Getting Down To Business

With the current economic boom set to continue into the new millennium, there has never been a better time to consider starting your own business. Thousands of people do it successfully every year and small businesses now account for the largest growth in employment nationally. All you need to start with is a good workable idea for a new product or service or a better way of doing something that already exists. And if you don't know how to go about developing your idea, don't worry. There are literally dozens of organisations and agencies, both nationally and locally, who are only too willing to help with advice, practical help and finance.

And you don't have to spend huge amounts of time and energy in trying to find out which of these bodies can help with your particular requirements. There is now a single point of contact for all sources of support for start-up and expanding small businesses in Ireland. Enterprise Link (phone 1850 35 33 33) is an initiative of the Department of Enterprise, Trade and Employment, operated by information staff of Enterprise Ireland. The 1850 phone number ensures that a call can be made from anywhere in the country for only 12p.

Services provided by Enterprise Link include:

Referrals to state agencies and private sources of enterprise support throughout the country using a specially designed database of support organisations.

A computerised logging system ensures that records will exist for each call so follow-up is possible.

Factsheets on topics of interest to new businesses are available on a variety of issues from patents to business plans.

1. Finding a Product or Service
Most of the great business successes start with a simple idea. You may have spotted a gap in the market for a service or product, or a better way of doing an already familiar task. Usually the easiest way for someone to find a new product or service idea is to concentrate on a sector with which he or she is already familiar.

Another way to find a product, if you feel you have the necessary business skills, is to buy into a franchise. You are essentially buying the right to sell someone else's product and share the profits. A number of the large banks have franchise advisory departments who can help you evaluate the terms of the franchise agreement.

Local and international trade publications are a good source of current information on new developments and market trends. The Dublin Central Library at the Ilac Centre is one place where current and back issues of most Irish trade magazines can be read. Trade fairs and general travel abroad can introduce many new product ideas. Sometimes these can be copied very effectively to supply a local niche.

The main thing to remember when looking for a new business idea, whether it's a product or service, is that it must be in some way innovative. It's also a mistake to imagine that new product ideas for small companies are nearly always consumer goods. The busiest industry sector for small business supported by Enterprise Ireland, Shannon Development and Údarás na Gaeltachta is metals and engineering, followed by clothing and footwear, the food sector and timber products. In these industries there are plenty of opportunities for sub-supply, and producing part of someone else's product can often be a very secure way to start.

2. Feasibility Study
When someone has an idea for a new service or a product they are usually keen to get started right away. But prior investigation and research is crucial if the business is to have the best chance of success. This is commonly known as the feasibility study.

A feasibility study should indicate whether the project has a good chance of succeeding or not. If it looks good, the next stage is to build a comprehensive business plan. If the indications are that the market is already flooded with similar products or services, or that the margins are too low due to cheaper competition, at least the study has prevented a serious loss. It may also have led to a new idea to be explored.

Feasibility studies can sometimes qualify for grant aid to cover up to 50 per cent of wages, expenses, travel and subsistence costs, consultancy fees, and the cost of developing a product prototype. A good feasibility study can take many months to complete. Not all business ideas qualify for grants, but they all deserve to be investigated before resources and time are spent getting them off the ground.

If a prototype has to be developed, help may be available from a regional technical college or university with relevant specialists. They welcome opportunities to collaborate with industry on research and development work. Forbairt also provides many services relevant to developing a technological or scientific project.

The most important element of the feasibility study concerns the sources of funding to set up and run the business until it begins to make a profit from sales. Borrowing is generally a bad start for a business as it increases the costs. It is much better to have investors who believe in the worth of the project. There are many tax incentives for investing in a manufacturing business, both for the promoters themselves and third parties.

3. Preparing a Business Plan
To remain operational, a business must be profitable, or at least have the potential to become and remain profitable after it has recovered its start-up costs. Investors will only invest in a business if they can clearly see an opportunity to make profit. One well-prepared document is essential to introduce a business idea to bankers, investors, state agencies and business support groups: a business plan.

The financial element of the business plan is fundamental. The other key areas are details of the promoters; how the company is to be managed; how production is to be organised and controlled; and a sales and marketing analysis.

The plan should anticipate the questions anyone considering risking their money in a business should ask. It should explain what the product or service being proposed is, detailing how it differs from what is currently on the market, or, if it is a totally new concept, why it will appeal to people at all. The pricing policy is also vital, both for competitive reasons and for the way it will affect the financial projections.

The prevailing economic conditions have a relevance to the project's success. Luxury products, in particular, are very susceptible to cyclical ups and downs. Similarly, the life span of the product, and ideas for additional products, have a relevance to the business's long-term survival.

The plan must show how much it will cost to establish the business and how that money is to be raised. An important aspect, and one that every prospective investor will want to know first, is how much the promoters themselves will be risking, who else is likely to invest, and whether there are to be a lot of borrowings.

The business plan will make clear how much money is going to be needed until the business starts to make a profit. At best, this figure can only be an estimate and it should always err on the high side. Starting the business with a commitment for less than may be needed could spell disaster, leaving the business short of working capital and possibly ruining any chance of success.

