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The two huge mistakes you can make when starting your business are to:

1. First decide on a product or service to sell and then go out and try to find customers to buy what you’re offering.

2. Start without a fully-researched business plan.

Deciding on a product first and then looking for customers to buy your goods is a common problem, and the reason many businesses fail. What happens is this. The novice entrepreneur comes up with a great idea for a business, stocks up his shelves, opens his doors and then nothing happens. In our town I’ve seen so many examples of this, where would-be entrepreneurs arrive full of optimism that our town wants their gift shop, book shop, candle shop solely on the basis that we haven’t got one already.

Why haven’t we got one of these shops? Is it maybe that no one either wants or needs whatever it is you’re trying to sell them? Or if they do, perhaps there aren’t enough potential customers to make the business viable. It’s an easy mistake to make and I believe if you were to take a quick nationwide survey of everyone’s garages, lock-ups, spare rooms and garden sheds, I bet you’d find thousands, probably millions, of products that were all part of that initial great idea, which ended in failure.

To succeed you must first identify your target market and understand their needs before you get your products and services together.

Not having a winning business plan is the other most common mistake made by would-be entrepreneurs.

If you go on an unfamiliar journey do you plan your route first, or wait until you’re hopelessly lost before asking for directions?

I know a lot of you would say you wouldn’t plan a route, and wait until either you got lost, got lucky or gave up.

But the point is you reach your destination faster and far less stressed if you invest a small amount of time preparing and familiarising yourself with the best route.

Why businesses fail

There are many reasons why new businesses fail.

o Overestimating how much the business will sell or underestimating how long it will take to achieve initial essential sales targets.

o Underestimating costs.

o Failing to identify your market correctly because of inadequate market research, or no research.

o Failing to control costs.

o Carrying too much stock.

o Being personally and financially unprepared for running your own business. Or in other words failing to have a winning business plan.

Personally I thought the rent was too high for our town. When I mentioned this to the letting agent they scoffed and dismissed my surmising as rubbish. Not only had they already had one offer, but were now turning down others.

The new tenant duly arrived and I watched with interest as what was once a tired sweet shop was transformed into a state-of-the-art Internet cafe´.

I was shocked. Who in their right mind would consider opening an Internet cafe´ when the local council had just extended the library to include free Internet access for all library members? And those who weren’t library members could pay a nominal fee of 50p to surf the web for 30 minutes. Needless to say the new Internet cafe´ proprietor didn’t appear to have any trade at all. Within weeks they closed only to reopen a few days later as a second-hand bookshop. Again surprising as there was already a large second- hand bookshop in what is a very small town.

Soon after the doors closed for good and the property went on the market again.

I don’t take any pleasure telling you this story, but the reason it’s important is that any one of us could end up in the same unfortunate position as that entrepreneur if all we do is follow our heart and go with the business idea that suits us most.

Unfortunately business doesn’t work this way. Before you can even think about success, you need to be able to survive. There are two important words that I want to stress in the above list of reasons for business failures. They are:

o overestimating

o underestimating.

I speak from experience when I tell you that it’s so easy to overestimate how much you will sell and underestimate how long it’s going to take to get your business fully up and running.

I believe it can take at least three years to establish any worthwhile business. So prepare yourself for a long ride.

Researching your idea

There are various areas of your idea that will have to be researched and looked at. The primary area that you need to concentrate on is to thoroughly research your product or service. Look at these from every possible angle.


You need to be as sure as you can that either the product or service you are about to launch will actually appeal to your target market. Here’s something to think about – why was the teabag a roaring success and the coffee bag a huge flop? I don’t think anyone has actually managed to answer this one, but it does go to show that sometimes even though something similar has been an enormous success it doesn’t mean that your new idea will work too. You can stack the odds in your favour by undertaking thorough research.

Question everything about your product or service and ask yourself:

o What makes your product/service unique?

o Why would customers choose you in favour of anyone else?

o How easily can you source your products?

