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Starting a new business in a recession

Starting a new business in a recession can be incredibly demanding but ultimately very rewarding.

However, it is likely that you will need to take a good luck at your product or service before going live. People still have money to spend they are just more careful about how they spend it.

Ask yourself a few questions-

How are you going to save people money?
How are you going to market and promote your business?
What is the most cost effective marketing?
How is your product different to existing products?

Will the sales save businesses?

As 2008 draws to a close most high street shops and many online retailers have started their sales early. Many of the larger stores including Debenhams and M&S launched sales in the run up to Christmas which in years gone by would have been unheard of.

It is during this holiday season that he ghosts of Christmas visit the high street.

The ghost of Christmas past exists to remind many retailers of the happy days. They can look back on many a festive period where shoppers spent money regardless of the cost reassured that their credit cards would take the strain and that their jobs were secure enough to service the debt over the coming months. Whilst this may bring a smile to the face of the company shareholders, many will reflect on whether enough was done during these times to improve customer loyalty and to strengthen the company position.

The ghost of Christmas present now walks through the high street past stores with sales and discounts. There are banners informing the public of store closures and empty shop premises that are nothing but a reminder to the public that times are hard. In an attempt to drive customers through the doors retailers strive to slash their prices and get pennies in the tills.

So what will the ghost of Christmas yet to come reveal? Have the high street stores set a precedent for years to come. Is the future of the high street doomed with more big names suffering the same fate as Woolworths and Adams? Will the public expect nothing less than discounted prices for year upon year of festive spending?

Whilst the future of the high street is not clear, this commentator is sure that their will be more stores that go into administration. How soon the public return to the heavy spending levels of previous years is uncertain. 2009 will be a difficult time for many businesses no matter how big they are. Let us hope that by Christmas 2009 we still have a wide selection of retailers to choose from and that our economy is starting to recover from mistakes made in the past.

More firms enter administration as 2008 closes

It is the end of the year but for many it may feel like the end of the world. The last month of the year has brought administration to many retail companies.

MFI, the home of the flat pack furniture retailer has now ceased trading with the loss of 1,400 jobs after the business failed to find a buyer for its stricken stores. The company's 111 stores have now all been closed.

Woolworths will have closed all of its stores by 5 January 2008 as 27000 temporary and permanent staff lose their jobs.

Ernst & Young has announced, that Music, games and DVD chain Zavvi has gone into administration, threatening 3,400 jobs. The store has struggled with sales but Zavvi's main supplier is Woolworths' unit Entertainment UK (EUK), which went into administration on 27 November.

Whittards have appointed Ernst & Young as administrators and the company is expected to be sold to EPIC private equity partners for an undisclosed sum.

The Warwickshire based firm Adams has confirmed it could go into administration as the New Year approaches after a creditor began proceedings against the childrens clothing retailer.

The outlook looks ‘gloomy’ to say the least for many other retailers. There is considerable speculation in the press and online over ‘who will be next’.

Falling pound helps UK businesses export

The pound has reached a new low against the euro for the fifth day in a row. The pound got close to 1.11 euros the lowest ever exchange rate since the euro was introduced. This even led to exchange rates at UK airports actually exchanging the pound for less than a euro!

Whilst this may sound like bad news for many it can provide opportunities for UK businesses. Companies that currently export goods to members of the EU will find that they are now more competitive.

Many new and existing businesses should look to Europe as a potential market. The low value of the pound should make UK exports more popular in many EU countries. If UK businesses can grasp this opportunity to increase exports it may place the UK in a better position when the current economic downturn improves.

As the pound drops exports should increase further.

Banks to help small firms

Lloyds TSB and HBOS have assured small firms that they will pass on future interest rate cuts to borrowers. The two banks, due to merge, have stated that any interest rate cut will be passed onto small businesses with a turnover of less than one million pounds. They will follow the base rate set by the Bank of England.

Bank of Scotland, part of HBOS, wants £250m of funding from the European Investment Bank to allow it to lend to small businesses at discounted rates.

