Starting & running a business all in one for DUMmIES

Beforesetting up BCA, Ben worked as a business journalist for eight years, coveringthe UK’s media and marketing sectors and most recently was News Editor of Marketing magazine.. 37 Decid

By Liz Barclay, Colin Barrow, Paul Barrow, Gregory Brooks, Ben Carter, Frank Catalano, Peter Economy, Lita Epstein, Alexander Hiam, Greg Holden, Tony Levene, Bob Nelson, Steven D Peterson, Richard Pettinger, Bud E Smith, Craig Smith, Paul Tiffany, and John A Tracy

Edited by Dan Matthews

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About the Authors

Dan Matthews: Dan Matthews is Group Online Editor of Caspian Publishing,

which produces magazines, Web sites, and events for an audience of UKentrepreneurs Primarily working on realbusiness.co.uk, Dan writes aboutstellar business success stories as well as up-and-coming start-ups He waspreviously Group Online Editor of Crimson Business Publishing, with respon-sibility for sites such as startups.co.ukand growingbusiness.co.uk Hehas contributed to a range of business magazines, including being contribut-

ing editor of Real Business Magazine and Growing Business Magazine.

Liz Barclay is presenter of BBC Radio 4’s daily consumer and social affairs

programme You and Yours Before joining the BBC she worked for Citizens

Advice specialising in Employment and Family Law and Money Advice She

writes on business issues for BBC Online and has written on business and

personal finance for various national newspapers, magazines, and Web sitesover the past 10 years Liz has also produced and presented 60 small busi-ness and 10 occupational health and safety programmes for BBC2 and writtenseveral booklets on work and personal finance to accompany BBC televisionand radio programmes She chairs and speaks at conferences and seminars

on work and business, is a trained counsellor, and lives in London

Colin Barrow is Head of the Enterprise Group at Cranfield School of

Management, where he teaches entrepreneurship on the MBA and other grammes He is also a visiting professor at business schools in the US, Asia,France, and Austria His books on entrepreneurship and small business havebeen translated into fifteen languages including Russian and Chinese Heworked with Microsoft to incorporate the business planning model used inhis teaching programmes into the software programme, Microsoft BusinessPlanner, now bundled with Office He is a regular contributor to newspapers,

pro-periodicals, and academic journals such as the Financial Times, The

Guardian , Management Today, and the International Small Business Journal.

Thousands of students have passed through Colin’s start-up and businessgrowth programmes, raising millions in new capital and going on to run suc-cessful and thriving enterprises He is a non-executive director of two venturecapital funds, on the board of several small businesses, and serves on anumber of Government Task Forces

Paul Barrow trained and qualified as a Chartered Accountant with Deloitte &

Touche before obtaining his MBA at Bradford University As a senior tant with Ernst & Young he was responsible for managing and delivering qual-ity consulting assignments During the mid-1980s, he was Investment Review

consul-Director for a UK venture capital business In 1998, as Group Finance consul-Director

of Adval Group plc, he was part of the team which took their software pany on to the Alternative Investment Market Adval specialises in providingmultimedia training – both bespoke and generic Paul has also been a direc-tor of several owner-managed businesses, and has started up and sold otherbusinesses He currently works with businesses as diverse as software,turkey farming, and food retailing Paul is a Visiting Fellow at CranfieldUniversity where he teaches on the Business Growth Programme This pro-gramme is designed specifically for owner managers who want to grow andimprove their businesses He also teaches at Warwick University and OxfordBrookes on similar programmes Paul has written several other business

com-books: The Business Plan Workbook and Raising Finance (both Kogan Page/Sunday Times); The Best Laid Business Plans and The Bottom Line (both

Virgin Books) All these books are aimed at owner managers trying to growand improve their businesses

Greg Brooks is a freelance journalist who has written for a number of

broad-casters, newspapers, and magazines including Channel 4, The Guardian,

Marketing, New Media Age, and Marketing Direct He has also carried out

cor-porate ghostwriting and consultancy duties for a number of blue-chip clientsaround the globe As part of his role as an industry commentator, he hasspoken to organisations such as the BBC about how to communicate withconsumers and journalists using interactive channels

Ben Carter runs his own digital agency helping famous and not so famous

brands launch marketing initiatives to capitalise on the changing media scape and ever-changing consumer behaviour Current clients of Ben Carter

land-& Associates include npower and AOL, and the company has also providedconsultancy services for several major UK-based blue-chip companies Beforesetting up BCA, Ben worked as a business journalist for eight years, coveringthe UK’s media and marketing sectors and most recently was News Editor of

Marketing magazine He has also freelanced for a number of national

newspa-pers including The Times and The Guardian and is used regularly as a

com-mentator on the booming digital economy by different media, including the

BBC, The Independent, and CNN.

Frank Catalano is a veteran marketing consultant and analyst He’s the

principal of Catalano Consulting, a strategic marketing firm advising Internetand technology companies His consulting assignments include stints asManaging Director for PC Data’s Internet Monitoring Division, VP Marketingfor McGraw-Hill Home Interactive, VP Marketing for iCopyright, and VPMarketing for Apex Computer He also was a marketing manager for EggheadSoftware and for the Apple Programmers and Developers Association Whennot consulting, Frank provides tech industry analysis and commentary for

KCPQ-TV Fox Seattle and is the author of the long-running Byte Me columns

for Seattle Weekly and others His essays and short fiction about technology

have appeared in a wide variety of print and broadcast media, includingClickZ, Omni, Inside Multimedia, and Analog

Peter Economy is associate editor of Leader to Leader, the award-winning

magazine of the Peter F Drucker Foundation for Nonprofit Leadership, andauthor of numerous books Peter combines his writing expertise with morethan 15 years of management experience to provide his readers with solid,hands-on information and advice He received his bachelor’s degree (withmajors in economics and human biology) from Stanford University and his MBA at the Edinburgh Business School Visit Peter at his Web site:

www.petereconomy.com

Lita Epstein, who earned her MBA from Emory University’s Goizueta

Business School, enjoys helping people develop good financial, investing, andtax planning skills While getting her MBS, Lita worked as a teaching assistantfor the financial accounting department and ran the accounting lab Aftercompleting her MBA, she managed finances for a small nonprofit organizationand for the facilities management section of a large medical clinic Shedesigns and teaches online courses on topics such as investing for retire-ment, getting ready for tax time, and finance and investing for women She’s

written more than ten books, including Streetwise Retirement Planning and

Trading For Dummies Lita was the content director for a financial services

Web site, MostChoice.com, and managed the Web site Investing for Women

As a Congressional press secretary, Lita gained firsthand knowledge abouthow to work within and around the Federal bureaucracy, which gives hergreat insight into how government programmes work In the past, Lita hasbeen a daily newspaper reporter, magazine editor, and fundraiser for theinternational activities of former US President Jimmy Carter through TheCarter Center

Alex Hiam is a consultant, corporate trainer, and public speaker with 20

years of experience in marketing, sales, and corporate communications He isthe director of Insights, which includes a division called Insights for