In the initial burst of enthusiasm for your new business venture it’s easy to overlook the question of sourcing. You need to be sure that not only you can obtain your products (or raw materials if making your own) but also that the price you’re paying isn’t subject to frequent and excessive price fluctuations.


The result has been an overall increase in his business as he has gained not only a reputation for always having fresh fish available, but also a greater variety than previously.


If you’re sourcing either products or raw materials from abroad you’ll need to make sure that you allow provision somewhere in your costings for those inevitable currency fluctuations and other costs that can adversely affect the price you pay for your goods. Remember that the price that suppliers quote you when you’re working out your initial costings may not be the price you actually have to pay when you open for business.

Another factor you’ll need to consider is transportation costs, which can rise significantly in the event of an oil price increase, civil unrest or natural disaster.

I know an entrepreneur who sells sailing boats that he imports from France and Poland. He goes there himself and transports them back to the UK on a road trailer towed by his four-wheel drive. He believes this is the only way that he can ensure he gets his goods on time without paying excessive transportation costs and waiting weeks or even months for his boats to arrive.


Beware of the effect that having to order minimum quantities can have on your business.

We buy our Dutch bikes direct from Holland, which means we have to pay shipping costs. To keep costs to an absolute minimum our suppliers send our bike deliveries as fillers for other business trailers, so our bikes travel with all sorts of other goods such as fruit, flowers, vegetables and even cakes. The benefit to us is that we pay low transportation costs, as our order is nothing more than a way of the haulage company ensuring they fill all the space in their trucks.

Another often unseen problem with minimum orders is you may not be able to order further stock as you haven’t got the cash as all your money is already tied up in your stock.

This is why it’s essential to work out a cash flow forecast.


You’re intending to start a business where your unique selling point is that you make all your own products. How quickly can you make them? You’ll need to be sure that you can keep making them while still running your business.

Whatever it is you’re selling, make sure you can produce it as quickly as will be needed to make your business profitable. If you’re marketing home-made produce, your customers will expect that’s what they’re getting. Offer anything else, and you may well destroy your uniqueness.


Her attention to detail has gained her an enviable reputation both in the UK and abroad, with many of her products being purchased for the lucrative American market.

She was doing so well that she decided to move her business from exhibiting at craft fairs to taking on her own shop. However, soon after opening her shop she had to close it. Not because she couldn’t find enough customers to support her expanding business, but because she couldn’t make her products fast enough to keep up with demand.

Whereas before she spent her days working at her kitchen table crafting her products, she now had a shop to run, which meant she had little or no time left to make her products. Of course she could have hired someone to run the shop for her, but her business couldn’t support employing staff as well as paying the hefty rent, business rates and all the other costs that come with a high street premises.

She’s now back at her kitchen table doing what she loves most and her business is booming.


Packaging and promotion of your goods often go hand in and. A product that is imaginatively and attractively packaged will obviously have greater a chance of being sold over one that is not. Toy manufacturers spend millions of pounds annually on making sure their products grab the attention of their intended audience, children.

Mail order

If you’re intending to offer your products by mail order, you’ll need to be sure:

o that your products are suitable for dispatch by either postage or by courier;

o they don’t get damaged while in transit. You should also considering offering your customers insurance to protect their goods once they leave your business.

Selling at craft fairs and exhibitions

o Try to make all your customers walking advertisements by giving them something eye-catching to put their purchases in.

o Where possible choose packaging that has either been made from recycled materials or is capable of being recycled.

o Consider encouraging your clients to return their packaging to you for use again. You’ll be surprised how many will do this and how many will buy from you because you offer this as a service.

Wholesaling your products

If you are selling your products wholesale you need to be sure that whatever you’re selling remains in the same pristine condition once it reaches your customers’ shelves as it did when it left you. Even though your clients are retailers and not the public, if your goods turned up damaged and unappealing few retailers will want to restock your orders.


