delivers. They will probably be hard to execute, but should be worthwhile (and it’s because they’re hard that no‐one does them). Talk to customers to find out what they really want. 10) Take a holiday: If you work on your business 18 hours a day, 6 days a week, 50 weeks a year, you will burn out. And you’ll stop thinking subjectively about the business. Incidentally, if you can’t take a holiday, you need to understand The E‐Myth. 9) Do a publicity stunt: Do something to attract attention both from the public and the media. It should be related to your business in some way. 8) Use online business forums: If you sell through your website, online business forums can be a powerful way to build reputation and drive traffic. Put at least an hour a week aside to read posts and reply with relevant comments. Be wary of spending more time on forums than working on your business. 7) Text message your customers: How cool would it be to get a text from your dentist reminding you about your dental appointment that afternoon? It’s so easy and cheap to text customers; every ___________________________________________________________________________________________ How to start a New Business Page 6 of 26 business should be doing it. Use automated SMS systems to make it easy. Remember to give customers an easy to opt out of further text messages. 6) Reduce rates for repeat business: Buy more, pay less. Make sure customers understand that simple rule and keep repeating it. They will respond to it. 5) Have a spring clean: Clear your desk, premises, website, anything. A spring clean gets rid of the clutter and brings a new freshness. Customers will notice. 4) Support a cause: This is known as cause‐related marketing, and is a powerful way to get your business noticed through its support for a relevant charity or organization. Pick your cause carefully, commit to it in the long‐term (better still form a partnership with them), and shout about everything you do to help it. 3) Tell your story: Even big companies benefit from the stories of their founders. Look at Richard Branson and Alan Sugar – they personify the companies that have made them very wealthy. Don’t be afraid to build your company around you; people like buying from people. 2) Pick up the phone: The phone is the cheapest marketing tool you have. Don’t waste it on cold calling. Use it to phone leads or contacts, rather than just email them. In a world swamped with electronic communication, this is a great way to stand out. 1) Never lose your enthusiasm: The most important thing you can do to stand out it… something. Businesses that do something regularly tend to perform better than those that do something brilliant now and again. ___________________________________________________________________________________________ How to start a New Business Page 7 of 26 21 ways to be positive in your business If you’re anything like us, you experience the emotional highs and lows of running your own business. They don’t call it a roller‐coaster journey for nothing! And aren’t the highs really high, just as the lows are as low as they get? While all business owners find the highs GREAT to deal with, many find the lows really tough. Running your own business is a lonely thing to do. Even if you have a supportive partner and are surrounded by people, it’s essentially all down to you. Providing support to you is one of the main things that drives us forward here at Bytestart. We know that most business owners go through similar emotional journeys and it’s great to be there to help you. So here are 21 ways to help you stay positive in your business. Bookmark this page and come back to it regularly when your day isn’t quite going as planned. 1. Identify what really motivates you and go after it: Do you want to be a millionaire? Enjoy more time at home with your family? Why are you in business? It’s easy to forget. Once you remember your true motivation, you can spend time pursuing it. After all, that kind of control is why you went into business in the first place. 2. Surround yourself with positive people and things: Some business leaders say you are the sum total of the people you spend the most time with. If they are negative people, they’re going to drag you down with them. Same with your working environment – make it bright, light and happy. 3. Have a clear out: Nothing beats that spring clean feeling, right? Grab some black bags and chuck away the stuff that’s been festering in your business. Trust us, you’ll feel great! A good clean can be a great way to shake off something you don’t like and start again. 4. Do some team building: Even if you only have one employee, get out and do some team building. It can be as simple as the pub on Friday afternoon, or as fun as a night out karting, bowling, something like that. Make sure your business picks up all the costs so your team can focus on having fun. 5. Get out: Sitting at work all the time can be terrible for your state of mind. Where are you going to get your new ideas from? Get in the habit of networking regularly, or go to seminars. Hanging out with like‐minded business people can be immensely rewarding and refreshing. 6. Set challenging goals: When you set a challenging goal for you and your business, you will rise up to achieve it. So work out what you really want to do and then go for it. 7. Remind yourself of your goals: Once you have goals don’t allow yourself to forget them. Get a giant sign made up with the business goals and stick it to the wall. Type up your personal goals and carry them with you everywhere in your purse or wallet. ___________________________________________________________________________________________ How to start a New Business Page 8 of 26 8. Get a mentor: A mentor will help you achieve what you want in your business. They’ve been there, done that, and their job is to keep you on the right track. Ask your local Business Link or Chamber of Commerce if they run a scheme or keep a list of potential mentors. 