RESOURCE CENTRE

Your EnterQuest Bulletin - 25 May 2005

In this week's issue:

• why do people really go into business?
• simple steps to promote your business
• tax and the family business - new developments
• finding tutorials and courses on the Internet
• the British Standards Institute's website reviewed
  

Small business answers

If you have any questions about your business idea, are lacking some basic data about your target market, or simply need help tracking down a grant, subsidy or other source of business support in your local area, then send an e-mail with your query to the EnterQuest information team and we'll do our best to help.

Send your question to enterquest@cobwebinfo.com.

Weekly stir

Why do people really go into business?

One Saturday afternoon, a lawyer was making himself a cup of tea when he noticed a leak coming from under his kitchen sink. So he picked up the phone book and called his local plumber, who turned up within an hour. The plumber took out a spanner from his tool bag, fiddled with a pipe for a couple of minutes, then announced the problem was fixed and handed the lawyer a bill for £250.

"£250? That's preposterous!" blurted the very agitated lawyer. "Even I don't charge that much, and I'm a lawyer."

"No, I didn't charge that much when I was a lawyer either," replied the plumber.

An amusing story, yes, but not all that implausible when you think about it.

This relates to our question. Why do people really go into business? Or perhaps more accurately, why SHOULD people really go into business?

Most people, when they go into business, do so because they believe they will be successful at doing something that they know they are already good at, where they have loads of experience or which is related to their existing profession.

And a very sound strategy this is too. No-one in their right mind would start up a business doing something that they knew absolutely nothing about, would they? Well, maybe we should look at business failure rates a bit closer, because they reveal that many people fail because they do exactly that - they start a business that they know nothing about.

Incredibly, this is especially the case for entrepreneurs who have already run a successful business and then, in a misguided fit of omnipotence, think they can run any business in any sector, where they've got no experience at all.

So why would - or why should - a lawyer decide to become a plumber?

There's a famous story about a bank robber who wreaked havoc during the 1950s by successfully knocking off banks in several American cities without getting caught. However, one day he finally ran out of luck and, when captured, was asked why he did it.

His reply, so the story goes, was: "Because that's where the money is".

See the point? And no, it's not that you should start robbing banks.

The point is that smart people who go into business, or change their business, do so because they can see an opportunity to make money, and in some cases quite a lot more money than they are currently earning.

This principle applies whether people take the plunge in their current profession or area of expertise, or go into a different "profession" where they learn, get trained up or team up with someone who knows what they're doing.

The right formula for pursuing a successful business opportunity involves not only understanding the business you are going into and how to deliver a professional service to your customers, but also, and more importantly, recognising that there is sufficient demand and a large unfulfilled gap in the market.

In other words, it's about working out that there's going to be enough money in it that you will be able to cover your costs, turn a profit, and potentially grow your new enterprise.

The joke above may be a bit far-fetched, but in reality a lawyer could quite easily decide to become a plumber because there is a national shortage of them, and there is a large, regular, repeat-buying market which has to find the money to pay for the service.

If you can see an opportunity where there's money to be made, where there are people willing to spend it, and with a gap in provision of the service, then that's a real business opportunity worth looking at.

Marketing tip

Simple steps to promote your businesses

When you're developing a marketing strategy to grow your business and find new customers, it's sometimes easy to lose sight of the basic, but effective, marketing ideas that can work for any small business in any sector.

So here's a reminder about five low-cost or no-cost marketing ideas that are guaranteed to boost your profile, along with some practical resources and links to help you get started.

1) Word-of-mouth referrals and recommendations

This is one of the most cost-effective, powerful forms of promotion available to a small business, and you don't necessarily need to wait until customers are suitably impressed with your service to recommend you to friends - you can even identify potential customers through the grapevine of word of mouth.

Write a list of 20 people you know but don't see regularly - they might be relatives, friends, ex-colleagues or neighbours. Send each of them a friendly e-mail or postcard to tell them about your business. Ask them for feedback, advice or the contact details of anyone who might be interested in the products and services you offer.

To view an example of an effective referral marketing system, visit Instant Referrals. PublicityAdviser also has a series of tips on getting and giving referrals.

2) Networking

Attending a business networking event might seem intimidating at first, especially if you're on your own and have little experience. But there are plenty of ways to make it a less scary and even an enjoyable experience.

• Don't feel you have to be pushy and sell yourself - the number one rule of networking is to listen.
• Ask questions, gather information, offer contacts and advice - people will remember you for it.

Find a network near you by consulting your local Chamber of Commerce.

3) Business cards

The thing to remember with business cards is that everyone has them, so yours need to stand out from the crowd.

