How2Become an Entrepreneur by Kern Jones

AN ENTREPRENEUR INTRODUCTION GREAT IDEAS THE TOP 10 INSIDER TIPS AND ADVICE BEING AN ENTREPRENEUR THINKING LIKE AN ENTREPRENEUR FINANCING YOUR BUSINESS BUILDING YOUR BUSINESS HOW TO AVOID MISTAKES REGISTERING YOUR BUSINESS FRANCHISES FINANCIAL MANAGEMENT USING THE INTERNET

How2become... AN

ENTREPRENEUR

INTRODUCTION Dear Sir/Madam, Thank you for purchasing your new ‘How to become an Entrepreneur’ CD-ROM – We very much value your custom. So you want to become an Entrepreneur? Maybe you have a business idea that you think could be the next big thing, or maybe you are just seeking to earn an extra bit of cash in your spare time. Whatever your ideas, dreams or aspirations, it is possible to be whatever you want. This may seem like a bold statement but it is in fact true! Many people are beginning to believe in themselves and take the plunge in starting their own business or company. The latest Global Entrepreneurship Monitor Report shows that the UK has the third highest entrepreneurship rate of the G7 economies behind the US and Canada. We feel sure that you’ll ﬁnd this guide both informative, inspiring and motivating. Take the time to read the content, learn from the mistakes of others and above all – believe in yourself! How2become was formed during 2005. The idea came from nowhere, and it is now a highly successful business. You can do it too! Good luck and best wishes,

Richard McMunn Founder of How2become Ltd P.S. Visit my business start-up website for free tips at: www.RichardMcMunn.com

How2become... AN

ENTREPRENEUR

GREAT IDEAS GREAT IDEAS COME FROM NOTHING Take a look at any business around you. Whether it be on the Internet or the high street, in most cases, that business started from nothing. Look at Google for example – a simple idea that has grown to be one of the most successful businesses in the world. In fact, Google now enjoys a turnover of millions of pounds every day! That business idea came from nothing and was turned into an online phenomenon. Perhaps a good example of how a business can grow from nothing is the business from which you purchased this guide – How2become Ltd. My name is Richard McMunn and I started the business How2become in 2005. I would say that I’ve always been a creative person, determined, driven and enthusiastic. Prior to 2005 I had never been in business, with the exception of a mobile car washing business that I set up when I was 15 years old. I used to wash cars on my local housing estate and charge £1.50 for each wash. I can remember offering a unique service where I would carry buckets of water round to people’s homes in order to save them from getting out of bed on a Sunday morning. When they eventually woke up, their car had been cleaned. I would then call round later to collect the money. I used to earn about £70 a weekend, which for a teenager was a lot of money. I carried on the car washing for a few months until I left school and decided to join the Royal Navy. After 4 years serving on HMS Invincible I decided to join the Fire Service. I never viewed the car wash business as ‘a business’ but instead as a source to make a few extra pounds. However, it wasn’t until I started the company How2become, some 20 years later, that I realised how much I had learnt back then. After serving 14 years in the UK Fire Service I wanted a fresh challenge. The thought of leaving such a secure job was scary, so I decided to think up some ways to make a bit of extra cash in my spare time. I had heard of a friend who had set up an Internet business that was doing very well, so I decided to think of one myself. I had very little experience of the Internet apart from visiting Friends Reunited and the odd dating site!

How2become... AN

ENTREPRENEUR

GREAT IDEAS GREAT IDEAS COME FROM NOTHING I sat at home during Christmas 2004 and began to think of ideas. After half an hour I had a plan! People always used to ask me how they could get into the Fire Service. I used to sit down with them and tell them how to prepare effectively for each stage. They would then thank me for my time and go on their merry way. To me, this was the business opportunity I had been looking for. I carried out a bit of research on the Internet and searched for a few domain names that I had ideas for. The first domain name I purchased was www. becomeafirefighter.co.uk. After all, I was going to be selling a guide on how to join the Fire Service, so this was an ideal title! The only problem with this name was that it was too restrictive. How could I sell other career guides from a website with a title like that? I then tried to think of other names for a business that were more generic and that would give me the freedom to expand if I so wished. The first one that came to mind was How2become and after checking to see if it was available I purchased the .co.uk version for £1.99. And so How2become was born! Unfortunately the .com version of How2become was not available at that time as it was already was owned by an American gentleman from whom the company later purchased it from for $5,000! For the next 3 months I worked tirelessly in the evenings and at weekends writing my first ‘How to become a UK Firefighter’ guide. Although I knew my subject well, I was not a fantastic writer or a fast typist and therefore it took me longer than I had originally anticipated to complete the guide. During this period I also attended a ‘business start up’ course with Business Link. This proved to be one of the best decisions I have ever made for a number of reasons. To begin with, the tutor on that particular course is now the company’s business mentor and I, along with my business partner, meet up with him once a month to discuss progress and new ideas. He keeps our feet on the ground and provides us with essential advice and guidance. The second reason why the course proved so vital is because it taught me the basic essentials that I needed to know about in order to set up my own business, like registering your company and taking steps to protect your brand.

How2become... AN

ENTREPRENEUR

GREAT IDEAS GREAT IDEAS COME FROM NOTHING There are so many things to think about when you set up a new business and that extra support and guidance can save you a lot of time and money. Once the first guide was complete, I needed to create a website in order to sell it. I have to say that this was probably the hardest thing I have ever done, primarily due to my lack of experience on the Internet. I also refused to pay someone else to do it as I wanted to have control over my website 24 hours a day. I did not like the idea of having to wait for a company to update my website for some extortionate cost, so I decided to learn the hard way – and I’m glad that I did. I still look after the website myself, which is constantly changing and requires updating every day of the week. There are many web hosting companies out there who can provide you with a cost effective ‘do-it-yourself’ web package. I started out with www.oneandone. co.uk who I found to be quite easy to use. The only frustration I found was that their call centre was based in France and their call operators did not speak very good English. I can remember sitting in my cellar on the phone to one of the operators for 2 long hours trying to get him to explain how to add Microsoft FrontPage extensions to my website. It’s like anything else though, once you know how - it’s easy! You just have to be prepared to work hard and not give in. Once my website was complete I was ready to sell my first guide. I had heard of ‘pay-per-click’ advertising via Internet search engines such as Google, Yahoo, and Miva, but once again had no experience of how to get started. One of the dangers of this type of advertising is that you can spend hundreds of pounds and not sell anything! However, it is a risk that is worth taking, though there are a few things I know now that I wish I knew back then. Visit the section on ‘Pay-per-click’ advertising in your guide for some valuable tips and advice on how to get started. So there I was with my first product complete, my website complete, and no customers! Many people think that once you have a website, people will automatically find it. This is not the case. You have to go out and get your own customers/visitors and this can cost you a lot of money. Some websites gain automatic visits through publicity in local and national newspapers and this is a great way to gain customers.

How2become... AN

ENTREPRENEUR

GREAT IDEAS GREAT IDEAS COME FROM NOTHING I started with pay-per-click advertising through a company called www.miva. com. They basically account for a small percentage of the total Internet search traffic but I found them useful as a starting point. Their adverts appear on national newspaper websites and other well known company websites. Pay-per-click advertising basically means that you pay a specific amount every time someone clicks on your advert. How much you are willing to pay is up to you! Obviously the more you are prepared to pay, the further up the rankings you appear. This rule applies to Miva and Yahoo but Google is a totally different kettle of fish! (For more about pay-per-click advertising see the dedicated section of this guide.) So, after three days of ‘bidding on keywords’ through Miva I finally sold my first product! The feeling of selling my first product was amazing! Ok, so I’d only made about £7 after advertising/production costs but it was a start and I knew that there was a market for my product. With my £7 profit I then went out and purchased more CDs so that I had more products to sell. I had spent very little money setting up the company and it was my intention never to borrow any money from the bank. To this day the company has never borrowed any money from the bank. After a few weeks of trading on the Internet, sales were averaging approximately 1 per day. I was getting the visits to the site but I was only converting at approximately one sale every 100 clicks. Each visit to my site that Miva generated for me cost 10p. This basically meant that for every £10 I spent on advertising I would sell one product. The total product sale price (including postage and packaging) was £17.95. Therefore I was making approximately £5 per sale after advertising, postage and packaging, and production costs. To spend £10 on advertising in order to sell one product was ludicrous! So I decided to look at ways to improve my conversion rate. To begin with, my website was not that great and it didn’t reflect the product that I was selling in the best light. I needed to make it better and look more appealing to the customer. I decided to ask a friend (who I knew would be honest) to have a look at my site and provide me with open and honest feedback. A little while later I received an email from my friend, who had reviewed my website, and this is what he said:

How2become... AN

ENTREPRENEUR

GREAT IDEAS GREAT IDEAS COME FROM NOTHING E mail from friend – Hi Rick, I’ve had a look at your site and it made me laugh!! I have to give you 100% for effort but I certainly wouldn’t buy from it. I don’t think it looks genuine. It doesn’t really inspire me with confidence and I wouldn’t feel safe that I’d actually get anything for my money. To begin with there’re no contact details on your site so I can’t contact you to ask questions and there’re also no details about your company, such as your company registration number etc. Keep trying mate and let me know if you need any more advice!, Best wishes, Pete It is always worth asking for feedback, whether it’s from people who don’t know you or from friends/relatives who are going to be totally honest with you. After receiving the above email I changed just one thing on the website that effectively increased my sales by 300%, and that was the inclusion of a contact email address. As soon as I included this on the site my sales went up to 3 a day! This doesn’t sound like much but it equated to £150 profit a week, which I viewed as a lot of money. I was now beginning to learn new skills and although my business was far from perfect, I had a business that was starting to make money. Over the next few months I worked my socks off trying to create other products whilst still running the business and improving my existing products and the website. I was still learning about website creation and trying out different pricing structures to see which one worked best. I decided to create a new guide entitled ‘How to become a Police Officer’, which like the first would provide insider tips and advice on how to pass the selection test. As I did not have a background of employment with the Police, I needed to find some inside information on how to secure a job within the Police Force. I then decided to apply to become a Police Officer myself and go through the application process just so I could get the information!

