RESOURCE CENTRE

Your EnterQuest Bulletin - 15 December 2004

In this week's issue:

• six more reasons why small firms fail - and how to make sure you don't
• how to track your enquiries and conversion rates
• complying with the Trade Descriptions Act 1968
• getting to the top of the search engine heap
  

Weekly stir

Six more reasons why small firms fail - and how to make sure you don't

Despite the dismal statistics about the number of new businesses that fail within three years, almost half a million people still give setting up a small business a go every year, and this figure is steadily on the increase.

And what's encouraging is the fact that not everyone flops, and that if the factors that contribute to failure are recognised and addressed early enough, your chances of survival increase considerably.

Here are six deadly failure factors, along with tips for how you can avoid them.

1. Under funding the business at start up

Unfortunately, too many people underestimate the time it takes for sales to reach target levels and for their new business to start breaking even, or achieve a positive cash flow. It's vital that you not only start up with sufficient capital to acquire the things you need to begin operating your business, but also have enough working capital to see you through those difficult first few months when sales revenues are only just building up.

Talk to your bank, accountant or financial adviser about this as early as possible, using detailed and realistic sales forecasts and cash flow projections to help you avoid running out of cash.

2. Taking on more work than you can do well

Particularly in the first year or two, it's very tempting to get involved in every opportunity that comes your way. But what may happen is that you end up trying to do more work than you are capable of doing well. The result is that quality suffers, and your reputation with it. The entire focus of why you started up in the first place begins to disappear, and this gets noticed by your customers and prospects.

Always concentrate on what you know you can do well, and if you can't, then find someone else inside or outside your business who can do it for you.

3. Having a poor relationship with your bank

You can't communicate enough with your bank manager so they understand and appreciate the particular needs, ups and downs, and tight corners that your new business will have to deal with. Business owners that don't communicate early enough or often enough with their bank get into the greatest difficulty when they reach a stage when they need more support.

If your firm is faced with regular seasonal downturns or slow periods and you've planned for this and discussed it in advance with your bank, then they are far more likely to be supportive in terms of providing loans and overdrafts that will help see you through these dips in trading.

4. Not keeping records and legal documents

Apart from this being essential from a good admin point of view, in many cases keeping certain records and documents is required by law. Yet too many small business owners fail to do it and it results in their downfall sooner or later. This is usually through a combination of ignorance and ineptitude.

Now this is something that everyone can avoid and should regard as standard business practice. After all, your financial records, statements and balance sheet are essential documents that help you understand and manage your financial position at all times. And the tax collectors don't budge an inch with people who are poor or late at making their returns.

5. Not spending enough on professional advice

Many new business owners simply believe they know it all or can learn it all as they go along. Unfortunately, most of them don't remain in business for very long.

Accountants, lawyers, HR, marketing and IT advisers just seem like an unnecessary expense, especially in the early stages of a business. But the reality is that if you really aren't familiar with the ground you're walking on, then getting professional advice should be viewed as a necessary investment in your future.

There's also a wide range of products and services you can buy off-the-shelf to help you with your accounts such as Sage's Instant Accounts - or click for reviews and links for accounting software packages specifically for small businesses. And don't forget services to help you understand and comply with your legal obligations, such as our own Red Tape BUSTER.

6. Hiring crap people

This is every new business owner's nightmare. Getting the wrong people, without the right skills to do the job, or even worse with the wrong attitude, can be extremely damaging to small firms. A rotten attitude and poor service from a member of your team will be smelled a mile away by the customers that you've bent over backwards to attract in the first place.

The people you employ in a small business are going to be your most important asset, and they might even be your USP.

Learn how to interview, select and appoint people based on a clear definition of the duties and responsibilities you need, but above all look for personality attributes such as attitude, initiative and flexibility.

Get great people to work for your new firm and give them as much opportunity and responsibility as possible.

Every small business has vital signs that tell you if the business is doing well or not. Your marketing efforts have vital signs as well that will tell you whether you are doing well in your promotional campaigns.

If you have premises open to customers, you should be tracking the following three basic measurements on a constant basis:

1. How many calls or enquiries do you get per day?
2. How many of those enquiries do you convert to visitors to your premises?
3. How many of those visitors do you convert to customers?
   