The plan should look professional. It does not need to be long—a short and to-the-point document is more likely to be read. A two-page outline and 12 pages of details well-edited so there's no repetition or ambiguity, all neatly typed and bound, is ideal.

All the main banks produce guidelines for preparing a Business Plan. If the project is innovative, free help with the planning may be available from Business Innovation Centres in Dublin, Cork, Limerick and Galway, or from community enterprise centres. The County Enterprise Boards can often help you deal with some of the information required for a business plan. If you are willing to pay for the services, some accountancy firms offer extensive consultancy services that include drafting a business plan.

4. Finding the Money
In many instances, a business can be set up with very little financial outlay and there's a lot to be said for starting small, but a business with real growth potential usually needs a good start. At the very least, a bank overdraft will probably be needed. For this, a relationship of trust with a local bank and a sound business plan will usually suffice, though personal guarantees may also be required.

All businesses need at least some financial commitment by the person starting it up. This can be a combination of savings, loans and investments, though some businesses may also be able to apply for grants to cover part of the cost of start-up or expansion. In addition there may be tax relief or incentives to help your company take on employees or for the long-term unemployed to become self-employed.

A wide range of agencies and private companies is available to help you develop your business: from guidance on starting-up to management development, training and locating premises. Some of these are supported by public funding, while others are commercial services aimed at small business.

Where a substantial investment has to be made, there are some very valuable tax concessions available. This includes a return of tax paid in previous years for entrepreneurs investing in new manufacturing businesses that qualify under the guidelines for Enterprise Ireland grant aid. This Seed Capital Scheme is part of the Business Expansion Scheme (BES).

A new entrepreneur, investing in shares in a new business, can claim back income taxes paid on up to £25,000 of income per year, in three of the previous five years. This is particularly valuable to someone who was made redundant and now wants to start a business for the first time.

Smaller companies may get risk capital from community-based funds raised to support job creation or from the Business Innovation Centres which have a small venture capital fund. The examination and assessment of proposals will be no less rigorous than anyone else's, but their interest in smaller companies will be stronger.

5. Marketing
Marketing is a broad term, which incorporates advertising, promotion, public relations, pricing, packaging, design and all activity that gets your product out, seen and sold.

Market research is a tool which feeds useful information to you at every stage of your development.

When you know that you have a product with real potential, it is vital to draw up a clear Marketing Plan. When you know what you want to achieve, you can then pick and choose which marketing tools to use (advertising, PR, direct mail etc.). Without a plan, you may be tempted by short-term solutions with possible long-term problems.

Your Marketing Plan should describe and cost how you are going to promote your business or product, and attract customers. It should plot activities over a calendar year, making the most of local events, special holidays etc. You should also be aware of your competitors and keep track of their activities. You will probably want to use a mixture of tools at different times, so it is vital to be aware of the relative costs and be realistic.

A successful Marketing Plan rests on a sound Business Plan which tells you how much money you need to generate in order to break even, clear a profit and, eventually, expand. Don't lose sight of your goals; choose your tools carefully. Some require more time than money, others more money, less time. As your business grows and changes, you will need to evaluate the tools you are using to meet new challenges. Some, however, you should never stop using. Especially those that help you to think and review from your customers' point of view. Keep in touch with them with mailing lists, follow-ups, thank you notes and personal contact. There are many ways to build a business by cultivating your customer base.

6. Decide How You Want to Trade
Before a business can start trading, its directors need to decide which legal form to adopt. This decision affects the way a business is taxed and the accounting records required. A business can be unincorporated, such as a sole trader or partnership, or an incorporated limited company. A business can also be a co-operative or a limited partnership.

Sole Trader
Simplicity and convenience are the main advantages of a sole trader business. This type of business can be run by an individual using his or her name without any formalities. For tax purposes, the owner is regarded as a self-employed person, though they can employ others. But if that person decides to trade under a name which is different to his or her own, they must register their business name with the Registrar of Business Names at Parnell House, Tel. (01) 8045200.

Partnership
A partnership is an extension of the concept of the sole trader to cover cases where two or more people join up to provide a service. It is mainly intended for professional partnerships and is not really suitable for a manufacturing business. The advantages for sole traders and partnerships is that confidentiality is maintained since the public has no access to accounts. It is relatively easy to transfer the business to a limited company at a later date.

Limited Company
The limited company is considered to be the best way of running most businesses of any size. The business is an entity, separate from any individual and owned by the shareholders in direct proportion to the number of shares held.

The shareholders are required to meet at least once a year and appoint a board of directors to run the business for them. If the business fails, a shareholder can only lose the value of the shares he or she holds, giving them limited liability. However a director can be liable for some debts if it can be shown he or she acted negligently.

Limited companies are regulated by law and must be registered with the Registrar of Companies at Parnell House, Tel. (01) 8045200. To register a company, a solicitor draws up a set of articles describing the company's business in broad terms. Alternatively, there are a number of agencies recognised by the Companies Registration Office who can register companies using a standard set of Memorandum & Articles of Association. This is a cheaper and quicker alternative.