How2become... AN

ENTREPRENEUR

GREAT IDEAS GREAT IDEAS COME FROM NOTHING Quite a brave step but the principle of applying for jobs and turning them down when offered has now proven to be the ‘backbone’ of How2become. I also new a friend who worked in Police recruitment who provided me with some fantastic tips on how people could improve their chances of success whilst applying to join the Police. A few months later my second guide was complete and I once again started to create a web page for the Police Officer guide. Once I had developed and started to promote my second product things began to change. I started to believe that I could create a company that could provide information guides on just about anything. Providing my products were good and contained ‘inside’ information, there would always be a market for them. This is where the running of the business was starting to take over every spare minute I had. I was still working full time for the Fire Service and I was working most evenings and weekends running the business. After approximately 6 months of selling I was getting tired and needed some help. I wasn’t yet prepared to give up my full time job, just in case the business didn’t work out, so I decided to take on a business partner. This decision was probably the second best decision I ever made, for a number of reasons. To begin with, it allowed me to create more products and concentrate on the things that I was good at. Secondly, and more importantly, it allowed me to give the things that I wasn’t very good at to someone else. I realised very early on in the business that my weaknesses were the organisation of the finances and bookkeeping! My friend Peter Gardner, who was an old colleague from the Fire Service, had kept a keen interest in the business and he often asked me how things were going whenever we went out for a social drink together. It was Peter whom I asked to join me in business as I knew he was a very organised person and was good with figures and accounts! He was the missing link that the business needed. One of the most important things about being an entrepreneur is to be aware of your weaknesses. You don’t have to be good at everything to be successful. When you start your own business you will soon realise what you are good at, and what you are not. Taking on a business partner is a difficult decision and I would only recommend it if you are 100% certain that your partnership is going to work. I was lucky when I took on Peter as a business partner due to the fact that our partnership works extremely well, both in business and in friendship.

How2become... AN

ENTREPRENEUR

GREAT IDEAS GREAT IDEAS COME FROM NOTHING Once Peter had come on board he assumed the role of Commercial Director, while I became the Business Development Director. I would be responsible for the development side of things and Peter would take care of all the commercial aspects, including the ordering/distribution of products and customer care etc. This was a big step for the company as it allowed me to concentrate on creating guides and developing the website. It also allowed me to enter the business into competitions, something I believe is very important for any new business. I then set about writing more guides, going through selection processes and making contacts. Within the first 12 months of working together we had 25 products for sale and our turnover had increased dramatically. I entered the company into a number of business awards but didn’t achieve much success until one day I noticed an advert on MSN. The HSBC bank were inviting new businesses under 3 years old to enter a Start Up Stars competition. Basically, the HSBC Start-Up Stars competition is the UK’s premier business awards, supported by Sky News and the Daily Express. Start-Up Stars isn’t just about finding the most profitable businesses with high turnovers, but it recognises those businesses that have identified an opportunity and used creativity and sound business practice to make it a success. We received news during April 2006 (12 months after the business was first registered) that we had become a regional winner of the competition and that we would now go forward to the National Finalist judging panel. 25 businesses would compete for a top 10 finalist spot and the chance to win £25,000 prize money. There are 2 main reasons why I believe it is important for a business to enter competitions of this nature. First and foremost, entering competitions will make you raise your game. It will make you look at areas of your business that you may otherwise neglect. The second reason I think it is important for a business to enter competitions is for the publicity. Just by becoming a HSBC Start-Up Stars regional finalist we received vital radio and newspaper coverage. It also entitled us to display the HSBC Start-Up Stars logo on our website, which would further give customers the confidence to purchase our products and ultimately increase our sales and turnover.

How2become... AN

ENTREPRENEUR

GREAT IDEAS GREAT IDEAS COME FROM NOTHING The business is still being developed and requires constant attention. This situation will hopefully never change. The creation and development of any business venture is a constant cycle and all the time you are doing this you will have a business. Start your entrepreneurial career as you mean to go on. Pace yourself, focus on building a sustainable business and go about your business with professionalism, pride and determination. By all means be in it for the money, but more importantly be in it for the fun! Good luck,

Richard McMunn

How2become... AN

ENTREPRENEUR

TOP 10 INSIDER TIPS AND ADVICE TIP 1 - HAVE A FANTASTIC IDEA Easier said than done I hear you say? Of course it is not easy to think of a fantastic idea but if you apply a bit of logic to the process you will be amazed at the idea you come up with. To begin with I always have a piece of paper and a pencil on my bedside table just in case I think of something in the night. There’s nothing worse than thinking of an idea and then soon forgetting about it because you’ve been unable to write it down. When you are out and about shopping or eating at a restaurant, have a look around and take note of what the people are doing. What can you see? Are there any opportunities? A great idea comes from having the ability to notice and detect ‘gaps’ in the market place. Why has eBay become such a successful business? The answer is because it is simple and there is a huge demand for the service. Always be on the look out for ideas and opportunities but remember to keep them to yourself or close to people you can trust. The last thing you want is someone else stealing your idea! If you have an idea and you want some advice then please feel free to contact me at: richardmcmunn@how2become.co.uk

How2become... AN

ENTREPRENEUR

TOP 10 INSIDER TIPS AND ADVICE TIP 2 – ATTEND A START UP COURSE When you ﬁrst start up a business you will need some basic tips and advice. You will ﬁnd most of this within this guide but you may wish to attend a local start up course in your area. You should be able to attend a free course, which may also show you how to complete a business plan. Take a look at Business Link, which is a Government business advice and support agency. They usually run courses in most areas and are an invaluable source of free information. Another invaluable resource is the Enterprise Agency located in England. They often run free start up courses and are fantastic for anyone who is thinking of setting up a new business. Their courses will teach you about the basics you need to know in order to get started and, more importantly, to help you avoid the pitfalls! For those of you in Scotland, the Enterprise Agency can be found here. For those people who are interested in advice for starting up a new business in Wales, please click here.

How2become... AN

ENTREPRENEUR

TOP 10 INSIDER TIPS AND ADVICE TIP 3 – CONSIDER THE INTERNET The Internet is an amazing tool that can have so many benefits to any new business. If your business can be developed and operated on the Internet then you should take advantage of this. Even if you are setting up a Bed and Breakfast or Hotel chain you will need to have a website where people can book online. Each year more and more people use the Internet to promote and sell their products. Conversely, more and more people are using the Internet to purchase products from the comfort of their homes. One of the main advantages of running an Internet business is there are very few overheads. If you are setting up a shop or retail unit then your overheads can be extortionate. Salaries, rental costs, business rates, heating and electricity are just a small number of overheads you will endure if you choose to have premises. All of the above will eat into your profits so you will need to make a specific amount each month just to break even! With an Internet business you do not need a flash office or lots of employees. When starting up your business try to think of the different ways that you can take advantage of the Internet.

How2become... AN

ENTREPRENEUR

TOP 10 INSIDER TIPS AND ADVICE TIP 4 – WORK HARD AND DON’T GIVE UP! When you start your own business it is understandably going to take up most of your time. Your evenings, weekends and every other spare minute will be taken up by establishing the business and moving things forward. During the initial stages of the new business’ growth and development you will undoubtedly feel stressed, and on occasions you will feel like giving it all up. If you do get to this stage it would be worthwhile taking a short break and coming back to it later. It is very easy to burn yourself out and you will need to plan ahead to avoid this happening. When starting your own business you will need to have plenty of energy so make sure you get adequate rest, exercise and make sure you eat a healthy diet. You will have heard of the saying ‘Work hard, play hard’. Most successful entrepreneurs know how to create a healthy work/lifestyle balance and this is something that you should try to incorporate into your schedule early on. Take the time out to do things you like doing and reward yourself when you reach signiﬁcant milestones!

How2become... AN

ENTREPRENEUR

TOP 10 INSIDER TIPS AND ADVICE TIP 5 – LEARN TO WALK BEFORE YOU RUN One of the problems you will feel when starting your new business is a level of frustration. That is, frustration at not being able to move forward as quickly as you want. Any new business needs solid foundations if it is to become sustainable. It is pointless building a new business that is successful in its ﬁrst year and then fails in the proceeding year due to a lack of initial planning and foresight. When a builder builds a house, he makes sure the foundations are laid and fully dry before he begins to lay his bricks on top. Use this analogy when building your business. Create solid foundations in terms of ﬁnancial management, product quality and customer service standards before you move forward. These are the type of things that can come back to haunt you if you fail to put effective systems in place very early on. Think carefully before borrowing money. Can you cope without it? Are there other ways of funding your business that have less of a risk attached to them? Think carefully before you leap and strive for sustainability!

How2become... AN

ENTREPRENEUR

TOP 10 INSIDER TIPS AND ADVICE TIP 6 – ELIMINATE WASTEFUL MEETINGS Statistics show that over half the time spent in meetings is waste. This means half of meeting time failed to accomplish what was intended and/or the meeting was attended by the wrong people or people who were not prepared for the meeting. This fact also applies to informal face-to-face meetings. Before setting up a meeting, ask yourself the following questions: • • • • •

Is the meeting essential? Who needs to be at the meeting? How long does the meeting need to run for? (maximum) What do I aim to get out of the meeting? How will I know if the meeting is a success?

I can remember an old boss I used to have who was a fantastic meeting organiser and coordinator. The meeting would always ﬁnish bang on time. He would always ensure the discussion was relevant. He would eliminate wafﬂe and move on when appropriate. He would always control the meeting and direct it in the way he wanted to – in order to ensure it was a success. Everyone left the meeting with targets and objectives that were reportable.

How2become... AN

ENTREPRENEUR

TOP 10 INSIDER TIPS AND ADVICE TIP 7 - CALCULATE THE COST OF WASTED TIME When you understand how much wasted time costs your business, fixing it quickly becomes an essential priority. To calculate the cost of wasted time, apply a “rule of thumb” for the cost of a minute of an average employee’s time. Multiply this amount by the time spent on any particular activity that fails to perform as required for you or your customers. Double this cost if the person could have used the time to do something productive for you. Remember that time during the working day is time that should be spent on moving your business forward. Employees who fail to recognise this are costing you money. Even when the business is doing well and profits are high, act as if profits are low and look to save money wherever you go!

How2become... AN

ENTREPRENEUR

TOP 10 INSIDER TIPS AND ADVICE TIP 8 - PLAN TO DO IT RIGHT THE FIRST TIME Save time by treating the activity you are doing as if it were valuable to you. When you value something, you take the time to do it right the ﬁrst time. This means planning in advance to reduce surprises and eliminate variations in your handling processes. Consider the following: • • • • •

What if things go wrong – how will we cope? Are people fully trained to do their job properly? What perceptions do people have about the task and its priority? Do they have the right tools to do the job? What delays could we encounter and how will this affect us?

For example, if you are creating a new product and the person who is working on it suddenly goes off sick for 2 weeks, how will you cope? How will this affect the business? Are customers waiting for this order? Think about the wider picture and don’t just focus on the task in hand.

How2become... AN

ENTREPRENEUR

TOP 10 INSIDER TIPS AND ADVICE TIP 9 - BE A PENNY PINCHER When you are an employee the last thing on your mind is wasted office supplies. Paper, pens, files, staples etc are all there to be used. However, as an employer you should have a totally different perspective. The old saying ‘look after the pennies and the pounds will look after themselves’ is a useful lesson when running your own business. 5p saved every day equates to £182.50 over a 1 year period. That extra money saved could be used to pay for an advert in a local paper that would in turn generate more sales or leads. Remember that small savings here and there can equate to huge profits elsewhere!

