Enterprise - Finance

We calculated our overheads based on standard expenditure costs including rent (at £399/month at Duke Studios); software - Adobe Creative Suite, MS Office and various studio equipment, travel and research costs and so on.  

Based on an initial £25,000 salary for year 1 (£17,127 after national insurance and income tax), our annual income required is £100,000 alongside the total overhead costs of £17609.05. Using these values, and based on 244 available work days, our minimum daily charge rate as 'Craft' is £482.  

As we intend to make a profit in the first year to account for various contingency costs (including small business loans and dividends), our actual daily charge rate is £600. This will provide an annual pre-tax profit of £28,792 and a total net profit of £23,033.60. However, as we want to offer the best and most affordable service as possible, the amount we can charge can be anything above £482.

Enterprise - Website design

I decided to design some initial website design ideas to experiment with applying our brand to other forms of media. Our website will be a useful tool in creating an online presence - advertising through social media including Twitter and LinkedIn and various online networking tools. As we have consistently kept a minimal / monochrome aesthetic, I kept the design concise, focusing primarily on type layout.

Using the copy created by Max, as featured on our publication, I decided to create a piece of text which will be presented to the viewer upon the first load. It will provide a brief insight into who we are, what we do and what we can offer to suit their needs.

Enterprise - Publication / Handout

For our final presentation, we decided to create a publication / paper portfolio that would provide a brief insight into our business accompanied by some samples of our work. A4 format to fit in an A4 sealable plastic wallet - printed on A3.

We each sourced our own logo design work to incorporate into the portfolio accompanied by a short description as to who the client was (dependent on whether it was live or not') and what deliverables it was applied to (business card, packaging etc).

Enterprise - Start up business loans

Small business loan

I initially looked at Natwest due to its reputation it has with helping start-up businesses - plus Luke had a brief chat with the business manager. A small business loan is ideally suited to small businesses like ours. Based on ongoing overhead cost estimates (£17,609.05), this choice seemed the most plausible as this service is for loans up to £25,000. 

Start-up package

Natwest offer a start-up package for upcoming businesses who are either beginning to trade or have been trading for less than a year. It offers two years free business banking, a fee-free overdraft 

Business plan

Natwest also offer a service where we can create an online business plan, as seen below. The layout is easy to navigate, clear and concise, and provides all the necessary information for a start-up business. However, I have used the business plan provided by BusinessLink as a basis of our own. This service could prove useful, however.

Enterprise - Finance / Accounts

Salary

Based on our initial cost of living costs, we decided to give ourselves an initial start up salary of £25,000 before NIC and tax. The after tax net salary amounts to £19,362, based on the 2011-12 tax year.

Enterprise - More expenditure costs

Business insurance

Using www.moneysupermarket.com, we decided to draw up a quick estimate as to what insurance we may have to pay. However, as we initially chose a partnership structure to base our business on, the amount may differ from the one below. In this case, they provided an estimate of £265.

Based on a limited company

As you can see, the quote is around £120 more than if we were a partnership.

Other equipment costs not accounted for

Although we initially disregarded the following, we decided it would be beneficial adding these to the existing equipment costs to provide a more accurate estimate. 

Accountant

Luke got in touch with a friend of his who trades as an accountant and he provided a rough estimate of around £350 - £400 for a small, start-up business like ours; based on what we intend to turnover.

Enterprise - Limited Company

We are now... a limited company with equal shareholding between all four members.

We initially decided to run as a partnership due to the equal opportunities it offers. However, after looking back at my research and requesting advice from my parents (as my dad has set up his own business), we decided to look at becoming a limited company due to the multiple benefits it offers.

Reasons why:

- Liability is limited, which protects your personal assets from your company's debts, and means that your company can apply for credit, loans and mortgages in its own name.
- Because limited companies have records with Companies House, they are often seen as a more reliable and secure option than non-limited companies.
- The availability of your company's records may help creditors and customers build up a sense of trust and faith in your business.
- Being a limited company also protects your company name so that no other company can use it.