Unless you are proposing to sell a truly unique, sought-after product to a small niche market, consider very carefully the price at which you sell your goods and services before you throw open your doors.

The ethos that runs through all of the businesses that I am involved in is that we offer a value-for-money service where customer service is our number one priority. We’re not bargain-basement clearance merchants. We offer a quality products at prices customers find attractive and leave enough profit to make it all worthwhile.

Market research


When researching the competition, make sure that you are actually comparing like with like.

I recently came across an Internet business offering what appeared to be bicycles similar to the ones we sell. Naturally I was concerned that this business appeared to be offering considerably lower prices. However when I compared their cycles to ours it was apparent that they were not the same product in terms of specification and build quality.


The best way to approach your research is to make a checklist of all the things you need to know about your competition before you start researching.

To be successful, research needs to be carried out over a period of time as opposed to on one occasion, as every business has seasonal peaks and troughs. Prices will vary depending on what time of the year it is. For example, most retailers suffer in the early part of the year when business is slow after Christmas. On the other hand this can be a boom period for gym owners and travel agents.

So make sure your research gives an accurate picture of the market in general and not one that is either enjoying a seasonal boom or a temporary famine!


Obviously before you can start researching your competitors you must first identify who they are. The important point to remember is that it’s not always the readily identifiable ones that you need to worry about.

Remember the poor guy who opened up an Internet cafe´ in my local town only to find that the local library were offering Internet access? These sorts of events aren’t as uncommon as they might sound. Around about the same time as the Internet cafe´

disaster our local council opened a new restaurant, which they offered as a concession to a private company. The location of this restaurant is superb in that it gets the best views of the harbour. Naturally it’s doing very well, but what about the private restaurant owners who are having to work doubly hard on the almost impossible job of winning customers back to their restaurants which have no sea views?

It’s always a good idea to keep an eye on what your local council is up to. If nothing else you may well spot a business opportunity – a worthwhile concession up for tender.

The main ways to find your competitors is to check:

o advertisements in your hobbies’ magazines, club websites and your local paper;

o the Internet – using the main search engines (Google, Yahoo!, etc);

o trade directories;

o Yellow Pages;

o Thompson directory.


When checking out the competition make sure you find out:

o Exactly what it is they are offering. How do their products or services compare to yours in terms of quality as well as price?

o The total price of their product once you’ve included all the extras. For example is VAT included or added on at the point of sale?

o The sort of guarantees your competitors are offering. Can you match or better what they are offering?

o How quickly they can deliver their goods. How does this compare to what you are offering?

o Customer testimonials. Have they included any customer testimonials in their sales material/website? If they have been established for any length of time they should have testimonials from satisfied clients. If they haven’t, why not?

o How close they are to where you will be based. If they are on your doorstep is there really enough room for the two of you?

o How busy they are. If they have a retail business you should camp yourself discreetly outside at various different times to see how many people not just go into their shop, but also come out having made a purchase. If they are mail order

or website based, monitor their site to see how often it is updated. Also send them some query emails to see how quickly they reply. It’ll soon become apparent whether or not a business is doing well or dying on its feet.


Sometimes the only reliable way to be sure that whatever it is you’re about to sell is going to appeal to your potential market is to carry out customer surveys.

You can do this in a number of ways:

o If your hobby has a magazine with a readers’ letters page, write to the editor with your idea asking for the readers’ help with your research. Make sure you include your email address.

o Post messages on website discussion forum boards. Again, invite comments and suggestions regarding your proposal. This is a great way of getting some useful marketing feedback and if you encourage people to email their thoughts to you, you will then have a ready-made sales list for introducing your products or services.

o Send out questionnaires to clubs, groups and organisations relating to your hobby. Encourage participation by offering an incentive for everyone who completes them. For example, everyone who returns their questionnaire before such and such date will automatically be entered in our free prize draw to win a whatever it is you’re offering.

o Network and mingle. Wherever your hobby enthusiasts gather, get out there and network with them. Most hobbies will have regular group get togethers, which can be great places to test drive any ideas you might have. For example, if you’re introducing a new product or service you could go along and offer free test runs/trials for whatever it is you’re offering. I use this technique a lot in my businesses when I’m planning to introduce something new. Not only have I found this a brilliant way of getting new ideas, but also for finding new customers.