How2become... AN

ENTREPRENEUR

TOP 10 INSIDER TIPS AND ADVICE TIP 10 – LEARN FROM EVERY MISTAKE It is inevitable that you are going to make mistakes along the way. We wouldn’t be human if we didn’t make mistakes! The important thing to remember is how you respond to the mistake. Whenever something negative happens in your business environment ask yourself this question: ‘Where is the opportunity here?’ I’ll give you an example. When I ﬁrst started the company How2become I received a serious complaint from a customer who had found 2 spelling mistakes in a guide he had purchased from us. He threatened to take legal action and was extremely annoyed at the poor product I had sold him. When I came off the phone I was distraught and felt awful that I had let down a customer through a lack of planning and failing to have my guides proof read by a professional. I asked myself the above question and the answer was that I had an opportunity here to put things right and sort out all of my products. I immediately employed a proof reader and improved all of my products. As a result of that complaint I got my act together and now people compliment me on how good the guides are and how they found employment through following the advice. Turn every mistake to your advantage!

How2become... AN

ENTREPRENEUR

BEING AN ENTREPRENEUR INTRODUCTION An entrepreneur sees things differently than other people. They look for opportunities wherever they go and have the ability to identify a ‘gap’ in the market. A gap in the market is an opening or opportunity that has yet to be filled. That gap or opportunity is usually created by a need for that product or service by the paying customer. It is the entrepreneur’s ability to identify that niche that makes him/her unique. It is possible for everyone to become an entrepreneur. So many people have great ideas yet so few fail to realise their full potential. This is often due to fear or anxiety, coupled with a refusal to take risks, or maybe the fact that they are simply happy with their situation. It is those people who are willing to take a risk, and who believe in themselves and their visions, that ultimately succeed. You need no qualifications to become an entrepreneur. You just need a desire to be both professionally and financially free in order to get started. Once you have an idea then you can really begin to test your potential and drive yourself forward to success and your ultimate goal. To become a successful entrepreneur is far easier than you think! The first question you need to ask yourself is ‘What is my ultimate goal?’ From the offset it is important that you have a vision or dream, no matter how big it may be. Without a vision you will have no idea where you are going, or more importantly how to get there. Many people believe that being a successful entrepreneur is defined by making a million. Of course we would all love to have a million pounds in the bank but this should not be your priority. Financial freedom should be your focus. Whether that means you need to make a hundred thousand pounds or a million pounds, only you will know, but financial freedom has so many benefits. Not having to worry about the bills or mortgage is financial freedom in my book but this may be different in yours.

How2become... AN

ENTREPRENEUR

BEING AN ENTREPRENEUR WHATEVER YOUR GOAL, IT IS ACHIEVABLE Which of the following do you think could make you a million pounds the fastest? • A new style of dog food to be sold in the UK; • A new solar powered car; • An international web-based translation service. Most entrepreneurs would chose the web-based translation service. Why? The other two ideas would involve an enormous amount of research and development. These are ‘visible’ products that require face-to-face interaction with the customer in order to sell them. The Internet-based translation service still requires development and research but has far greater potential due to the fact that it is an international product that can be sold via the Internet. Remember that the question asked ‘Which one of the following could make you a million pounds the fastest?’ So what qualities do you think you need in order to become a successful entrepreneur? Take a look at the following list: • Capable of identifying opportunities in the marketplace; • Has to start from nothing and eventually create everything; • Be prepared to make mistakes, learn from them and start again if the need arises; • Be prepared to pay staff without paying themselves if necessary; • Has to be wiser, harder and more inquisitive than in previous employment; • Be prepared to take full responsibility for everything that happens.

How2become... AN

ENTREPRENEUR

BEING AN ENTREPRENEUR WHATEVER YOUR GOAL, IT IS ACHIEVABLE The qualities identified on the previous page can all be learnt either through practice or through experience. Write down the list of qualities you believe you already have and the experience already gained in these areas. This will enable you to focus your mind on the areas you have little or no experience in. For example, if you have never had any experience in identifying opportunities in the marketplace then now is the time to begin. When you are out and about, shopping, eating in a restaurant, at the gymnasium or at work, start to look around for opportunities. What are people doing? How do they sit at their computers? How do they shop? How do they eat whilst sat at the table in a restaurant? Can you see any opportunities? I’ll give you an example – I was eating in a restaurant a short while ago when a customer complained about his rocking table. We’ve all seen this before or even sat at a table ourselves that had one leg shorter than the rest. The waiter hurried over and folded a napkin in half before placing it underneath the shortest leg, which was causing the table to rock. To me, this is an opportunity. What if the waiter had a small purpose made wedge that could easily fit underneath the leg that was causing the problem? There are literally thousands of opportunities out there all for the taking. All you have to do is train your mind to notice them. Remember to keep a small notebook and pencil with you or in the car so you can write your ideas down. You may go for weeks and weeks without coming up with an idea but eventually one will spring to mind that is the perfect opportunity! Small is often best Take a minute or two to think about your current situation. If you could think of a business idea that created you an extra £250 profit per week, would you be happy? How long would that happiness last before you wanted to expand and develop? The reason I say this is because I can remember saying that if I could make an extra £40 per week in my spare time I would be a happy man. But as soon as I reached that point I wanted to be more successful. Not successful in terms of how much money I could make, but in terms of how far I could take my business. How2become... AN

ENTREPRENEUR

BEING AN ENTREPRENEUR On your journey to success you should never forget where you have come from. Don’t become greedy and always remember how you felt when you achieved your first sale! That memory should stay with you forever! Business partnerships There are pros and cons to having a business partner. Most people who go into business together do so for a number of reasons and these are very much dependant upon a variety of circumstances. Yes, in an ideal world it is nice to keep 100 percent of your business and if you are running a business from home in your spare time then this is an ideal solution. However, if you are seeking financial backing and business experience you may wish to enter into a partnership with an investor. What would you rather have: Option 1: 100 percent of your business with no financial backing. Option 2: 40 percent of the business and an experienced business partner who invests £300,000. With option 2 you may find that your 40 percent shares are worth a lot more than your 100 percent a few years down the line. Investment can be a good thing but it all depends on your own circumstances at the time of starting the business. Whatever investment you obtain, make sure the person who is investing is also bringing their business expertise to the table. It’s pointless having £300,000 to invest if neither of you know how to invest it!

How2become... AN

ENTREPRENEUR

THINKING LIKE AN ENTREPRENEUR Thinking like an entrepreneur Take a look at the two lists below and you will notice that there is a distinct difference between how an entrepreneur thinks as opposed to someone who is not in business: Person not in business • • • • • • • •

I’ll continue working here because of my pension. The job is steady and secure. I only have 10 years until I retire. I have a high position within the organisation/company. I have a good company car. I’m glad the weekend is here. Is it Monday already? I could run a business.

The Entrepreneur • • • • • • • •

I need to make money so I can retire whenever I want. I want to be ﬁnancially free. I don’t want to stop running my business. I am in control of my own future and destiny. I own my own car. Is it the weekend already? Thank goodness it’s Monday! I am running a business.

The advantages The advantages of being an entrepreneur far outweigh the benefits of a secure career with a fixed salary. Don’t get me wrong, I have the utmost admiration for the person who holds down a steady job and always provides for his or her family. However, after spending a total of 15 years in a public sector organisation I became seriously frustrated. My frustrations are not uncommon, especially if you are an employee working for an employer. Decisions seem to take an age to be made. Senior managers are more concerned with themselves, their status and their future as opposed to the benefit of the organisation. How2become... AN

ENTREPRENEUR

THINKING LIKE AN ENTREPRENEUR I can remember sitting for 8 hours in a meeting and not being asked a single question about how my team was performing. After 15 years of this I decided to take the plunge and start my own business. I now have the power to make my own decisions, which are based solely on the beneﬁt of the company. I have no need for status or promotion and I now enjoy working. If any of the above sounds familiar then I urge you to give entrepreneurship a go! Think laterally, not literally! A man was driving home in his car one cold and wet winter’s evening when he suddenly realised he had a puncture in one of his tyres. He pulled over and got out of his car to investigate the problem. He decided to change the wheel and replace it with the spare tyre that he kept in the boot of his car. He began by loosening all of the wheel nuts one by one until the wheel became loose. Then, by accident he dropped three of the wheel nuts down a drain leaving him with only two left. He stood there wondering what to do. He had no breakdown cover and it was too late to call anyone for assistance. Then, out of nowhere he had an idea! He undid one nut only from each of the remaining three wheels and used them to secure the spare wheel. Then he drove home safely at a slower speed. It is this type of lateral thinking that will help you to see things that other people wouldn’t normally see. Develop your mind to see opportunities and you will ﬁnd success. Self Motivation Motivation is the drive and desire to succeed. It is the catalyst to your success and something that should come naturally when you are running your own business. Of course 100% motivation is unsustainable all of the time, but you should naturally feel the drive and energy to become successful. If ever I have an off day or feel a little de-motivated, then I always take time out and do something different. I’ve learnt to know when I’m unlikely to perform at my best and a brisk walk for an hour always gets me back to full levels of motivation.

How2become... AN

ENTREPRENEUR

THINKING LIKE AN ENTREPRENEUR Keeping fit and healthy will also play an important part in your success. Many successful entrepreneurs understand that a healthy body and mind is essential if they are to succeed. You will be working very hard at times and often late into the night so you will need to be at peak fitness. Fitness is also a great way to take your mind off your new venture and this in turn will help you to come back to it totally refreshed an invigorated. Failure is an opportunity! It is inevitable that failure will cross your path somewhere along your route to success. How you view ‘failure’ or the mistakes that you make along the way is important. It is important for a number of reasons. Firstly, within every failure or mistake there is an opportunity. You just need to learn how to identify the opportunity and turn it to your advantage. Secondly, we wouldn’t be who we are today without learning from the mistakes we have made. Making mistakes, and more importantly learning from them, will turn us into better entrepreneurs. As soon as you make a mistake, or fail in your pursuit to achieve something significant, ask yourself the following questions: • ‘Where is the opportunity here?’ • ‘How can I learn from this and make it work for me?’ Most people usually get down following a mistake or failure but you must learn to adapt your thinking and mentality to turn negative situations into positive ones. Learn to take responsibility Remember that you are the key to your destiny. You control your future and therefore you must take responsibility for it. In order to become a successful entrepreneur you don’t have to be good at everything. You will decide which jobs you want to do yourself. I personally enjoy being creative and as a result of that would class myself as a creative entrepreneur. Somebody else takes responsibility for running the day-to-day side of the business and they are far better at that role than I am. How2become... AN

ENTREPRENEUR

THINKING LIKE AN ENTREPRENEUR I understand that in order to become successful I will need to employ people who are better than me at specific jobs or tasks. Only you will know what you are good at and the jobs that you want to be involved in. Many successful entrepreneurs will employ people who are highly trained and experienced in their roles in order to help them improve their company or business. You should adopt this same principle once you have established what role you want to play in the growth of your own enterprise. Remember to take full responsibility for the outcome of every situation and improve at every opportunity. If somebody makes a mistake, look for ways to prevent it from happening again. Stick to what you’re good at! When deciding what business to set up, bear in mind the following: You are far more likely to succeed in a business venture that you have experience of. Trying to start a business in an area that you have little or no knowledge of will only cause you problems and difficulties. For example, if I tried to start a business making wedding cakes I know that I would struggle and come up against many difficulties, simply because I have no knowledge or experience in this area. Yes, I could employ someone to do it for me but I’d still be in the dark about how to develop a business in this area. My advice to anyone who is thinking of starting up their own business is to think of areas that you are either good at, or have experience in. In addition to this you are also more likely to think of business ideas that relate to a field you have experience in. Learn to multi-task In the early months of your business you may find that you have to multi-task in order to keep things going. Whilst this will inevitably be hard work, you will gain invaluable experience in a number of areas that you have probably never worked in before. Your budget or initial outlay may be low, so you won’t be able to pay for a bookkeeper until you get some money coming in. This means that you will have to look after the books in addition to developing the business. You may have to be involved in packing and distribution if your business requires attention in these areas.

