HI I’M xx, xx FOR A COMPNAY CALL REGUS – WE SPECIALISE IN FLEXIBLE WORKSPACE SOLUTIONS. I HAVE BEEN ASKED TO COME ALONG TODAY TO TALK TO YOU ABOUT THE COSTS OF SETTING UP AND RUNNING A BUSINESS. WITH OVER 1,000,000 CUSTOMERS GLOBALLY AND CENTRES IN 95 CITIES WORLDWIDE, MANY OF THEM START UP COMPANIES OR IN THAT FIRST YEAR OF TRADING, WE’VE MANAGED TO GLEAN FROM THEM HOW THE SUCCESSFUL ONES HAVE MADE THEIR BUSINESSES WORK, AND ALSO WHAT THEY FELT WERE SOME OF THE KEYS COSTS OTHERS SHOULD FACTOR IN WHEN FORMULATING THEIR BUSINESS PLAN AND LAUNCHING THEIR BUSINESS
SO, WHAT WE CAN COVER OFF TODAY IS WHAT’S THE TRUE COST OF SETTING UP A BUSINESS? WHAT ARE THE KEY EXPENSES IN LAUNCING THE BUSINESS, OR INDEED TAKING A FLEDGING BUSINESS TO THE NEXT LEVEL. IS THERE A WAY TO CONTROL THESE COSTS? THE GOOD NEWS IS YES TO THAT LAST QUESTION.
SO – THE KEY BUSINESS COSTS YEAR ONE All these consume money; they also eat up time. You need to decide what to manage yourself and what to delegate or outsource to other people. It’s crucial that you leave yourself enough time for the core business of generating income and growth. WHAT WE ARE ABLE TO DO IN THIS PRESENTATION IS OUT SOME POUND SIGNS ON THESE KEY COSTS SO YOU HAVE SOME ACTUAL FIGURES YOU CAN USE IN ANY FUTURE VENTURES YOU MAY UNDERTAKE.
Whatever the size of your proposed new venture, you need a plan. Good ideas or assurances from friends and contacts that they will buy your products or services are not enough. No bank or business angel will take you seriously if you don’t have a detailed business plan. A business plan describes what your proposed business will do, how you will differentiate yourself from your competitors, and what your goals are. It must show you understand the marketplace, and that you have researched competitors, potential customers, and suppliers. If your business will rely on patents or copyright, you must show you have taken steps to obtain them. Details of your own background, and that of other key staff are important. You must demonstrate that you have the relevance experience or skills to make the business work. Without that, people will hesitate to back you. You also need detailed financial information, for example why you want financing, how you will use it, and how a lender or investor will get their money back. You should include sales and cashflow forecasts. OUR CLIENTS HAVE TOLD US IT CAN BE daunting at first, but if you haven’t thought through these issues, you may struggle to make the business work.
Company formation The UK offers several legal business structures, also known as business entities, to suit a variety of needs, each one with a different set of legal and fiscal responsibilities. Choosing the right one is important to accommodate your new future business’s present and future goals. The legal business structures in the UK are: Private Limited Company Partnership Limited Liability Partnership Sole Trader Choose the right name A good business name is your business’s first asset. AGAIN, THAT WAS ONE THING OUR CLIENTS REALLY STRESSED HOW IMPORTANT THE INITIAL NAME IS FOR ANY COMPANY Secure licenses and permits You’ll need licenses and permits from your respective municipal and regional governments, make sure you register for country tax and sign up for the right insurance. Total cost around £250
Whatever type of business you start up, you will probably need an accountant to help you do your books and annual tax return. You may also need help with payroll, audit, and company secretarial services. So, how much will an accountant cost? A sole trader could spend less than £ 800 a year for simple book-keeping and preparation of annual accounts, however for more complicated accounts this can rise to over £ 1,500. Whatever your tax situation, two rules apply. First, keep on top of things. Do your books each month and do your returns on time. Secondly, don’t try to be too clever, and don’t choose an accountant who tries to be too clever. You’ll probably get caught! THE FEEDBACK OUR CLIENTS GAVE US ON THIS LED TO REGUS LAUNCHING A PRODUCT NAMED BEPRO, WHICH GIVES OUR CLIENTS MORE TIME TO GENERATE SALES, AND LESS TIME SPENT FIGURING OUT THEIR ACCOUNTS
As a fledgling business, you may not want to saddle yourself with the overheads of renting an office long-term. In fact, the single largest expense for a start-up is office space. But while your spare room may be a cheap and convenient alternative, it will not create a great first impression for customers or investors. Fortunately, there are alternatives, including renting serviced offices by the hour, the day or the month. These provide fully-equipped workspace for 1 to 100+ people with options to suit different budgets and needs. There are also virtual offices. These allow home-based or start-up businesses to project a successful image without paying for physical office space. For a set price a month, you gain a professional office address and a dedicated phone number answered by a receptionist. Regus also offers a solution called the BusinessWorld membership programme. This provides mobile and home-based workers with on-demand access to workspace at its business centres worldwide. All these solutions offer the advantage of flexibility. They also free up your time and resources. Typically, serviced offices are fully furnished and equipped with facilities like photocopiers, professional printers and work stations. This releases you from having to fund these facilities yourself; it also frees you from tasks like cleaning and maintaining your premises.