Marketing that offers a wide range of services for supporting and training insales, customer service, planning, and management His firm is also active indeveloping the next generation of leaders in the workplace through itsInsights for Training & Development Alex has an MBA in marketing andstrategic planning from the Haas School at U.C Berkeley and an undergradu-ate degree from Harvard He has worked as marketing manager for both

smaller high-tech firms and a Fortune 100 company, and did a stint as a

pro-fessor of marketing at the business school at U Mass Amherst Alex is the

co-author of the best-seller, The Portable MBA in Marketing (Wiley) as well as

The Vest-Pocket CEO and numerous other books and training programs He

has consulted to a wide range of companies and not-for-profit and ment agencies, from General Motors and Volvo to HeathEast and the U.S.Army (a fuller list of clients is posted at www.insightsformarketing.com)

govern-Alex is also the author of a companion volume to this book, the Marketing Kit

For Dummies(Wiley), which includes more detailed coverage of many of thehands-on topics involved in creating great advertising, direct mail letters,Web sites, publicity campaigns, and marketing plans On the CD that comes

with the Marketing Kit For Dummies, you’ll find forms, checklists, and

tem-plates that may be of use to you Also, Alex maintains an extensive Web site

of resources that he organised to support each of the chapters in the book

Greg Holden started a small business called Stylus Media, which is a group

of editorial, design, and computer professionals who produce both print andelectronic publications The company gets its name from a recording stylusthat reads the traces left on a disk by voices or instruments and translatesthose signals into electronic data that can be amplified and enjoyed by many

He has been self-employed for the past ten years He is an avid user of eBay,both as a buyer and seller, and he recently started his own blog One of theways Greg enjoys communicating is through explaining technical subjects in

nontechnical language The first edition of Starting an Online Business For

Dummieswas the ninth of his more than 30 computer books He also

authored eBay PowerUser’s Bible for Wiley Publishing Over the years, Greg has been a contributing editor of Computer Currents magazine, where he writes a monthly column He also contributes to PC World and the University

of Illinois at Chicago alumni magazine Other projects have included ing documentation for an electronics catalog company in Chicago and creat-ing online courses on Windows 2000 and Microsoft Word 2000 Greg balanceshis technical expertise and his entrepreneurial experience with his love of lit-erature He received an MA in English from the University of Illinois atChicago and also writes general interest books, short stories, and poetry.Among his editing assignments is the monthly newsletter for his daughters’grade school After graduating from college, Greg became a reporter for hishometown newspaper Working at the publications office at the University ofChicago was his next job, and it was there that he started to use computers

prepar-He discovered, as the technology became available, that he loved desktoppublishing (with the Macintosh and LaserWriter) and, later on, the WorldWide Web Greg loves to travel, but since his two daughters were born, hehasn’t been able to get around much He was able to translate his experi-

ences into a book called Karma Kids: Answering Everyday Parenting Questions

with Buddhist Wisdom.However, through the Web, he enjoys traveling ously and meeting people online He lives with his family in an old house inChicago that he has been rehabbing for – well, for many years now He is a

vicari-collector of objects such as pens, cameras, radios, and hats He is alwayslooking for things to take apart so that he can see how they work and fixthem up Many of the same skills prove useful in creating and maintainingWeb pages He is an active member of Jewel Heart, a Tibetan Buddhist medi-tation and study group based in Ann Arbor, Michigan.

Tony Levene is a member of The Guardian Jobs & Money team, writing on

issues including investment and consumer rights as well as on taxation Hehas been a financial journalist for nearly thirty years after a brief foray intoteaching French to school children Over his journalistic career, Tony has

worked for newspapers including The Sunday Times, Sunday Express, The Sun,

Daily Star, Sunday Mirror, and Daily Express He has written eight previous books on money matters including Investing For Dummies Tony lives in

London with his wife Claudia, ‘virtually grown up’ children Zoe and Oliver,and cats Plato, Pandora, and Pascal

Bob Nelson, PhD, is founder and president of Nelson Motivation, Inc., a

man-agement training and products firm headquartered in San Diego, California

As a practising manager, researcher, and best-selling author, Bob is an nationally recognised expert in the areas of employee motivation, recognitionand rewards, productivity and performance improvement, and leadership.Bob has published 20 books and sold more than 2.5 million books on manage-ment, which have been translated into some 20 languages He earned his BA

inter-in communications from Macalester College, his MBA inter-in organisationalbehavior from UC Berkeley, and his PhD in management from the Peter F.Drucker Graduate Management Center of the Claremont Graduate University.Visit his Web site at www.nelson-motivation.comor contact Bob directly at

BobRewards@aol.com

Steven Peterson is a senior partner and founder of Home Planet

Technologies, a management training company specializing in hands-on ware tools designed to enhance business strategy, business planning, andgeneral management skills He is the creator and designer of The ProteanStrategist, a state of the art computer-based business simulation The simula-tion creates a dynamic business environment where participants run compa-nies and compete against each other in a fast-changing marketplace Eachmanagement team in the simulation is responsible for developing its ownstrategy, business plan, and program to make the plan work Steven has usedThe Protean Strategist to add excitement, hands-on experience, teamwork,and a competitive challenge to corporate training programs around theworld He has worked with both large and small companies on products andservices in industries ranging from telecommunications to financial servicesand from high technology to consumer goods and industrial equipment He

soft-can be reached by e-mail at peterson@HomePlanetTech.com When he’s notplanning his own business, Steven is planning to remodel his 80-year oldhouse or to redesign the garden And he confesses that of the three, thegarden proves to be the most difficult Steven holds advanced degrees inmathematics and physics, receiving his doctorate from Cornell University Heteaches part-time at the Haas School of Business, University of California atBerkeley, and lives in the Bay Area with his long-time companion, Peter, andtheir long-lived canine, Jake.

Richard Pettinger (BA, MBA, DipMktg) has taught at University College

London since 1989, where he is senior lecturer in management He teaches onthe foundation courses, organisational change, and construction marketingcourses He has also taught strategic and operations management; the man-agement of change; human resource management; and leadership to a widerange of undergraduate, postgraduate, professional, and international stu-dents Richard is also enhancing and developing Management Studies Centreactivities and courses, including the directorship of the new InformationManagement for Business course Since 2005, Richard has been a visiting pro-fessor at the Jagiellonian Business School, Krakow, teaching strategic man-agement and developing a common UCL/Jagiellonian syllabus in strategicmanagement and organisational change Richard is the author of over thirtybusiness and management books and textbooks, and also writes journal, conference, and study papers

Bud Smith’s experience is split between the technical and marketing sides of

the computer and Internet industries Bud was a short-order cook beforestarting in the computer industry at age 21 He was a data entry supervisor,programmer, and technical writer before working as a competitive analystand QuickTime marketing manager at Apple Computer He has been a full-time writer and has joined Frank Catalano in several consulting projects Bud

is currently Director of Marketing at AllPublish, a venture-funded SiliconValley startup Bud’s writing experience is all on the nonfiction side andincludes computer and medical articles as well as a dozen computer books

Craig Smith is the editor of Marketing, the UK’s highest circulation weekly

magazine, and PPA Weekly Business Magazine of the Year, serving the ing and advertising industries He has worked as a business journalist for 18years and is a regular commentator on marketing issues to the national pressand broadcast media Craig works closely with industry trade bodies, theAssociation of Publishing Agencies, and Business in the Community to pro-mote best practice in the areas of customer magazines and cause relatedmarketing

market-Paul Tiffany is the managing director of market-Paul Tiffany & Associates, a Santa