How2become... AN

ENTREPRENEUR

THINKING LIKE AN ENTREPRENEUR When I first started the company How2become, I literally did everything whilst still working full time during the day. My evenings and weekends were spent answering questions from potential customers, writing new guides, making contacts, copying CD-ROMs, packing the products and taking them to the post box. I multi-tasked for six months solid and I would often work until the early hours just trying to keep the business afloat. Whilst it was hard work I now know that period of my life was very important in terms of creating a sustainable business. Don’t be afraid to work hard – you will be rewarded! One idea at a time! Once you come up with your first idea, take the time to make it grow and develop, ensuring that you give it your full attention. One of the problems that you may encounter in the early years is that you start to come up with more ideas than you can cope with! Whilst this is great for you, it is still important that you concentrate on one idea at a time and be cautious not to spread yourself too thinly. You will also find that because your business is new, customers will be cautious about using your service or buying your product. Therefore it is essential that you put time and effort into every area of your business so that it runs smoothly and without too many glitches. Networking and Contacts Every entrepreneur understands the power of having good connections, but the most enterprising connections aren’t made in a room full of people. Networking will be essential to your business’ success and how you go about creating your contacts is very important. Networking has many benefits. For example, when I first started the business How2become I attended a start up course through Business Link. As a result of this I met a very good business advisor who still provides the company with advice to this day. He then put me in touch with an exceptional freelance writer who has successfully contributed to a number of guides that the company sells. In addition to this the freelance writer put me in touch with a very good accountant who now looks after the finances for the business. Hopefully now you are beginning to see the importance of networking and how one contact ultimately leads to another one. How2become... AN

ENTREPRENEUR

THINKING LIKE AN ENTREPRENEUR Create your own opportunities and be prepared to learn from as many people as possible. There is always something to learn and there is always someone to teach you. Take advantage of this fact and be nice to people along the way! Networking and Contacts Here is a useful exercise: Using the form below write down a list of all the people you know. Then, against each name write down how you think they could be of use to you in your business.

NameHow this person can help me ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

How2become... AN

ENTREPRENEUR

THINKING LIKE AN ENTREPRENEUR Entering competitions When you start your business, and you begin to reach a point where you are making sustainable progress, consider entering local and national business competitions. To begin with, it will make you raise your game. It will also make you create a business plan and it will make you look at every area of your business closely. Most competitions require you to submit an application form or entry slip where you have to answer a number of questions about your business. After about a year of trading I decided to enter the company into a number of competitions. With some of them we didn’t get anywhere, whilst with others we found success. One thing I began to realise very early on was that by entering these competitions it forced us to improve the business. It also gave the company valuable free publicity. If you ﬁnd success in a competition, the competition organisers will automatically send out a press release telling the local media about your new found success. Naturally, this can be great for sales and you may even ﬁnd that your sales increase as a result. The type of questions that you may have to answer when you enter a competition are indicated on the next page.

How2become... AN

ENTREPRENEUR

THINKING LIKE AN ENTREPRENEUR Entering competitions – sample questions Question 1 How did you start your business and what was the inspiration behind the idea? Question 2 What challenges have you overcome along the way? Question 3 How do you structure, manage and develop your business? Question 4 What are your future plans for the business? Question 5 What are your business’ key strengths and weaknesses? Question 6 Do you take advice from anyone? If yes, who and why? Question 7 What are your key business breakthroughs to date? Question 8 What is the innovation and creativity that drives your business forward?

On the following page we have provided you with some useful links to a number of the more recognisable business awards. You may also ﬁnd local business awards through your local Business Link and Enterprise Agency websites.

How2become... AN

ENTREPRENEUR

THINKING LIKE AN ENTREPRENEUR Entering competitions HSBC Start-Up Stars National Business Awards National Business Awards for Scotland Building Public Trust Awards

Protect your environment One of the first and most important rules in business is to protect your environment. As an entrepreneur you will constantly be watching your competitors and trying to close the door on any ‘holes in your business’ that people could exploit. For example, make sure you protect your business name and if necessary apply for trademark protection or patent your idea. Whilst this can be a lengthy and expensive process it is certainly worth the effort and the additional cost. The National Business Register is an excellent source for protecting your business name against ‘passing off’ and other common problems. You will also want to protect your intellectual property by way of copyright. The purpose of copyright is to allow creators to gain economic rewards for their efforts and so encourage future creativity and the development of new material, which benefits us all. Copyright material is usually the result of creative skill and/or significant labour and/or investment, and without protection it would often be very easy for others to exploit material without paying the creator. There is no official registration system for copyright in the UK and most other parts of the world. There are no forms to fill in and no fees to pay to get copyright protection. You do not need to register copyright - there is no official registration system. This is why protection is said to be automatic. So long as you have created a work that qualifies for copyright protection, that is it falls into one of the categories of material protected by copyright, then you will have copyright protection without having to do anything to establish this. It is a requirement of various international conventions on copyright that copyright should be automatic with no need for registration.

How2become... AN

ENTREPRENEUR

THINKING LIKE AN ENTREPRENEUR This can be very beneficial to a person who creates a copyright work, as worldwide protection is given for the creation without the creator having to do anything. However, copyright owners can take certain precautions to help protect their rights. A copy of your work could be deposited with a bank or solicitor. Alternatively, a creator could send himself or herself a copy by special delivery post (which gives a clear date stamp on the envelope), leaving the envelope unopened on its return. Whatever you do, make sure you take the time to protect your business environment and intellectual property. Non-disclosure and confidentiality agreements Think very carefully about disclosing your idea before you have obtained protection for it. Disclosure can invalidate your ability to apply for protection. In many cases, a third party may agree to sign a non-disclosure or confidentiality agreement (NDA). Many businesses will not do this as a matter of policy. They may already be working on a similar product and signing an NDA could jeopardise this. If you have to disclose your idea, talk to an intellectual property advisor first. They can advise you on the best course of action to take.

How2become... AN

ENTREPRENEUR

FINANCING YOUR BUSINESS Financing your business Unless you have plenty of cash to spare you are going find it difficult to raise the money you need to get your business off the ground. The first and most important step is to calculate how much capital you are going to need. Do not make the mistake of simply plucking a figure out of thin air! Instead, take the time to sit down and work out a realistic figure that you believe you are going to need. Once you have that figure, you then need to find a way of obtaining it. There are basically 2 options open to you: A business loan In truth, the reality of you managing to secure a business loan is slim. Banks are highly experienced in start up business and realise that only a few ever make it past the first year of trading. Before they consider giving you a business loan they will want to see how much you are prepared to invest yourself, which in most cases will be nothing. However, if you are in the position where you can part fund your business loan then there is more chance of you obtaining investment. Be very careful about securing a business loan against your property or other assets. Venture Capitalists A venture capitalist is someone who invests capital in a business venture. Conventionally, venture capitalists are looking for a higher rate of return than might be given by more traditional investments such as a bank loan. This will normally be in the form of shares in return for their investment. Naturally you will feel reluctant to part with your shares but it is worth bearing in mind the following: When you start out with a new business idea or venture, your 100% shareholding will be worth next to nothing. If you do not get the right kind of investment, those 100% shares might still not amount to much 3 years down the line. However, if you gave up 40% of your shares to a venture capitalist for a £200,000 investment, the 60% that you then have might be worth a lot more than the 100% in 3 years time!

How2become... AN

ENTREPRENEUR

FINANCING YOUR BUSINESS In addition, bear in mind that with most investors you will also be gaining their experience and knowledge. After all, they will want to see their investment flourish just as much as you do. Business Angels Business angels are usually wealthy individuals who are prepared to invest in high-growth businesses in return for equity or shares. Some business angels invest on their own, whereas others do so as part of a network, syndicate group or investment club. In addition to money, business angels often make their own skills, experience and contacts available to the company, which is obviously of benefit to you. With a bank loan or a loan from a friend or company there is more pressure on you to make the business work. Business angels typically invest in businesses with an investment need of between £10,000 and £250,000 - most initial investments are less than £75,000. The advantage of using a business angel is that they often make an investment decision quickly, without complex assessments. However, you will still need to draw up a professional business plan. Please see our separate section on how to develop your own business plan. Most business angels are also likely to have local knowledge, as they tend to focus their investments within a small geographical area. Again this can be advantageous to you and your new business. Some business angels could also have their investment funds matched by the government under its Enterprise Capital Funds (ECFs) scheme. ECFs targeted at Small and Medium-sized Enterprises (SMEs) are under development and will only win government approval if they clearly show how they are targeting SMEs. In effect, ECFs are commercial funds that invest a combination of private and public money against a share of equity in small high-growth businesses seeking up to £2 million of equity finance. Business angels are usually wealthy individuals who are prepared to invest in high-growth businesses in return for equity or shares. Some business angels invest on their own, whereas others do so as part of a network, syndicate group or investment club. In addition to money, business angels often make their own skills, experience and contacts available to the company, which is obviously of benefit to you. With a bank loan or a loan from a friend or company there is more pressure on you to make the business work.

How2become... AN

ENTREPRENEUR

FINANCING YOUR BUSINESS Business angels typically invest in businesses with an investment need of between £10,000 and £250,000 - most initial investments are less than £75,000. The advantage of using a business angel is that they often make an investment decision quickly, without complex assessments. However, you will still need to draw up a professional business plan. Please see our separate section on how to develop your own business plan. Most business angels are also likely to have local knowledge, as they tend to focus their investments within a small geographical area. Again this can be advantageous to you and your new business. Some business angels could also have their investment funds matched by the government under its Enterprise Capital Funds (ECFs) scheme. ECFs targeted at Small and Medium-sized Enterprises (SMEs) are under development and will only win government approval if they clearly show how they are targeting SMEs. In effect, ECFs are commercial funds that invest a combination of private and public money against a share of equity in small high-growth businesses seeking up to £2 million of equity finance. The disadvantage of business angels is that they don’t make investments very regularly and may not be actively looking for an opportunity, so they may be difficult to find. While you may decide to approach an agency to help you with this, business angels will place a lot of emphasis on your relationship with them and how well you can work together directly. Tracking down the right investor may take longer than expected and can typically take several months. The British Business Angels Association (BBAA) will direct you to local and appropriate business angel networks and provide guidance with preparing and presenting your business proposal.

