This module explores the concept of innovation at work and the self employment aspect.

1. Innovation At Work - Self Employment
TUTOR’S NAME HERE

2. Innovation At Work - Self
Employment
Learning Objectives
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Unit 1: The Pros and Cons of Self
Employment
Unit 2: Generate An Innovative Idea
Unit 3: Implementing your Action Plan
Unit 4: The Practicalities Self Employment

3. U. 1
The Pros and Cons of Self
Employment

4. The ‘Pros’
• You:
 get to be your own boss
 get to do what you’re interested in
 get to set and meet your own deadline
 can get to express yourself
 can realise your potential
 can be proud of what you do
 can gain control of your own destiny
 can be creative
 can have a second career
 can cut out the commute
 can hand on a legacy to those you care about - posterity
 can gain recognition from family, peers, community
 can deploy your skills
 can get sense of fulfilment in meeting the challenge
 can design your lifestyle rather than have it dictated to you
 can achieve financial independence
• It:
 can be profitable
 can be varied

5. The ‘Cons’
• It can be lonely
• If you don’t work you don’t earn – no ‘sick leave’;
holidays cost you in time away from the business
• Owner/Managers have to fulfil all roles – a huge time
commitment – long and irregular hours
• Expect the unpredictable.....
• Can be a long period before owner/managers can
draw wages and thereafter additional profits – or
before shareholders see a dividend
• Can be ‘feast or famine’ – takes a long time to smooth
out the peaks and troughs
• Over-trading (trading in business much of which won’t
be delivered) can often be a bigger problem to
manage than finding the sales

6. U. 2
Generate An Innovative Idea
• To Create Value and Generate Income
• Steps from idea generation through to operating
a profitable business....

7. •What is
innovation?

8. Innovation is a Frame of mind:
Always question WHERE are you
going?

9. Creative thinking – the ‘inner innovator’
Personal motives – the ‘inner innovator’
Action
The journey of innovation

10. The “Inner Innovator” :
• Knowing yourself...
- Self-awareness
- scope for self advancement
- recognise then overcome your personal
barriers
• Influences good and bad...
• ‘Push and Pull’ factors ....
‘Push’ = necessity
‘Pull’ = opportunity
-

11. Innovative thinking:
•Observe……..

12. Imagine:
Thinking…..

13. •Acting on your
idea…..

14. Planning for innovative self
employment.....

16. WHY?
WHAT?
WHEN?
WHO?
HOW?
WHERE?
A Self Employment ACTION PLAN…
implementing an idea to do
something new

17. U. 2
Exercise:
• Devise An Action Plan
For An Innovative Self
Employment Proposal

18. U. 3
Implementing your Action Plan

19. Being innovative about innovation…..
COLLABORATE…
•No individual has all the answers
•Lone wolves starve!
•‘Co-opetition’ - Collaboration is an effective
response to competition

20. Benefits of collaboration .... You
can access resources:
Benefits
Access to ExpertiseProblem Solving
Research
Specialised
Equipment
Enhanced credibility
International R&D
Networks

21. How to make collaboration
work for you.....
• Collaboration takes time and energy
• Cultivate the RIGHT collaboration!
• But HOW?

22. • Draw up a formal agreement: who
does what for what return
• Agree targets
• Record work activity; measure
progress against targets
• Agree a timetable for regular
communication
• Involve a mutually trusted third party
to act as mentor/buddy/ honest broker
as required
How to make collaboration work for
you.....

23. Distinguish good collaboration from bad
by....
• estimating the return on a collaborative
project... against the cost of opportunities
foregone... + the ongoing costs of supporting
the collaboration
• defining and agreeing your SHARED PURPOSE
• Committing to transparency

24. Managing the collaboration

25. • Scope out the challenge
• Structure the boundaries
• Sort tasks for execution
• Be prepared to accept and learn from
failure
Managing the collaboration

26. Tools to ensure a successful
collaboration
Step 1: Situation analysis
Step 2: Partnership formation and project design
Step 3: Consensus building (
roles/responsibilities)
Step 4: Implementation

27. U. 4
The Practicalities Self Employment
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• Different Self Employment Options
• Sources of Finance
• Profit
• The Importance of Cashflow

28. Self Employment Option 1 - Sole
Trader
• Advantages
– Easy to set up
– You have full
control
– No audit required
– Minimal reporting
• Disadvantages
– Fully liable for
debts
– Income tax is paid
on profits not
drawings
– It can prevent
growth due to lack
of capital

29. Self Employment Option 2 -
Partnership
• At least two partners
required (but can be
a larger number)
• It is advisable to
seek legal advice
and draw up a
partnership
agreement

30. Self Employment Option 2 -
Partnership
• Advantages
– Pooling of skills
– Increase in
resources
– The risks are
shared
– Easily set up
• Disadvantages
– Each partner fully
responsible for all
debt
– Difficult to
introduce new
partners
– Personality clashes
can become a
problem

31. • The company is
owned by
‘Shareholders’
• The Company is
managed by
‘Directors/Executives’a
• Company is seen as a
separate legal entity
from the individuals
own it and the
executives who
manage it
Self Employment Option 3 – Limited
Company