Rosa, California-based firm that has offered management training and sulting services to organizations throughout the world for the past fifteenyears In addition, he has taught business planning courses at some of thetop business schools in the USA, including Stanford, Wharton, and The HaasSchool of Business at the University of California, Berkeley, where he cur-rently serves as adjunct professor He holds an MBA from Harvard Universityand a PhD from Berkeley He can be reached by e-mail at

con-tiffany@haas.berkeley.edu

John A Tracy is Professor of Accounting, Emeritus, in the College of

Business and Administration at the University of Colorado in Boulder Beforehis 35-year tenure at Boulder he was on the business faculty for 4 years at theUniversity of California in Berkeley He has served as staff accountant atErnst & Young and is the author of several books on accounting, including

The Fast Forward MBA in Finance and How To Read a Financial Report Dr

Tracy received his MBA and PhD degrees from the University of Wisconsinand is a CPA in Colorado

Publisher’s Acknowledgements

We’re proud of this book; please send us your comments through our Dummies online registration form located at www.dummies.com/register/.

Some of the people who helped bring this book to market include the following:

Acquisitions, Editorial, and Media Development

Project Editor: Daniel Mersey Content Editor: Steve Edwards Commissioning Editor: Samantha Clapp Executive Editor: Jason Dunne

Executive Project Editor: Martin Tribe Technical Reviewer: Faith Glasgow Cover Photos: © Getty Images/Adam Gault Cartoons: Ed McLachlan

Composition Services

Project Coordinator: Jennifer Theriot Layout and Graphics: Claudia Bell, Carl Byers,

Stephanie D Jumper, Alicia B South

Proofreaders: Laura Albert, John Greenough Indexer: Valerie Haynes Perry

Publishing and Editorial for Consumer Dummies Diane Graves Steele, Vice President and Publisher, Consumer Dummies Joyce Pepple, Acquisitions Director, Consumer Dummies

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Kelly Regan, Editorial Director, Travel Publishing for Technology Dummies Andy Cummings, Vice President and Publisher, Dummies Technology/General User Composition Services

Gerry Fahey, Vice President of Production Services Debbie Stailey, Director of Composition Service