Source: duport.co.uk

Enterprise - LLP's

A limited liability partnership (LLP) is similar to a normal partnership, but it also offers reduced personal responsibility for business debts.  Unlike sole traders and partners of ordinary partnerships, the LLP itself - not the individual members - is responsible for any debts that it runs up, unless individual members have personally guaranteed a loan to the business.

LLPs are more complicated to set up and run than ordinary partnerships, as they have to meet many of the same requirements as limited companies. LLPs are designed to be used by profit-making businesses. Non-profit making organisations should not use this business structure.

Differences between general and limited partners

Any individual or legal body - for example a company - may be a partner in a limited partnership, either as a general or as a limited partner. However, you cannot be a general and a limited partner at the same time.

You will have different debts and obligations in a limited partnership, depending on which type of partner you are:

- General partners are liable for all debts and obligations of the partnership
- Limited partners are only liable for the debts or obligations they put into the business

Because limited partners have some form of legal protection from incurring any additional debts, they may not:

- Take out their contribution to the partnership for as long as it exists
- Control or manage the business
- Have the power to make any binding decisions for the firm

Enterprise - Taxes / NIC

As we are an ordinary partnership consisting of 4 individuals, we do not need to pay corporation tax. We need to pay Class 2 National Insurance and if our annual profits are over a certain amount, we also need to pay Class 4 NIC. HMRC sets up the right tax and NI records for individuals (partners) and the partnership themselves.

Income Tax and Capital Gains Tax 

The profits and gains of the partnership are shared among the partners. Each is personally responsible for paying tax on their share.  The nominated partner needs to register the partnership with HM Revenue & Customs (HMRC).  Each partner also needs to register themselves with HMRC. This helps HMRC set up the right tax and National Insurance records for both the partnership and partners. Every year each individual partner will need to complete a Self Assessment tax return to show the profits they get from the partnership.

The partnership should appoint one of its officers - the nominated partner - to fill in the Self Assessment Partnership Tax Return and send it to HMRC. This includes a Partnership Statement, which shows how profits or losses have been divided among the partners. The nominated partner should also ensure that all other officers are given copies of the Partnership Statement to help them complete their own tax returns. Although the nominated officer has responsibility for the Partnership Tax Return, all the partners are jointly liable for any penalties resulting from it being submitted late or incorrectly.

National Insurance contributions 

As well as being responsible for their tax, individual partners are also responsible for paying their own National Insurance contributions (NICs). Partners normally have to pay Class 2 National Insurance contributions. If their annual profits are over a certain amount they also pay Class 4 contributions.

Corporation Tax 

If partners are companies, they must pay Corporation Tax on their profits from the partnership, and should record the relevant figures on their Corporation Tax return.

VAT 

If the partnership has - or expects to have - turnover of more than £73,000, it will need to charge VAT to its customers and pass this on to HMRC.

PAYE (Pay As You Earn) for employers 

Partnerships with employees will need to collect and pay income tax and NICs, which will mean operating a PAYE (Pay As You Earn) system.

Source: businesslink.gov.uk


Checklist

In order to set up business as a partnership there are certain things you need to do - some must be done as a group and others as individual partners. You should:

- Display all the partners' names at all your business premises together with the address to which official documents should be sent.
- Display all the partners' names on your business website and stationery, including letters, invoices, receipts and cheques along with your principal place of business.
- If the partnership has more than 20 partners you need only display your principal place of business.
- Register the partnership, and each partner, for Self Assessment with HM Revenue & Customs (HMRC).
- Contact HMRC to register your partnership for VAT if you expect a turnover of more than £73,000 a year.
- Register with HMRC for PAYE (Pay As You Earn) if the partnership employs staff.
- Register with HMRC for the Construction Industry Scheme if the partnership is a contractor or sub-contractor.

