The Language of Small Business Texts and Vocabulary Training (for students of Economics) Part 2. Учебное пособие

Professional Back Up

UNIT 9.

Professional Back-Up

Luck can make a lot of difference to the success or failure of an enterprise; but you cannot sit around waiting for luck to land on your doorstep. You must take all the steps you can to ensure success. Weakness in specific skills must be covered; you may be able to obtain advice and guidance from an enterprise agency or Small Firms Service. But there may still be some skills for which you must seek outside professional help.

The time to seek out and engage professional advisers will be fairly early in the planning stage. Thus their expert advice can be taken before your plans are firmly formulated. If the adviser is good, this should help you avoid making the sort of expensive errors and misjudgements which could mean your business begins with a permanent disadvantage.

The sort of advisers who could be helpful to you include:

−Accountant;

−Bank;

−Solicitor;

−Surveyour / estate agent;

−Designer / design shop / design consultant;

−Corporate finance adviser.

141

The Language of Small Business

ACCOUNTANT

THE ADVICE AVAILABLE

The advice accountants may be able to give ranges from the basic services, such as book-keeping, to the more sophisticated, such as tax planning or raising funds. Not every accountant will offer every sort of advice. For example, a big firm of accountants is unlikely to undertake weekly book-keeping functions; a sole practitioner may not have the expertise for help with raising funds.

Some of the areas of advice include:

−accounts: doing the book-keeping, setting up accounting systems, advising on computerized accounting packages, auditing for a limited company;

−finance: managing cash, helping to raise finance and to negotiate with the bank manager, raising venture capital, organizing entry to the Unlisted Securities Market;

−business purchase: investigating possible acquisitions, analysing franchise opportunities, negotiating purchase prices;

−tax: preparing income tax and VAT returns, carrying out PAYE and national insurance requirements for employees, personal and business tax planning;

−general business advice: preparing business plans, budgets, forecasts and advising on the form of your business, that is, whether you should be a sole trader, in partnership or form a limited company.

Quite a lot of accountants, particularly the large firms, also have management consultancy divisions, which can advise on the setting up of internal systems, computerization and so on.

HOW TO CHOOSE

− The term «accountant» does not necessarily mean that the person so described has any formal accountancy qualification. If

142

Professional Back Up

you want to employ someone who is a member of a recognized body, you should look out to see if there are letters after the name.

What you gain by using a member of one of these bodies is the knowledge that a required course of training has been followed and certain exams passed. In addition, if you run a company and you want to appoint an auditor, you must appoint someone who is a member of one of these bodies, which have been recognized by the Department of Trade as auditing bodies.

If you need to find someone who will help with your bookkeeping and preparation of your tax returns, and your business is fairly small-scale, employing fully qualified accountants may be the equivalent of cracking a nut with a sledgehammer. You may be able to find someone else quite competent to carry out the limited range of jobs you have in mind, but obviously at a much cheaper rate.

The only satisfactory way of choosing an accountant is by recommendation and taking up references. Ask your bank manager. Colleagues and friends who use the services of accountants are also possible sources of recommendation. References should be taken up whether recommended or not.

There is a case to be made for opting for one of the big firms of accountants, which have specialist small firms divisions, if you want to raise money from the venture capital industry. Venture capitalists may look with more confidence if your financial advisers are well known, rather than from a small firm of accountants however good at their job.

As with any business negotiation there should be a discussion about the scope of the work to be done and clear agreement on what this is and what it will cost. Really you must satisfy yourself, before any work is begun, that the accountant knows what you want and is capable of doing it.

If it is management consultancy that you are interested in, find out if the consultancy is a member of the Institute of Management Consultants. An important point to check is that the consultant has experience of the problems of small businesses.

143

The Language of Small Business

COST

What an accountant costs can be difficult to establish. The answer is it usually depends on the type and the amount of work involved. But the range can be wide, depending on whether you are using a large firm, a smaller provincial one or a book-keeper.

Before you decide to use someone, you must have a clear statement on costs, otherwise they will come as a shock to you.

With some types of work, raising venture capital for example, you may not have to pay the fee if you do not succeed in raising the money.

BANK

THE ADVICE AVAILABLE

There are two sources of advice available:

−your bank manager;

−specialist small business section or centres.

Banks obviously offer a great range of financial facilities,

such as current accounts, provision of overdrafts, longer-term loans, leasing and factoring, import and export assistance. Most of the banks also have specialist services for small businesses and networks of small business centres or advisers which can give general business advice. Some of the banks offer free banking for the first year if you open a business account with them.

The role of adviser sits rather uneasily with the provision of finance. Some small businesses may hesitate about discussing business problems completely frankly in case it should affect the bank’s judgement about extending an overdraft, for example. However, this worry may be illusory, as most bank managers or advisers are competent enough to spot problems from the figures presented.

144

Professional Back Up

HOW TO CHOOSE

The bank or the branch of the bank which holds your personal account may not be the automatic answer. There can be a strong case made for separating your business and personal affairs so that one cannot influence the other.

If your business is planned to be on a large scale, if, for example, you are raising substantial funds and are looking for very fast growth – such as profits of £200,000 to £300,000 within five years – it may make sense to put your account with one of the larger branches. This is particularly so if you can build up a relationship with the bank manager. The manager of a large branch will have more discretionary power; this means that fewer decisions will need to be referred upwards to regional decision-markers within the bank, thus losing the personal touch.

There is probably no advantage in opting for a larger branch if you are likely to be working on your own or on a small scale.