9. Reward yourself: Achieved a goal today? Had a great day? Enjoyed work? Find a reason to reward yourself and enjoy it. Rewards can be as simple as a cold pint on a summer’s afternoon. A good reward can also be a great way to motivate yourself to get a difficult job done. 10. Take an impromptu day off: You work for yourself so you have more control over your life, right? Then exercise that control now and again. Take a day off at short notice and enjoy it. Don’t feel guilty whatever you do; if you work hard you deserve it. 11. Make time for yourself: If you can’t get a whole day off, make sure you regularly have time for yourself. Perhaps you could join a club or something where you have to take an evening off at least once a week. Remember, all work and no play makes Jack a dull boy... 12. Show clear leadership: Taking true control of your business is so important and can make you feel great. It’s easy to lose control over time. It’s your business; don’t be afraid to make it do what you want it to do. 13. Daydream about what success looks like: When you achieve the thing you’re currently trying to do, what will it look like? How will it feel? Top athletes visualise themselves crossing the line ahead of their competitors. Can you do the same? 14. Keep work life and home life separate: This is important whether you work at home or have business premises. Find ways to make a clear distinction between your personal life and your work life. Even a simple change of clothes could do it. 15. Do something different: Feeling a little bored with your business? Then try something new. Try a different way of doing something. Better still try three different ways. You never know, you might find a way of doing something that’s even better than the way you do it now. 16. Try harder: Sometimes when you do the same things week in week out, you forget to try your hardest. Today, why not work on your business as if it was day one all over again. You could get back the buzz that powered you in the first few months. 17. Learn something new: And while you’re trying new things, how about a skills top up? Even if you have been in business for years, there is always something new to learn. Education can fire off so many new ideas, it can be scary. 18. Fire a client: Most of us have a client that we hate – and you know what, their money is rarely worth the hassle that comes with it. So fire them. Make sure you are polite in the way you tell them to find a new supplier. But don’t forget to celebrate the moment! 19. Seize an opportunity: As business owners we see opportunity almost every day. Most of the time it is right to ignore it. But now and again, when an opportunity comes along that makes you excited... so grab it and have fun with it. Even if it’s not core to your business it could be a good distraction to keep your spirits high. 20. Take action: When something needs to be done in your business, just do it. A good trick is to make your first job the one you’re least looking forward to. ___________________________________________________________________________________________ How to start a New Business Page 9 of 26 21. Apply a reality check: You can’t control the things that happen to you. But you can control your reaction to events. Bad things come along as sure as good things. Keep your spirits up, take the bad things on the chin and look forward to the next good thing that’s on the way. What are the dangers of overtrading? Business is a complicated old game sometimes. Just when you think you’ve got your head round one thing, you realise there’s another rule you didn’t know about! Here’s a good example. Did you know it’s possible to get your business into serious financial trouble by selling too much? Surely that’s not possible... after all, if you sell loads; you’ll have plenty of money coming in. But there is a condition called overtrading, where a business sells too much too quickly and grows too rapidly. Essentially the business runs out of cash. Here’s how it can work. Let’s say your business makes widgets, which sell for £10. To make a widget you have to buy in materials for £7. That means £3 profit per widget. You start the month with £700 in the bank. You win an order for 100 widgets which will generate you £300 profit. But you have to first spend £700 on materials from your supplier, which demands cash up front. Your customer has purchased on 30 day terms and won’t pay their £1,000 bill till the end of the month. So you have an empty bank account for a month. And then another order comes in, for another 100 widgets. But you don’t have any money to pay your supplier for new materials until the end of the month. You’re overtrading – selling more than you can deliver – and your business has run out of cash. It probably means you’re going to lose your new order to a competitor. Of course there are some simple ways out of this scenario, such as an overdraft, short‐term loan or credit terms with suppliers. But throw in the complications of day‐to‐day business life with salaries, rents and other bills to pay, and you can see how many businesses tread a very fine line between staying liquid and running out of cash. Overtrading can affect different businesses in different ways. Even a service business selling someone’s time can find that too many hours sold become difficult to deliver profitably, especially if they have to buy in freelance help. So it’s something that has to be anticipated and planned for. Here are five signs that your business is growing too fast and you need to think carefully ahead: You need to borrow money to make it through each month ___________________________________________________________________________________________ How to start a New Business Page 10 of 26 A classic sign of overtrading. Dipping into an overdraft occasionally is OK, and using a small business loan to get through a project is fine, but when you need to borrow cash regularly it’s a warning sign. Business life has a habit of throwing unexpected costs at you now and again, and if your business doesn’t have cash reserves to call on, it could be a problem. Remember that banks are wise to businesses running up big debts and going under, and small businesses like yours are less likely to be offered business credit. Instead you may be asked to put your own personal assets up as collateral. Do you really want to risk your home to run a business with tight profit margins? Your profit margins are small Some businesses operate in crowded marketplaces, and that usually has the effect of pushing prices down. Which pushes profit margins down and affects cash flow. Low profit margins make business hard work. You have to work harder to get the sale in the first place, and really have to juggle the cash to make it work. Late payments are seriously affecting your cash flow One of the effects of this recession is a reduction in the speed of payments from customers. And for businesses that already have a delicate cash flow it can be a kiss of death. Be clear with all customers what your payment terms are and don’t be afraid to chase money when it’s late. It’s your money that customers are unfairly holding onto; don’t play banker with an interest free loan. A key supplier is getting nervous Really important suppliers might know you have a problem before you do. They will have watched with delight on one hand as the amount of stuff you order goes up... and with some concern on the other as your payments slow down. If you are experiencing problems or can see issues arising down the line, talk to your suppliers quickly. It’s usually a lack of communication that makes people nervous. Your accountant has gone a funny colour A good accountant will spot