How2become... AN

ENTREPRENEUR

BUILDING YOUR BUSINESS The importance of quality customer service As soon as you start your business, and especially when you begin trading, make sure your customer service is of the highest standard. In order to build a successful business you will need to build a good name. A successful business cannot be built on repeat business alone. Therefore it is essential that you obtain new customers. Naturally this can be done via advertising, but the best form of advertising is free and this is achieved via ‘word of mouth’. A satisﬁed and happy customer is likely to recommend you to one other person, whereas an unhappy customer will tell ten other people about their bad expereince with your company. Therefore, the only effective way to build a good reputation is to build quality customer service. This can be achieved in a number of ways. First and foremost the product or service that you are selling must be of high quality. Customers expect a good service for their money, and rightly so! Take your time to ensure the product you are creating or the service you are providing is excellent. Think about the paying customer and how you think your product will be viewed by them. Trial your product or service with an anonymous person and ask them to provide you with feedback, both good and bad. If you have a contact telephone number on your website or on your advertising material make sure it is accessible during your stated working hours. If customers get through to an answerphone then they are less likely to call you back. The same rule applies for email contact. State a time within which you will reply to customers’ correspondance and make sure you stick to it. For example, email contact details that state a response will be provided ‘within 48 hours’ are not good for a business. In this ever changing, fast world that we live in, people want answers immediately. Therefore it is important that you respond to them quickly, efﬁciently and promptly. It is inevitable that you will, at some point, receive complaints. How you deal with these is extremely important. Even when you know that the customer is ‘trying it on’ in order to get a refund, it is still adviseable that you try to resolve the issue and make their expereince with you a pleasurable one.

How2become... AN

ENTREPRENEUR

BUILDING YOUR BUSINESS Always have the interests of your business at the forefront of your mind and do not at any point make the complaint personal. Of course you will want to defend your business and you shouldn’t apologise for errors that are not your fault, but always try to resolve an issue and offer a full refund if you think it is warranted. Market Research To succeed as an entrepreneur you must attract and retain a growing base of satisfied customers. Market research is predominantly aimed at convincing people to try out or keep using particular products or services. As a business owner and entrepreneur you should carefully plan your marketing strategies and performance to keep your market presence strong. Any market research should be based on the importance of customers to your business. Essentially, effective market research has two important principles: 1. All of your company policies and activities should be directed toward satisfying your customers needs. 2. Profitable sales are more important than maximum sales. To make best use of the principles above you should: • Determine the needs of your customers through market research; • Select specific markets to serve through targeted marketing; • Determine how to satisfy customer needs by identifying your market carefully.

When you decide to carry out your market research you should concentrate on the following 4 key areas: • • • •

Products and Services Promotion Distribution Pricing

How2become... AN

ENTREPRENEUR

BUILDING YOUR BUSINESS Products and Services – Find out from potential customers exactly what they want. This can be achieved by speaking to friends, colleagues or relatives. You could pay a market research company to carry out the work for you but this can be expensive. Promotion – How are you going to ﬁnd out where to promote your products and services? Find out from your potential customers where they usually look for your type of service. Is it on the Internet, in the yellow pages or on the TV? Price – What is the maximum price your customers are willing to pay for your product? This is very important. You may ﬁnd that your customers will not pay as much as you think they will, in which case you will have to revisit your pricing policy. Distribution – How will you distribute your products and services? Ask your potential customers how they would expect to receive or obtain your products and services. Whether it is via the Internet, through mail distribution or simply for sale through a shop, it is important that you understand what your customers want.

How2become... AN

ENTREPRENEUR

BUILDING YOUR BUSINESS Where there’s a will there’s a way! Determination, especially in the early days of your entrepreneurial career, is very important. You will undoubtedly come up against a number of difficulties and hurdles on your way to success and it is during these times that you must not give in! You may find that you come across some negativity along the way too, this must be ignored. When I started my business I can remember quite a few people putting down my idea and stating that they felt it would never work. That was enough to drive me on and prove them all wrong! If you have the determination, the will and the drive to succeed, then you can. Remember, it is during the testing times that you will need to be at your sharpest! Don’t be flash! Flash means crash! So many entrepreneurs go out and buy the fastest and most expensive car with the investment they have obtained, which was intended to help them start their business. This is a usually a big mistake. Many of them want the status that goes with being a director and want a car to match their social standing. Do not go down this route as all you’ll be doing is increasing your chances of failure. By all means purchase the car, clothes or other material accessories you desire when you can afford to buy them, but make sure you keep aside plenty of money for rainy days and problems that you might encounter in the early years of your business development. The last thing you should be doing is buying expensive cars with the money you have borrowed or obtained for investment. If you really want expensive material items then work hard for them and set yourself goals to help you achieve them.

How2become... AN

ENTREPRENEUR

HOW TO AVOID MISTAKES How to avoid the common mistakes It is an unfortunate fact that 20% of new businesses fold in their ﬁrst year and 50% in the ﬁrst three years! This does not mean to say that the odds are against you, it just means that you are going to have your work cut out in order to create a sustainable business. On the following pages we have provided you with some useful tips and advice to help you avoid failure in the early years as an entrepreneur.

How2become... AN

ENTREPRENEUR

HOW TO AVOID MISTAKES How to avoid the common mistakes Tip 1 – Carry out effective market research. Whilst you may think that you know your market, you probably don’t. The only way to be 100% sure is to carry out effective market research. This can be as simple as asking people, friends or colleagues whom you can trust about your new idea. You may even decide to pay a company to carry out market research for you, but what is important is that you deﬁne your market. Who are they, where will they look for your product and how do they want to buy it? It is highly recommended that you carry out effective market research many times during the lifespan of your business, even if it is just to conﬁrm what you already know!

How2become... AN

ENTREPRENEUR

How2become... AN

ENTREPRENEUR

HOW TO AVOID MISTAKES How to avoid the common mistakes Tip 2 – Don’t try to run before you can walk! If you have great ideas for your business then this is a good thing. Drive, determination and a will to succeed are all important. However, these need to be harnessed effectively and you cannot move forward until you are ready, both in terms of financial status, infrastructure and experience. Which of the following businesses would you rather have? • A business that folds after 3 years and has turned over a total of £500,000 with a profit margin of 40%. • A business that is sold for a profit of £500,000 after 4 years and has turned over a total of £500,000 with a profit margin of 35%. The second business has become more sustainable than the first business and has therefore become sellable. The second business has value and is still profitable, whereas the first business has folded. Your goal is to create a sustainable yet profitable business that will stand the test of time. This can only be achieved by careful analysis, guidance and professional judgement, especially during the first stages of the business’ life. Treat your business as if you were building a house: • To begin with you build the foundations (a good idea, market research, business plan, protecting your idea and financial management). • Then you build the first layer of bricks (product development, adequate premises, good staff, quality customer service). • Then you lay the remainder of the bricks and put the roof on (continued product development and improvements, customer surveys, market research, business awards, new products etc). • Finally, once you have lived in your house and looked after it for a few years, it is worth more than your original investment and you may want to sell it for a profit!

How2become... AN

ENTREPRENEUR

HOW TO AVOID MISTAKES How to avoid the common mistakes Tip 3 – Keep a close eye on those around you! When you start a new business venture you will already be aware of your competitors, unless you are entering into a market where there are currently none. It is essential that you maintain a level of awareness of their activities and the products and services that they are selling. It is also important that you watch out for ‘hidden’ competitors who may be creating a product or service that is not too disimilar to yours. Maintaining a close eye on your competitors can be done in a number of different ways. Some are listed below: • • • • •

Search the Internet for competitors Visit trade fairs or business exhibitions Look at planning application lists from the local council ofﬁces Keep an eye on advertising Word of mouth

Make this area an essential part of your business plan under a ‘Competitors’ section. Do not take your eye off the ball as it can cost you dearly!

How2become... AN

ENTREPRENEUR

HOW TO AVOID MISTAKES How to avoid the common mistakes Tip 4 – Be careful who you employ Your employees are one of your most valuable assets. Effective employees have the ability to turn good work into turnover and proﬁt for you! However, poor employees will cost you time and money so it is certainly worth taking the time to recruit good people. You may already know somebody who excels in their ﬁeld and they may be of use to you if they have skills that are an asset to your business. Employing people whom you have no knowledge of whatsoever can be dangerous. Remember that it is your money you are paying them so you will want to make sure you get a good return for your investment. Make sure you thoroughly check all references and make your selection process rigorous and tailored to the role. The interview itself is probably the most effective tool for ensuring you get the right people. Invite potential candidates back for a second interview if you feel the need and spend time with them to make sure they have the right personality and attributes that you are looking for.

How2become... AN

ENTREPRENEUR

HOW TO AVOID MISTAKES How to avoid the common mistakes Tip 5 – Provide quality customer service Don’t forget – A disgruntled customer will tell more people about their bad experience with your company than a happy customer will tell about their good experience with your company. Go out of your way to resolve customer complaints and always learn from every complaint or negative experience. If you make promises then stick to them. If you promise to deliver within a certain timeframe then make sure you do. If you fail to meet your own expectations or standards then make it up to the customer in some way by either offering a refund or a credit note. If you ﬁnd yourself constantly offering refunds then this alone should give you the impetus to improve your customer service standards. It is also worth carrying out periodic customer service satisfaction surveys to measure your performance. Questions such as ‘How did you rate your experience with us?’, ‘If anything, what could we do better next time?’ and ‘Is there any part of our service you feel needs improving?’ will all provide you with comments to help make the necessary improvements. If you ﬁnd that the feedback you are receiving is consistent, then this will be a good indication of what you need to do to improve.

How2become... AN

ENTREPRENEUR

HOW TO AVOID MISTAKES How to avoid the common mistakes Tip 6 – Poor stock management If the type of business you are going to run requires a constant turnover of goods then make sure you always have sufficient stock available. When I started the company ‘How2become’ I can remember failing to order sufficient products from my supplier. As a result, this left me with a two day period without stock. This meant that my customers had to wait an extra two days before they received their goods. This is not acceptable. Since then we have always ensured that we have sufficient products in store. Contact your suppliers and ask them what their turnaround times are and keep a log of when you need to order new stock. Take into consideration problems with your suppliers and adapt accordingly. You can almost guarantee that you’ll run into problems with couriers at some point in time. If a customer comes to you for a product or service and you are unable to provide it to them, you will lose that customer for good. Don’t leave it until the last minute to order your stock. It is better to have too much than too little!

How2become... AN

ENTREPRENEUR

HOW TO AVOID MISTAKES How to avoid the common mistakes Tip 7 – Prepare for the unexpected Contingency planning is an essential part of any business. Sit down and think about the type of things that could affect your business. - What would I do if a major competitor came on the scene and offered a better service than me? - Is there any scope for a competitor to undercut me? - What would I do if my suppliers all of a sudden went bankrupt? - What would I do if a ﬁre damaged my premises and I was no longer able to trade from there? These are the type of questions you should be asking yourself and you should be putting in place policies and procedures to protect yourself. Expect the unexpected and prepare for every eventuality.

