Adventures in Micro Business

Each month, Professor Russell Smith answers your queries


Q: My business has been running for two years and is doing well but I would like to grow it even further. Can you recommend a cost-effective marketing approach?

A: One thing to consider is putting your business forward for an award in one of the annual competitions that will be available in your region. These awards are often sponsored by large organisations but run by local radio stations, regional newspapers or via government initiatives. Taking part in such competitions will give access to new networks of potential customers and, if you are successful, most organisers provide a wealth of promotional activities that help market your business. An easy way to find out about competitions near you is to use the Business Awards Finder search facility from the Business Link website ( businesslink.gov.uk ).

Q: I have been buying and selling goods via eBay for some time now and would like to know at what point this hobby becomes a business.

A: According to the HM Customs and Revenue website ( hmrc.gov.uk ), “Buying goods for resale on a regular basis is definitely a business activity.” Your eBay activities may therefore already need to be treated as a business. And should your annual turnover be in excess of £70,000 then you will need to register for VAT. You should take advice from an accountant as soon as possible.

Q: Is my bank the best source of advice about finance for my business?

A: Banks will be very knowledgeable about the services that they offer to business owners but that is not the same thing as independent financial advice. Most self-employed people will find all of the help that they require from their accountant although some businesses – especially those with rapid growth aspirations – may need additional, expert advice. The SME Funding Adviser Scheme is an initiative from the Chartered Accountant’s professional body (see icaew.com) that provides access to expert financial advice. Under this scheme, the ICAEW classifies accounting firms as SME Funding Advisers if they have expertise in Bank Loans and Overdrafts, Business Plans for Finance, Business Start-up Finance and Small Scale Equity Finance (Business Angels).

Q: Is it true that employees can smoke in my company van if they are on their own?

A: The smoking ban that came into force on 1st July 2007 requires that vehicles be smoke-free if they are used by more than one person even if those persons are not in the vehicle at the same time. If that is the case, you must also display a sign within the vehicle showing the international “no smoking” symbol not less that 70mm in diameter.

Q: I am thinking of taking on my first employee – where can I get advice about the things I will need to take into account?

A: An excellent source of advice is the Citizens Advice Bureau website, adviceguide.org.uk , which details the basic rights at work that you should take into account. The same website also has a lot of useful information about contracts of employment. In terms of tax and National Insurance, you would be advised to ask your account to handle “payroll” matters for you. Most accountants offer a very cost-effective service and will undertake all the calculations plus generate the necessary payslips for less than £6 per person per month (after initial set-up costs).

JARGON BUSTER

Invoice discounting and factoring

Small businesses can struggle when customers are slow to pay their bills on time. Invoice discounting is a service whereby finance firms advance cash (perhaps 80 to 90%) to the small business when it issues a valid invoice although it retains the responsibility to seek payment from the customer. Invoice factoring is similar but the factoring organisation takes on the responsibility of chasing payment from the customer. Not all types of small business will qualify for invoice discounting or factoring.

Debt restructuring

Sometimes a growing business needs working capital and can benefit from restructuring its debt by extending the repayment period and reducing its monthly repayment amounts. Multiple debts may also be restructured into a single debt - often termed “consolodation”. This mechanism can be used when taking out a single loan to pay off multiple creditors. Always be aware, however,that banks will be unwilling to restructure your business debt unless they can be convinced of your ability to meet the repayments.

Send your questions to Prof Smith at independent@businessboffins.com. Selected questions will be answered each month. Answers are for the general guidance of owner-managers only; always seek professional advice. Professor Smith is the founder of Business Boffins Ltd which, in collaboration with Oxford Brookes University, Anglia Ruskin University, Warwick University, Manchester Metropolitan University and University of the West of England delivers support programmes to small businesses nationwide. Independent and Independent on Sunday readers can enrol on the programme at a discounted rate; see businessboffins.com/independent.

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