COST

You should definitely shop around to find out what it will cost you for the finance you need. Cost does not only include the interest rate, but also the terms surrounding any loan or overdraft. However, there may be other reasons apart from cost which govern your choice, for example, any «special relationship» you have established with a manager.

SOLICITOR

THE ADVICE AVAILABLE

Solicitors can be particularly useful during the formation of your business, Some of the specialist advice they can give includes:

145

The Language of Small Business

−business advice: on the legal form of your business (that is, sole trader, partner, limited company), on personal guarantees, steering you through the maze of employment law, helping with debt collection by advising on writs and winding-up orders;

−contracts: conditions and terms of sale of your product, leases, franchise contracts, for example;

−legal entity: forming companies and drawing up partnership agreements;

−product protection: helping to obtain a patent or register a trade or service mark or an industrial design.

HOW TO CHOOSE

Very similar considerations apply to the choice of solicitor as to that of your accountant. Solicitors specialize in different branches of the law, so you should ensure that the firm can give you the advice you need on specialized topics. If the specific partner you deal with cannot do this another partner in the same firm may be able to do so, but it is your responsibility to question abilities closely to satisfy yourself that the advice will be soundly based. A wise precaution can be to take up references.

As with accountants, some businesses would be advised to choose a large firm because of the credibility the name would add to your quest for raising large sums of money.

COST

For whatever you want doing, ask for an estimate of costs; if the answer is that it is not possible because the solicitor does not know how long the work will take, ask for the daily rate. But a solicitor who cannot give you an estimate is not impressive.

The law requires solicitors’ fees to be «fair and reasonable». When you receive the bill, if you do not understand how it is made

146

Professional Back Up

up, your solicitor will have to get a certificate from the Law Society declaring the bill fair and reasonable if you demand it.

SURVEYOR / ESTATE AGENT

THE ADVICE AVAILABLE

You may at some stage want the help and advice of a surveyor or estate agent in your search for suitable premises. This may include:

−structural surveys. This could be important if you are considering buying a freehold or buying a lease which includes the condition that you carry out repairs and maintenance;

−funding and assessing of suitable premises and negotiation with the landlords or vendors;

−advice on whether planning permission or the landlord’s consent for change of use is required and helping to make the application for you.

HOW TO CHOOSE

For advice on structure, repairs and maintenance use a qualified surveyor.

COST

The answer is much the same as with other advisers: agree with your chosen adviser the scope of the work to be done before any of it is carried out and ask for a quote.

147

The Language of Small Business

DESIGN / DESIGN SHOP / DESIGN CONSULTANT

THE ADVICE AVAILABLE

Design can be a crucial element in the success of a business. It may not appear as obvious as the need for accounting or legal expertise, and yet it is. Designers can give help and advice on the visual elements of your business and product. There are specialists in:

−setting the image of your business or corporate identity;

−fitting out premises, where this is important for customers or suppliers;

−designing what your product looks like or product positioning;

−selecting what your employees wear and what your vans look like (livery specialists);

−using letterheads, logos, brochures and leaflets;

−packaging.

Using a design shop can be a more cost-effective alternative than an advertising agency for a small business, especially as you are likely to adopt other means of getting your message across than straight advertisements.

You may find that some printers have designers working with them, and could be the most cost-effective of all. However, cheapness is not the best option, if you fail to achieve your objectives because of the poor quality of advice. You must still assess how good the advice is.

Before you approach a designer you should have a clear idea of what you want, although be prepared to listen to suggestions. You should ask the designer to show you a wide range of ideas in what is called «scamp» form, which is a very cheap way of letting you see what sort of impression the idea will give. Settle on two or three ideas that you think are consistent with your product or business and ask the designer to work in more detail on these.

148

Professional Back Up

HOW TO CHOOSE

The best way of finding a designer whose advice you value is to ask friends and colleagues for recommendations. Another approach is to keep an eye open for work you admire which other business have, for example, a logo you think good, an effective premise fitting and so on. Most businesses will be flattered if you ask who helped design it. Whichever way you choose of finding some names of designers, ask for references and see examples of the work done.

COST

There are two elements of cost:

−the idea;

−carrying out the idea into production.

A designer should be able to give you a quote.

CORPORATE FINANCE ADVISER

(or venture capital sponsors)

This is a new profession emerging; they have developed the role of intermediary between those wanting funds and those with money to invest, such as venture capital funds. Their emergence coincides with the growth in availability of venture capital.

THE ADVICE AVAILABLE

A venture capital sponsor will look into a business plan and proposal, and their sponsorship of it should carry some weight with the funds, but this only applies if their reputation is sound.

There are four ways they may be able to help you: − advice on the marketing strategy;

149

The Language of Small Business

−advice on the organizational structure, in particular whether there are gaps in the top management and how the structure can be strengthened;

−a check on your projections;

−advice on how much money you will need and the best way of raising it.

HOW TO CHOOSE

As with any new profession, there are those who are very good and those who are awful. Unfortunately, there is no clear-cut way of finding the name of a good sponsor as there is no organization or recognized qualification. Probably the best way is to ask other people how they raised the funds and if they would recommend the person who helped. Magazines which are aimed at those running small businesses may have articles about who has raised money and how much. Contact the managing director of the firm who raised the funds and ask for a recommendation.

COST

A venture capital sponsor will probably charge between 21/2 and 4 per cent of the money raised. But there may also be demands for shares or options on shares and directorships.