Enterprise - Partnerships

HMRC

If you’re starting or joining a new business partnership, both the partnership and each partner need to be registered for Self Assessment. The partner nominated to receive and send in the partnership tax returns must complete the partnership registration form. It’s quick and easy and can be done online.

You must register as a partner in the business if you’re an individual. HMRC will use the information you send to set up the right National Insurance records for you too. You can do this online. It will help if you have information about the partnership to hand before you start, for example:

- Address and postcode
- Partnership Unique Taxpayer Reference
- Company registration number (if registered with Companies House)

If a company, trust or another partnership becomes a partner in the partnership, it needs to be registered for Self Assessment too. The person responsible for the new partnership, for example, the trustee or company secretary, should complete and sign form SA402.

Source: hmrc.gov.uk


Types of partnership

There are three types of partnership:

1) 'Ordinary' partnerships
2) Limited partnerships
3) Limited liability partnerships (LLPs)

All three types of partnership have the following features in common:  

- Two or more persons – ie the partners - share the risks, costs and responsibilities of being in business
a partner can be an individual or another business, eg a limited company or another partnership
- The profits and gains of the partnership are shared among the partners, unless the partnership agreement states otherwise
- Each partner is personally responsible for paying tax on their share of the profits and gains, and for their - National Insurance contributions
- Each partner must register for Self Assessment with HM Revenue & Customs (HMRC) and complete an annual tax return
- A nominated partner must also send HMRC a partnership return
- Partners raise money for the business out of their own assets and/or with loans
- The partners themselves usually manage the business, although they can delegate certain responsibilities to employees
- It's possible to have 'sleeping' partners who contribute money to the business but are not involved in running it from day to day
- The partnership must keep records showing business income and expenses

Ordinary partnership

'Ordinary' partnerships An 'ordinary' partnership has no legal existence distinct from the partners themselves. If one of the partners resigns, dies or goes bankrupt, the partnership must be dissolved - although the business can still continue.

A partnership is a relatively simple and flexible way for two or more people to own and run a business together. Ordinary partnerships also have to be registered with HMRC for tax purposes. The nominated partner does this by registering the partnership for Self Assessment. If the partnership has debts, the partners are jointly liable for any amounts owed and so are equally responsible for paying off the whole debt.

Creditors can claim a partner's personal assets to pay off any debts - even those debts caused by other partners. If a partner leaves the partnership, the remaining partners may be liable for the entire debt of the partnership. Therefore, partners do not enjoy any protection if the business fails.

Source: businesslink.gov.uk


Naming a partnership

A partnership can trade under the names of the partners, 'Wright, Brown and Ali LP', for example, or it can use another business name - such as 'Fantastic Design Solutions Limited Partnership'.

If your trading name does not include the partners' names, you must still make sure that your business website and stationery - such as letters and invoices - display all of their names as well as the trading name - for example, 'Wright, Brown and Ali, trading as Fantastic Design Solutions Limited Partnership'.

If there are more than 20 partners then the business website and stationery do not have to list them, but they must show the address of the partnership's principal place of business.

The trading name should not be the same as, or too similar, to that of any existing business, and it should not contain words that people might find offensive or misleading.

Source: businesslink.gov.uk

Enterprise - Business structure

Business structure (from BusinessLink)

If you're self-employed, you pay Income Tax and National Insurance on what is known as 'taxable income'. Taxable income is mainly the profits you make from working for yourself (whether as a sole trader or partner). You pay Income Tax and Class 4 National Insurance through the Self Assessment system. You will need to fill out a tax return following the end of every tax year. As soon as you start in business you will need to register with HMRC so that the correct tax and Class 2 National Insurance contribution records can be set up.

The most popular legal structures for start-ups are sole trader, partnership and private limited companies.

Source: online.businesslink.gov.uk


Partnership

We are a standard partnership of 4 creatives.

Anything that one partner does affect all of the partners, because each partner of the general partnership is personally responsible for all obligations of the partnership deals. Thus, each general partner's exposure to risk is increased by a factor equal to the number of general partners in the business.