Contents at a Glance

Introduction 1

Book I: Where to Start? 5

Chapter 1: Preparing for Business 7

Chapter 2: Being Your Own Boss 19

Chapter 3: Can You Do the Business? 37

Chapter 4: Starting Your Business Plan 47

Chapter 5: Establishing Your Starting Position 57

Chapter 6: Researching Your Customers, Competitors, and Industry 71

Book II: Money in Mind 89

Chapter 1: Finding the Money 91

Chapter 2: Figuring Out Financials 115

Chapter 3: Cash Flows and the Cash Flow Statement 139

Chapter 4: Forecasting and Budgeting 157

Book III: Getting the Staff 177

Chapter 1: Staying on the Right Side of the Law 179

Chapter 2: Finding Person Friday – Advertising and Interviewing 191

Chapter 3: Employing People Successfully 211

Chapter 4: Disciplining and Dismissing Staff 229

Chapter 5: Paper Money, Money Paper – Payslips and Deductions 243

Chapter 6: Inspiring Employees to Better Performance 257

Chapter 7: Coaching and Development 273

Chapter 8: Tackling Performance Appraisals 283

Book IV: How Not to Cook the Books 293

Chapter 1: Working for Yourself Can Be Less Taxing 295

Chapter 2: Filling In and Filing Your Self Assessment Form 309

Chapter 3: Getting Down to Bookkeeping Basics 321

Chapter 4: Controlling Your Books, Your Records, and Your Money 333

Chapter 5: Producing a Profit and Loss Statement 349

Chapter 6: Developing a Balance Sheet 363

Book V: Bigging Up Your Business 375

Chapter 1: Taking a Closer Look at Customers 377

Chapter 2: Marketing Your Wares 391

Chapter 3: Writing a Marketing Plan 417

Chapter 4: Brochures, Press Ads, and Print 435

Chapter 5: Signs, Posters, and More 455

Chapter 6: Public Relations and Word of Mouth 473

Chapter 7: Planning Your Business Web Site 481

Chapter 8: Choosing and Equipping Your New E-Business 497

Chapter 9: E-Marketing 519

Book VI: Getting Bigger 541

Chapter 1: Thinking Strategically 543

Chapter 2: Managing More Than One Product 563

Chapter 3: Improving Performance 587

Chapter 4: Franchising for Growth 607

Chapter 5: TV and Radio Ads (or Your Own Show!) 617

Chapter 6: Becoming a Great Manager 631

Index 649

Table of Contents

Introduction 1

About This Book 1

Conventions Used in This Book 2

Foolish Assumptions 2

How This Book Is Organised 2

Book I: Where to Start? 2

Book II: Money in Mind 3

Book III: Getting the Staff 3

Book IV: How Not to Cook the Books 3

Book V: Bigging Up Your Business 3

Book VI: Getting Bigger 3

Icons Used in This Book 4

Where to Go from Here 4

Book I: Where to Start? 5

Chapter 1: Preparing for Business 7

Getting in Shape to Start Up 7

Assessing your abilities 8

Discovering a real need 9

Checking the fit of the business 10

Checking Viability 10

Researching the market 10

Doing the numbers 12

Raising the money 13

Writing up the business plan 13

Going for Growth 15

Gaining economies of scale 15

Securing a competitive advantage 15

Retaining key staff 16

Gaining critical business mass 16

Chapter 2: Being Your Own Boss 19

Going into Business 19

Working as a sole trader 20

Forming a partnership 21

Opting for a limited company 22

Becoming a franchisee 24

Taking on Employees 24

Minding Money Matters 25

Getting money to run the business 25

Paying out 26

Getting paid on time 27

Planning for your retirement 28

Safeguarding Your Business Assets 28

Protecting your name 29

Guarding your logos and trademarks 29

Copyrighting your creations 30

Protecting your designs 31

Patenting your inventions 31

Closing Down Your Business 32

Laying off staff and cutting hours 32

Making people redundant 33

Paying what you owe 34

Getting Help 34

Chapter 3: Can You Do the Business? 37

Deciding What You Want From a Business 37

Gaining personal satisfaction (or, entrepreneurs just wanna have fun) 38

Making money 39

Assessing Yourself 39

Discovering your entrepreneurial attributes 40

Taking a skills and knowledge inventory 42

Working out a business idea that’s right for you 42

Figuring out what you’re willing to invest 43

Weighting your preferences 44

Chapter 4: Starting Your Business Plan 47

Getting the Most Out of Your Plan 47

Looking forward 48

Looking back 49

Looking around 50

Naming Your Planners 50

Putting Your Plan on Paper 51

Executive summary 52

Company overview 52

Business environment 53

Company description 53

Company strategy 54

Financial review 54

Action plan 55

Chapter 5: Establishing Your Starting Position 57

Situation Analysis 58

Identifying Strengths and Weaknesses 58

Frames of reference 58

Capabilities and resources 60

Critical success factors 66

Analysing Your Situation in 3-D 67

A glance at competitors 68

Completing your SWOT analysis 68

Chapter 6: Researching Your Customers, Competitors, and Industry 71

Why Research Matters – And What to Focus On 72

Research for better ideas 72

Research for better decisions 73

Research for your strengths and weaknesses 73

Planning Your Research 76

Carrying Out Primary Research 77

Observing customers 78

Asking questions 78

Using the answers 81

A Dozen Ideas for Low-Cost Research 82

Watching what your competitors do 82

Creating a customer profile 82

Entertaining customers to get their input 83

Using e-mail for single-question surveys 83

Watching people use your product 83

Establishing a trend report 83

Researching your strengths 84

Analysing customer records 84

Surveying your own customers 85

Testing your marketing materials 85

Interviewing defectors 85

Asking your kids 86

Finding Free Data 86

Getting info off the Web 87

Hooking up with a librarian 87

Tapping into government resources 87

Getting media data 88

Book II: Money in Mind 89

Chapter 1: Finding the Money 91

Assessing How Much Money You Need 91

Projecting receipts 92

Estimating expenses 93

Working out the closing cash balances 93

Testing your assumptions 94

Reviewing Your Financing Options 96

Deciding between debt capital and equity capital 97

Examining your own finances 98

Determining the Best Source of Finance for You 99

Considering the costs 100

Sharing ownership and control 100

Beating the clock 101

Staying flexible 101

Adding value to the business 102

Gaining security and certainty 102

Limiting personal liability 102

Going for Debt 102

Borrowing from banks 103

Uniting with a credit union 105

Borrowing from family and friends .106

Managing mezzanine money 107

Sharing Out the Spoils 108

Going for venture capital 108

Benefiting by business angels 109

Looking to corporate venturing 111

Finding Free Money 112

Getting help from the government 112

Winning money 114

Chapter 2: Figuring Out Financials 115

Understanding a Profit and Loss Account 115

Revenue 117

Costs 117

Profit 119

Interpreting the Balance Sheet 120

Assets 122

Liabilities and owners’ equity 123

Growing Up 125

Examining the Cash-flow Statement 127

Cash in and cash out 128

What’s left over 130

Evaluating Financial Ratios 131

Short-term obligations 132

Long-term responsibilities 134

Relative profitability 135

Chapter 3: Cash Flows and the Cash Flow Statement 139

The Three Types of Cash Flow 139

Setting the Stage: Changes in Balance Sheet Accounts 141

Getting at the Cash Increase from Profit 142

Computing cash flow from profit 142

Getting specific about changes in assets and liabilities 144

Presenting the Cash Flow Statement 148

A better alternative for reporting cash flow from profit? 151

Sailing through the Rest of the Cash Flow Statement 151

Investing activities 151

Financing activities 152

Free Cash Flow: What on Earth Does That Mean? 153

Scrutinising the Cash Flow Statement 155

Chapter 4: Forecasting and Budgeting 157

Constructing a Financial Forecast 157

Pro-forma profit and loss account 159

Estimated balance sheet 163

Projected cash flow 166

Exploring Alternatives 167

The DuPont formula 167

What-if analysis 169

Making a Budget 169

What’s in the budget 170

How budgets are made 171

Book III: Getting the Staff 177

Chapter 1: Staying on the Right Side of the Law 179

Cutting through the Red Tape 179

Working Out What the Law Expects from You 180

Going the Extra Distance 181

Deciding Who Has Rights 182

Employees 182

Self-Employed 184

Consultants 185

Agency Workers 185

Home Workers 186

Exemptions 186

Young People 187

Deciding What to Put in the Contract 187

Drawing Up Other Employment Policies 187

Managing Without an HR Department 188

Getting Help and Advice 189

Chapter 2: Finding Person Friday – Advertising and Interviewing 191

Filling the Gap 191

Getting It Right from the Start 192

Coming up with the job description 193

Advertising – what you can and can’t say 193

Placing your ads 194

Using an agency 195

Using the Jobcentre 196

Following up recommendations – and remembering to be fair! 196

Considering Diversity 197

Sorting the Wheat from the Chaff – CVs and Application Forms 198

Drawing up your short list 199

Dealing with the ones that don’t make the short list 200

Handling the Practicalities of Interviews 200

Making flexible appointments 201

Making sure everyone can get into the building 201

Paying for expenses 201

Planning the Interviews 202

Working out what to ask 203

Setting tests 203

Taking notes 204

Checking Up on Your Chosen One 204

Following up references 205

Proving that potential staff are entitled to work in the UK 205

Checking convictions 206

Checking health 206

Checking qualifications 207

Offering the Job to Your Dream Candidate 207

Making an offer that can’t be refused 208

Setting the start date 208

Withdrawing a job offer 209

Chapter 3: Employing People Successfully 211

Motivating and Rewarding Employees 211

The practice of management 211

Dealing with difficult or de-motivated employees 214

Keeping motivation all in the family 214

Rewarding achievements 216