Obviously it’s unlikely that you will be the only business operating in your chosen field, but if you do find that the competition is thin on the ground this doesn’t necessarily mean good news for your business. It may be that businesses like the one you are proposing have come and gone. So it’s worth further research if there isn’t any sign of real competitors.

Investigate as much as you can about your potential market. The following are good sources of market information.

o Internet search engines.

o Local libraries.

o Council records.

o Speaking to other shop owners who are operating in the geographical area you are considering.

o Newspaper archives.

o Posting ‘information wanted’ notices on web forums.

o Speaking to potential customers.

Prior to starting our cycle business, my partner and I spoke to as many of the local shop owners as we could, trying to find out whether or not they thought there was any future in our idea. Without exception everyone we spoke to was extremely helpful and offered us the benefit of their experience and came up with some useful suggestions.

So if you’re planning to open a shop or business in a particular locality don’t be afraid to ask existing businesses for their thoughts. That way you’ve got a good chance of finding out what’s gone on in your area, and whether or not a business similar to what you’re proposing has come and gone.


There’s no easy answer to this one, and how much you sell will depend on a combination of factors including:

o how big your market is

o how well you promote your products and services

o your unique selling points

o your competitiveness.

The first thing you must get right is to actually ensure that there is a demand for whatever it is you are offering. Once you’ve established this you then need to be sure that there will be sufficient demand to make it profitable.

The cost of starting a business

To succeed you will have to have a fairly accurate idea of how much it is going to cost to start your business.

A common mistake is to decide on the type of business you want to start and work backward finding out, often too late, that you can’t afford to keep going what you’ve already started.

When calculating your initial costs, you should consider:

o How much you will have to pay for your initial stock.

o Any specialist equipment or machinery that may be required.

o Vehicle costs.

o Registration or professional fees – for example you may need to employ a solicitor to read and report on a lease agreement, patent a product or pay local authority registration fees.

o Insurance costs.

o Costs of hiring additional storage space.

o Website costs.

o Stationery costs.

o Working capital.


Working capital is the amount of money you have available to run your business on a day-to-day basis, and without it, you will be unable to trade successfully.

This is as opposed to fixed capital, which is the capital you use to buy your fixed assets, for example what you spend on items such as buildings, vehicles, machinery etc.

A common problem when it comes to working capital, and one that I’ve made in the past, is to underestimate how much working capital you actually need to keep your business up and running. For example, if your business involves selling a range of products you will always have money tied up in unsold stock. Not only that but when you sell your stock you will then need to buy additional stock to replace what you’ve sold. Thus even though your business will be receiving sales revenue (income from sales), you will have to reinvest some, or even all, of this revenue in purchasing replacement stock.

You’ll also to have pay your ongoing business costs, which might include rent, business rates, heating, lighting, advertising and so on as well as paying yourself and any staff you may have.

You need either to have money available in the form of working capital, or access to a bank overdraft to cover your regular business expenses until such time as your business is fully able to support itself.

Initially, you might find that although you’re busy, you are not earning very much, if indeed anything, because you’re having to reinvest your revenue in your business.

It’s a common problem and one you need to address at your business planning stage.

Who is going to finance your new venture?

There are a number of options available to you:

o use your own funds;

o bank loans;

o business angels;

o small firms loan guarantee.


Wherever possible you should use your own funds. That way you won’t be burdening your new business with loan repayments. Obviously, this won’t always be possible.