What you pay your staff is just a fraction of what they will cost you, however. A common estimate is that the cost of employing someone is 40%-100% of their salary, in addition to the salary itself. This includes the cost of holiday pay, absences, employers’ national insurance contributions , insurance premiums, pension contributions, and administrative costs like HR and payroll. You should also factor in the time you would spend recruiting and managing them. YOUR TIME IS A KEY COST YOU MUST ALWAYS BE AWARE OF – THE MORE TIME SPENT ON ADMIN, THE LESS YOU CAN SPEND ON GENERATING REVENUE WHEN EMPLOYING POEPLE there can also be the costly patter of tiny feet. Even the smallest company must pay sick pay , maternity pay , paternity pay When you start up, think seriously whether you need full-time employees or whether you can use the services of freelancers. Although more expensive on an hourly basis than employees, freelancers bring a wealth of experience, can process the work you give them more quickly and professionally, and only charge you for the hours they work. Be careful though; freelancers must not be tied to always working in your office, and must be free to perform the work at the time of their choosing prior to its deadline. The advantage for you is that their fee is all you pay.
Running your own business brings responsibility for a multitude of jobs that your colleagues used to do for you. They range from ordering office stationery, to buying office furniture, to handling the mail, to managing your IT systems. For stationery you cannot just use any old piece of white A4 paper. For example, the stationery of a limited company must state certain information in legible lettering. This won’t set you back hugely, however, with printed letterhead paper costing from £ 100 for 500 sheets depending on the quality of paper, it adds up. When it comes to office furniture, there is a huge price range. An office chair could cost from £ 50 second-hand, to more than £5,000 each for a design classic chair. On IT, a typical over-the-phone support service could cost around £150 a year per user. A data vault will cost from £300 a year and with data recovery, and labour cost if things go wrong, software, hardware and new parts all costing extra. The expense can quickly add up. Other possible running costs include reception and/or security, and cleaning and maintenance. One way to cut many of the overheads of running an office is to use serviced offices. Because serviced or virtual office providers buy such products and services in bulk, they can pass on cost savings to small businesses. Also, you pay a fixed charge and the workspace provider does it all for you.
Some people love marketing their business, others do it reluctantly. Either way, you need to spend time on it: the custom of friends and family is never going to be enough. THE FACT IS THAT NOWADAYS, ANY BUSINESS WANTING TPO BE TAKEN SERIOUSLY NEEDS A WEB PRESENCE. PLUS IT WILL USUALLY HELP GENERATE REVENUES. The cost of setting up a website is small, compared to how hard it can work for you. A six-page ‘brochure’ site costs from £400 . An interactive or e-commerce site costs more (probably £4 ,000+). You can update website content yourself using free or relatively cheap software, but do spend time on this: many a beautiful website is spoilt by slapdash updating. What other marketing materials do you need? You could use brochures, direct marketing, presences at trade fairs, viral marketing and social networking sites like Facebook and LinkedIn. The costs of printing marketing materials is not high: 500 colour A6 flyers could cost less than £ 50; so too could 500 postcards. You can get logos designed for £ 150 or so, though many plcs famously spend hundreds of thousands on this. The average cost for a full direct mail service is around £1 to £ 2 per item. This includes concept, design, target lists, printing, folding, addressing and envelope stuffing. But you only achieve that cost-per-item once you are mailing several thousand prospective customers. Since bad marketing can be worse than no marketing, you may also need to pay specialists to plan and write the content of your marketing materials. Copywriters can charge between £400 and £1250 a day.