Compensating Your Employees 218

Setting payment levels 218

Creating a menu of benefits 220

Staying on the Right Side of the Law 220

Keeping employment records 220

Preparing contracts of employment 222

Working legal hours 223

Granting leaves 224

Avoiding discrimination 225

Keeping the work environment safe 226

Chapter 4: Disciplining and Dismissing Staff 229

Resolving Disputes 229

Following a disciplinary procedure right through to dismissal 230

Calling in the arbitrators 231

Dismissing of Staff – the Right Way 232

Having fair grounds to sack an employee 232

Applying your decision 233

Giving written reasons for dismissal 233

Giving notice of dismissal 234

Dismissing for gross misconduct 234

Dismissing for underperformance 236

Dismissing Staff – the Wrong Way 236

Avoiding wrongful dismissal 237

Steering clear of constructive dismissal 237

Automatic unfair dismissal 238

Tying up the Loose Ends 238

Handing over paperwork to a new employer 238

Sorting out outstanding payments 239

Paying instead of allowing staff to work their notice 240

Dealing with pensions 240

Restricting what employees can do after leaving 240

Giving references 241

Facing Tribunals – Something to Be Avoided 242

Chapter 5: Paper Money, Money Paper – Payslips and Deductions 243

Setting Everything Out on the Payslip 243

Gross pay 244

Deductions 244

Net pay 245

Carrying Out Your Duties as a Tax Collector 246

Deducting income tax 246

Deducting National Insurance 249

Counting Up Any Other Deductions 251

Deducting pension contributions 251

Making child support payments 252

Giving to charity 252

Dishing out union dues 252

Handling Attachment of Earnings Orders 253

Overpayments 254

Money to Make Up for Shortfalls 255

Chapter 6: Inspiring Employees to Better Performance 257

The Greatest Management Principle in the World 257

Recognition isn’t as simple as it looks 258

Biscuit motivation 259

Discovering What Employees Want 259

Creating a supportive environment 262

Having a good game plan 263

Deciding What to Reward 264

Starting with the Positive 266

Making a Big Deal about Something Little 267

Money and Motivation 268

Compensating with wages and salaries 268

Realising when incentives become entitlements 268

Working out what motivates your staff 269

Realising that you hold the key to your employees’ motivation 271

Chapter 7: Coaching and Development 273

Playing a Coach’s Role 274

Coaching: A Rough Guide 275

Coaching Metaphors for Success in Business 277

Confronting Turning Points 278

Making turning points into big successes 278

Making coaching special 278

Tapping Into the Coach’s Expertise 280

Chapter 8: Tackling Performance Appraisals 283

Appraising Performance 284

Spelling Out the Performance Appraisal Process 285

Avoiding Common Traps 289

Sorting Out Why Appraisals Go Bad 290

Preparing for the No-Surprises Appraisal 291

Book IV: How Not to Cook the Books 293

Chapter 1: Working for Yourself Can Be Less Taxing 295

Defining the Terms 295

Meeting HMRC’s standards for self-employment 296

Delving into the grey area: Sole trader or simple seller? 297

Formalising Your Status 298

Registering your new business 298

Choosing your tax year carefully 298

Signing on for and paying VAT 299

Keeping Accounts to Keep Everyone Happy 302

Filling out Schedule D can pay dividends 302

Counting your credits 303

Accounting for big business items 304

Claiming extra help as you start up 305

Accounting for loss making 305

Scanning National Insurance 306

Complicating the classes 306

Putting a cap on national insurance 307

Hiring Helpers 307

Employing your family 307

Establishing a partnership with your partner 308

Paying employees 308

Giving Up Work 308

Chapter 2: Filling In and Filing Your Self Assessment Form 309

Managing the Mechanics of the Form 309

Getting the forms 310

Discovering you don’t have to fill in a form 311

Keeping records 312

Filling In the Return 312

Avoiding the most common self assessment errors 312

Listing income and credits 313

Going into savings and investments 314

Making friends with the blank page 315

Seeing about supplementary pages 315

Counting the Ways of Doing the Sums 317

Finding out that the early form-filler works less 317

Using purpose-built software 318

Filing Your Form 318

Posting in your form 319

Submitting your form online 319

Paying on Account 319

Asking for a reduction in payments 320

Adding up the potential penalties 320

Chapter 3: Getting Down to Bookkeeping Basics 321

Bookkeeping: The Record Keeping of the Business World 321

Wading through Basic Bookkeeping Lingo 323

Accounts for the balance sheet 323

Accounts for the profit and loss statement 324

Other common terms 324

Pedalling through the Accounting Cycle 326

Understanding Accounting Methods 327

Realising the limitations of cash-based accounting 328

Recording right away with accrual accounting 329

Seeing Double with Double-Entry Bookkeeping 330

Differentiating Debits and Credits 332

Chapter 4: Controlling Your Books, Your Records, and Your Money 333

Putting Controls on Your Business’s Cash 333

Current accounts 334

Savings accounts 338

Petty cash accounts 338

Cash registers 339

Keeping the Right Paperwork 341

Creating a filing system 341

Working out what to keep and for how long 342

Protecting Your Business Against Internal Fraud 343

Facing the reality of financial fraud 344

Dividing staff responsibilities 344

Balancing control costs 346

Insuring Your Cash through Employee Bonding 347

Chapter 5: Producing a Profit and Loss Statement 349

Lining Up the Profit and Loss Statement 349

Formatting the Profit and Loss Statement 350

Preparing the Profit and Loss Statement 352Finding Net Sales 352Finding Cost of Goods Sold 352Drawing remaining amounts from your worksheet 353Gauging Your Cost of Goods Sold 354Deciphering Gross Profit 355Monitoring Expenses 355Using the Profit and Loss Statement to Make Business Decisions 356Testing Profits 358Return on Sales 358Return on Assets 358Return on Shareholders’ Capital 359Branching Out with Profit and Loss Statement Data 360

Chapter 6: Developing a Balance Sheet 363

Breaking Down the Balance Sheet 363Gathering Balance Sheet Ingredients 364Dividing and listing your assets 365Acknowledging your debts 367Naming your investments 368Pulling Together the Final Balance Sheet 369Horizontal format 369Vertical format 369Putting Your Balance Sheet to Work 371Testing your cash 371Assessing your debt 372Generating Balance Sheets Electronically 373Book V: Bigging Up Your Business 375

Chapter 1: Taking a Closer Look at Customers 377

Checking Out Who Your Customers Are 377The good customer 378The bad customer 379The other guy’s customer 380Discovering Why Your Customers Buy 381Understanding needs 382Determining motives 383Finding Out How Your Customers Make Choices 384Perceptions are reality 384The five steps to adoption 385Remembering the Big Picture 385Dealing with Business Customers 386Secondhand demand 386Decision making as a formal affair 387Forces to be reckoned with 388

Chapter 2: Marketing Your Wares 391

Making Up the Marketing Mix 391Defining Your Product Parameters 392Using Advertising to Tell Your Story 392Considering the customer’s point of view 393Setting advertising objectives 394Deciding the budget 394Defining the message 395Choosing the media 395Choosing the frequency 396Providing opportunities to see 396Figuring your bang-for-the-buck ratio 397Getting in the News 397Deciding who to contact 399Following through 399Selling and Salesmanship 399Telling the difference between selling and marketing 400Selling yourself 400Outsourcing selling 401Measuring results 402Pricing for Profit 403Caring about business conditions 403Working to your capacity 403Understanding consumer perceptions 404Skimming versus Penetrating 404Avoiding setting prices too low 404Pondering Place and Distribution 404Choosing a location 405Selecting a distribution channel 406Working from home 408Looking at Legal Issues in Marketing 408Naming your business 409Looking at logos 409Registering a domain name 409Protecting patents 410Registering a trademark 411Detailing your design 412Controlling a copyright 412Setting terms of trade 413Describing your goods 414Abiding by fair business rules 415Dealing with payment problems 415

Chapter 3: Writing a Marketing Plan 417

Identifying Some Planning Rules and Tips 417Avoiding common mistakes 419Breaking down your plan into simple sub-plans 420Writing a Powerful Executive Summary 421Clarifying and Quantifying Your Objectives 422

Preparing a Situation Analysis 423Seeing trends more clearly than others do 423Using a structured approach to competitor analysis 424Building a competitor analysis table 424Explaining Your Marketing Strategy 425Combining strategies and objectives 425Giving your strategy common sense 425Summarising Your Marketing Mix 427Prioritising your touchpoints and determining cost 427Marketing plans for multiple groups 429Exploring Your Marketing Components 429Managing Your Marketing 430Projecting Expenses and Revenues 430Build-up forecasts 431Indicator forecasts 432Multiple scenario forecasts 432Time-period projections 433Creating Your Controls 433

Chapter 4: Brochures, Press Ads, and Print 435

Designing Printed Marketing Materials 436Dissecting the anatomy of printed materials 436Putting the parts together: Design and layout 438Understanding the stages in design 439Finding your font 441Producing Brochures, Fliers, and More 446Listing your top three uses 447Writing about strengths and weaknesses 447Incorporating a clear, compelling appeal 448Putting it all together 448Placing a Print Ad 450Can you afford to advertise? 450Finding inexpensive places to advertise 451Selecting the ad size 452Testing and improving your print ad 453

