Small Business News | Cash-strapped entrepreneurs get creative

Small Business News | Cash-strapped entrepreneurs get creative

A recent BBC article discusses the problem of finance for cash-strapped entrepreneurs looking at a new generation of online funding platforms.

In order to get new ventures off the ground these online platforms, such as Kickstarter, cater for everyone from starving artists to tech start-ups. They also allow anyone with a business proposition to post an online pitch which goes straight into the offices and homes of potential investors and donors across the world. Although there is no limit on how much people can raise, creators of the projects must take a Dragons Den style approach and set a cash goal and a time limit. If they reach the goal within the time limit they get to keep the pledges. If they don’t, all pledges are returned. Alongside the ability to gain funding, young entrepreneurs receive feedback on their products and plans and well as having the added bonus of a readymade group of potential customers. So far 650 projects have been successful and pledges have come from 70,000 people globally.

To read more about this scheme please visit the BBC website.

Small Business News | SME’s plan own spending cuts

An article recently published by SME Web suggests that VAT increases and National Insurance measures could force a spending decrease and inhibit expansion for the UK’s small and medium enterprises.

The coalition government has been relying on a boom in the private sector in order to support the UK economy, particularly as large public sector cuts are implemented. However a study conducted by YouGov and Safestore reveals that with the increase in VAT from 17.5% to 20%, a third of UK small and medium enterprises believe that this rise will be detrimental to their business. A further 19% of SME’s say they plan to either freeze or lower salaries in order to survive new measures. When questioned about the NI measure, 31% did not believe that the raise would encourage expansion of their business. With over 12 million people employed by SME’s in the UK, this could strike quite a blow on both a personal and wider economical level. Moreover any negative effects from the VAT increase may affect small firms who will have to pass the increase on to their customers, unlike big businesses who can absorb the cost.

To read the full article, please visit SME Web

What is the price of happiness? £40K per year for small business bosses

Small business owners would ideally like to receive an average salary of £40,685 per year from their business, according to new research from Barclays. A poll of more than 2,000 small business bosses across the country revealed that a big pay packet is one of the top priorities for SMEs owners. The research also found:

  • The majority of respondents (56 %) started their own business so they could be in charge of their own destiny
  • Less than a half (42 %) of SMEs owners saw setting up their own business as the answer to having more control over their work/life balance
  • A quarter (25 %) has taken the opportunity of starting their own business after being made redundant

For further information, please visit Fresh Business Thinking website.

A Budget for business not banks?

Hey everyone

If you read the recent Budget-related post by Mark Dye, our newest Business Heroes contributor, you’ll know that he was pretty downbeat about what small business might get from the Exchequer.

Well, they say that 20/20 vision is hindsight so, with the benefit of having been able to absorb the full details of Mr Darling’s speech yesterday, here’s my take.

With election fever gathering, it’s difficult to look past the politics when it comes to this year’s Budget but – nonetheless – I’ve tried to keep to a summary of what the Budget revealed for small business rather than the machinations of why it’s been done!

Budget 2010 - Did the Budget meet your expectations?

Going public

Pre-Budget, there was big expectation that the public sector would be in the firing line for big cuts to help reduce the deficit. Much like elsewhere in the Budget though, the Chancellor made it very clear that he thought it would be dangerous to change course in the early stages of recovery, and instead opted to leave the sector intact. Darling also promised that small business would have a better chance to pitch to the public sector, by awarding 15% more Central Government contracts (equating to £3bn worth of business). He also promised to take steps to speed up payment to small business from government, with 80% of invoices to be paid within five days

Funding entrepreneurial flair

The Chancellor was keen to point out the Government’s successes on making banks lend more to small business, citing the £38bn lent to SMEs by RBS and Lloyds thanks to Labour’s intervention. Darling’s assertion that he would introduce £94bn in new business loans, with more than 50% going to SMEs, was backed up by two new initiatives in the form of the UK Finance for Growth fund (providing a £4bn range of finance support) and the Growth Capital Fund (loans for fast growing business, with 50% provided by commercial banks)

Credit where credit’s due

Finance was, unsurprisingly, the big theme for small business. The suggestion that there are still too many SMEs being unfairly denied credit will probably resonate loudly with the community as a whole. Darling’s announcement that a new body to adjudicate and provide legal enforcement to the SME credit application process will be an interesting one to watch develop

Tax doesn’t have to be taxing

Business rates are the 3rd biggest business cost according to the FSB, and the Chancellor’s decision to cut business rates for one year from October will undoubtedly affect hundreds of thousands of businesses for the better (around 500,000 in Darling’s estimate). The dual boost of doubling Capital Gains relief from £1m to £2m and the decision not to raise the rate is also likely to be welcomed

In cider information

Well, we couldn’t help but mention it – 10% duty on cider! My commiserations to West Country entrepreneurs!

So, what’s your view on some of the above proposals? Let us know by posting a comment below.

All the best,

Gordon

Will the 2010 budget be one to secure votes and be good for SMEs? Probably not..

