No better time to start a business

THERE is a good chance that before the day is out, you will meet someone involved in a small business, whether it is the newsagent where you buy your Daily Express, the sandwich shop where you buy your lunch or the pub where you go for an after-work drink.

Lauching in a downturn could be the right choice Lauching in a downturn could be the right choice

You may even be considering starting your own small business. If so, you will be joining the majority of firms that make up the UK’s 4.7 million businesses. These small fi rms employ 13.5 million people, representing 58 per cent of the private sector workforce, contribute 64 per cent of commercial innovations and more than 50 per cent of UK turnover. Their importance in the UK cannot be underestimated.

Those who have been made unemployed should remember that they may have transferrable skills that can be put to good use in their own enterprise. Former Woolworths manager Claire Robertson is a good example. When the Dorchester store where she worked closed earlier this year, she reopened it under the name Wellworths, securing jobs, including her own.

However, starting a business is not easy. While 500,000 are launched each year, about 300,000 fail in their first three years.

Preparing for both the good and bad times is key to a firm’s success. In some ways, there can be no better preparation than starting up in a downturn because it will ensure you are more frugal, tougher and ready for all situations.

Over the past year, this nation of shopkeepers and sole traders has been wrestling with bankers who are hiking up

rates for loans and overdrafts, organisations that are settling invoices later, and an increase in red tape.

The economic crisis has led to the banking industry tightening its belt, refusing loans to viable businesses andincreasing overdraft rates. Small businesses have become the victims of the credit crunch despite the fact that it was the bankers who started taking risks with other people’s money, not the enterprises themselves.

Two years into the credit crunch, and despite government intervention and bank pledges to lend fairly, many fi rms are finding it hard to get affordable finance. Figures from the Federation of Small Businesses (FSB) show that a quarter have seen the cost of new or existing loans and overdrafts increase by up to seven per cent, despite interest rates being at a record low.

The FSB has campaigned to make access to finance easier, such as through the establishment of the Enterprise Finance Guarantee (EFG), which despite a slow start, has now loaned £520m to more than 5,000 businesses since January.

The FSB is also working hard to help small businesses get paid on time. Some 4,000 business failures were due to late payment last year, and small businesses are currently owed £25.9bn in overdue bills.

Businesses and agencies in both the public and private sector should sign up to the Prompt Payment Code to highlight best practice and promise to pay fairly. Companies House should be given the power to name, shame and fine late payers and the Government should take on board a measure recently announced in Scotland that requires timely payment to sub-contractors working on government projects.

We also want the Government to halt all new business regulations over the next 12 months so that small business owners can concentrate on surviving the recession. There were 57 new or altered regulations in 2008, and the same amount is expected this year, including changes on maternity and paternity leave and an increase in corporation tax.

The FSB works to make the environment more fertile for entrepreneurship. Membership bodies such as ours provide valuable networking opportunities and advice on vital legal and tax issues. There are also government-funded sources of support, such as Business Link (businesslink.gov.uk), which contains guidance on the latest employment legislation and practical advice for businesses.

It is not easy being small, but if you are considering self-employment, there are advantages such as the flexibility and creativity of being your own boss. Remember, one day you could follow the likes of well-known names such as Dyson and  Dell, both of which started small. And tycoon Richard Branson’s vast business empire started with him selling records in a phone box. While all these started small, ultimately they thought big. Good luck!

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