Chapter 5: Signs, Posters, and More 455

The Essential Sign 456What your sign can do 457Writing good signs 457Discovering Flags, Banners, and Awnings 460Flagging down your customers 460Canopies and awnings 461Posters: Why Size Matters 461Deciding on outdoor ad formats 462Maximising your returns 463Messages on the Move: Transport Advertising 465Bus shelter panels 466Taxi advertising 467

Airport advertising 467

A note about your own vehicles 467Ambient Media – Your Ad in Unusual Places 468Small but Effective – From T-shirts to Shopping Bags 469T-shirts, umbrellas, and bumper stickers, anyone? 469It’s in the bag 470

A Few Commonsense Rules for Outdoor Advertising 471

Chapter 6: Public Relations and Word of Mouth 473

Using Publicity to Your Advantage 474Tackling public relations 474Creating a good story 475Communicating your story to the media: Press releases 476Considering video and electronic releases 477Being interviewed for TV and radio 478Making the Most of Word of Mouth 478

Do good deeds 479Spice up your sales promotions .479Identify and cultivate decision influencers 480Seize control of the Internet 480

Chapter 7: Planning Your Business Web Site 481

Guiding Principles for Business Sites 482Specifying Your Site Content 483Creating a Look and Feel for Your Site 486Having Your Site Done for You 489Getting engaged 489Projecting your management style 491Beating the wrap-up 494Making your site accessible 495

Chapter 8: Choosing and Equipping Your New E-Business 497

Starting Off on the Right Foot 498Mapping Out Your Online Business 498Looking around 499Making your mark 499Evaluating commercial Web sites 500Flavours of Online Businesses You Can Taste Test 501Selling consumer products 501Punting what you’re good at 502Making money from your expertise 503Creating opportunities with technology 504Being a starving artist without starving 505Marketing One-to-One with Your Customers 506Focus on a customer segment 506Boost your credibility 508Create customer-to-customer contact: Everybody wins 509

Be a player in online communities 510Add ways to sell and multiply your profits 512

Software Solutions for Online Business 513Web browser 514Web page editor 515Taking e-mail a step higher 515Discussion group software 516FTP software 516Image editors 516Instant messaging 517Backup software 517

Chapter 9: E-Marketing 519

Reaching Out with a Web Site 520Choosing a Web address 520Checking your name’s availability 522Registering your site name 523Creating a Compelling Web Site 523Finding resources to help with design 524Hiring a professional designer 524Developing a registration-based site 526Getting Your Site Noticed 526Buying visibility on search engines 527Content as a traffic driver 528Tracking Your Site’s Traffic 529Interpreting click statistics 529Paying attention to your site’s visitors 530Designing and Placing a Banner Ad 530Hiring a Web media service 532Creating your own banner ad 532Placing your banner ads 534Using E-Mail for Marketing 534The only e-mail to send: Good e-mail 534Understanding e-mail etiquette 535Spreading your message virally 537Getting Mobile with Your Marketing 537Knowing How Much to Budget for the Web 538One Final – But Important! – Thought 539Book VI: Getting Bigger 541

Chapter 1: Thinking Strategically 543

Making Strategy Make a Difference 543What strategy means 544When strategy works 545Applying Off-the-Shelf Strategies 546Low-cost leadership 547Standing out in a crowd 551

A focus on focus 554

Checking Out Strategic Alternatives 556

Up, down, or sideways 556Leading and following 558Coming Up with Your Own Strategy 561

Chapter 2: Managing More Than One Product 563

Facing the Product Life Cycle 563Starting out 565Growing up 565Middle age 566Senior stretch 567Where you are now 568Finding Ways to Grow 568Same product, same market 571New market or new product 572New product and new market 575Managing Your Product Portfolio 577Strategic business units 577Aiming for the stars 578Looking strong and attractive 583

Chapter 3: Improving Performance 587

Checking Your Internal Systems 587Keeping track of your routine 587Analysing market position 588Retaining Customers 590Realising why retaining customers matters 591Working to retain customers 592Improving Productivity 597Cutting costs 597Budgeting from zero 598Increasing margins 598Working smarter 599Rewarding results 600Increasing Sales 601Getting customers to buy more 601Encouraging referrals 602Entering new markets at home 603Selling overseas 604Adding new products or services 605Diversifying as a last resort 606

Chapter 4: Franchising for Growth 607

Finding the right franchise 607Adding a franchise 608Knowing what to look for 608Searching for a business 609Investigating and appraising 610

Franchising your Business Idea 612Weighing the advantages and disadvantages 612Doing the pilot 613Finding franchisees 614Rolling out the franchise 615

Chapter 5: TV and Radio Ads (or Your Own Show!) 617

Creating Ads for Radio 618Buying airtime on radio 618Targeted advertising via radio 620Cheaper Ways to Use the Power of Video 621Designing Ads for TV 622Getting emotional 623Look, Mum 624

A question of style 625Buying airtime on TV 626Working out the cost of a TV ad 627Making your own TV (or radio) programme 629

Chapter 6: Becoming a Great Manager 631

Building a Team 631Looking at types of teams 632Founding principles 633Coaching and Training 635Appraising Performance 637Developing a Leadership Style 638Understanding leadership 638Delegating 638Evolving leadership styles for growth .642Managing change 643Measuring Morale 646Index 649

Welcome to Starting & Running A Business All-in-One For Dummies, your

launch pad to understanding the fundamentals of setting up, lishing, running, and growing a successful small business

estab-This book draws together information on the key areas of successful business –planning, funding, staying on the right side of the law, employing staff, book-keeping, accounting and tax (grrrr!), marketing and promotion, and planningfor growth – all in one bumper guide

With help from this book, you can transform a simple idea into your very ownbusiness empire

About This Book

This book is the ultimate business advisor providing expert guidance forbusinesses at every stage of the start-up process

Starting & Running A Business All-in-One For Dummies draws on advice from

several other For Dummies books, which you may wish to check out for morein-depth coverage of certain topics (all published by Wiley):

Bookkeeping For Dummies (Paul Barrow and Lita Epstein)

Business Plans For Dummies (Paul Tiffany and Steven D Peterson,

adapted by Colin Barrow)

Digital Marketing For Dummies (Ben Carter, Gregory Brooks, Frank

Catalano, Bud E Smith)

Managing For Dummies (Richard Pettinger, Bob Nelson, and Peter

Economy)

Marketing For Dummies (Craig Smith and Alexander Hiam)

Paying Less Tax 2006/2007 For Dummies (Tony Levene)

Small Business Employment Law For Dummies (Liz Barclay)

Starting A Business For Dummies (Colin Barrow)

Starting and Running an Online Business For Dummies (Dan Matthews

and Greg Holden)

UK Law and Your Rights For Dummies (Liz Barclay)

Understanding Business Accounting For Dummies (John A Tracy, adapted

by Colin Barrow)

Conventions Used in This Book

To make your reading experience easier and to alert you to key words orpoints, we use certain conventions in this book:

Italics introduces new terms, and explains what they mean.

Bold text is used to show the action part of bulleted and numbered lists.