How2become... AN

ENTREPRENEUR

REGISTERING YOUR BUSINESS THE DIFFERENT TYPES OF COMPANY AND HOW TO REGISTER SOLE TRADER Sole trading (on your own) is the simplest way to run a business. One of the major beneﬁts is that you do not have to pay any registration fees and you get to keep all of the proﬁts! However, you will have to keep all of your own records and accounts, which will mean you need to employ a bookkeeper and an accountant unless you carry out these functions yourself. The only real downside to a sole trader business is that you are personally liable for any debts that your business runs up. This can make sole trading a risky option for businesses that need a lot of investment. Setting up and registering a sole trader business is relatively simple. All you need to do in order to register as a sole trader is download and complete form CWF1 from the HM Revenue & Customs (HMRC) website (PDF).

How2become... AN

ENTREPRENEUR

REGISTERING YOUR BUSINESS THE DIFFERENT TYPES OF COMPANY AND HOW TO REGISTER PARTNERSHIPS In a partnership there are always two or more people who share the risks, costs and responsibilities of the business. The benefit of a partnership is that they are a simple way for two or more people to own and run a business together. Partners are personally responsible for any debts that the business incurs and they are all self-employed. The difference between a partnership and a limited company is that the partnership has no legal existence apart from the partners themselves. If one of the partners resigns, dies or unfortunately goes bankrupt, then the partnership will have to be dissolved. If any of these situations occur then the business can still continue to trade. Setting up and registering a partnership There are 3 different types of partnership as follows: General partners In this type of partnership general partners invest in the business. They also take a share of the profits and are involved in the day-to-day running of the business. The risk with a partnership of this nature is that each partner is fully liable for any debts that the partnership may have. Therefore, each partner could lose all that they have invested and still be liable for more than their initial investment if the partnership gets into trouble. Every partnership must have at least one general partner. Sleeping or dormant partners Sleeping partners invest money in the business and share in its profits. However, they do not take part in the day-to-day running of the business. Like general partners, they are still fully liable for the partnership’s debts.

How2become... AN

ENTREPRENEUR

REGISTERING YOUR BUSINESS THE DIFFERENT TYPES OF COMPANY AND HOW TO REGISTER PARTNERSHIPS Companies It is possible for a company to be an officer of a partnership. If this happens then the company has the same rights and responsibilities within the partnership as the other partners. Partnerships whose officers are all companies have to prepare “partnership accounts” and send these to Companies House or the Northern Ireland Companies Registry every year. The officers of these partnerships must also attach a copy of these accounts to their own company accounts when they submit these to Companies House.

How2become... AN

ENTREPRENEUR

REGISTERING YOUR BUSINESS THE DIFFERENT TYPES OF COMPANY AND HOW TO REGISTER LIMITED LIABILITY PARTNERSHIP A limited liability partnership (LLP) is similar to an ordinary partnership in that a number of individuals or limited companies share in the risks, costs, responsibilities and profits of the business. The difference here is that the liability is limited to the amount of money the LLP invested in the business and to any personal guarantees they have given to raise finance. This means that members have limited protection if the business runs into trouble. Setting up a Limited Liability Partnership (LLP) A limited liability partnership (LLP) is very similar to a normal partnership agreement. The added benefits of an LLP are that it offers a reduced personal responsibility for business debts. This is something that is worth taking into consideration when starting your business. Unlike sole traders and partners of ordinary partnerships, the limited liability partnership itself is responsible for the debts that it incurs. However, this does not apply if individual members have personally guaranteed a loan to the business. Limited liability partnerships have to meet similar requirements to limited companies and are therefore not easy to run. The main purpose of an LLP business structure is to be used for profit-making businesses. It is advised that non-profit making businesses should not use this type of business structure. To register an LLP please visit the Companies House website at www. companieshouse.gov.uk

How2become... AN

ENTREPRENEUR

REGISTERING YOUR BUSINESS THE DIFFERENT TYPES OF COMPANY AND HOW TO REGISTER LIMITED COMPANY Limited companies exist in their own right and are registered through Companies House. This means the company’s finances are distinct from the personal finances of their owners. Shareholders may be individuals or other companies. They are not responsible for the company’s debts (unless they have personally guaranteed a bank loan, for example). However, they may lose the money they originally invested in the company if it fails. Setting up and registering a Limited company (private or public) Basically there are 2 different types of Limited company. These are as follows: • Private Limited Company • Public Limited Company Many small businesses that start out choose to become a private limited company. The main differences between a private limited company and a public limited company are as follows: • Public limited companies can raise money by selling shares on the stock market whereas private limited companies are not permitted to do this. • Public limited companies must have share capital of at least £50,000. • Public limited companies must have two shareholders, two directors and a qualified company secretary. • At any point a private limited company that is limited by shares can convert into a public limited company, but it must re-register with Companies House in order to do so.

How2become... AN

ENTREPRENEUR

REGISTERING YOUR BUSINESS THE DIFFERENT TYPES OF COMPANY AND HOW TO REGISTER Setting up and registering a Limited company (private or public) Limited by shares or by guarantee? Private limited companies are limited by shares and they are owned by their shareholders. The benefit of this ruling is that the shareholders who paid in full for their shares are not liable for the company’s debts. However, any shareholders who have part-paid for their shares (if applicable) are liable for the outstanding amount owing to the company for their shares. It is also possible to set up a private limited company that is limited by guarantee. In this type of company the people who form it agree on liability limits when it is established. This structure is often used by social enterprises to limit the personal liability of their directors and trustees. To register or set up a private or public limited company please visit the Companies House website at: www.companieshouse.gov.uk. Once you have applied to set up your company you will receive notification as to whether your application has been successful or not. Setting up and registering a Limited company (private or public) In addition to registering your private business as a company you must also: • Display the company name clearly on the outside of all its offices or other places of business. • Display the company name clearly on all your business stationery, including letters, invoices, receipts and cheques. • Detail your company’s place of registration, registered number and registered office address on all its business letters and order forms. • Send all the necessary registration documents and forms, fully completed and signed, to the Registrar of Companies. • Contact HM Revenue & Customs for advice to ensure that you are acting within your legal responsibilities. How2become... AN

ENTREPRENEUR

REGISTERING YOUR BUSINESS THE DIFFERENT TYPES OF COMPANY AND HOW TO REGISTER Registration documents and forms required to set up your Limited company In order to set up as a limited company within the UK, you must send several documents and completed forms to Companies House. If you are setting up your company in Northern Ireland you will need to register with the Companies Registry for Northern Ireland. Here is a list of the documentation you will have to complete and register: • A Memorandum of Association, giving details of the company’s name, location and what it will do. • Articles of Association, describing how the company will be run, the rights of the shareholders and the powers of the company’s directors. • Form 10 (Statement of the First Directors, Secretary and Registered Ofﬁce), giving details of the company’s registered ofﬁce and the names and addresses of its directors and company secretary. The equivalent of this form in Northern Ireland is Form 21. • Form 12 (Declaration of Compliance with the Requirements of the Companies Act), stating that the company meets all the legal requirements of incorporation. The equivalent form in Northern Ireland is Form 23. Here is the link to a list of Companies House statutory forms.

How2become... AN

ENTREPRENEUR

FRANCHISES FRANCHISES Franchises are very popular at the moment and more and more people are choosing to buy one as opposed to starting out by setting up their own business. By purchasing a franchise you are effectively taking advantage of the success of an already established business. As the ‘franchisee’, you are buying a licence to use the name, products, services, and management support systems of the “franchiser” company. This licence normally covers a particular geographical area and runs for a limited time. The downside to a franchise is that you will never actually legally own the business. As a franchisee, the way you pay for the franchise may be through an initial fee, ongoing management fees, a share of your turnover, or a combination of these depending on how you have set up the franchise. A franchise business can take different legal forms - most are sole traders, partnerships or limited companies. Whatever the structure, the franchisee’s freedom to manage the business is limited by the terms of the franchise agreement. For more information about buying a franchise please visit the British Franchise Association website.

How2become... AN

ENTREPRENEUR

FINANCIAL MANAGEMENT FINANCIAL MANAGEMENT AND ORGANISATION When you start up your new business time will need to be spent on financial organisation. Having the idea and drive to succeed is paramount in your success, however, poor or no financial management from the onset will adversely affect your business. The way in which you handle your finances will be critical to the success of your business. If you fail to keep on top of your bookkeeping or your bookkeeping is disorganised then the viability and success of your business venture will be compromised. Conversely, keeping bookwork up to date will help you through the lean times and allow your business to grow. One of the most daunting things about starting your own business and giving up full time working is the prospect of looking after the company accounts. What to do first Before you even get your business underway talk to the local offices of the Inland Revenue and HM Revenue and Customs. Either call them or make an appointment to see them. Explain the details of your business plan and ask them what you need to do. They’ll provide you with advice, leaflets and a selection of forms - such as VAT registration - that you may need to complete before you begin trading. This is important! If you start off with all the necessary information it will make the bookkeeping process much easier. It also helps to have a contact within the local offices that you can call whenever you run into any difficulties.

How2become... AN

ENTREPRENEUR

FINANCIAL MANAGEMENT FINANCIAL MANAGEMENT AND ORGANISATION Business Bank Account You will need a business bank account if you are running a business. You simply can’t survive without one. It is the focal point of your business finances, showing all the financial transactions of your business. A business bank account is where you pay money in, pay suppliers and your workforce, draw out petty cash and complete all of the other essential financial transactions involved in running a business. If you’re a sole trader, this will keep your business account separate from your personal finances. Whatever type of business you run, it will be essential for calculating tax. A business bank account can in some cases give you access to support, advice and finance. You will need to decide which bank to use. Before you start comparing different banks it’s worth knowing the products and services they may offer. Bank facilities - Deposits: Paying in cash and cheques. - Withdrawals: Taking out cash through an ATM or at a branch. - Payment by cheque: Use of a business chequebook, which can sometimes be personalised with your company logo. - Automatic money transfers: Direct debits and direct credits. Night safe: For depositing money when the bank is closed. - Balance enquiry and statements: For keeping track of your finances.

How2become... AN

ENTREPRENEUR

FINANCIAL MANAGEMENT FINANCIAL MANAGEMENT AND ORGANISATION Business Bank Account Payment cards Company debit card: This will debit an amount immediately from your business account. In most cases the transactions are free and there is no annual fee. Company credit card: A charge card (such as Barclaycard or MasterCard) that can be issued to key members of staff. Repayments are made monthly from your business current account (usually interest free credit). There is usually a fee per transaction, an annual fee or both. Borrowing Overdraft and loan facilities: Short-term financing, subject to an application procedure. May also provide access to the Government-backed Small Firm Loan Guarantee scheme. - Asset finance: Leasing and hire purchase facilities to enable you to buy equipment. - Factoring and invoice discounting: Short-term borrowing against the value of unpaid invoices. - Commercial mortgage: Funding to help you buy a business. Often up to 80% of the purchase can be financed by the bank.