you are overtrading before you do. And it’s their job to warn you about it and help you put a plan in place to manage it. Your accountant could be your best friend to help you survive the next few months. How to squeeze 26 hours out of your day ‐ time management tips So, you’ve started your own business. Well done! But what a culture shock, especially if you have just stopped working for someone else. In your last job, there were probably other people to do the different things demanded by the business. But now, it’s all down to you. Even if you have employees, you will need to be across a lot of things in your business and ensure they are happening. Accounts: that’s you. Dealing with important clients or complaints: that’ll be one for you. Making sure the marketing is happening: you again. Who fancies a coffee... yep, you better put the kettle on. ___________________________________________________________________________________________ How to start a New Business Page 11 of 26 You get the idea. To survive your first few years in business you need to be like an octopus with eight arms constantly doing things. But realistically, it’s not possible to operate at full capacity like this for more than about 12 hours a day. The human body and mind just can’t do that in the long‐term and it’s the quickest way to burn out. So you need to smarter about how you use your most precious resource: your time. Here are Bytestart’s ultimate time management tips for business owners: Accept you can’t create time There are only 24 hours in a day. You need 7 to 8 for (proper) sleep, a couple for rest and relaxation, and probably another hour for comfort breaks, eating etc. That leaves you 13 to 14 hours a day for your baby (aka your business). The first principle of time management is that you can’t expand that time. You can’t create time by giving up sleep or decent meal breaks. Yes it will buy you some hours in the short‐term, but there will come a point where your body is so exhausted that you become ineffective. So you need to make the most of the time you have every day. Set goals The best way to make the most of your time is to know what you must achieve each day. Business owners who are goal driven tend to achieve more than others who just bumble along. Ideally you should have a goal for every day. It could be as simple as finishing a project, or making ten phone calls. Your goal should be realistic and easily measured. Get in the habit of writing your goal down every day and give yourself a tick when you’ve achieved it. Your brain is wired to reward you for achieving things in this way. Make a list Before you can get stuff done, you have to know what needs to be done. Get in the habit of creating a list of tasks every day. Every single thing you must do goes on the list; even tasks you repeat every day. That way the list becomes important. Remember that reward your brain gives you for achieving things... it works with small tasks too. You can’t beat a bit of paper for creating your task list. Use a new piece every day. If you’d prefer something a bit more hi‐tech, use the ‘tasks’ function in the email program Microsoft Outlook. Online there are good free task managers at www.todoist.com and www.RememberTheMilk.com. Prioritise your list Each task should now be assessed by two factors: urgency and importance. Steven Covey, the author of “7 Habits of Highly Effective People”, suggests drawing a simple grid with four sections. At the top write ‘Urgent’ above one box, and ‘Not Urgent’ above the other. On the left write ‘Important’ next to one box and ‘Not Important’ next to the other. You can now classify tasks as A, B, C or D. A tasks are Urgent and Important. An example is dealing with a complaint from your biggest client. B tasks are Important but Not Urgent. This could include planning a project or returning client calls. ___________________________________________________________________________________________ How to start a New Business Page 12 of 26 C tasks are Urgent but Not Important. These will be incoming calls or other distractions. D tasks are Not Important and Not Urgent. Think people trying to sell you stuff on the phone! Know where your time is going Keep a simple diary for a few days to see where your time is actually going. I bet you’d be surprised how much time you spend dealing with emails! If a diary isn’t accurate enough for you, try a free online time tracker like www.Toggl.com. Get into the habit of limiting the time you spend on non‐important things, for example only looking at email twice a day. Delegate more Got a team? Give them more of your tasks to do. They can manage it; it’s only you that’s holding them back. Introduce tasks slowly, be very clear about how you want them to be done, and give them space to get them wrong before they get them right. Yes, yes, no‐one can do tasks as well as you, but you don’t have a dog and bark yourself, do you? Don’t waste a second Get a mobile device to handle emails and read documents on the move. Load your iPod with audio of seminars and courses to learn while you drive. Keep a business book in your bag for 5 minutes of spare time. And remember to always keep your notepad with you, so you can capture tasks as you think of them. Why finding your own niche can lead to business success Can you identify your audience? One of the most important and sometimes difficult first tasks of any new business owner is to identify who will be interested in buying their products or services, who they should market to and who needs to hear from them? The classic mistake made by all too many entrepreneurs is to assume that they are playing to an audience that includes … well, everyone. Today’s market is moving further and further away from mass interest and closer to niche businesses – those that are focused on a particular social, racial or financial segment of the market that can be clearly identified and marketed to. For years business advisers, accountants and bank managers have been trying to get us to focus on our core markets, but now is definitely the time to start listening. It is more important than ever to know your audience, to understand their motivations, their wants and needs, where they may be found and how they may be influenced. You don't need millions of clients to be profitable ___________________________________________________________________________________________ How to start a New Business Page 13 of 26 It is also more acceptable than ever before to play to a smaller crowd to achieve your corporate success. You don’t need to have millions of clients to be profitable: even massive mass‐market players are starting to move towards a focus on the niche or narrower audience. Search engines are a good barometer for business activity. They rely for their survival on offering the public an intuitive interface