Adequate business financing is key to any business, so don’t discount any option just yet, including the following: Personal Financing Especially for low-capital intensive small businesses, dipping into your savings (or asking friends or family for gifts or loans) might possibly be the shortest and best route to getting your business started. Loans Available for residents and non-residents alike, loan conditions vary according to the size of the loan needed (or if it’s considered a microloan), the amount of collateral, the financial institution and other factors. You may be required to pay the loan back in as little as three years or in some cases as many as fifteen. Payments could be required monthly, quarterly or semestrally. Just be sure to shop around. Grants Grants are available to new and existing businesses on the municipal, provincial, regional, national and European Union level. Grant conditions vary widely, but grants are commonly available for businesses in certain industries or sectors, creating employment in particular areas or employing certain disadvantaged populations. Check with your municipal, provincial and regional government, or your local Chamber of Commerce, for available grants. Angel Investors or Business Angels Angel investors are private investors who invest in new or existing businesses for a variety of personal or financial reasons. But angel or not, angel investors expect a good return on their investment like any financial institution would. The advantage of an angel investor is that investment conditions, and the amount of risk they are willing to assume, vary widely. Sometimes when a bank turns you down for a loan, an angel investor might just come to your rescue. Lines of credit A line of credit during the start-up phase can be considered a peace of mind loan for those extra unanticipated costs (which there will be and you should plan for, by the way). You pay interest on the borrowed money when you need it, and a commission for the privilege of having a line of credit when you don’t. Interest rates can be fixed or variable and terms are often for one year. So far, we’ve talked about the money you will be paying out. What about the money coming in? As many as one in three start-up businesses fail, and cashflow problems are a key cause. Even if you quickly find customers for your goods and services, the money can take months to materialise. Yes, you can take legal action to get money out of slow payers, but this will not help you customer retention rates. For many businesses, the solution is factoring or invoice discounting. With factoring, a factor (often a bank) takes on responsibility for collecting your company’s debts; meanwhile, they advance you up to 85% of approved invoices. It means you: get money more quickly and smooth your cashflow do not have to spend time and resources chasing payments do not have to sacrifice goodwill by nagging customers. There’s a charge for all this, of course. You usually pay interest on the money advanced – usually 1.5-3% over base rate. You also pay a fee for credit management and administration, typically, 0.75-2.5% of turnover. With factoring there is usually a charge for the collections service, commonly between 0.75% and 2.5% of turnover. You can also use invoice discounting, though this is usually only available to companies with a proven track record. With invoice discounting, you can draw money against your invoices, but you still administer the sales ledger yourself. Again you typically pay 1.5%-3% over base rate for money you draw down, but the credit management fee is typically 0.2-0.5% of turnover.
SO, WITH ALL THESE COSTS TO FACTOR IN, OUR CLIENTS TELL US HOW THEY WISHED TO HAVE THESE SORT OF COSTS LAID OUT WHEN THEY WERE BUILDING THEIR BUSINESS PLANS – NO SURPRISES MEANS A MORE SUCCESSFUL BUSINESS. TIMES MAY BE HARD, BUT FOR THE RIGHT PEOPLE START UP BUSINESSES CAN GROW AND FLOURISH, BUT BEST TO STICK TO THE BASIC RULES OUR CLIENTS TELL US THEY HAVE HAD TO DRIVE THEIR BUSINESSES FORWARDS. WATCH OUT FOR THE UPSELL – TAKE WHAT YOU NEED ONLY TO AVOID BEING SADDLED WITH ONGOING COSTS YOU CAN AVOID DON’T SPEND MONEY ON WHAT YOU DON’T REALLY NEED – IS THAT STATE OF THE ART LAPTOP NEEDED AT FIRST? IS THE EXTRA MEMEBR OF STAFF A REAL NECCESSITY? CAN THEIR TASKS BE COVERED BY OTHERS? FACTOR IN THE COST OF YOUR TIME – EVERY MINUTE SPENT SOURCING OFFICE FURNITURE, OR STAFF THAT MAY BE A COSTLY LUXURY, IS TIME YOU CAN SPEND MAKING MONEY FOR YOUR BUSINESS
The Cost of Setting up a Business
The cost of businessPresented by xx, xx Date xx May, 2012
OverviewWhat is the true cost of setting up a business?What are the key expenses in launchinga business?Is there a way to control your costs?
Year one –Key business costs Set-up and Registration Accountancy and Tax Premises Staff costs Running the business Website and Marketing Cash management & Factoring
The Business Plan Skills Competitors Suppliers Staff Cash flow Marketing Customers Tech Finance Copyright Patents
Set-up and registration From £250Company Formation• Private limited company (Ltd)• Partnership• Limited liability partnership (LLP)• Sole traderRequirements• Unique name• Preparing the memorandum and articles of association• Filing incorporation docs• Registering for country tax• Signing up for employers’ liability insurance
Accountancy and tax Allow £800AccountantBook keepingAnnual Tax ReturnsPayrollAudit
Premises From £200Home workingLong lease office spaceServiced officesMobile working
Running the Business Approx £1000 Office Furniture Hardware Maintenance Legal Security Health & Safety Marketing Stationery IT Software Direct mail Phone support Reception Cleaning Data Recovery Systems
Website and Marketing From £500BrochuresStationery print costsPromotionWebsite costsAdvertising
Cash management & Factoring From £2001 in 3 start-up business failCash flow problems key causeCash flow solution includes: Factoring Invoice Discounting Factor/ Invoice Invoice Bank Bank 85% Up to 90% Collects Collects debt debt Fees: 1.5 - 3% over base rate Fees: 1.5 - 3% over base rate Admin: 0.75 - 2.5% turnover Admin: 0.2 - 0.5% turnover
And finally…RememberWatch out for the up sellDon’t spend money on things youdon’t really needFactor in the cost of your time