My experience of banks and their lending policies has been dismal to say the least – so much so that I don’t think I will approach them again. Your ideas may be more successful than mine, but if you do get turned down for a loan don’t take this to mean your ideas don’t have any potential.


This is my favourite funding option. Business angels are other successful entrepreneurs who, in return for a share in your business, will loan you money to start or expand your business. Obviously, you’ll need to be satisfied that you can get on with your business angel and that you’re happy to have someone else have a role in your business. The advantage, of course, is not only funding for your business but also the expertise these entrepreneurs can bring to your business.

You can find business angels by using the Internet and searching under keywords: ‘business angels’, ‘funding for business’, ‘venture capital’ etc.


The SFLG guarantees loans from banks and other financial institutions for small firms that have viable business proposals but have failed to get a conventional loan because of a lack of security.

You can apply for a loan for sums of between £5,000 and £100,000, or if your business has been trading for more than two years you can apply for up to £250,000.

To be eligible you must be a UK company with an annual turnover of no more than

£3m, or £5m if you are a manufacturer.

The SFLG guarantees 75 percent of the loan. In return, the borrower has to pay the Department of Trade and Industry a premium of 2 percent on the outstanding amount of the loan.

You can get a loan for most business activities although there are some restrictions. Further information can be found on the DTI website

Dealing with slow and non-payers

Hopefully, you will have few instances where customers either refuse to pay you, or are slow in settling invoices.

When this happens you have a number of options, culminating in taking them to court. In my experience, most customers will pay their bills before ever getting to the stage of having to threaten legal action. So it’s important when dealing with an overdue account not to rush in wielding a sled hammer when one isn’t needed.

These are some things we do to encourage prompt payment in our business:

o Confirm our prices and what is included in a written estimate so customers know exactly how much they are going to have to pay. By doing this you reduce the likelihood of having a payment dispute at some later date.

o Do not routinely offer credit terms. We include in all our written estimates that our terms of business are that payment is made immediately upon completion of the job. When it comes to our retail cycle business, we only release the cycle when the bill has been paid, and not before.

We adopt the following procedures for dealing with late payers:

o Where a customer does not settle their bill immediately, we allow a period of no more than seven days for their cheque to arrive, after which time we send a polite reminder letter.

o If after a further seven days we still hear nothing, we phone our client and ask what the problem is. It’s vital to keep dialogue friendly and non-threatening. There can be a number of genuine reasons why customers are late in paying.

o If after a further seven days we still haven’t been paid, and there isn’t a genuine reason why the bill hasn’t been settled, we then write a final letter, sent by recorded delivery. It asks that payment in full is made by return, or if this is not possible, we are contacted immediately to advise when payment will be made. We also include in our letter that if we don’t receive a payment within seven days, we will reluctantly have to take out County Court Summons.


Taking non-payers to the County Court should always be a last resort. Although the system is easy to use, it is far better to have your debt settled without the costs and time involved in preparing your case for court. You can if you wish to employ a solicitor, however, you will have to pay their costs upfront. If your application is successful in the courts you can reclaim your fees from the other side.

But be warned that even if the court makes a judgment in your favor, your delinquent customer might still not pay their account. Then you have to make a further application to the court to allow you to recover the debt from them.

It can be a lengthy, tiring process, and you really must be sure the debt is great enough to be pursued.

You can get the all the information, forms etc you need to make a County Court Claim by visiting your County Court or their website at http://www. Or you can phone the Business Debtline on 08001 976 026.

Writing a winning business plan

Most small business gurus (you know the types – the ones who’ve recently been made redundant having spent most of their corporate lives killing careers with PowerPoint presentations and now want to sell their perceived skills to small business entrepreneurs) will have us believe that the most important reason for having a business plan is so that we can borrow money for our businesses.

And their angle on this? To write one for us, for which of course we will have to pay them a fee.