32. • In the UK and Ireland
Companies are registered
with Companies Registry
• Audited accounts and can be
accessed online
Self Employment Option 3 –Limited
Company

33. Self Employment Option 3 –Limited
Company
• Advantages
• Owners are not
personally liable for the
debts of the company
• So protection of
personal assets (some
exceptions)
• Simple in the UK and
Ireland : Normally set
up as a “Shelf company”
• Limited Company status
may be a pre-requisite
for certain contracts /
tenders
 Disadvantages
• Much more legal
regulation involved
• Tax position of company
separate from the
Shareholders
• Subject to an annual
Audit / Report – this
can be a substantial
expense

34. Key costs for a small business

35. Key costs for a small business
• Equipment / Vehicles
• Stock
• Legal / Professional
• Advertising
• Accommodation costs
• Interest and charges
• Wages or drawings
• Other unanticipated
costs

36. Sources of finance
• Personal/family
investment
• Bank finance
• Business Grants
• Asset Finance
• Alternative loans
• Investors –
Equity/Angel

37. Personal Investment
• Personal savings
• Family & Friends
• Use of equipment

38. Bank finance
• Overdraft Facility
• Credit Card facility
• Term Loan

39. The Banks will consider an
application under the 5 C’s:-
- Character
- Capacity
- Capital
- Collateral
- Conditions
Bank finance

40. • Character – Good character - honesty, integrity ,
reliability , hard working……
• Capacity – Ability to repay: Does the business
have the cash-flow to meet the repayments? Are
the projections realistic?
• Capital – Extent of personal commitment (‘skin in
the game’) How much has been invested by the
promoter and what percentage is external debt?
• Collateral – What security is available in personal
or business assets should things not work out?
• Conditions – What are the market conditions and
trends in this sector and what may be their impact
on this business?
Bank finance

41. Bank finance
• Overdraft Facility
• Overdrafts are a short term borrowing
facility
• There will be ‘Arrangement Fees’
• Interest rates can vary over time
• Personal financial guarantees may be
required

42. Bank finance
• Credit Card Facility
• Very short term! This is in effect a one
month borrowing facility
• Full balance should be cleared monthly
• Interest rates are very high
• Defaults incur high penalties & charges

43. Bank finance
• Term Loan
• This is a longer term borrowing arrangement
– can be from 1 – 15 yrs
• Interest rates are fixed – agreed monthly
payment
• Personal guarantees (security) are required in
most cases
• Arrangement fees are charged

44. Business Grants
• UK:
• Invest NI
• Princes Trust
• Local Councils
• Department of Agriculture and
Rural Development - LEADER
•Republic of Ireland
•Local Enterprise
Offices
•Enterprise Ireland
•Local Employment
Partnerhips
•Bord Bia
•LEADER Companies
•Udarás na Gaeltachta

45. Alternative Loans
• Credit Union Loans
• Government Loan Funds
• NGO/Philanthropic
• Hire Purchase/Leasing
• ‘Crowd funding’

46. Costs Involved in a Business
• FIXED COSTS
– Costs which are not affected by the
level of activity of the business:
premises (rent, rates), vehicles,
equipment, insurance, bank interst...
• VARIABLE COSTS
– Costs which are directly affected by
the level of activity in the business:
staff, inputs/raw materials,
electricity, fuel (eg: delivery costs)....

47. Examples of Typical Profit Margins
• Low 20% - Supermarkets
18% - Newsagents
25% - Music Stores
• Medium 32% - Toy Store
33% - Printers
35% - Pet Shop
45% - Florists
45% - Fast Food Outlets
• High 65% -- Opticians

48. The importance of Cashflow
• “Cash is the oil
that lubricates the
business engine”

49. The importance of Cashflow
• Profit with Good
Cashflow
• Loss with Good Cashflow
• Profit with Poor
Cashflow
• Loss with Poor Cashflow
Survival chances
Excellent
Medium Term
Short-term
Doomed to Failure

50. Purpose of a Cash Flow Forecast
• To identify
potential cash
shortfalls before
they happen.....
Do the sales of the
business have a
seasonal nature?

51. • To act as a
management tool
in making
decisions.
– Example:
Expenditure may be
deferred until cash
position has
improved.
Purpose of a Cash Flow Forecast

52. • The Cashflow
forecast
confirms for the
bank .... How
much finance the
business needs and
that the business
the ability to repay.
Purpose of a Cash Flow Forecast

53. Indications of Cashflow Problems
• Overtrading –
failure to fulfil
orders on time
• Returned Cheques
• Bank Letters /
Fees
• Supplier problems

54. •Registration with Government (UK - HMRC;
Ire - Revenue)
•Income Tax – tax return every year - severe penalties for
non-disclosure and interest on late payments
•Business (Corporation) Tax – charged on the profits of
Limited Companies – annual returns
•National Insurance
•Tax on goods and services: VAT (turnover threshold UK =
£82k p.a.) – usually quarterly returns - supported by full
records of all transactions – costly penalties
•Accurate record-keeping is vital – sales and purchases.
invoices -also allows you to monitor & control-5/6 years
Meeting Your Legal Commitments

55. invest time in your future.
THANK YOU