Monofontis used to highlight Web addresses, showing you exactly what

to type into your computer

Foolish Assumptions

This book brings together the essential elements of knowledge that areessential for understanding the world of small business As a consequence, tokeep the book down to a reasonable number of pages, we’ve made a fewassumptions about you (we hope you don’t mind!) Maybe you’re:

A entrepreneur looking for a start-up bible

A small business owner-manager seeking a comprehensive reference guide

An aspiring business owner

How This Book Is Organised

We’ve divided Starting & Running A Business All-in-One For Dummies into six

separate books This section explains what you’ll find out about in each one

of these books Each book is broken into chapters tackling key aspects ofthat part of the business world

Book I: Where to Start?

This book is the one to turn to first if you’re thinking about starting up a newbusiness It runs through all of your main considerations during the initial

planning phase, and offers all sorts of advice and information to get you off to

a flying start

Book II: Money in Mind

You might not be running your business to get rich (on the other hand, youactually might be running your business for exactly that reason!), but withoutmastering the basis of finance, you won’t stay in business for long This bookwalks you through the basic money matters you’ll need to know and stay ontop of

Book III: Getting the Staff

Unless you’re intending to run your business all by yourself, you need tomaster the essentials of recruiting and retaining staff, and employing themsafely and legally This book tackles the ‘people management’ section of busi-ness, regardless of whether you employ one or 100 members of staff

Book IV: How Not to Cook the Books

Tax, financial records, profit and loss, and balance sheets Unless your new orgrowing business is a firm of accountants, you need to know the facts and fig-ures outlined in this book And even if you are an accountant, this book tack-les the business side of figures

Book V: Bigging Up Your Business

One of the keys to successful business is bringing in customers This booklooks at the many and varied ways of doing just this, from humble beginningsfor a new start-up to grander ideas for an expanding venture

Book VI: Getting Bigger

If you’ve already made a success of your business – or if you’ve followed theadvice in the other books to their most profitable conclusion – this is thebook you need to read! Showing you how to expand your business into aneven greater one, this book considers factors as diverse as being a great man-ager to undertaking a TV advertising campaign

Icons Used in This Book

When you flick through this book, you’ll notice some snazzy little icons in themargin These pick out key aspects of starting and running a business, andpresent you with important nuggets of information:

Want to get ahead in business? Check out the text highlighted by this icon topick up some sage advice

They say elephants never forget, and nor should good business owners Thisicon focuses on key information you should never be without

Running a business isn’t without it’s dangers – be they financial or legal – andthe text beside this icon points out common pitfalls to avoid like the plague

Every once in a while, we all like to get a bit carried away And that’s where thisicon comes in – sometimes we like to give you information that is interestingbut not absolutely essential to starting or growing your own business If yousee this icon next to a paragraph, you have our permission to skip by if it’s not

of immediate interest to you – doing so won’t harm your chances in business

Where to Go from Here

Starting & Running a Business All-in-One For Dummies can help you succeed

no matter what kind of business expertise you’re looking for If you have agreat and proven business idea, you may want to plug straight into findingout how to raise finance (head over to Book II) If you need more than justyourself to get your great business idea off the ground, then you may want tofind out how to find great employees (check out Book III) If you’re planning

to take care of your own bookkeeping and finances then you may want to findout how to successfully balance the books and take care of tax (flick through

to Book IV) Or perhaps you’ve already started out and you’re looking foradvice on how to take you’re business to the next level (Book VI gives somegreat advice) This book is set up so that you can dip in and out of it in anumber of ways depending on your situation

‘OK – Here’s the business plan Nigel takes charge

of marketing, Tristram sales, Keith accounts, and Psycho makes sure clients pay on time.’

Book I

Where to Start?

In this book

If you’re contemplating starting up a new business – or

even if you just want to check that your current ness is running smoothly – you’ve come to the right place!

busi-In this book we address the basic issues to consider whenyou’re setting out on your career in business

Here are the contents of Book I at a glance:

Chapter 1: Preparing for BusinessChapter 2: Being Your Own BossChapter 3: Can You Do the Business?

Chapter 4: Starting Your Business PlanChapter 5: Establishing Your Starting PositionChapter 6: Researching Your Customers, Competitors, andIndustry

Chapter 1 Preparing for Business

In This Chapter

Working up to opening up

Measuring your business’s viability

Growing for success

Would you go into the jungle without carrying out some pretty rigorouspreparation? You’d need to know something about the terrain andhow to navigate it, as well as the temperature, rainfall, and food supply Youwould also be keen to know what predators you might meet on the way andhow to defend yourself against them

When you’re starting a business, particularly your first business, you need

to carry out the same level of preparation as you would for crossing the Gobi desert or exploring the jungles of South America You are entering hos-tile territory

Your business idea may be good, it may even be great, but such ideas are two

a penny The patent office is stuffed full of great inventions that have neverreturned tuppence to the inventors who spent much time and money filingthem It’s how you plan, how you prepare and how you implement your planthat makes the difference between success and failure And failure is prettymuch a norm for business start-ups Tens of thousands of small firms fail,some disastrously, each and every year

In this chapter the scene is set to make sure you are well prepared for thejourney ahead

Getting in Shape to Start Up

You need to be in great shape to start a business You don’t have to diet orexercise, at least not in the conventional sense of those words, but you dohave to be sure you have the skills and knowledge you need for the businessyou have in mind, or know how to tap into sources of such expertise

The following sections help you through a pre-opening check-up so you can

be absolutely certain that your abilities and interests are closely aligned tothose needed by the business you have in mind It will also help you to checkthat a profitable market exists for your products or services You can use thissection as a vehicle for sifting through your business ideas to see if they areworth devoting the time and energy that is needed to start up a business.You may well not have all the expertise you need to do everything yourself.Zillions of agencies and advisers can fill in the gaps in your expertise

Assessing your abilities

Business lore claims that for every ten people who want to start their ownbusiness only one finally does so It follows that there are an awful lot ofdreamers out there who, whilst liking the idea of starting their own business,never get around to taking action Chapter 3 looks in detail at how you canassess whether you are a dreamer or a doer when it comes to entrepreneur-ship For now, see whether you fit into one of the following entrepreneurialcategories:

 Nature If one of your parents or siblings runs their own business,

suc-cessfully or otherwise, you are highly likely to start up your own ness No big surprise here as the rules and experiences of business arebeing discussed every day and some of it is bound to rub off It alsohelps if you are a risk-taker who is comfortable with uncertainty

 Nurture For very entrepreneur whose parents or siblings have a

busi-ness there are two who don’t If you can find a busibusi-ness idea that excitesyou, has the prospect of providing personal satisfaction and wealth, thenyou can assemble all the skills and resources needed to succeed in yourown business You need to acquire good planning and organisationalskills and either develop a well-rounded knowledge of basic finance,people management, operational systems, business law, marketing andselling, or get help and advice from people who have that knowledge

 Risk-taker If you crave certainty in everything you do, then running

your own business may be something of a culture shock By the time thedemand for a product or service is an absolutely sure-fired thing, theremay already be too many others in the market to leave much room foryou Don’t confuse risk taking with a pure gamble You need to be able toweigh things up and take a calculated risk

 Jack-of-all-trades You need to be prepared to do any business task at

anytime The buck definitely stops with you when you run your ownbusiness You can’t tell a customer their delivery will be late, just because

a driver fails to show up You will just have to put in a few more hoursand do the job yourself

Discovering a real need

You might be a great potential entrepreneur but you still need to spell outexactly what it is you plan to do, who needs it, and how it will make money