This move by Lloyds TSB and HBOS should be welcome news for many business start ups that have outstanding debt with the two organisations. It may also encourage new businesses to seek funding from these banks instead of their usual bank.

VAT changes – Pre-Budget Report 2008

In these ‘extraordinary, challenging times’ the government has opted to reduce VAT from 17.5% to 15% in an attempt to encourage spending.

Consider the retailers Next, M&S, Debenhams and John Lewis to name a few. Most of their goods are priced at £20, £49, or £100. All of the stores merchandise will be already marked up with prices that are rounded up (or down) to the whole pound. In theory these products should now sell at, £19.57, £47.96 and £97.88 respectively. Will these items all have their prices adjusted? It is very unlikely and it would be an administrative nightmare for some retailers. Consider Argos for example. Thousands and thousands of lines all priced up and printed in catalogues.

OK there are ways around this. They could simple reduce the fee at the till. Posters could be displayed around the stores informing customers that the new VAT rate will be applied at the till. However, we have a strong feeling that many businesses will pocket the reduced VAT as extra profit.

2008 Pre-Budget Report Summary

Chancellor Alistair Darling presented his second Pre-Budget Report on Monday 24 November 2008. As expected Mr Darling concentrated on measures to protect and support businesses and individuals in these ‘extraordinary, challenging times for the global economy’.
budget brief case
This summary concentrates on the tax measures which are being
introduced. The main tax proposals are:
• reduction in standard rate of VAT from 1 December 2008. The VAT rate will be reduced from 17.5% to 15% from Monday 1 December 2008
• changes to personal allowances including prospective reduction in the basic personal allowances for individuals with income above £100,000
• a prospective new income tax rate of 45% for individuals earning £150,000
• deferral of the planned increase in small company corporation tax rate
• new loss carry back provisions
• details of changes to capital allowances for cars.

Top tips for saving money when starting business

When starting business there are many ways of saving money. Saving money in business is sometimes a case of making a decision between your business ‘NEEDS’ and your business ‘WANTS’.

Work from home
Whilst not all businesses can be operated from home it is likely that your new business can take its first steps from a spare room in your house. Many new businesses convert a spare room to an office. Garages become temporary storage facilities. Consider the costs of renting a new office or business unit for your new venture. They will include solicitor’s fees, property rent, business rates, telephone installation and rent, electricity, gas and water charges, new furniture and equipment, just to get you started. Whilst working from home is not free and you will still be using utilities and paying some business rates, the savings can run to thousands per year. Do you WANT to operate your business from a separate location to your home, or do you NEED to get an office, factory, unit etc.?

business bank accountDo not pay for banking. Most of the high street banks provide free banking for at least 12-24 months. Whilst a £5-£10 administration fee may not seem expensive, this fee leaves your account every month. Imagine someone physically removing £10 from your wallet every month. That’s £120 per year of your money when you could be getting free business banking. Are you sticking with your existing bank because it’s easy and you want to be loyal. There are generally very few reasons that people NEED to keep their banking with one bank. If you have agreements, loans, overdraft facilities then there is a justifiable reason to stay put. If not, and you normally keep your account in credit, then switch bank accounts now.

Stationery and furniture
Only buy what you need, not what you want. There is a temptation for many start ups to kit out their office with new equipment and supplies. It is understandable that this may feel like a positive step towards setting your new business up, but the reality is that you could probably make do with existing equipment and stationery requirements are very low. Do you need that new PC, filing cabinet, colour printer, selection of folders and paper? Perhaps a family member or friend could help you out with some supplies from their office or place of work. Get the basics and avoid the lure of the local stationers.

Energy efficiency
Switch energy suppliers. We are constantly being told that the energy companies are increasing their prices, so shop around for the best deal. Uswitch have provided free energy comparisons for many years.