How2become... AN

ENTREPRENEUR

FINANCIAL MANAGEMENT FINANCIAL MANAGEMENT AND ORGANISATION Business Bank Account Other features - Deposit accounts: A lot of banks have business deposit accounts with higher interest than a current account for any reserve funds your business may have. - Merchant services: If you want to accept credit and debit card payments from customers, you will need a merchant account. This is provided by a bank but to get one you will often need two yearsâ&#x20AC;&#x2122; trading history and audited accounts. Once set-up, you will be charged an annual fee plus a percentage of every transaction. - Insurance: The larger banks will often offer their customers insurance cover for business interruption, health, loan repayments and more. - Support: Most of the larger banks offer resources and support to help you run your business. For example, you may be assigned a relationship manager who will offer business advice. The bank may also provide seminars, educational literature or bookkeeping software. - Introductory offers: The four main banks offer special introductory offers to start ups. This is usually a period of free banking for 12-24 months.

How2become... AN

ENTREPRENEUR

FINANCIAL MANAGEMENT FINANCIAL MANAGEMENT AND ORGANISATION An Accountant - Do I need one? An accountant will be another form of business advisor to you when you first start running your own business. They will be able to give advice on your business plan and the tax issues of registering a new business. Some accountants offer bookkeeping services but if they don’t or if you wish to handle this yourself, you can get help with setting up manual or computerised bookkeeping systems. Most importantly, you need an accountant to assist on things like whether it is necessary to register for VAT or PAYE and the procedures involved. An accountant will also give you financial advice and help with budgeting, cash flow and credit control, in addition to up-to-date information on any general or legal enquiries. As your business grows Whether you are starting up or a growing business, an accountant can advise you on the best way to arrange additional finance without putting your business at risk. Remember, an accountant isn’t just there to help you manage your money. Once you have the finance in place there needs to be some control to ensure growth of your business is handled in the right way. Many of your concerns will be financial - adequate working capital, good stock control, invoicing and so on - so an experienced accountant’s advice will be invaluable in such matters. Also, an accountant will be on top of all the current taxation issues. Taxation is a large business expense and an accountant can effectively minimise these costs.

How2become... AN

ENTREPRENEUR

FINANCIAL MANAGEMENT FINANCIAL MANAGEMENT AND ORGANISATION VAT For all businesses whose annual turnover exceeds a certain amount (currently £61,000, but this could change in the Budget), VAT quarterly returns must be completed and sent to HM Customs and Excise along with any payment due. The VAT forms are very simple - just a single page, in fact - and usually work in the company’s favour. This is because although you must pay VAT on any income generated, you can claim back VAT paid on some goods and services, such as office supplies, vehicle servicing, fuel and so on. So the extra accounting is definitely worth it and even companies whose turnover is less than the VAT limit can still register voluntarily. Not all products and services attract the standard 17.5% VAT rate, so it’s worth contacting your local HMC&E office to request one of their introductory videos, which will explain the basics of VAT accounting. Keep yourself up to date with the latest VAT information and rates by listening to the Budget. This will be done by your accountant/bookkeeper but it is good for you and your business to be aware of this information. Remember you are expected to account for every business-related penny spent and you are expected to show each month’s profit/loss and income/expenditure in sufficient detail so that the tax can be clearly calculated.

How2become... AN

ENTREPRENEUR

How2become... AN

ENTREPRENEUR

FINANCIAL MANAGEMENT FINANCIAL MANAGEMENT AND ORGANISATION The top 10 financial management tips and advice: Financial Management Tip 1 Talk to the local offices of the Inland Revenue and HM Revenue and Customs. Either call them or book an appointment. If possible do this before you start to trade as this will save a lot of complications at a later date. Financial Management Tip 2 Get yourself a business bank account. Look around at what’s on offer and use all the facilities the bank has to offer you - you can never get too much advice. Financial Management Tip 3 Right from the start, keep records of payments and sales etc. Keep all your receipts as, again, failing to do this can cause problems for your business accounts in the future. Financial Management Tip 4 Get yourself an accountant and book an appointment to see them. They will give you advice and information on all your business accounting matters. Financial Management Tip 5 Get yourself a freelance bookkeeper to keep your accounts in order on a monthly basis. This will save you the time you would spend doing it yourself and free you up to drive your business forward. Financial Management Tip 6 Keep up to date with financial business matters, from VAT to corporation tax. Although your accountant will know all this information, it is beneficial for you to know it too so that you can plan and budget your finances in order to develop your business. Financial Management Tip 7 Know your business. Know how much profit percentage you make and how much you turnover. Again, this will enable you to move your business forward or budget where needed.

How2become... AN

ENTREPRENEUR

FINANCIAL MANAGEMENT FINANCIAL MANAGEMENT AND ORGANISATION The top 10 financial management tips and advice: Financial Management Tip 8 Keep paperwork. Keep all paperwork to do with the financial side of your business, even if you think it is not relevant. It is better to have some irrelevant paperwork than to be missing the records your accountant or bookkeeper will be chasing you for. Financial Management Tip 9 Make sure you put by money each month to cover any future VAT bill or corporation tax bill. This will prevent you from receiving that large tax bill that has not been accounted for. Financial Management Tip 10 Although the financial side of the business is extremely important, do not spend hours and hours on it (use your bookkeeper/accountant). The important element of your business is your entrepreneurial skills, and moving and developing your business on to bigger and better things.

How2become... AN

ENTREPRENEUR

USING THE INTERNET THE INTERNET There are many different ways of using the Internet to your advantage. It is a highly cost-effective business tool if used correctly and is a great way of reaching thousands of potential customers at just a click of a button. If you can create a product that is universally in demand and accessible through the Internet, then you are on to a winner. Here are just a few ideas of how the Internet can be used to a commercial advantage: • With the Internet, you are able to obtain up-to-date quality sales opportunities not readily available elsewhere. Fast changing industries such as the fashion business can gain immensely, by finding out about the latest trends, what the market is buying and being able to respond to it before their competitors. • Those businesses who mail out to many different organisations can gain financially. With post, or even fax, you pay for each separate mailing or call. With electronic mail, the cost of sending to 50 addresses is about the equivalent of sending to 5 companies via Royal Mail. • Imagine a magazine publisher with journalists in different towns. At present, each journalist types the copy, then faxes or posts it to the office where it is passed to the sub-editor who amends it before it is retyped and made up into pages. With the Internet, each journalist types the story, mails it electronically by email to the sub-editor who amends it onscreen and passes the computer file to be automatically formatted and made up into pages. No retyping or associated errors. No faxes being lost on people’s desks. There is nothing lost in the post and it doesn’t take three days to get there. You can also automatically check the work for spelling and grammar errors if you want to. Examples of highly successful Internet business are: Google, Friends Reunited and eBay etc. • With the introduction of pay-per-click advertising, new businesses with little or no experience can sell products straight away. • There are very few overheads involved. To start your Internet business you do not need a flash office or lots of employees. Many people earn in excess of £1,000,000 per year by selling goods on eBay! Many of them do this in their spare time. How2become... AN

ENTREPRENEUR

USING THE INTERNET THE INTERNET More and more businesses are using the Internet as a place within which they can both advertise and sell. The great thing about the Internet is that it is fast, easy to use, the number of users is growing every year, your overheads are low and you don’t have to directly interact with the customer. Many people are setting up businesses from their homes and it is possible to make a fortune by simply trading on the Internet from the comfort of your own home. Friends Reunited was initially set up from home by a couple who wanted to find a way to contact old school friends. They recently sold a percentage of the business for £30,000,000 and still retained a stake in the company. The Basic Benefits of E-Commerce The benefits of e-commerce include: • Increased sales – this is the first thing that people consider when dealing with e-commerce; • Decreased costs – your overheads are low; • Increased profits – due to the fact that your overheads are low; • The size of your market expands from regional to national or national to international; • You can reach a specific target audience through pay-per-click advertising.

How2become... AN

ENTREPRENEUR

USING THE INTERNET HOW TO GET STARTED ON THE INTERNET Terminology The Internet is rife with different terminology. Here are a few terms to help you along with their basic definition: URL Definition: When you go to a web page, the URL of that page is everything that is showing up in the address window of your browser including the http:// and all that comes after it. Also Known As: Uniform Resource Locator or website address. Domain name Definition: The main part of the address of a website. This must be purchased and can be used by you if you own it or rent it. Also Known As: Website address or URL. Blog or Web Log Definition: A blog (short for “web log”) is a type of web page that serves as a publicly accessible personal journal (or log) for an individual. Typically updated daily, blogs often reflect the personality of the author. Browse Definition: To follow links in a page, to shop around in a page, exploring what’s there, a bit like window shopping. Browsing a web page is different from searching it. When you search a page, you find a search box, enter terms, and find all occurrences of the terms throughout the site. When you browse, you have to guess which words on the page pertain to your interests. Searching is usually more efficient, but sometimes you find things by browsing that you might not find by searching because you might not think of the “right” term to search by.

How2become... AN

ENTREPRENEUR

USING THE INTERNET HOW TO GET STARTED ON THE INTERNET Browsers Definition: Browsers are software programs that enable you to view www documents. They “translate” HTML-encoded files into the text, images, sounds and other features you see. Cache Definition: In browsers, “cache” is used to identify a space where web pages you have visited are stored in your computer. A copy of documents you retrieve is stored in cache. Case sensitive Definition: Capital letters (upper case) retrieve only upper case. Most search tools are not case sensitive or only respond to initial capitals, as in proper names. It is always safe to key all lower case (no capitals), because lower case will always retrieve upper case. Cookie Definition: A message from a web server computer, sent to and stored by your browser on your computer. When your computer consults the originating server computer, the cookie is sent back to the server, allowing it to respond to you according to the cookie’s contents. The main use for cookies is to provide customised web pages according to a profile of your interests. Download Definition: To copy something from a primary source to a more peripheral one, as in saving something found on the Web (currently located on a server) to a disk or a file on your local hard drive.

How2become... AN

ENTREPRENEUR

USING THE INTERNET HOW TO GET STARTED ON THE INTERNET Favourites Definition: In the Internet Explorer browser, a means to get back to a URL you like, similar to Bookmarks. FTP Definition: File Transfer Protocol. Ability to rapidly transfer entire files from one computer to another, intact for viewing or other purposes. Host Definition: A computer that provides web documents to clients or users. HTML Definition: Hypertext Markup Language. A standardised language of computer code, imbedded in “source” documents behind all web documents, containing the textual content, images, links to other documents (and possibly other applications such as sound or motion), and formatting instructions for display on the screen. When you view a web page, you are looking at the product of this code working behind the scenes in conjunction with your browser. Browsers are programmed to interpret HTML for display. Internet Definition: The vast collection of interconnected networks that all use the TCP/ IP protocols and that evolved from the ARPANET of the late 60s and early 70s. Note, “internet” (with a lower case “I”) refers to any computers that are connected to each other (a network), and are not part of the Internet unless they use TCP/IP protocols. An “intranet” is a private network inside a company or organisation that uses the same kinds of software that you would find on the public Internet, but that is only for internal use. An intranet may be on the Internet or may simply be a network.