with the web that will return the business websites that they need, and a shift of focus towards offering niche sector searches has been noted recently. Google is a global phenomenon – it is not the most popular search engine in every country but it has a monopoly in much of the western world, and most of us find it difficult to remember a time before it existed (it was actually launched just ten years ago, in September 1998). Google has always taken a “whole of market” approach to searching for results for its customers, but trends are now shifting, and smaller, newer competitors are nipping at its heels by offering a more sector‐orientated approach to search. If Google does not step up to this plate, it runs the very real risk of losing its monopoly and going the way of former search mega services such as AltaVista and Lycos (we don’t hear much from them these days, but once upon a time they were the search engines of choice). The growth of niche search engines This new trend has shown that there is a demand not only for more niche or sector‐orientated businesses but also for search engines that are tweaked or tweakable towards finding them. The role of a search engine is to supply the most appropriate results for its audience, but what percentage of a search engine’s users are blind, women, Korean‐speaking, Muslim …? Search engines that weight the importance of websites favouring a particular sub‐section of society will therefore be more accurate and useful for that sub‐section, and this is what is starting to happen. One such search service, recently reported on by the BBC, is Rushmore Drive. Launched in April 2008, it was created specifically for a black American audience. Because search engines decide upon the positioning of websites in their results based on the wants and needs of the majority of those who use them, an argument can quite confidently be lodged that as only 14% of the American population are black their needs and wants are not being effectively met by an “all of market” search engine – or at least that is the belief of Rushmore Drive’s founders. Google and Yahoo! have made some steps in this direction by providing facilities to enable users to create their own individually orientated search facilities, but we are well and truly on the brink of a new era in search that paves the way not only for new players at the top of this arena, but for any niche or sector‐orientated business. Start your niche business Corporate gurus have been telling us for some time that to succeed in your business you must be completely focused on its success and to truly believe in and be excited by what you do. What better way of achieving this than to start a business based around your community, a hobby that you are passionate about or something that you fervently believe is missing in the world? Being this niche‐orientated will enable you to accurately identify your audience, focus your promotion on them and rapidly become a big fish in your small pond. ___________________________________________________________________________________________ How to start a New Business Page 14 of 26 Small businesses rarely fail because of a lack of energy and enthusiasm, as it would be quite normal to find a new business owner slaving over their work well into the night, on weekends and over public holidays. Lack of funds and lack of entrepreneurial experience are the most common reasons why new businesses do not reach their potential. To focus your business on a smaller market will enable you to minimise financial waste and maximise return on investment when promoting (something your accountant and bank manager will rejoice at). About the Author This article was written by Bill Morrow, founder of Angels Den. Angels Den offers entrepreneurs with bright ideas or enterprises of any size the opportunity to meet with investors whose funds can help businesses to reach their true potential. Don’t slash and burn in the drive for cost savings When times are good, businesses are tempted to extravagance, hiring staff, moving into new premises and diversifying product ranges. But when things get tough, you must seek more efficient ways of doing things. Many companies react to hard times by cutting advertising and marketing budgets, but this can be a mistake. It is better to review your processes, focus on core markets, and avoid wasting time and money on unprofitable areas. “The slash and burn approach to cutting costs is very dangerous,” says Rob Allison, managing director of Southampton‐based consultancy Expense Reduction Analysts (UK). Such a drastic approach is often unnecessary. One company was spending up to £60,000 a year on corrugated cardboard boxes. They’d been doing it for 10 years, but in that time the technology of box manufacture had moved on so the boxes were overspecified. “By reducing the specification and stock levels, they managed to lop about 30 per cent off their annual spend,” says Allison. Such simple steps as clearing your desk and letting the answerphone take calls can help improve business efficiency. Tania Lewis, business adviser at Sterling Design Services, says if you can see less than 80 per cent of your desk then you are probably suffering from ‘desk stress’ and need to tidy up. “The most effective people work from clear desks,” she says. Time is money so use your time effectively You can lose huge amounts of time taking on too much, allowing disruptions, failing to delegate, being disorganised and letting meetings overrun. “Remember time is money and if you waste it you will earn less,” says Lewis. ___________________________________________________________________________________________ How to start a New Business Page 15 of 26 Making staff redundant can be a quick way to boost profitability. It worked for Elizabeth Gooch, founder of business software company EG Solutions, after she took her eye off the UK market in pursuit of new business in South Africa and the Netherlands. Having reported losses of more than £800,000 in 2007, Gooch set about shedding staff. She managed to cut costs by £1.2m, returning the business to a pre‐tax profit of £50,000 in the six months to the end of July 2008. But take care when issuing P45s as you don’t want to lose key staff who are a vital resource. “If times are going to be tough, you need that resource working to its best,” says Allison. “Implementing a strong cost management regime can save you as much as a key member of staff would cost.” Lower costs by cutting your stock levels One effective strategy is to cut inventory ‐ most people keep too much. If the rate of goods going out has slowed, raw materials will be stockpiling in your store. Often people keep ordering out of habit, says Allison. “If these habits are maintained when everything else changes the warehouses quickly become overloaded with raw materials, which