Is the recovery in the UK economy about to hit the buffers?

Today the news was full of doom and gloom as commentators speculated on the likelihood of a so-called 'double dip' in the economy. Certainly didn't help to cheer one up, especially as here in Colchester the heavens opened up and we saw more rain in a few hours than the whole of July (at least it seemed like that - not seen the official figures yet but if I was a betting man I'd lay a fiver on it).

So, will house prices fall, will inflation rise, will unemployment rise, will the pound crash against the dollar and the euro, will banks loosen the restraints on lending to businesses? So many uncertainties that its enough to make a grown man tremble. However, if you are a small businessman or businesswoman then its important to have a positive attitude. After all, the entrepreneurial spirit means taking risks when others run for the bunkers and hunker down until the storm clouds have passed.

If you are in business and you are not running a company of thousands of employees then you are crucial to the economy and any hope of meaningful recovery. After all, businesses of less than 20 employees make up about 97% of firms in the UK. In fact 95% of firms employ less than 5 people. 3 million are sole proprietors and 462,000 are partnerships. Small firms account for over 50% of the economic activity in the UK. Amazingly, over 2 million people run their businesses from home - so I guess I am one in 2 million!

So, its down to us folks to get things working and get this country back onto its feet. Question is, are we up to and what is the government doing to help us?

Firstly, lets take a look at that second part. The new government's first budget introduced some good news for small enterprises. The move to reduce the Small Companies Tax Rate to 20 per cent is welcomed and will help over 850,000 small firms. The Government also announced it will extend the Enterprise Finance Guarantee which was introduced following calls from the Federation of Small Businesses and will help many small firms who have problems in obtaining credit.

However, there were also some negative measures. The rise in VAT to 20% will hit business and is likely to hit many small businesses, especially those in the high street. In my view there will be a rush to the stores in the run-up to Christmas and in the first three days of the New Year as a result of the rise coming in on 4 Jan 2011. After that I reckon there will be a slump in demand. How long that lasts depends on other things such as consumer confidence. If job losses through the proposed cuts in the public sector start to bite and if house prices fall we may well see a real slump happen.

As to whether the small business sector is up to the task of turning things around, I personally believe that the sector has become better than ever at finding where the opportunities lie and of taking advantage of every opportunity, whether or not the government of the day helps or gets in the way. With the internet its much easier to find opportunities and to grow your business. Being creative is very important and being prepared to reach out to others across the globe, finding partners when maybe years ago, before the internet, it was much harder to this.Then you had to travel more and meet possible partners. Now you can do more from your desk and using the internet its possible to sign contracts without even picking up a phone. That's how I started my business of and its how I do most of my business, both in terms of finding partners and in terms of dealing with customers.

Remember, your future is in your own hands (as much as its anyone's) and the opportunities are there, you just need to find them and grasp them with all you might. No-one is going to hand things on a plate to you, so rise up and accept the challenge.

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Tools to help you Business Grow

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When you first start out in business, unless you are already wealthy you are probably short of cash. You may have some finance form the bank or other sources but if you are selling a physical product then you probably have lots of things to spend that money on, such as stock.

As a result, you may find funds a little tight for other things such as software, a computer and related hardware. So what options are there?

Firstly, lets take a look at most of the tools every business will need:

1. Telephone & Fax Machine - mobile will do but a fixed line is handy as some customers may not like ringing a mobile number. A fixed line number seems more trustworthy to many. Also, if you want a real fax machine (as averse to a 'virtual fax number') then you really need a fixed line, though you could share the same line for broadband, phone and fax by using VOIP (Voice Over Internet Protocol) for the fax. BT offer this service with their Business Broadband option.
2. Computer with broadband connection - an essential item these days, especially f you are going to have a web-site and use email. Yes you can get email on your phone but its not as easy to write an email on your phone as it is on a normal screen! Laptops have the advantage that you can take them with you on business trips or when visiting clients. Desktops tend to be cheaper for the same features and power. Of course, if you have a computer then you will need other things like printer, back-up drive and monitor etc.
3. Office - you may work from home but you still need some dedicated office space, even if it's just as spare room or the garden shed! you need to be organised and have room for files, documents and if you sell stuff too, stock.
4. Stationery - such as letterhead, invoices, files, writing materials, paper and inks or toner for your printer.
5. Desk and comfortable chair (2 or more if you see clients at your office). Comfortable is very important and its worth paying a lot of attention to the ergonomics of your working environment - not just chair, desk height, monitor position, keyboard and mouse but also light and air, as well as heating. You want to be as alert and comfortable as possible when working. Poor environment can lead to health issues and tiredness.
6. Vehicle - not essential if you don't deliver anything to clients and you don't need to pick things up. You can always use public transport or taxis if you need to get from A to B and back. It's also much greener. However, if you do need one you need to weigh up the various features and costs. A family car may do for the occasional trip with stock but if you regularly need to transport physical items then a van may be more appropriate and if you are VAT registered you will be able to off-set the VAT. Also, leasing is an option for a business. A compromise may be an estate car which can double up for family and business use, though the accounting side gets complicated. This brings us to the next topic.
7. Accountant - every business needs an accountant. I recommend finding one before you even start your business in fact. They can help you decide what kind of business set-up is right for you (sole trader, partnership or limited company). They can even register everything for you, advise you about matters such as VAT, PAYE (if you employ anyone) and even register your company with Companies House if you decide to set up a limited company. They can advise you too about what software to use and may even have put together a spreadsheet you can use when first starting out that calculates things like your profit (or loss) at any given point in time. Some accountants are specialist so look for one that specialises in your sort of business.

