Business startup advice/questions (yes, another one!)

[itcametomeinadream]

I'm starting a new business and would appreciate any comments others may have on my plans and some advice on the best way forwards. It's probably easiest if I detail the most pertinent areas, and hope someone may have some input. I'm aware that these questions have arisen previously on these forums, however it gets quite difficult to apply this to my individual situation after so much reading!

It is a new business offering (reasonably specialist) internet consultancy services which requires minimal startup costs (<£1000) and will not require any 'real world' premises - other such costs are also minimal (paper and postage mainly!).

I'm planning on starting this business while remaining in full time employment in order to mitigate risk. I believe this is possible due to the ability to attract custom and undertake work on an 'as required' kind of basis.

I've written a business plan, and have forecast (I hope, pessimistic ) profits of 25-30k during the first year of trading, once I am running the business full time. I have projected this amount to increase to 50-55k by year two, by which time there will be one other employee/shareholder/director.

My original intention was to start a Ltd company, but I'm now unsure as to whether a sole trader would be a better solution, at least in the short term. I'm concerned that a sole trader status may impact on the perception of my business, and also about extra protection afforded to Ltd companies. I'm also unsure about the status of the company name as a sole trader - especially as an online company, protecting this name could end up being extremely important.

Any comments etc. much appreciated - I'm aware that I will need professional advice at some point

 

[fastfences]

Hi there, and welcome. I'll drop the name, but we do have things in common as I've had things 'come' in dreams also :wink: .

I suggest (purely for simplicity) to commence as a sole trader to test the waters, so to speak. You can have a company structured at any stage later on, but it's more difficult, and costly, to reverse the process.

A ltd. company won't protect your name, only a registered Trademark will do that. I'm sure you'll receive professional advice on that during the course of your post.

Cheers, and best wishes for your venture.
Nigel

 

[andrew]

i am not sure about this but i heard if you start a business while in paid employment, your employers will own the intellectual rights to your business e.g. the guy, who invented post-it notes got nothing from the invention.

so you will have to prove that you had the idea before you were working there. my friend had to buy his business from my university.

 

[Cornish Steve]

This is true if the work is obviously performed for the company and sometimes if the nature of the work is similar. If you work for a car dealership and sell real estate on the side, you're probably in the clear. (You should probably check with our legal friends, though, just to be safe.)

 

[Joyous]

i am not sure about this but i heard if you start a business while in paid employment, your employers will own the intellectual rights to your business e.g. the guy, who invented post-it notes got nothing from the invention.

Although this is not my area of expertise I'd have thought this would very much depend on what your full time emplyment was. I've seen a number of IT contractor contracts that contain such a clause but if, say, you're working as an accounts clerk for your local council I don't see how they can claim that a computer program that you wrote in your own time is their intellectual property.

Itcametomeinadream (wow, what a name) I have to confess that I thought your forecast profits for your first year's trading somewhat optimistic, especially as you'll be trying to achieve this while in full time employment. I presume that your business plan outlines how you're going to achieve this.

Unless your business model is particularly risky I'd say you're better off starting as a sole trader and then incorporating at a later date if necessary. Your service and professionalism will have a greater impact on the perception of your business then the letters 'Ltd.'

Regards

Joy

 

[itcametomeinadream]

Thanks for the replies fastfences, andrew, goldctrsteve and Joyous! (I'm definitely at the right forum!)

if the work is obviously performed for the company and sometimes if the nature of the work is similar

From the two posts about this I can see that this is a potentially problematic area, since I intend to trade in the same industry as my employer, although with a very different target market.

I thought your forecast profits for your first year's trading somewhat optimistic, especially as you'll be trying to achieve this while in full time employment.

Just to clarify, my forecast is once I run the business full time, not while I am also employed elsewhere. I would expect profits of no higher than £10 yearly if I remained in full time employment, and this would likely be closer to the £5k mark. My intention to run a company whilst employed is so that I can prove conclusively whether my proposed methods of customer acquisition (e.g. advertising) give the return on investment I expect, and also adapt my business plan with accurate statistics based on this

Unless your business model is particularly risky I'd say you're better off starting as a sole trader

My business model (as far as I am aware) is extremely low risk.

Your service and professionalism will have a greater impact on the perception of your business then the letters 'Ltd.'

I agree, although I am aware from experience that online businesses in particular suffer from lack of trust, which can be mitigated by 'real world' factors such as business incorporation, having a business address people can visit etc (which I see as disadvantages of doing business as a sole trader).

Thanks again for the replies - they are extremely useful!

 

[kartel]

Hi I know how you feel and there is alot of help out there to start your business up. I started my business 2 weeks ago with the help of http://www.ne-bic.co.uk they give free advice in any area of set-up.

With regards to trust. i believe that you should get the first customers from people and contacts you know already. do a good job for them and the word gets spread around.

Where then people you do not know and who would not really contact you otherwise. would contact you. then that is your chance to do what you can to get this person on board and happy with your service.. that is how you break into the real world and get people's trust .. thats what i believe anyways hehe.

 

[itcametomeinadream]

I agree that it's easy to start with existing contacts etc, however I have a lot of experience in online advertising and search engine optimisation, and so I will be (and already am) acquiring potential customers via those sources, as this is low cost and can be very effective.

I'm still unsure as to how much of a downside being a sole trader would be, and whether the additional expense etc of a Ltd company outweighs that.

 

[theMBA]

Itcame....

One thing you need to watch out for is the following. Assuming your business takes off sufficiently for you to leave your current full-time employment, when you leave, your current employer might require you to refrain from taking your clients/customers with you for a certain period of time (I think this is called restraint of trade, and might already be written into your contract of employment). Something else to check out with the appropriate professional advisers if your business gets serious.

 

[refreshious]

I've just started and am currently producing my prototype. I have yet to write a 'real' business plan, but am following some steps from the 'Beermat' entrepreneur book.

1. Elevator Pitch
2. Mentor
3. My first customer (strategic partner, etc).

this will test the waters, then I'm able to write my business plan.