Source: ukincorp.co.uk

The profits and gains of the partnership are shared among the partners. Each is personally responsible for paying tax on their share.  The nominated partner needs to register the partnership with HM Revenue & Customs (HMRC).  Each partner also needs to register themselves with HMRC. This helps HMRC set up the right tax and National Insurance records for both the partnership and partners.

The partnership should appoint one of its officers - the nominated partner - to fill in the Self Assessment Partnership Tax Return and send it to HMRC. This includes a Partnership Statement, which shows how profits or losses have been divided among the partners. The nominated partner should also ensure that all other officers are given copies of the Partnership Statement to help them complete their own tax returns. Although the nominated officer has responsibility for the Partnership Tax Return, all the partners are jointly liable for any penalties resulting from it being submitted late or incorrectly.

If the partnership has - or expects to have - turnover of more than £73,000, it will need to charge VAT to its customers and pass this on to HMRC.

Source: businesslink.gov.uk

National Insurance contributions

If you're self-employed and your annual profits are over a certain amount you normally have to pay Class 4 National Insurance contributions in addition to Class 2 contributions. The amount of Class 4 National Insurance contributions you have to pay for any tax year is based on your profits for that year. You pay 9 per cent on annual profits between £7,225 and £42,475 (2011-12) and 2 per cent on any profit over that amount.

Limited company

Aside from the sole trader route, the limited liability company is the most popular business structure in the UK.  The liability of company directors is ‘limited’ in that the company’s finances are separate from personal finances, which is not the case for sole traders. Limited company shareholders are not responsible for any debts run up by the business, although directors may need to guarantee loans or credit taken out in the company’s name.

There are some high level requirements which all limited companies must fulfil:  

- The company must be registered at Companies House
- The company’s annual accounts must be filed at Companies House
- Annual Return (Form AR01) must be completed each year to ensure Companies House records the most up-to-date information about the company. This is subject to a modest annual fee.
- HMRC must be informed if the company has any profits or taxable income on an annual basis.
- Every limited company must complete an annual corporation tax return. Any liabilities must be paid within 9 months of the company year end.
- All company employees must pay income tax and NICs on any income they receive.

Source: bytestart.co.uk


If you're a sole trader or partnership, there's no better time to convert your business to a limited company. Here are six reasons why:  

1. The principal benefit of trading as a limited company has always been the limited liability bestowed upon the company's officers and shareholders. As a sole trader or other non-limited business, personal assets are at risk in the event of failure of the business, but this is not the case for a limited company. As long as ths business is operated legally and within the terms of the Companies Act, directors' or shareholders' personal assets are not at risk in the event of a winding up or receivership. And as often happens on occasion, such events are not always under our own control.

2. The first £10,000 of a limited company's profits are tax free. This is not the case for sole traders and partnerships.

3. Company profits may be distributed as dividends to shareholders. Presently, National Insurance is not applicable to dividend payments, effectively reducing your tax liability still further.

4. Operating as a limited company often gives suppliers and customers a sense of confidence in a business. Quite often, larger organisations in particular will prefer not to deal with non-limited businesses.

5. The costs associated with managing and operating a limited company are not significantly greater than with non-limited businesses. Accountants and other professional advisers may have conflicting views on when they consider the benefits of being limited to outweigh the advantages of being self-employed. In general terms - at least from the perspective of taxation and accountancy - changes to legislation over the last few years have meant much lower costs associated with limited companies.

6. There is no obligation for a limited company to commence trading within any set time period after its incorporation. This means that the formation of a limited company is one simple and low cost method to protect a business name. Whilst this does not in itself give any rights to use of the business name, many clients form companies in anticipation of future development of new businesses or in order to protect the limited company name of an existing non-limited business for the future. No two limited companies can exist with exactly the same name.