• Get a new batch printed on unusual material - textured card, plastic or even wood - or make it an unusual shape.
• Offer a business tip, memorable quote or special offer on the back.
• Include your photo on the card - this makes it more personal, easier to remember you and harder to throw away.

Click Business Cards offers highly practical tips on designing killer business cards, and go to Refernet for a series of tips on situations and places where you should use your business cards.

4) Discussion online

The Internet offers hundreds of different opportunities for promoting your business - but it's difficult to know where to start, and to keep costs down.

A free way of raising your profile on the web is to join specialised forums and discussion groups for your sector, and exchange links with websites that complement yours. For those of you based in London, the Affinity Trading Network is a good example of an active online network for small businesses. You get the chance to create and post a full web profile about your business and access to the lively Trading Boards, which enable you to chat with others and increase your online exposure. Check out this directory of many other UK business forums.

5) Testimonials

Having customer testimonials on your marketing literature or your website is a simple way to prove your credibility to potential customers who may be undecided about buying from you. One easy way to get testimonials is to ask your existing customers for feedback - do this over the phone or via a short survey in the mail or on your website.

When you do get a positive comment that you'd like to use as a testimonial, make sure you ask permission first. Explain clearly how you will use the testimonial, whether this is on your website, in your newsletter or as part of a new brochure, mailshot or flyer. Make sure you name the customer when you quote the testimonial - this carries more weight, but will mean ensuring you get permission to use the name and above all, spell it correctly!

Find hundreds more simple, cheap and easy to implement ideas, tips and techniques for increasing sales no matter what type of business you run in the UK Small Business Marketing Bible.

Legal tip

Tax and the family business - new developments

Last October, we reported a legal case which involved a company called Arctic Systems and the Inland Revenue. Arctic Systems was challenging a new way of calculating tax payable by limited companies with two members, where one member was a specialist and the other took care of the administrative side of the business. The Inland Revenue had decided that profits divided between the two members should be taxable as if they'd only been earned by the specialist member, and this threatened to affect thousands of husband-and-wife teams across the country.

Unfortunately, Arctic Systems lost their case and the Inland Revenue won, and at the end of April it was announced that an appeal had also failed. So what are implications for husband-and-wife teams in a limited company?

• Firstly, the advice given to this sort of family business by accountants and tax experts will have to change and in some cases the traditional limited company structure may no longer be a good idea.
  
  
• Secondly, dividends paid on shares in a husband-and-wife team where both members own equal shares will be taxable according to the value of their contribution to the company. If, for example, a computer consultant is the chief income earner in a company, thanks to knowledge and experience and contacts, his or her contribution to the company's income is greater. Profits (or dividends) distributed to the other member may be regarded more as a gift (or for legal purposes a 'settlement') than as earned.
  
  
• The last implication is that the situation is still a bit confused, and businesses that think they might be affected by this new application of tax law should talk to their accountant. They should ask whether their status as a limited company might lead to higher taxes, and whether HM Revenue & Customs (HMRC) might backdate the demand.

The Institute of Chartered Accountants of England and Wales offers regularly updated links to information on this case. And HMRC has published guidance of its own, along with Helpsheet IR270 which defines a 'settlement'.

And the UK Red Tape BUSTER has hundreds of factsheets, scenarios and frequently asked questions about tax and many other small business legal situations.

IT tip

Finding tutorials and courses on the Internet

It's convenient and flexible, so it's no wonder e-learning is becoming increasingly popular. People are now using the Internet and CD-ROMs to follow courses in hundreds of subjects, from computer programming and word-processing to health and safety and staff management.

For a small business owner or sole trader, e-learning can be ideal if you need to delve into a subject but don't have time to go to college.

• You can follow courses at your own pace, and return to topics you need to cover in depth. It saves you the trouble and expense of travelling to lectures. Many courses combine online teaching with tutoring by e-mail and occasional days or weeks of intensive lectures in a traditional classroom.
  
  
• The BBC offers numerous basic courses, including several for those interested in learning European languages.
  
  
• The National Extension College offers a huge range of web-based distance learning courses covering everything from business management to creative arts.
  
  
• And the Open University, which has been offering distance-learning business courses for years, continues to provide education in the digital age. You can study using the Internet, CD-ROMs, video and of course books (remember them?). Check out the OU website for more information.
  