A good starting point is to look around and see if anyone is dissatisfied withtheir present suppliers Unhappy customers are fertile ground for new busi-nesses to work in

One dissatisfied customer is not enough to start a business for Check outand make sure that unhappiness is reasonably widespread, as that will giveyou a feel for how many customers might be prepared to defect Once youhave an idea of the size of the potential market you can quickly see if yourbusiness idea is a money making proposition

The easiest way to fill an endurable need is to tap into one or more of thesetriggers:

 Cost reduction and economy Anything that saves customers money is

always an attractive proposition Lastminute.com’s appeal is that it acts

as a ‘warehouse’ for unsold hotel rooms and airline tickets that you canhave at a heavy discount

 Fear and security Products that protect customers from any danger,

however obscure, are enduringly appealing In 1998, two months afterLong-Term Capital Management (LTCM), one of America’s largest hedgefunds, was rescued by the Federal Reserve at a cost of $2 billion, Ian and

Susan Jenkins launched the first issue of their magazine, EuroHedge In

the aftermath of the collapse of LTCM, which nearly brought down the USfinancial system single-handedly, there were 35 hedge funds in Europe,about which little was known, and investors were rightly fearful for their

investments EuroHedge provided information and protection to a

ner-vous market and five years after it was launched the Jenkins’s sold themagazine for £16.5 million

 Greed Anything that offers the prospect of making exceptional returns

is always a winner Competitors’ Companion, a magazine aimed at helping

anyone become a regular competition winner, was an immediate cess The proposition was simple Subscribe and you get your moneyback if you don’t win a competition prize worth at least your subscrip-tion The magazine provided details of every competition being run thatweek, details of how to enter, the factual answers to all the questionsand pointers on how to answer any tiebreakers They also provided theinspiration to ensure success with this sentence: You have to enter com-petitions in order to have a chance of winning them

suc- Niche markets Big markets are usually the habitat of big business –

encroach on their territory at your peril New businesses thrive in kets that are too small to even be an appetite wetter to established

mar-Book I Where to Start?

firms These market niches are often easy prey to new entrants as theyhave usually been neglected, ignored or ill-served in the past.

 Differentiation Consumers can be a pretty fickle bunch Just dangle

something, faster, brighter or just plain newer and you can usually grabtheir attention Your difference doesn’t have to be profound or evenhigh-tech to capture a slice of the market Book buyers rushed in droves

to Waterstones’ for no more profound a reason than that their doorsremained open in the evenings and on Sundays, when most other estab-lished bookshops were firmly closed

Checking the fit of the business

Having a great business idea and having the attributes and skills needed tosuccessfully start your own business are two of the three legs needed tomake your business stool balance Without the third leg, though, your stoolisn’t stable at all You need to be sure that the business you plan to start isright for you

Before you go too far, make an inventory of the key things that you are ing for in a business These may include working hours that suit your lifestyle;the opportunity to meet new people; minimal paperwork; a chance to travel.Then match those up with the proposition you are considering (Chapter 3talks more about finding a good business fit.)

look-Checking Viability

An idea, however exciting, unique, revolutionary, and necessary is not a ness It’s a great starting point, and an essential one, but there is a good dealmore work to be done before you can sidle up to your boss and tell him orher exactly what you think of them

busi-The following sections explore the steps you need to take so that you won’thave to go back to your boss in six months and plead for your old job back(and possibly eat a large piece of humble pie at the same time)

Researching the market

However passionate you are about your business idea, it is unlikely that youalready have the answers to all the important questions concerning yourmarket place Before you can develop a successful business strategy, youhave to understand as much as possible about your market and the competi-tors you are likely to face

The main way to get to understand new business areas, or areas that are new

to you at any rate, is to conduct market research The purpose of thatresearch is to ensure that you have sufficient information on customers, com-petitors, and markets so that your market entry strategy or expansion strat-egy is at least on the target, if not on the bull’s-eye itself In other words, youneed to explore whether enough people are attracted to buy what you want

to sell at a price that will give you a viable business If you miss the targetaltogether, which you could well do without research, you may not have thenecessary resources for a second shot

The areas to research include:

 Your customers: Who will buy more of your existing goods and services

and who will buy your new goods and services? How many such tomers are there? What particular customer needs will you meet?

cus- Your competitors: Who will you be competing with in your

product/market areas? What are those firms’ strengths and weaknesses?

 Your product or service: How should you tailor your product or service

to meet customer needs and to give you an edge in the market?

 The price: What would be seen as giving value for money and so

encour-ages both customer loyalty and referral?

 The advertising and promotional material: What newspapers, journals,

and so forth do your potential customers read and what Web sites dothey visit? Unglamorous as it is, analysing data on what messages actu-ally influence people to buy, rather than just to click, holds the key toidentifying where and how to promote your products and service

Book I Where to Start?Inflated numbers on the Internet

If you plan to advertise on an Internet site itmakes sense to check out the sites you’re con-sidering Be aware that some sites publish a fairamount of gobbledygook about the high number

of ‘hits’ (often millions) the site scores Millions ofhits doesn’t mean the site has millions of visitors

Some Internet sites increase their hit rate by thesimple expedient of adding the number of pageseach viewer must download to view the page

Another mildly meaningless measure of theadvertising value of a site is the notion of a ‘sub-scriber’ In Internet parlance anyone visiting a

Web site and passing over their e-mail addressbecomes part of that company’s share price! It

is rather like suggesting that anyone passing ashop and glancing in the window will turn intohard cash tomorrow

Any real analysis of Web site use starts with

‘page impression’, which is a measure of howmany times an individual page has been viewed

The Audit Bureau of Circulations, which startedits life measuring newspaper response, hasnow turned its attention to auditing Web sites(www.abce.org.uk)

 Channels of distribution: How will you get to your customers and who

do you need to distribute your products or services? You may need touse retailers, wholesalers, mail order, or the Internet They all have dif-ferent costs and if you use one or more they all want a slice of themargin

 Your location: Where do you need to be to reach your customers most

easily at minimum cost? Sometimes you don’t actually need to be where near your market, particularly if you anticipate most of your saleswill come from the Internet If this is the case you need to have strategy

any-to make sure potential cusany-tomers can find your Web site

Try to spend your advertising money wisely Nationwide advertisements orblanketing the market with free disks may create huge short-term growth, butthere is little evidence that the clients won by indiscriminate blunderbussadvertising works well Certainly few people using such techniques made anymoney

Doing the numbers

Your big idea looks as though it has a market You have evaluated your skillsand inclinations and you believe that you can run this business The next cru-cial question is – will it make you money?

It’s vital that you establish the financial viability of your idea before youinvest money in it or approach outsiders for backing You need to carry out athorough appraisal of the business’s financial requirements If the numberscome out as unworkable you can then rethink your business propositionwithout having lost anything If the figures look good, then you can go aheadand prepare cash flow projections, a profit and loss account and a balancesheet, and put together the all-important business plan

You need to establish for your business:

 Day to day operating costs

 How long it will take to reach break-even

 How much start-up capital is needed

 The likely sales volume

 The profit level required for the business not just to survive, but also

to thrive

 The retail price of your product or service