possible small business-weighing up pros&cons. please help

[determinedtosucceed]

Good afternoon everyone.
I'm new to this forum and would greatly appreciate your advice.

Background:
Recently made reduntant from managerial role i loved and dedicated my career to at start of year , ive moved to a smaller place with my child under the age of two which the housing benefit dept have kindly said they will cover until i am offered new job.
I cannot just sit at home twiddling thumbs, and realised that whilst looking for jobs and attending interviews, this is a perfect if not the best opportunity to launch an online retail business i always wanted to.

I plan to start extremely small, selling 30-50 products under the value of £4-£30 each.
I will not be taking out a loan, so will not be falling into any debts should it not wrk out, stock can be sold off on ebay should that be the case.
As i do not have financial help, all/any profit made will go straight back to replenishing and/or expanding existing stock.
No salary will be taken for myself for the first year minimum.

With this said here are concerns i face due to conflicting information i have received.

1)As this is just an idea to test, how can i set up this trial run business without loosing the temporary housing that has been issued to me. I shall not be receiving income for myself to cover rent, but as soon as it got to that stage where i could provide (if i was still without office job) move back into my own privately paid home.

2)for such a small business that may only make anywhere between £50-500 profit per month vi an internet site is it best to trade as a limited comany? or soletrader to keep costs low.

3) if i pay tax for items internationally, then pay another amount for customs and duty tax, can i reclaim any of that as a soletrader or limited company?

I don't want to waffle on anymore as i feel i have asked a fair amount.
If anyone knows of or have ever been in my shoes temporarily on benefits wanting to get off and start a business with potential of being extremely successful ( but without loosing housing security from day one when your unsure if it will even work or not, then making myself homeless with a baby) please offer advice.
Many thanks!

 

[WebProfitsConsulting]

Hello,

I'm also new to the forum, but not new to online business!

Firstly let me congratulate you on your determination and boldness in pursuing your online business venture.

I must say at the outset that I'm not qualified to give advice on the tax implications, but I expect there are others on the forum that are.

In terms of your online venture, here are some thoughts:

1. Rather than go down the web commerce route with your own site, test the market to make sure there is a demand for the products you want to sell, at the price at which you want to sell them. I would suggest ebay is a good proving ground for this. The last thing you need is to go through all the effort and costs of setting something up, only to find there is no demand, or you can't profit from your venture.
2. Have a look to see if there are others in the marketplace already selling what you intend to sell. If no one is selling your product there are only two reasons a) your a genius and you've spotted a niche that no one has seen or b) others have tried it, couldn't make it work, and have shut up shop.
3. Have a look on ebay to see if anyone is selling similar products to you. When you find someone head on over to goofbay.com and pop in the username of the seller. This will tell you how much product they have sold, and for how much over the last 30, 60 and 90 days. This sort of competitor research will put you in a strong position to project the likely success of your business.

Hope that helps!

Den

 

[determinedtosucceed]

Thank you WebProfitsConsulting.

I shall try out your advice via ebay.
It is something that i have extensively researched whilst i was at work.
What i offer is in a popular industry, but the items i stock is often what myself and other individuals complain of not being able to find.
I have tested my research so far with a facebook page for a few months, tagging various people into advertisements i created myself. This then attracted a few hundred new clients over that weekend alone. So the demand is high, and i also have various international targets that are very interested to purchase should i have a professional site.
This is why i considered having an official yet small website.
I have looked at the progress of possible competitors at present, but although they have websites, fb pages and so forth, i still believe the standard and look of my products will be a cut above them.What i offer is a refreshing alternative. So with demand higher than the quantity of stock i have (eg i stock 6 of each type of product...with 30 products in total), i will always sell out and be able to restock other things aswell, with any luck.
Does this sound far fetched to you?Im trying to compress the information i have on my business plan so you understand without it turning into an essay.....shucks, too late!

 

[WebProfitsConsulting]

Your proposition sounds great.

You've clearly done plenty of research and validated the demand which is a strong place to be before you start your business.

If you determined that there is demand for your product and you've got your pricing right, I would suggest you need to keep a keen eye on the competition, and in particular how your product is better then any other alternative on the market. Do you competitors market online, and if yes, than how successful are they? How well do they rank in the search engines? What marketing strategies are they following? Are they making sufficient money to spend money on PPC advertising? Ultimately if you're going to compete with them online, then you need to know that you can do beat the competition in some/all of the areas above, and still make a healthy margin.

You're very much on the right track.

Feel free to PM me if you have any specific questions or require any pointers. I'd be happy to help.

Den

 

[Silky]

If you are not taking a salary but using the proceeds to buy more stock, then this shouldn't have any effect on any benefits you are receiving. You would be allowed to cover any legitimate expenses and I suspect there's probably a small amount you could claim without this affecting your housing benefit.

You won't be the first person who has tried to escape benefits by starting a business and it's worth talking to someone at the Job Centre on this -or perhaps investigate the New Enterprise Allowance:
http://www.direct.gov.uk/en/employment/jobseekers/programmesandservices/dg_198864

As for tax, you can't reclaim any of this unless you are VAT registered, not needed until your turnover is over £73k - but the Enterprise Allowance team appear to give business advice too, well worth looking into.