  
• Don't forget the wealth of quick tutorials available online covering IT-related topics such as word-processing, spreadsheets and HTML, or other issues such as giving a presentation or writing a sales letter. You can find them via the search engines and more often than not, they're free and accessible instantly. See the following as examples:
  
  Help With PCs
  Tech Tutorials
  How Stuff Works
  

New business idea

Here is this week's idea:

• Online Ticketing Agency

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 an 'alterpreneur' is?

a) someone who runs a business in addition to a full-time job
b) a member of a partnership with no say in the day-to-day running of the firm
c) a small business owner with no interest in growing their venture
d) an entrepreneur who runs two or more businesses

Answer at the end of the Bulletin.

Website review

The British Standards Institute (BSI - www.bsi-global.com)

Any business involved in the manufacture or sale of products for consumers needs to make sure their wares comply with minimum British Standards. But how helpful is the website of the organisation responsible for setting these standards?

• Navigation - the homepage is quite clearly signposted, and the sections containing the standards themselves are easy to find. News, information about kitemarks and CE marking and details about different products are also well presented. But as a guest you can only view the names of standards - you have to register to view a summary of what they actually mean, and have to pay to access the whole standard.
  
  
  

• Accessibility - the information is tricky to find, but the site does offer alternatives for those who can't view images, and claims to comply with minimum accessibility standards.
  
  
  
  
• Content - there is a huge amount of information on this site, and it's really useful to be able to read details about international and European standards as well as just British ones. But some of the detail is quite technical and complex, and would benefit from a more jargon-free, practical explanation. The business information micro-sites go some way to addressing this, but the site would still benefit from more factsheets and checklists.
  
  
  
  
• Relevance - news and press releases are up to date and are published at a rate of about three per month, and the Institute's quarterly magazine is fresh and interesting, populated with short, topical articles on relevant issues.
  
  

A mediocre 12 out of 20 for the BSI - adding some practical ways to make this highly technical information more digestible for business owners struggling to understand the law would dramatically improve this score.

Our rating - 12/20

Did you know?

The cold call scammers are targeting small firms again

The Office of Fair Trading (OFT) is warning businesses to be on their guard against cold callers falsely claiming to sell advertising in publications that support the emergency services or charities. This is illegal under the Control of Misleading Advertisements Regulations 1988, and businesses are urged to report any such call to the OFT immediately.

Another current scam involves cold callers falsely claiming that a business has already bought advertising space, and demanding payment for it. Many inexperienced entrepreneurs fall prey to these scams simply because they don't know any better - fortunately, the OFT is offering tips about avoiding these cold call scams on its website.

Digital revolution has bypassed British firms

Small business owners and older consumers don't understand new technology, according to a new report by communications watchdog Ofcom. Despite the Government's fanciful plans to have the entire UK online by the end of this year, Ofcom's survey shows that a third of small firms don't know what 'broadband' means and most have never heard of 3G, wi-fi or Voice over Internet Protocol (VoIP) technology. 45% of firms polled said they did not need Internet access and this trend was repeated among people over 65.

For any readers who are bamboozled by these techie terms, here's a quick jargon-busting guide to help you out:

• 3G - third generation mobile phone technology, capable of multimedia communication and high-speed data download
• wi-fi - officially short for 'wireless fidelity', this term has come to refer to a wireless network
• VoIP - a technology for transmitting ordinary phone calls over the Internet

Critical patches released for Firefox flaws

The Mozilla Foundation has issued patches for two "extremely critical" flaws in its Firefox web browser. The vulnerabilities can allow hackers to access and control a Firefox user's computer. Experts are warning that as Firefox becomes more popular, the number of attacks on the browser is likely to increase. Ironically, more people are switching to Firefox from Microsoft's Internet Explorer (IE) because of the rash of security problems afflicting IE.

Worth a visit

New community broadband resource

A new database has been launched which provides details about over 500 community broadband projects currently in progress in the UK. The Community Broadband Network (CBN) has developed the resource, and claims that over 50,000 small businesses and homes are supported by such initiatives, which tend to be run by social enterprises and voluntary groups. You can get involved with a network in your area, or get tips and mentoring to help set up your own initiative.

Faster loading pages - even with pics

The GifBot tool from NetMechanic compresses your GIF, JPEG and animated GIF images so that you can use them on your website without risking your pages loading slowly. It does this by reducing the size of the file without losing any of the image quality.

Worth a read

Aimed at charities, social enterprises and voluntary organisations, this book's practical, readable approach makes it easy to digest. It focuses on the basics of marketing, looking at understanding your target audience, selecting the most appropriate promotional technique and developing an effective marketing strategy, using real-life case studies and examples. Check out:

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Good luck

The EnterQuest Team

This information is meant as a starting point only. Whilst all reasonable efforts have been made, the publisher makes no warranties that the information is accurate and up-to-date and will not be responsible for any errors or omissions in the information nor any consequences of any errors or omissions. Professional advice should be sought where appropriate.