It sounds too east but you can save pounds by using energy more efficiently. The following tips should help you cut your bills and reduce your carbon footprint-
save energy

Do not leave any equipment on stand by.
Going to lunch? Turn off unused PC’s, office equipment and lights. It takes seconds to power up a modern PC.
Do not heat rooms that are not being used
Switch to energy efficient light bulbs

Printing and design
This is a subject that causes much debate between start up advisors and designers/printers. There are two sides to the argument.

1. Printed stationery, logos, branding all cost money. It may be argued that any money spent on nice letterheads and creative logos could be better spent on advertising your new business, promoting your products, buying stock, etc. An expensive letterhead will not bring your first customers through the door. You could simply produce your own basic stationery layout to get you up and running and look at adding a corporate image to your business when you have taken some orders.

2. Logos, branding and designed stationery present a corporate image for your company. It is argued that building a professional corporate image at the beginning of your business will save you having to re-brand at a later date.

Consider your market. Who are your potential clients and will printed stationery make them more likely to use your service? Is a corporate image essential to developing your business and establishing relationships with customers?

Is printed stationery, branding and logos a ‘need’ for your business or a ‘want’? There is no doubt that many business start ups need business cards for networking and meetings. But do you NEED, compliment slips, letterheads, invoices,

Increase in self assessment filing online

As the date for filing your paper version self assessment tax return has passed it would appear that more people are now filing their tax return online. This is due to the additional time given for filing your tax return online and a £100 penalty that is imposed on any late filing.

The deadlines for submitting your self assessment tax return are –

Manual paper submission – 31 October
Online electronic submission – 31 January

Latest figures estimate that an extra 30% of people will file their return online this year. If you have not filed your paper version before 31 October then you will need to file an online tax return to avoid the penalty.

Who should complete a tax return

•self-employed people
•business partners, and members of LLP’s
•company directors (except not for profit organisations, sometimes registered as chrities)
•people who get rent or income from land and property in the UK (but if you are an employee and this income is less than £2,500 a year a tax return may not be necessary. Please contact HMRC for more information)
•people who have other untaxed income and the tax due on it cannot be collected though a PAYE tax code
•people with taxable foreign income, even if they are not normally resident in the UK (this includes non-resident landlords)
•anyone who receives annually (or can be treated as receiving) income from a trust or settlement, or any income from the estate of a deceased person, and further tax is due on that income
•trustees and personal representatives (including people who manage the tax affairs of deceased persons)
•trustees of certain pension schemes
•names or members of Lloyd's
•ministers of religion (any faith)
•employees and pensioners with more complex tax affairs - see the following information

You need to fill in a tax return if you:
•have an annual income of £100,000 or more
•have annual income from savings or investments of £10,000 or more (before tax)
•claim against tax for expenses or professional subscriptions of £2,500 or more
•have untaxed income of £2,500 or more (although some pensioners may be able to pay the tax on this through their PAYE tax code)
•owe tax at the end of the year that cannot be collected through a change to your PAYE tax code for the following year

If you are 65 or over, HM Revenue & Customs may ask you to fill in a tax return so that they can work out how much higher personal allowance or Married Couple's Allowance you should get

For further information visit

Mum's the Business - Mothers starting new businesses

Latest figures suggest that an increasing number of mums are starting their own businesses. According to a survey by YouGov the reason given for most mums wanting to start their own business was for increased flexibility.

Many mothers find that ‘standard’ jobs offer little or no flexibility and do not fit with their role as a mother. Returning to work with a current employer often involves a full working week with early starts and late finishes. Jobs that do offer flexibility may not suit their skills and attributes and may simply not be challenging or rewarding. Therefore more Mums are looking to improve their work life balance by starting their own business.

By starting a new home based business many Mum’s are able to juggle the demands of bringing up their family with the challenges of running their own business. Many Mums have found that becoming a parent has stimulated a new interest or highlighted a potential new market that could be profitable.

Whilst starting a new business and looking after a family is far from easy, it does provide the solution for some parents.

Read our Business Blog for regular updates about finance, the economy, news of interest and related stories.


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