Best of luck with it all, redundancy can often be the nudge needed to get out of a comfort zone and do something you always fancied.

 

[determinedtosucceed]

If you are not taking a salary but using the proceeds to buy more stock, then this shouldn't have any effect on any benefits you are receiving. You would be allowed to cover any legitimate expenses and I suspect there's probably a small amount you could claim without this affecting your housing benefit.

You won't be the first person who has tried to escape benefits by starting a business and it's worth talking to someone at the Job Centre on this -or perhaps investigate the New Enterprise Allowance:

thanks! and funny you should because i called them this morning and not once did they mention this scheme, from what i have read, only once approved will help be offered. I will call to find out about it

As for tax, you can't reclaim any of this unless you are VAT registered, not needed until your turnover is over £73k - but the Enterprise Allowance team appear to give business advice too, well worth looking into.

okay, so it's only if trading as a limited company that i can reclaim on expenses like the packaging, labels, software, cheap little laptop, web hosting and so forth?

Best of luck with it all, redundancy can often be the nudge needed to get out of a comfort zone and do something you always fancied.

Thank you, yes very true, im so excited to make this successful.

 

[determinedtosucceed]

Your proposition sounds great.

You've clearly done plenty of research and validated the demand which is a strong place to be before you start your business.

If you determined that there is demand for your product and you've got your pricing right, I would suggest you need to keep a keen eye on the competition, and in particular how your product is better then any other alternative on the market. Do you competitors market online, and if yes, than how successful are they? How well do they rank in the search engines? What marketing strategies are they following? Are they making sufficient money to spend money on PPC advertising? Ultimately if you're going to compete with them online, then you need to know that you can do beat the competition in some/all of the areas above, and still make a healthy margin.

You're very much on the right track.

Feel free to PM me if you have any specific questions or require any pointers. I'd be happy to help.

Den

Thank you for your advice. I appreciate it. And yes i have been monitoring my competition. They are all online traders, two of which can be easily found if searched for on search engines.

However,although the others are known or up and coming littl businesses, my stock is still different in its own way. my marketing plan will be including everything short of a tv commercial.
social networks to create traffic, interviews via local magazine and other popular magazine a friend owns, the chance for a tv interview for online tv station of which i know the owner who has already offered his services, flyers and allsorts.
It's all about first image so i need to ensure i go all out and strike gold when i finally launch it.
Tomorrow i plan to call and ask about opening a basic business account, no overdraft or credit to start with, i wont open it until i am just about ready to launch...or should i open it sooner just to test it out against the website id be using?

Oh! most importantly, i almost forgot......as a limited company, how many different types of forms will i be required to fill out? do low cost accountants for small businesses exist?

 

[Silky]

I'd go for sole trader initially, you can still claim all your expenses but probably less complicated in the first instance. That said, proper advice is always advisable, I'm basing my comments on our own experience rather than any huge financial insight, I started as a sole trader and we then changed to a limited company when this grew and became more viable.

How you set up may also affect your benefits.

Hope this helps!

 

[determinedtosucceed]

You may be right there. (i will have to dissolve the limited company i registered recently).

The only reason i registered and was accepted as a private limited company was to reserve my business name ( as one does for a domain).
Having my business name out there as a sole trader, does that mean I will be vulnerable to a more financially established person/company copying me and registering their business in my name or something very similar? Or is there a way to protect the name?

I was not aware that i could claim back my stock and expenses as a sole trader aswell. I will have to check if it will jepardize my living situation the day i call hmrc to register as a soletrader.That's the most important factor until i am stable enough to cover living costs on my own again whilst starting up.
Is it possible i can still be eligible if i have an optimal salary (if any at all) which is below the annual allowance limit?

 

[KernowQueen]

some info here on sole trader & running a Limited Company might help - frankly accounts

sounds like you've got a good plan of attack, good luck, "this time next year Rodney..."

 

[Silky]

You may be right there. (i will have to dissolve the limited company i registered recently).

Please don't do that until you've taken proper advice from an accountant. At the worst you could simply leave it dormant rather than dissolving it, you could find however that when you compare the options, you would prefer to set up a limited company anyway.

The limited company route wouldn't rule out benefits, but you're seen more as an employee. As a director of your own company, you're able to pay yourself as much or as little as you want, so even if you're working full time, your salary can be what you can afford (rather than having to be at least minimum wage). Working Tax Credits and your Child Tax Credit will provide the contingency for you to support yourself and your family until you can afford to pay yourself.

If you're a sole trader, your profit is likely to be seen as your income. That's basically your turnover minus the cost of stock and all other related expenses. Naturally if you're constantly reinvesting this straight into further stock, then it can be rolled forward, you would however need to ensure that when it comes to the end of the year your accounts don't show a large profit when in fact you haven't had the cash flow to pay yourself - I'm not entirely sure how this is treat where benefits are concerned, it's worth a bit more google research.

I hope this makes sense, please do do more research before making your decisions.