may become redundant if your products change.” Reducing inventory allows you to be much more flexible as well as cut costs. One point about cost management often forgotten is that it needs to come from the top. People won’t look for ways to save money if they see their boss behaving extravagantly. Allison suggests the chief executive send a memo to staff saying his or her secretary will collect all pencils, biros, stationery etc not being used so they can be returned to the stationery cupboard. “The chances are your entire consumables bill for the next month will be halved,” he says. It also pays to go green. Look at your energy use. Switch off all unnecessary lighting, and use recycled paper wherever possible. One good way to minimise costs is to look for alternative suppliers. This will help renegotiate terms with existing suppliers and spreads the risk so your business isn’t vulnerable if they go down. On the other hand, you need to think about the costs of a potentially disruptive switch in supplier. And don’t repeat the error of Schwinn, the leading US cycle manufacturer for 80 years, which alienated its two key suppliers Giant and China Bicycles. The company was arrogant and failed to foster co‐
operation and teamwork, says Professor John Mullins of The London Business School. Schwinn antagonised key partners apparently not realising that one’s team includes more than one’s employees, says Prof Mullins. “Bankers, suppliers and dealers count too. Business, like entrepreneurship, is a team sport, and Ed Schwinn was not a team player.” Schwinn eventually went bankrupt after its debt to Giant and China Bicycles ballooned to some $30m. Work with your suppliers in your cost‐cutting efforts Sometimes a supplier can become part of the solution ‐ Chrysler’s Supplier Cost‐Reduction Effort (SCORE), creates shared responsibility for innovative ideas to get cheaper parts. The goal for each supplier is cost‐cutting opportunities that equate to 5 per cent of its annual billings to Chrysler. The collaborative programme has generated a flood of more than 100 ideas a week and an estimated savings of $2.5bn. ___________________________________________________________________________________________ How to start a New Business Page 16 of 26 Some companies save money by taking over their suppliers to become more vertically integrated, for example restaurant chains owning farms, or car‐makers owning tyre manufacturers. Conversely, non‐core activities can be passed to an outsourcing or offshoring company that can perform the same task more effectively or transfer the activity overseas. The latter approach can work particularly well in areas such as telecoms, software, and technical support. Reviewing your supply chain can uncover new business opportunities Reviewing the supply chain can even give you an idea for a new business, as happened at Dawnvale Café Components. Founders Neil Guest, Darren Wrigly and Paul Handley were working at a catering equipment supplier when they had the idea for their new venture. Clients had been complaining about the problem of sourcing kitchen and bar machinery equipment, often from multiple suppliers. This meant the equipment did not always match, or even work well together, and made purchasing expensive and time consuming. The three partners spotted a niche designing and installing kitchens and bars to provide a service that maximises space utilisation. Moreover, they quickly realised that the bar installation segment is the most lucrative as it has few competitors, so they focused Dawnvale on this. There are many ways to save money in business. What you shouldn’t do is ignore the need to cut budgets, or conversely rush in with a slash and burn strategy. The best approach is to examine why your current approach isn’t bringing in the desired results, and rework your efforts systematically. About the Author VentureNavigator is a state‐of‐the‐art online business planning tool designed to help start‐ups and small businesses improve their chances of success. Anyone can log on to the VentureNavigator Web site, submit a potential business plan, and receive a personalized assessment on its strengths and weaknesses. VentureNavigator also offers a user forum, where users can interact with each other, discuss current topics, and offer their own business advice. The service is funded by the UK Government Higher Education Innovation Fund (HEIF), ensuring that the service is free of charge to end users. www.VentureNavigator.co.uk. More information on author Jane Bird can be found at www.janebird.net Guide to raising finance to buy a franchise As the economy prepares itself for more stormy weather during 2009 with more business closures and more redundancies people will inevitably need to look at other ways to generate income and stay afloat during these challenging times. Although securing any kind of finance from the high street bank is a tough nut to crack, franchises remain inherently more successful than their non‐franchise counterparts and as a result, banks and financial institutions are likely to view franchising as a safer more attractive investment. ___________________________________________________________________________________________ How to start a New Business Page 17 of 26 On that basis you are more likely to secure funding on a franchise than if you were trying to start up a small business from scratch because it is a proven business model. So you’ve done your research, you understand that buying a franchise is a serious business option and not one to be taken lightly, but how can you raise finance to buy that franchise in the current climate? Business Planning Although as with any new business, there are several options for securing finance to get your business up and running, the preferred option for higher levels of finance tends to be bank loans. This is actually no different for a franchise investment. However, before you even think about approaching a bank, you need to build a feasible and comprehensive business plan to allow the bank to make a sound judgement on the viability of the business. Many well established franchisors may be able to help considerably with your business plan and it is worth making use of their valuable insight and experience of the franchising world. Many can provide advice on several aspects of the business and in some cases could even provide you with access to a template to get started. You need to be able to realistically demonstrate the potential market, which you believe to be there as well as project the finance that you aim to generate. Professional Advice It is invaluable if you are able to enlist the help and advice of professionals, including consultants, accountants or solicitors. There are a number of individuals that specialise in franchising so it is worth spending the time to seek out the most