Source: talktalk.co.uk

Enterprise - Cost of Living

Cost of living worksheet

Enterprise - Duke Studios

Charlotte looked into various studio spaces that would suit us as a practice, primarily those situated in Leeds due to its connections with industry, the fact we will all be situated in Leeds after graduation and the multiplicity of resources it has and we could take advantage of.

About

Duke Studios are, as stated on their site, a multi disciplinary creative space in the heart of Leeds, offering studio spaces, co-working membership and services. It is located in Munro house, above Leeds Gallery and Cafe 164. 

We wanted to be surrounded by like-minded professionals therefore we thought Duke Studios was a perfect place to set up our new business. Although not officially opened, this will provide a new and contemporary working space for us. There are plenty of resources, the space is more than adequate and provides 'endless collaboration potential' Business is social, meet, work, collaborate, explore, learn, grow and succeed. 

Pricing

Charlotte gathered the following information after the Leeds Print Festival:

Space (2): £399 p/m 

Broadband: Included 

Electricity / gas: Included

Strengths

- Close travel networks

- Situated in the business capital of Yorkshire

- Surrounded by like-minded creatives therefore there is a potential for collaboration

- New, contemporary and fresh studio space

- Meeting room for client contact

- Bills inclusive - relatively cheap cost

- Resources / workspaces etc

- Gallery below - potential exhibitions?

Enterprise - Business Plan / Links

Starting a business: http://www.businesslink.gov.uk/bdotg/action/layer?r.l1=1073858805&r.l2=1097138362&r.s=m&topicId=1073859137

Business Plan: http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1087369151&r.l1=1073858805&r.l2=1097138362&r.l3=1073869162&r.s=sc&type=RESOURCES

Insurance: http://www.constructaquote.com/liability-insurance/liability.aspx

Registering a trademark: http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1082501507&r.l1=1073858805&r.s=tl&type=PIP

Enterprise - Equipment / Software

Starting to look at various start up costs including software and back-up computers. As we all have our own computer, we decided to factor these in to cut the costs. The software includes the full Adobe Creative Suite Master Collection, Microsoft Office and QuickBooks (accounting software).

http://www.adobe.com/uk/products/creativesuite/mastercollection.html

http://volumelicensing.adobe.com/DRHM/store

http://emea.microsoftstore.com/UK/en-GB/Microsoft/Office-for-Mac-Home-and-Business-2011-2-Pack

http://store.apple.com/uk/product/FC309B/A

http://www.intuit.co.uk/quickbooks/accounting-software/products-pricing.jsp

Enterprise - Website

Website

I decided to use simplexwebs.com as a source for pricing as I know the guy who runs it therefore he may be able to sort out a deal for us. For an entry hosting package, the prices start at £6.99 per month or £69.99 annually - 12 months for the price of 10. As a start up business, I believe this would suffice.

Domain registration

www.craftagency.co.uk amounts to £11.49 for 2 years.

Total costs

£69.99 - Hosting

£5.75 (per year) - Domain

= £75.74 

= around £19 pppy

Enterprise - Start up costs / Overheads

Source: businesslink.gov.uk

Creating, monitoring and managing a budget is key to business success. It should help you allocate resources where they are needed, and should not be complicated. You simply need to work out what you are likely to earn and spend in the budget period.  Most businesses start preparing a budget around two to three months before the start of a new financial year.

Overheads

- Cost of premises, including rent or mortgage, business rates and service charges
- Staff costs - eg pay, benefits, National Insurance
- Utilities - eg heating, lighting, telephone or internet connection
- Printing, postage and stationery
- Vehicle expenses
- Equipment costs
- Advertising and promotion
- Travel and subsistence expenses
- Legal and professional costs, including insurance

Your business plan should help in establishing projected sales, cost of sales, fixed costs and overheads, so it would be worthwhile preparing this first.  Once you have figures for income and expenditure, you can work out how much money you're making. You can look at your costs and work out ways to reduce them. You should also be able to spot if you are likely to have cashflow problems - giving you time to do something about them.