Let’s get one important thing clear about business plans – you don’t need to have someone write one for you. I don’t care if they’ve been Richard Branson’s personal

business planner for the past 20 years, the only person that can really write a truly winning business plan for your business is you.

Because these experts will never tell you that your idea is absolutely farcical and you’d be wasting your money. An expert’s expertise is in writing business plans. So if the business you’re planning to start is in anything other than business plans, the truth is that they probably know absolutely nothing about your business. But you do because it has something to do with your hobby. You know your idea better than any paid expert whose real motivation for helping you will be his extortionate fees.


1. A well-researched business idea which includes information on what products and services you intend to offer, who your target customers are, details of your competitors and a general assessment of the market you are proposing to work in.

2. A clear idea of how much it’s going to cost you to start your business.

3. A clear idea of how long it is going to take your business to become fully operational.

4. A personal survival plan detailing how you will survive during the initial period when your business is not actually earning you money, but costing you.

5. A contingency plan for what to do in the event that something unforeseen happens to either your business or you.

6. Details of how you intend to fund your business and, if you intend to borrow money, the plan should include details of those who you are hoping to borrow this money from together with anticipated repayment periods.

7. Profit and loss forecast where you work out how much your business is going to cost to run versus how much you’re going to achieve through sales.

8. Cash flow forecast. Essential for every business because you work out how quickly and often you will receive cash into your business versus how much you will have to spend to continue trading.

9. Operational details for your business, which will include:

– details of where your business will be based, including any additional business premises that you may need to rent (for example additional storage space for stock etc);

– information on how many staff (if any) you will need to hire, where you intend to get these staff from and how much you’re intending to pay them.

(You should never rely on the goodwill of friends and relatives who offer to work for you for nothing. This is wholly unrealistic and if your business relies on others supplying their labour free of charge then you should be asking yourself if your business is really viable.)

10.SWOT analysis – what are the strengths, weaknesses, opportunities and threats facing your business?


If you’re considering approaching a bank to help finance your business, your business plan will need to be presented in a certain format. In addition to the above information, they’ll want to know more about your career history including details of why you’re suited to start and run this type of business. If you are in partnership with someone, or you are hiring specialist help, they’ll want to know more about these key people before they are willing to lend you any money.

Even if you’re not planning to borrow any money, I’d recommend you take advantage of their free software as I’ve found the spreadsheets for calculating profit and loss to be invaluable. Having a system where you can change one item and then immediately see the effect on profit and loss figures saves enormous time working things out.


The golden rule when presenting your business plan to prospective lenders is that you must be completely confident with the facts, figures, and projections.

Your presentation should be:

o Clear and to the point: free of superfluous and distracting things such as jokes, anecdotes and over-familiarity.

o So well-rehearsed that it doesn’t actually sound rehearsed.

o Convincing. Remember you’re asking someone to invest money in your business, which means they are sharing in your risk. They need to be convinced you know what you’re doing and that above all else you are confident that you can achieve what you are saying.

What to wear

Dress to impress, but make sure that whatever it is you choose to wear you feel comfortable and confident. Nothing is more soul-destroying than making a presentation to someone when you feel at a disadvantage because of the way you are dressed. Certainly if the business bankers that I’ve met in the past are anything to go by, traditional smart dress is essential as many are still trapped in some sort of unique time warp.


1. The two most common and potentially disastrous mistakes made by novice entrepreneurs are to decide on a product or service and then try and find customers to buy from them and to start a business without a written business plan.

2. The advantage of working out a winning business plan is that you can identify and address potential problems before it’s too late.

3. When researching your market make sure that you are comparing like for like when considering the competition. Even though two businesses may on the surface appear to be servicing the same market, they can be worlds apart.

4. Try to get an accurate picture of your set-up costs before you start your business.

5. Don’t forget to work capital. Insufficient working capital is often a cause of many otherwise potentially good business ventures going under. Remember that in the early stages you will need to reinvest much of your initial earnings to build and develop your business.