relevant help. Planning properly could mean the difference between a successful long running business and no business at all. Business Banking Once you are in a position to approach a bank for funding you need to make sure that you go to the right part of the bank. Three major banks are accredited by the British Franchise Association (bfa) as having dedicated franchise team to ensure that you are given the right advice and direction when raising the finance you need and this is all important. It is also vital that you know from the start how much money you need and that you don’t try and save costs by under‐borrowing as it could come back to bite you later. If this happens it will only mean you need to go back to the bank when you run out of funds. You also need to include the money you need to operate before making a profit (working capital), so that you can actually live whilst getting the business started. You need to be aware that most banks will only lend up to a maximum percentage of the value, so you will need to consider where the rest is coming from. Once at this stage the bank will be able to guide you on your next steps, taking into account your repayment schedule, timescales and business services. Also, why not read our guide to setting up a franchise business. About the Author This article was written by Tom Endean, marketing manager at the bfa. For information a list of the bfa’s affiliated banks and professional advisors log on to www.thebfa.org.uk ___________________________________________________________________________________________ How to start a New Business Page 18 of 26 The British Franchise Association (bfa) is the voluntary self regulating governing body for franchising formed in 1977 by the major franchising organizations looking to accredit and promote those franchise systems that meet the strict ethical and business criteria of a good franchise. 10 useful resources to help steer your business through the downturn With the current financial crisis set to continue for some time, small businesses should be looking at effective ways to survive a potentially long‐lasting recession. Here are 10 useful resources to help you successfully steer your business through the current economic downturn: Maintain healthy cash flow Once you know what money is coming in and out, you can manage your cash to unlock capital, transform your bottom line and safeguard your future in uncertain times. The Department for Business Enterprise & Regulatory Reform has produced a series of guides on cash management, which can be found via the BERR website. Explore funding options Looking for alternative forms of finance in an environment in which banks are tightening their credit criteria is definitely worth considering. For a brief but in‐depth low down on the options out there, click here. Track your finances The best thing you can do during an economic downturn is keep an eye on your money and the most efficient way to track your finances is to invest in some simple financial software. Intuit is offering its basic accounting package for free for three days between 20 and 22 January so go to Quickbooks to download it and take advantage. Manage your debtors In addition to a healthy cash flow, credit control and managing debtors is essential to any business. For expertise advice on credit control, the Institute of Credit Management (ICM) has created an online portal, which is designed to help businesses get paid on time. Cut tax costs Paying taxes is something we cannot get out of but there are a number of things you can do to curtail the amount of tax you have to pay such as through stock valuations and company cars. To get your head around complex tax rules and save hundreds, even thousands, visit taxcafe.co.uk. ___________________________________________________________________________________________ How to start a New Business Page 19 of 26 Slash your utility bills Now is the time to shop around and check if you are paying over the odds on your utilities bills or if you are getting value for money. Energy Helpline is an independent price comparison service which helps households and businesses find better energy packages. Be green and save Being energy efficient means you are not only being friendly to the environment but can save money at the same time. One way you can achieve this is by reviewing the modes of transport your business uses. To find out how you can save money as well as be green, go to the Energy Savings Trust. Consider flexible working While many companies are cutting costs by making redundancies, you can avoid this by taking a flexible approach to your workforce such as letting staff work from home. The right to request flexible working will be extended to parents of children aged between six and 16 from 1 April 2009. You can read more in our dedicated article on flexible working. Stay above the radar No recession lasts forever so you can never afford to stop marketing your company. The Forum of Private Business (FPB) has compiled a list of ways you can market your business on the cheap. For dozens of great ideas to promote your business without breaking the bank you should also read 50 Bootstrap Marketing Tips. Talk to somebody If you follow our tips but still think you may be heading towards difficulty in the coming months, you can get advice from a number of business support services. Business Debtline provides free, confidential and independent advice on how to deal with your debt problems. Visit www.bdl.org.uk or call 0800 197 6026. These tips were penned by Catherine Harrell, Group Strategy Manager at Intuit, the provider of business and financial management solutions for small organisations and their advisors. Why price cuts don't work in business As pressure mounts for more and more retailers to slash their prices, leading sales expert Andy Preston is warning other businesses that cutting prices is not the only way to get ahead in the ‘crunch’, and is urging them not to engage in price wars they cannot sustain in the longer term… It’s always interesting around this time of year that most retailers choose to cut their prices as a way of helping them win business over their competition. What concerns me more though, is how some other businesses in other sectors do the same, thinking that lowering their price is the quick way of winning ___________________________________________________________________________________________ How to start a New Business Page 20 of 26 some new customers. Even more concerning is that some business owners think that lowering their price is the only way of winning some new customers! Let’s face it – price cutting is a tactic that is often used to try and win more customers, particularly in the run‐up to the Christmas period or in January, when retailers are trying to encourage more customers to enter their