You should stick to your budget as far as possible, but review and revise it as needed. As the budget year progresses, control might be better exercised by either a rolling budget or periodic reforecasting.

Enterprise - Delegating roles

Reading week = enterprise. We initially wrote a to-do list and through this, delegated specific roles and tasks that we could focus on individually - in my case, accounts and finance. I will look at collating all the start up costs, specifically location / premises, equipment, website though Charlotte will gather various studio locations and their costings.

OUGD202 - End of module evaluation

Enterprise - Lecture 9

How not to fail

Entrepreneur rollercoaster - Uninformed optimism - informed pessimism - crisis of meaning - crash and burn - hopeful realisation (getontherollercoaster.com)

5 reasons why businesses fail

- Failure to adapt to a changing market
- Failing to continuously market yourself
- Not seeking advice or professional help when necessary
- Inadequate accounting records
- Disregarding or misinterpreting financial records

1) Failure to adapt to changing times

- Keep up
- Be informed
- Understand your macro and micro environments
- Analyse and find your place within your competitors
- SWOT your competitors / other practitioners (say, 3 that already do what you want to do - look at their strengths and weaknesses, but be objective)
- PEST your environment (see what factors are in your favour - why is it a good idea?)

Websites

NESTA - Analyses the creative industries and hows 'creative clusters' - reasoning for your location choice
Design Week - All aspects of the design industry, possible quotes for presentation
A-N.org.uk - Artist newsletter, knowledge bank resources - contracts, frameworks, business plans
Creative choices - Essential tools, career guidance, graduate start-ups

2) Failing to continously market yourself

Marketing plan - refer to how you would raise awareness, gain interest and so on...
Marketing communication mix - mention by name in presentation
Choose 3 methods to promote your business but use them creatively and imaginatively
Differentiate yourself by the way you think


3) Reasons why people fail


Five tips for design students

- Integrity - believing in your work, being honest
- Communication - imperative, be credible, develop verbal and visual presentation skills
- Cultural awareness - visual arts, maintaining this cultural awareness
- Development of professional skills - how we add value through planning, organisation
- Getting back to basics - think like an artist, seeing things differently, creative solutions
- Who will focus on marketing? Accounting? Art direction? Administration?
- Assign roles to team members

4) Inadequate accounting records
5) Disregarding or misinterpreting financial records

Keep finance on track - record every purchase / outgoing and so on
Accounting is essential


Business plan

What resources will you need?

Equipment
Space
Stock
Buy, rent or lease your equipment and space?

Why will people buy from you

- 3 competitors
- Look at their strength and weaknesses
- Make your augment coherent
- Say what opportunities this presents to you

Marketing plan

- Three effective and innovative methods
- Explain why they will be effective in reaching your particular target market
- Talk about the 'what' as opposed to the 'how'
- Why will visiting your website be a different experience to others?
- Differentiate yourself

How much will it all cost

- Start up costs
- Overheads
- Direct costs (materials and labour)
- Can you fund it yourself?
- Just show your considerations


Presentation

- No more than 10 slides
- Use powerpoint ONLY as a visual aid
- Do not use it as a crutch
- Hold your notes in your hand
- Treat it like a business pitch

Interviews

- Before you go to an interview, have a look at their competitors
- What are their strengths? How can you contribute towards these?
- What is in development? Contribution towards future plans
- The employer is in business to make a profit - USP, external environment
- Employers are looking for someone who can make a difference

- Conduct a SW analysis and see f you can come up with some opportunities
- Ask them about their competitors to show you have some business capabilities
- Ask them about things affecting their industry

Studio space / workshops

Factory - Screenprinting, woodworking etc
East street arts - Studio and artist spaces (cheapest in Leeds)
Umbrella - General space, creative hubs
Limehouse - Expert advice, manage space (receptionist), offices
Round Foundry - Creative businesses, folding offices
Old Broadcasting House - Hotdesking
Wildfire