How2become... AN

ENTREPRENEUR

USING THE INTERNET HOW TO GET STARTED ON THE INTERNET IP Address or IP Number Definition: (Internet Protocol number or address). A unique number consisting of 4 parts separated by dots, e.g. 165.113.245.2 Every machine that is on the Internet has a unique IP address. If a machine does not have an IP number, it is not really on the Internet. Most machines also have one or more Domain Names, which are easier for people to remember. Purchasing a Web Domain Name The first step to getting started on the Internet is to purchase and register a domain name. A domain name is the text name corresponding to the numeric IP address of a computer on the Internet. A domain name must be unique. Internet users access your website using your domain name. A domain name is basically the main part of the address of a website. For example, How2become’s domain name is: www.how2become.co.uk. You can purchase many different domain names, each with a different ‘level’ name. For example .com (commercial) is a generic top-level domain (TLD) used on the Internet’s Domain Name System. It was one of the original top-level domains, established in January 1985, and has grown to be the largest TLD in use. It is consistently pronounced as a word, dot-com, and has entered the common language this way. Although .com domains are officially intended to designate commercial entities (others such as government agencies or educational institutions have different top-level domains assigned to them), there has been no restriction on who can register .com domains since the mid-1990s. On the following page we have indicated other examples of domains that you can purchase.

How2become... AN

ENTREPRENEUR

USING THE INTERNET Purchasing a Web Domain Name Examples of domain names: .ac.uk - academic (tertiary education and research establishments) and learned societies; .co.uk - commercial/general; .gov.uk - government (central and local); .ltd.uk - limited companies; .me.uk - personal; .mod.uk - Ministry of Defence and HM Forces public sites; .net.uk - ISPs and network companies; .nic.uk - network use only; .nhs.uk - National Health Service institutions; .org.uk - non-profit organisations and charities; .plc.uk - public limited companies; .police.uk - police forces; .sch.uk - schools (primary and secondary education). The choice of domain name for your business is totally down to you. One of the important things to remember is that it should be catchy and easy to remember. An example of this is ‘How2become’ as it says exactly what it does and it is easy to remember. Try to think of a good name for your website. Purchasing a Web Domain Name Once you have decided on your domain name you need to see whether it is available to purchase. The Internet has been operating for many years and you may find that someone has already registered the name you are after. For example, when I started up the company How2become, the only domain name that was available to purchase was www.how2become.co.uk. The .com version of the domain name had already been purchased by a person in America some years earlier. I decided to trade specifically in the UK under the .co.uk version of the domain. Once I had made enough money from the business I then approached the owner of the .com version to see if he would sell me this version of the domain. After 3 months of haggling I managed to secure the domain for a sum of $5,000.

How2become... AN

ENTREPRENEUR

USING THE INTERNET Purchasing a Web Domain Name There have been examples of top tier domain names selling for tens and even hundreds of thousands of pounds. My advice to anyone who is starting out in business is to buy a domain name that is available for a low annual cost. Most .co.uk domain names can be purchased for around £1.99 per year. The .com version of domain names can cost anything up to £10 per year. There are many different web hosting sites where you can search for, and purchase domain names. Here is a list of some of the more commonly used web hosting sites: www.oneandone.co.uk www.reg-123.co.uk www.webfusion.co.uk To search for a domain name is simple. Just enter the name of your chosen domain into the search bar on any hosting site and it will tell you if it is available or not.

How2become... AN

ENTREPRENEUR

USING THE INTERNET Hosting The World Wide Web is a massive collection of websites, all hosted on computers (called web servers) all over the world. The web server (computer) where your website’s html files, graphics etc reside is known as the web host. Web hosting clients simply upload their websites to a shared (or dedicated) web server, which the ISP maintains to ensure a constant, fast connection to the Internet. You will find that most domain registration companies will also provide web hosting for you at a low annual fee. Building a website Whether your business warrants a website or not only you can decide. Before you make your decision it is worth bearing in mind that more and more people are using the Internet each year. Internet traffic is growing every day, which means you could, as a result of this, gain more customers to your site. Whether you are going to trade on the Internet or not I would still advise that you get yourself a website. You can then direct customers to your site and keep them informed of all services and products you are selling. Customers can also have easy access to your contact/address details and can be kept up to date of your products and services via a weekly or monthly newsletter. The biggest decision you will be likely to make is who to get to create your website. You may decide to do it yourself and there are many web hosting companies, such as www.oneandone.co.uk, who will provide you with a complete web creation package. I would only recommend you build your own website if you have knowledge of such systems as, speaking from personal experience, it can be extremely frustrating if you don’t.

How2become... AN

ENTREPRENEUR

USING THE INTERNET Paying someone else to build your website There are literally hundreds of companies out there who will create your website for you, all at different costs. If you are going to be selling a product via the Internet then it is certainly worth considering paying a professional company to do the work for you. However, before you part with your money make sure you pay them a visit ﬁrst and ask them questions about the service they can provide you. It is also worth getting a ‘branding session’ with the company so that they can get a feel for what type of service you are hoping to provide. Whilst they are the web design specialists, you are the person who knows what you want. Here are some of the more important questions you may wish to ask a web designer before you agree to a contract: • What timescale will my website be completed within and will there be a contract to back this up? • Are there any ‘hidden costs’ that I need to take into consideration? • How qualiﬁed is the web designer? • Will he/she keep me updated of any progress? • What is the turnaround time and cost for any future alterations? Here is a list of companies who offer web design solutions. Please note that How2become Ltd are not acting in conjunction with any of these companies and they are provided for reference purposes only. www.enginecreative.co.uk www.wisdom.co.uk Other web designers: www.webcreationuk.com www.evolutiadesign.co.uk www.cj-design.com/ You can also search for a UK web designer by visiting the following sites: www.ukwda.org/ www.web-design-directory-uk.co.uk/ How2become... AN

ENTREPRENEUR

USING THE INTERNET Internet Advertising Once you have your website you will want to direct traffic to it. Traffic is another term for visitors. If you are selling your product predominantly via the Internet then you will definitely need traffic. Don’t expect people to find your website just because you have one. You have to go out there and advertise the fact that you have a website and there are a number of ways in which you can do this: Search Engines Major search engine sites such as Google, Yahoo, Altavista, MSN, Ask and Miva are widely used by the Internet user. Google accounts for 70% of all usage and is therefore the most profitable of all the search engines. A search engine does exactly what it says – ‘searches’. The user of the site types in a word or phrase and the search engine provides him or her with a number of choices. Some of those choices are provided by the means of natural listings and the remainder by sponsored links. Natural Search Listings Natural search listings are those listings that appear at the discretion of the search engines and that do not incur a charge to the listed site. In most search engines, these are the “main” results. Search Engine Optimisation Search Engine Optimisation (SEO) is the process of increasing the amount of visitors to a website by ranking high in the natural search listings of a search engine (see previous page). The higher a website ranks in the results of a search, the greater the chance that site will be visited by a user. It is common practice for Internet users not to click through pages and pages of search results, so where a site ranks in a search is essential for directing more traffic toward the site. SEO helps to ensure that a site is accessible to a search engine and improves the chances that the site will be found by the search engine. Many web developers are skilled in SEO and will be able to provide you this service at a cost. An example of a web developer who specialises in SEO is www. wisdom.co.uk. How2become... AN

ENTREPRENEUR

USING THE INTERNET Sponsored Links Sponsored links are basically a form of ‘paid advertising’ on Internet search engines such as Google, Yahoo or MSN. They are predominantly text based ads appearing at the very top and on the right hand side of search engine results. How far up you appear on the listings of a search engine will be dependant on both the search engine’s own criteria, how well your adverts perform and how much you are willing to pay each time somebody clicks on your advert. With pay-per-click advertising you create your own ads and choose keywords, which are words or phrases related to your business. When people search on a search engine using one of your keywords, your ad may appear next to the search results. The beauty of this method is that you are now advertising to an audience that’s already interested in your business. People can simply click your ad to learn more about you, and hopefully make a purchase. The problem you have to overcome with this method is getting people to actually buy your product after they have clicked through to your site. Google vs Other Search Engines The major advantage of Google as a means of ‘paid for advertising’ is that approximately 70% of all Internet search engine users actually use Google as their ﬁrst choice. With Google you will get more trafﬁc to your site as there are more users. In terms of sponsored links Google rewards those advertisers who have a high click through rate (CTR) compared to their competitors. The click through rate is the number of clicks on an advert divided by the number of times it was displayed (impressions) and is presented as a percentage. For example, if there are 100 impressions of the keyword ‘wedding’ and your advert is clicked through 10 times out of the 100 impressions, your click through rate would be 10%. If your competitors have a click through rate that is less than yours, your advert will move higher up the listing. Basically, the higher up the listing you go the more clicks you will get. The aim is to get to the top! However, the majority of other search engines such as Yahoo base their sponsored search listings on how much an advertiser is prepared to pay, per click. The click through rate does not come into it. The advantage with Yahoo over Google is that you can see what your competitors are bidding per click, ther efore enabling you to outbid them and move up the rankings if you can afford to.

How2become... AN

ENTREPRENEUR

USING THE INTERNET SPONSORED LINKS TIPS AND ADVICE Make sure your adverts are relevant By this we mean make sure they are relevant to the words and phrases you are bidding on. For example, if you are selling golf equipment you would not want to bid on the phrase ‘Fire Brigade’. Instead you would want to bid on keyword phrases such as ‘golf equipment’ or ‘golf clubs’ etc. Make your adverts match the phrase or keyword you are bidding on. A good trick used by many experienced pay-per-click advertisers is to match the advert with the phrase or keyword you are bidding on. By doing this you are more likely to increase your click through rate and therefore get more trafﬁc to your site for less money. Test the market ﬁrst If you decide to sell your product via Internet search engines, make sure you test the market before you start spending out hundreds of pounds on your advertising campaigns. One of the biggest mistakes people make when advertising through sponsored links is that they waste money when starting out. They want their ads to be right at the top of the tree and are prepared to pay heavily for it. It is far better to bid at a low price initially and test your adverts to see if they create a good click through rate. If the click through rate is good and you are not selling anything then you may need to make some changes to either your product or your website in order to change this situation. Do not bid high prices on your adverts before you know that you have a product that people want to purchase. It is pointless spending £8 on advertising for every product that you sell for £5 as you would be losing £3 per sale! Start your bids low and only increase them once you know that your product sells. To get more business tips from Richard, please go to www.RichardMcMunn.com

How2become... AN

ENTREPRENEUR