stores. But just because retailers use it, that doesn’t mean it’s a good tactic for other industries (or even the best tactic for retailers in most cases). So how does this work for other businesses? For most other businesses, price‐cutting is the fastest way to lost profits! The problem is, it can sometimes be done in ‘panic’, when you’re short on customers, not winning deals or want to have the ‘edge’ over your competition. If the only way you’ve got the ‘edge’ over your competition is price, what does that say about you, your product or service and your company? You see, ‘lower price’ is an easy thing to compete on, isn’t it? There’s no sales skill required, no work involved, no effort – in fact it’s a very easy option. You can bet your last penny though, that if you’re in a competitive market and you lower your price and start winning business, what are all your competitors going to do? That’s right, drop their prices below yours!! Now you’re back where you started, but you’re getting less profit and you still haven’t solved your problem! So what do you do now? Drop your prices again and start the whole chain reaction off for a second time? Then a third? Then a fourth? What affect is that going to have on your profits?! So what are some things we can do to attract more customers, rather than cutting prices, and therefore profits?.... Andy’s Option 1 – Creating ‘Packages’ One way to improve profits is to create ‘packages’ – similar items bundled together to encourage customers to spend more. Think of a suit sold with a shirt and a tie? That’s a good example. A pair of shoes sold with shoe polish? You get the idea. The problem is, most people don’t bother to do this, or at best do it when the customer has already gone made their purchase! If you do it before that process even starts, you can get the customer to view the whole package as one item and therefore perceive it as better value for money. And the results for you? Higher average order value, higher profits and everyone’s happy! So have a think right now, what products or services can you put together as a ‘package’ that will increase the amount your customers spend on each purchase? Andy’s Option 2 – Think About Customer Problems This strategy is a little different than is typically used, but therefore can give you a massive advantage over your competition if used well! Instead of thinking what products you have and how to sell them to customers, instead do the exact opposite and think about the problems that your customers might have, related to the products you’re selling. Particularly in a tough market, people will buy products or services that they view as more ’essential’ rather than just a ‘nice to have’. If they’re having some major problems or headaches, if you can position your product as solving (or helping to solve) those problems, you’ve got a huge advantage and are far more likely to get those customers to buy from you, and also pay higher prices! ___________________________________________________________________________________________ How to start a New Business Page 21 of 26 Andy’s Option 3 – Re‐contact Existing Customers You’ve probably got some customers you haven’t spoken to in a while, and they may only need a phone call to remember you’re there and spur them into a purchasing decision. It wouldn’t hurt to call them, would it? In addition, I’ve lost count of the times I’ve suggested salespeople or business owners do this, they call up their existing customers – only to find out they’ve bought something they could have got from you, but they didn’t know you sold it! Think about some of your customers right now – especially those who may also not be aware of everything you sell. Why not give them a call? Good luck with all your future selling efforts! About the Author Andy Preston is a leading expert on Sales and selling for small businesses. You can see more about Andy here. You can also see more about Andy’s bite‐sized training for small businesses here. Tips to make your business more efficient in 2009 With 2009 predicted by many to be "not a particularly good year" in a general economic sense, this could be a good time for small business owners to improve the efficiency of their operations ‐ and at the same time save money. By making efficiency savings in all areas of your business, this will not only compensate for any downturn in trade, but also set in place good practices to help ensure the longer term success of your company. All companies, large and small, contain inefficiencies in their operations. In a small company this could be the practice of inputting sales data in to three spreadsheets instead of using a single central information store. In another company, the addresses of past clients have not been captured effectively meaning that a one‐off mailshot to people who already know your business cannot be put into action. In finance ‐ many small companies don't even know how much interest they receive on their business accounts. Here are some key areas you should concentrate on in 2009 to increase efficiency and save money: Review Your Business Bank Account Although interest rates have plummeted in recent months, there is still a massive gulf in rates between standard business current account rates, and savings rates. Not only is it worth depositing any spare ___________________________________________________________________________________________ How to start a New Business Page 22 of 26 funds (including funds set aside for tax liabilities) into a high interest bearing savings account, but you can also find very competitive deals on standard business current accounts. •
Choosing a business bank deposit account •
How to keep your bank charges low •
How to switch business bank accounts Credit Check Now, more than ever, you need to know who you are doing business with ‐ and if your suppliers and customers are financially healthy before doing business with them. You can do a simple credit check for around £10, less if you are intending to carry out multiple checks. Why not try Bytestart's own online credit check service? Cash is King Maintaining a healthy cash flow is probably the most important thing a business owner can do ‐ particularly when credit is harder to get hold of. This can be achieved in a number of ways ‐ from paying VAT when you get paid (the VAT Cash Accounting Scheme) to using invoice financing solutions to ensure you don't have to wait forever to get invoices paid. We have a number of helpful guides below: •
Top tips to manage bad debts and increase cash flow •
Manage your cashflow during a recession •
Essential tips for protecting your business cashflow •