These then are most of the essentials. If I have missed any out drop me a comment and I will add it to the list.  Now, moving onto ways in which you can save money in these different areas.

1. Telephone and fax - when starting out its tempting to spend lots of money on gadgets. believe me, unless your business revolves around being on the phone all day or sending out hundreds of faxes a week then you just need the basic phone and fax machine. Also, check if you provider has any deals. if you have an existing phone line then you may find that they will install an extra line for business use free of charge and may even offer money off your broadband if you take all three as a package. Remember, you don't need to have a specific business package or contract. You can just add it to your household one and then claim just the business ones as a business expense. As long as you can show the cost separately, then the tax man will be happy.
2. Computer equipment - again, same rule applies. Don't go overboard. A basic computer and monitor with cheap laser will suffice in the early days. Only if you are somebody like a graphic designer or a photographer will you need a more featured model. You can save hundreds of pounds here by buying something that is sufficient for the use you will make of it and not getting the latest whizz-bang PC your teenage son would drool over to play computer games!
3. Working from home has its advantages and disadvantages - its certainly cheaper than renting business premises but if you need storage beyond the garden shed or garage amount of space, r employ people, then working form home won't cut it. Sure you can bring work home but beware the pitfall of not keeping work and home lives separate. We all need a proper work-life balance to keep our sanity. If you need to rent then look for places with short leases so you aren't locked into expensive long-term contracts. Also, check your local Business Link centre and see what deals are available for new businesses. Often the government or local authority will offer cheap office space or rent-free periods to encourage local enterprise. There may a local scheme where you hot desk and only pay a nominal fee to rent access to an office, photocopier, WiFi network and meeting rooms, paying only for the time you actually use the facilities. These are great if you spend most of your time out visiting clients and are able to work from home some of the time.
4. Stationery etc - again, the cheap brand of paper will do for the fax machine and the printer. Only use more expensive paper when its essential, say in preparing brochures in-house or printing photographs for clients. Places like Staples are a good place to buy, or order online for more savings still. Saves time and petrol too.
5. Office furniture can be horribly expensive - try second-hand when first starting out. Only if you need to impress clients should you consider buying anything but budget. The only thing is, make sure that your chair is comfortable if you want to avoid back problems etc. You can still buy second-hand and in fact, this is a good way to get a higher specification for the same price as new or less. Buy in sales too, as places like Staples often have sales with big discounts when product lines are changing. Also, if you buy everything at once when setting up form a place like Staples, but open a business account at the same time, you will usually get 10% or 15% your first purchase!
6. Vehicle - if you can't afford a new vehicle then buy one that's a couple of years old from a reputable dealer and save on the depreciation. Another option is leasing which means you save your capital for other things like stock. It can be tax efficient too.
7. Accountant - relying on personal recommendation is more important than just going for the cheapest price in my opinion. It will work out cheaper in the long run. Also, if you can find one that is familiar with your type of business that will also prove beneficial and there may other pluses too, such as more knowledgeable accountants familiar with your business may know of ways you can save money and of schemes that benefit your business.

Finally, I would encourage you to look at open source software rather than expensive software. For your word-processing and spreadsheet needs look at OpenOffice. For graphics software or web design software, check out sites such as  www.download.com for software that is free for your particular platform. You can also get great software for free on computer magazines, especially the ones that come with a DVD full of free software. You can also benefit from upgrade deals that came with the magazines and save money that way. Another way to make big savings, especially if you have an Apple Mac, is to watch out for sales of bundles. MacHeist is a well-known one and MacUpdate also run them. keep you eye on the web and sign up for their RRS feeds.

That's all for now. I hope to cover software tools in more depth is another post.

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