A limited company must have at least two directors appointed by the shareholders to run the business. In most small companies the shareholders and directors are the same people. The directors are officers of the company and responsible to the shareholders for the efficient management of the company.

The Companies Act, 1963-1990, available from the Government Publications Office, lays out precise requirements for the presentation of accounts and the information to be contained within them. Alternatively, for more details consult an accountant or a solicitor for advice on structure.

7. Register for Tax
You should advise the tax office as soon you start in business. You can do this by filling in a Registration Form STR (for use by individuals setting up in business where anticipated turnover will be less than £100,000 per annum) or Registration Form TR1. Both are available from any tax office. These forms can be used to register for any or all of the following:

Income Tax

Employer's PAYE/PRSI

Value Added Tax

If you are setting up a company you should fill in a Form TR2. This can be used to register for any or all of the following:

Corporation Tax

Employer's PAYE/PRSI

Value Added Tax

Shortly after registration you may receive a visit or you may request a visit from a Revenue official to assist you in operating the tax system. Any difficulties or queries will be dealt with and general assistance will be given to help you comply with your tax obligations. You can request a New Business Visit from your local tax office or in the Dublin area by phoning the Taxes Central Registration Office at (01) 8746821.

For further advice or information on the above contact the following:

Enterprise Link: 1850 35 33 33

The Revenue Commissioners Information Office: (01) 878 0000

In many ways bands and musicians are similar to small businesses, and forming a band is akin to starting your own business. Apart from the artistic side of things, you should always ensure that the financial and legal aspects of any deals you make are geared to your best advantage. Frank Murphy of Gleeson McGrath Baldwin has advised and acted for many of Ireland's top artists and bands and is recognised as one of the leading experts in the area of media and entertainment law. He has also been involved in some landmark cases both in the Dublin and Belfast courts. Here he briefly outlines bands and the law, with particular reference to young bands starting out.

The first thing he stresses to bands and musicians who are offered a deal is to get a clear picture of what is involved and discuss it among the band or with your collaborators. Get good advice from an experienced solicitor, then decide what to do and go for it full blast. If it doesn't work out, your lawyer should have provided an exit from the contract. If it works out, great!

"In many instances it's a case of establishing A, B and C—a basic understanding of what the deal is about," he continues. "Most contracts are full of complicated clauses which are not relevant to the situation. A deal that works for both sides is what should be aimed at."

He makes the point that there is no such thing as a standard contract. Every contract should be tailor-made to suit the deal. Where small record companies or indie labels are involved, the aim is usually to licence off the deal; a profit-share type of deal is often now proposed, where the record company splits the income from the licensee who actually exploits the album.

Murphy also stresses that bands should keep things as simple as possible when negotiating a deal with a record company: "Don't let things get over-complicated," he says. "I often say to people to stop and think—is it actually necessary to sign a deal at all? Why not wait until you have progressed a little and have a clearer idea of what you want. The music business is almost unique in that there is only a 10% success rate, and nine out of ten bands will lose money for the record company. So if a record company puts money up, they are entitled to a return."

There are many organisations and groups which exist to help both new and established businesses. ISME (The Irish Small & Medium Enterprises Association) represents the concerns of small and medium enterprises by lobbying Government and other organisations impacting on SMEs. Its membership base is drawn exclusively from competitive businesses, entrepreneur and owner/managed sectors of the business community, which is the most dynamic and creative sector and the biggest sector in terms of the number of business establishments.

"The Association's strength rests in the combined experience of the members," offers Jim Curran, who is in charge of research at ISME. "We seek to harness that resource for the betterment of all members."

The combined purchasing power of the members has enabled ISME to reduce members' individual costs through purchasing and group discount schemes, including Group Insurance, Foreign Currency Scheme, Discount Health Scheme and other cost-saving initiatives. ISME also conducts management and staff training programmes.

ISME's independence allows it to speak out fearlessly on behalf of its members, and it has successfully lobbied government and other state agencies on various issues.

Local initiatives have also proved a major boost to employment, particularly in disadvantaged urban areas where unemployment can run higher than the national average. The Finglas Cabra Business Initiative, funded under the Operational Programme for Local Urban and Rural Development, assists new business start-ups and supports existing businesses.

Included in the range of services offered are a business information service, loan finance, rent subsidy, and book-keeping. You may qualify if you are either establishing a business in the area or living in the area and establishing a business elsewhere. There is an area-based incentive scheme whereby those living in the area and more than 12 months on the live register can retain full Social Welfare and secondary benefits for 12 months.

The initiative has had an 80% success rate, with over 700 people assisted into self-employment to date.

Ballymun Partnership have an ambitious 4-year work programme which aims to achieve a target of 2,000 work placements by the year 2000. The overall aim of the programme is to provide access to training and education for local people, enabling them to obtain skills to secure long-term employment. Areas given particular attention under this programme include Partnership in Care (a FÁS jobs initiative), Ballymun After-school Project and the Ballymun Education Response Group. The Ballymun Enterprise Service (BES) is responsible for the delivery of a range of supports and incentives to new and emerging businesses in Ballymun. Services include assistance in drawing up a business plan, assistance with book-keeping and tax advice, and access to financial support.