Guide to invoice finance and factoring for small businesses Follow Up Old Customers One of your best source of prospects are people who have already done business with you. It is widely common for businesses to have poor control over customer data ‐ particularly if it is stored in paper form. You should keep an up‐to‐date database of your customers' email addresses and postal addresses and remind them periodically of any special offers or promotions you can offer. Bootstrap Marketing There is no need to employ a full time PR agency if you don't have the budget. There are dozens of ways you can market your business effectively for literally pennies ‐ both online and offline ways. We have several popular guides which can help you get your message across: •
50 bootstrap marketing ideas for startups •
Bootstrapping your way to success ___________________________________________________________________________________________ How to start a New Business Page 23 of 26 Get a Website The web is still growing at a rapid rate, but many small companies still do not have a web presence. Many people would be surprised to hear that you can get online with your own company domain name and website for under £100 per year. •
Why do I need a small business website? Optimise your Website There's no point designing a beautiful website for your business if no‐one knows about it. The most important phase of getting your company online is driving potential customers to see your website. Again, there are offline as well as online methods to achieve this ‐ and you could yield some astonishing results if you put in the effort. •
Top 50 search engine optimisation tips •
How to build up links to your website Re‐assess all your suppliers With everyone tightening their purse strings due to economic uncertainty, this is a great time to re‐
assess how much you pay for all your services and supplies. Your review can cover everything from services (broadband, utilities, office space rental) to encouraging the suppliers of any materials you use to provide discounts. How to deal with stress in your business For a small business operating with just a few people, stress can be a massive problem that can bring the business to its knees. Business owners or employees under stress will be less productive, make stupid mistakes and bad decisions, and create an awful working environment. You’ll know when it’s happening, because customer complaints will rise, as will the amount of absence through sickness, and staff turnover. Ironically the symptoms of stress can lead to more stress. We all need a little stress to operate efficiently, but it’s when the balance is wrong that we suffer. Running your own business can be particularly stressful as the buck stops with you. You must take full responsibility for everything that happens in the business, and often that means you must do much of the work as well. This high workload can create immense pressure. If you have to do everything (or feel like you have to do everything) it makes it hard to take a day off to truly relax – essential to keep your body and mind healthy. ___________________________________________________________________________________________ How to start a New Business Page 24 of 26 Stress can also be caused by internal pressures. The recent National Stress Awareness Day focused on people taking action rather than worrying about things. This is particularly relevant for business owners. Who hasn’t laid awake at night worrying about a client or where the next sale will come from? It is vital that you identify levels of stress that you and your team are exposed to and take steps to control it. Not only is this essential for a healthy business, but you have a legal duty to ensure staff aren’t made ill by their work. This includes protecting their mental and physical wellbeing from the effects of stress. This doesn’t have to be difficult, with Bytestart’s guide to dealing with stress in a small business: Preventing stress It is much more effective to prevent stress getting a grip on your business than deal with the consequences. That means taking steps to remove the causes, and keeping an eye out for the early warning signs in your team. Look at their workloads and how work is scheduled. People who are not performing may feel there is too much to do, and not know where to start. Can you help them prioritise and take a reality check about their workload? Look at working relationships within the team and keep a check on the physical working environment. All of these things are potential stress triggers. It can be useful to ask your team to list the things they enjoy and hate about their jobs. You may spot a trend, giving you an insight into a stress trigger you need to tackle. It’s also worth keeping in touch with what’s happening in your team’s personal lives. A relationship breakdown or other problems at home can cause them to bring stress to work, even if they leave the problem at the door. Identifying stress You know the behaviour of your “employee from hell”? Actually, they may just be under a lot of stress. The symptoms of stress are the kind of behavioural traits no‐one wants to see in their staff. Watch out for tiredness and irritability, or unusual changes in the quality of work. Normally fun employees can lose their sense of humour or start to make bad judgement calls. They can also start to be physically ill more often – a cold that “won’t go away”, or regular headaches perhaps. You may also see a change in patterns of work or timekeeping. Basically keep an eye out for any long‐
term negative change in behaviour. Incidentally, do you recognise any of these symptoms for yourself? It can be hard to spot stress happening to you; but the people around you will spot it. As the boss of your business you must ensure your own wellbeing. Tackling stress The best treatment for stress is to remove the cause. If it is work problems then look at workload or reduce targets. Change the physical environment if needed, or encourage people to work more closely together. You can ease people’s performance back up again once their health is in a better condition. You can also encourage your team to manage their own stress, by giving them control over their own workload or performance. Use regular performance reviews to maintain control and ensure key targets are met. ___________________________________________________________________________________________ How to start a New Business Page 25 of 26 If the stress is being caused outside work, encourage your team to take their full holiday entitlement, and consider giving extra paid leave to sort significant problems out. Not only will this help someone cope with a relationship problem or family illness, but it should increase their loyalty to your business. Whatever steps you take, remember that it is more important to tackle the causes of stress than try to treat the symptoms. ___________________________________________________________________________________________ How to start a New Business Page 26 of 26