Hi all,

My name is Mark, and I’ve just joined the Business Heroes team to add some additional insight. Worried about tomorrow’s budget? Here’s my two-penneth…

Budget 2010

This Last year’s budget was a mixed bag for SMEs. While a continued delay on corporation tax and increases in capital allowance to 40 per cent may have been helpful, many were left feeling underwhelmed by Alistair Darling’s moves – especially that 50 per cent tax increase, hardly an incentive for Britain’s entrepreneurs!

Cash-flow was certainly one of the main worries of 2009 with many SMEs going to the wall while others suffered from a lack of easy access to finance from banks and financial institutions who, as we know, were having a very public nightmare of their own.

There were also calls among SMEs for a government funded wage bill subsidy for short-time working that fell on deaf ears. Indeed, even the launch of a £750m investment fund to provide support to emerging technologies in green, digital and energy areas, plus the introduction of a top-up supply chain insurance to help companies protect themselves against non-payment won’t have helped soothe the pain for SMEs who have felt little in the way of support.

So what does tomorrow’s budget hold? In truth, probably nothing new. Labour is looking to secure votes for another term in office but must be seen to be making plans to get public finances back in order. Yet at the same time there are still very real fears we may dip back into recession.

One thing we know for sure – and one that all parties agree on – is that public spending must be cut and Labour’s promise to reduce the budget deficit by 50 per cent over the next four years will have a major impact. And although the government has promised to spend more of its money with SMEs, these are likely to feel the pinch from a swathe of public spending cuts across the board.

Of course Taxes will go up and this has been widely expected with many businesses already preparing themselves for a 1 per cent rise in employers’ National Insurance Contributions from April. That said, VAT and corporation tax are widely tipped to remain the same while Capital Gains Tax could well rise. Again, a mixed bag.

Then there’s the good news that HMRC will be upping the ante when it comes to collection as new powers are bestowed upon it. These may include increased anti-avoidance measures and a greater allowance on setting interest rates charged on outstanding tax payments, while at the same time tightening rules on rebates.

The government will also be looking to reduce unemployment levels through a number of schemes and this is certainly one area in which small businesses will probably see budget benefits from through added hands on deck.

Whatever happens, small businesses should proceed with caution as any positives seen may be over-optimistic forecasts on Labour’s part if previous attempts are anything to go by. Then there’s that huge deficit that the treasury simply has to reduce which is not going to go away in a hurry.

I’m afraid, as far as the budget’s concerned at least; it’s more of the same for SMEs in 2010. Bah.

Steering Clear of Joint Misadventures

Hi all

The most successful businesses are those that are geared to adapt to change, evolving almost instinctively to suit market needs. For some this may be about internal change, for others it could involve establishing a joint venture with a similarly minded business.

Joint ventures can complement skill sets, increase your customer base or expand geographic presence – providing opportunities (and profits) that might otherwise be unavailable.

While a joint venture (let’s refer to them as JV’s for the purpose of this article!) has its obvious attractions, there is also risk. To make it a success, you need to find that ‘special someone’ that’s the right fit for your company.

For those considering a JV, here are my top tips:

  • Do your research: There’s no foolproof way to implement a successful JV but careful planning is always the best place to start. Changing your business model can be potential pitfall so it needs careful consideration before you move forward. Setting clear objectives will make it a lot easier to establish exactly who you need to make it work and how it will work.
  • Know what you’re looking for: The name of the game is finding someone who is in a similar industry to your own (but not a direct competitor) who can bring new skills and resources to the table to complement your own. Your goal should be to enhance your offering – there’s no point in one online retailer partnering with another if what the business really needs is a shop front.
  • Explore your network: Look within your network first – is there someone within your existing relationships, your supply chain for example, that you could team up with? Remember, you already have relationships with your customers and suppliers so you’ll cut out a lot of the hard groundwork by working with someone you already know.
  • Do your due diligence: A JV is a legally binding and long-term commitment – make sure you carry out checks on potential partners before you sign up. Are they financially secure? Are they performing well? To get a balanced view, also find out what their customers and suppliers have to say. Ultimately though, working with other people will also involve subjective measures. There’s no legal contract that can ensure mutual respect and trust within the venture, so working chemistry should also be factored in.
  • Focus on communication: Once a decision has been made, set the precedent by showing flexibility and willingness to communicate openly – this will immediately create a feeling of trust.  Arrange for regular catch-ups for the key people involved, especially during the planning stages. It will keep you on track and make further decision making a much smoother process.
  • Get it in writing: By this point you will have jointly established what you hope to achieve and what each party is expected to contribute. While the ownership of some joint ventures can be divided equally among the participants, it’s not always necessarily the case. It may be that one party has a controlling interest, so make the distinction from day one.  Ensure it’s clearly stated in a written agreement.

Congratulations – once that’s all done you should now be well on your way to a successful joint venture!

That said, expect teething problems and anticipate both highs and lows. As with any successful relationship, you need to be prepared to work hard and show commitment to make it work.