Even if you don't have premises, you should still be tracking how many enquiries you get by phone and by e-mail, where they have come from, and how many of them you then convert into buyers.

If you aren't already doing this, you should start today. Here are some tips to show you how to track your enquiries effectively:

• Start a phone log with names and phone numbers. Ask each caller how they heard about your business, and make sure you get all their contact details, including e-mail.
  
  
• Set up a 24-hour line that offers free, recorded information to callers in return for them leaving their name and contact details on an answering machine.
  
  
• Consider setting up an e-mail enquiry form on your website. This means people making an enquiry have to enter their contact details, and you can also ask them to tell you how they heard about you. It will also mean that e-mail enquiries arrive in a standard format that makes them easier to deal with.
  
  
• If you have premises open to the public, keep a detailed log of walk-in traffic to help you determine where it's coming from. Ask visitors how they found out about you to help you understand whether most of your traffic is coming from newspaper ads, Yellow Pages listings, your website or your shop front. Remember also to ask your visitors if they called first, so you can work out your phone-to-visit conversion rate.
  
  
• Persuade phone callers to actually visit your premises by making them a special offer (such as a free report or a discount on a purchase) that they can only get if they come to your business premises.
  
  
• Keep detailed figures on how many people call you or visit you each day, week, month and year. This will enable you to detect seasonal variations and slowdowns, as well as to work out whether your response rate is going up, down or staying static.

If you collate this information regularly, you can determine how well you are spending your marketing budget. For example, if six out of ten visitors read your ad in the local paper, and only one saw your Yellow Pages ad, you can use this information to decide which form of advertising represents the best value for money.

In the UK Small Business Marketing Bible you can find hundreds more tips on promoting your business, as well as techniques and tactics that will help increase sales for any small business in any sector.

Legal tip

Complying with the Trade Descriptions Act 1968

Last week we looked at unfair contract terms, and to continue the theme, this week's legal tip is about the Trade Descriptions Act 1968 (TDA). You've got a world-beating product, or you provide a service that knocks the competition into touch, and you want to tell the public about it. But what are you allowed to say, and what would be against the law?

• The TDA says that you can't apply a false description to the goods you're selling, whether you make them yourself or if you're a retailer selling goods made by another business.
• So, what's a false statement? Well, some statements are obviously false, such as claiming something's made in Britain when it actually comes from Brazil. You can't claim something has particular qualities (such as unbreakability) when it doesn't, and it's forbidden to say your goods are supplied to people or organisations when they're not (think "as used by Nelson Mandela", or "by Royal Appointment").
• The same applies to services - you're not allowed to advertise a service that you can't actually supply.
• The Act also goes into specifics as regards certain false statements about accommodation and facilities (which usually applies to things like hotels and B&Bs) and the provision of services (their nature and the time they're provided).

But none of this stops you saying your products or services are the best. You can say you're the leading company, making world-class goods, and that your services are admired from Land's End to Inverness. Telling people they're dealing with the best is part of the game, and the law allows it.

Having said that, be careful if you trade in used goods - saying something is in excellent condition when it's not is an offence. And there are special conditions applicable to food and to "green claims" made about environmentally friendly goods. You can find out more about this from the Department for Environment, Food and Rural Affairs website.

If in doubt about what you can say to promote your business and goods, you should get in touch with your trading standards officer - the law is enforced by your local authority's trading standards department and they should be able to give good advice. You can find your local branch at http://www.tradingstandards.gov.uk.

The Department of Trade and Industry also has a helpful PDF guide for businesses.

Finally, our Red Tape BUSTER has hundreds more legal tips, as well as FAQs, scenarios and legal checklists essential for small businesses.

Getting to the top of the search engine heap

Search engine ranking - books are written about it, webmasters spend hours improving it, rumours about the latest techniques swirl about the Internet. It seems you really have to be a web expert to understand search engine ranking, but there are one or two simple ways anyone can improve their website's position on a search engine listing.

The benefits are clear - a good search engine ranking will bring you more visitors and potentially more customers. One good way to improve your website's ranking is to make sure plenty of other sites link to yours. Here's how:

• Other sites will link to you if you provide interesting content. You need to make sure it's genuinely interesting though, and that there's plenty of it (after all, people link to good quality sites in order to improve their own websites, not to give free advertising). For example, a woodturner might provide a history of carpentry or photographs, and a food retailer might provide regularly updated seasonal recipes.
  
  
• Ask people to link to you. One obvious source of links is other businesses such as your clients or your suppliers - you don't compete with them and it's in their interests to help you do well.
  
  
• Register with relevant directories. Some sites (known as link farms) simply offer a random list of links and are specifically designed to improve participants' ranking. But the major search engines tend to penalise these and even blacklist them as they dilute the quality of their results. Much more useful are listings on trade association websites, local directories, and other websites related to your business. There's more on link farms and how to avoid them here.
  
  
• Finally, don't spend too long tinkering to improve your ranking. Spend your time creating great content and making an interesting website instead - visitors will spend more time there and come back more frequently, and will ultimately get a better impression of your business.

Page ranking is only a small part of promoting your website. Design, writing, and converting visitors to customers are all important, and the Web Developer's Journal has a good selection of articles on other ways to increase traffic.

Each week we provide you with summaries of some popular or emerging business ideas in the UK.

Here is this week's idea:

• Dial-A-Driver service

Just one word

Regularly improving your vocabulary is not just about learning a new word and its meaning. It will improve your general knowledge and make you feel and act smarter in all sorts of personal and business situations.

Do you know what the difference between a 'quotation' and an 'estimate' is? Which of the following two definitions apply to each word?

a) a calculation of the likely cost of a job or project made by a person who is willing and able to perform the work

b) an offer to sell something at a stated price and under specified conditions

Answer at the end of the Bulletin.

Did you know?

Royal Mail website helps with postage savings

Royal Mail has launched an online service to help small businesses save time and money on their postage, which is just as well, considering it has also recently announced that the price of a first class stamp will go up by 2p to 30p from 7 April next year. The new website provides tips on how to manage ongoing postage costs, along with explanations of the discounts available to small firms, including savings on bulk mailings. It also offers the opportunity to order stamps and envelopes online.

To access the new site, go to:
http://www.royalmail.com/smallbusiness

Festive boom for online shopping

According to new figures from the Interactive Media in Retail Group (IMRG), consumers will spend around £4 billion online this Christmas, which is a 64% increase on figures from 2003. The IMRG says online shopping is growing 26 times faster than high-street sales, with consumers being motivated by convenience, the wide choice available on the web, increased security and savings for purchases made online. Europe's online sales this Christmas are forecast to overtake those in the US, with sales here in the UK responsible for around a third of the total figure for Europe. Yet another reason to get your business website up and running...

To read the IMRG's findings in full, go to:
http://www.imrg.org/IMRG/press.nsf/(httpPressReleases)/
D16597AC857A670680256F640036710A

Adobe are running a tour of practical workshops for businesses interested in learning how they can use the Acrobat 7.0 program to manage everyday business information. The workshops are part of Adobe's plan to increase business use of PDF documents, and will focus on how to create, edit and sign off PDFs, as well as how to restrict access to potentially sensitive work.

Workshops are taking place in January and February across the UK. Find one near you at:
http://www.adobe.co.uk/special/thinkagain/think_again_LE1.html

Finally - practical advice on employment contracts

The Advisory, Conciliation and Arbitration Service (ACAS) has published a useful training tool on its website, to help small business owners thinking of recruiting staff to develop contracts of employment. The free online tool provides guidance on what you have to include in a written statement of employment, how an employment contract actually works, a summary of employees' pay rights, and advice on avoiding misunderstandings. The launch is part of a series of online advice on the employment process that has attracted more than 5,000 users in the last two months.

You need to register (it's free) at the following website in order to get the tool:
http://www.acas.org.uk/elearning

Holiday reading for entrepreneurs

Christmas is less than two weeks away now, and many of you will be taking a well-earned break. However, we know that true entrepreneurs never really stop working, so we're including a list of recommended holiday reading in this week's bulletin. The items on this list, according to the esteemed Wall Street Journal, are top-notch examples of books that genuinely help small business owners and aspiring entrepreneurs to further their ventures.

See if Santa will bring you any of the following:
http://www.startupjournal.com/howto/soundadvice/20041209-capell.html