So, you think your idea has what it takes? Well, do me favour and don’t ask mum and dad what they think. Mummy and daddy will always protect their babies and you will always get a biased opinion.
Get to Ryman, buy yourself a clipboard and gather some questions together. Get that ass out on the street and find out what the public think of your idea. If your idea requires business approval, start contacting companies – the bigger the better. You’ll find that people are always interested in hearing about new products and ideas.
When talking to businesses it’s a must that you make sure you get these businesses to sign what is known as a Non-Disclosure Agreement or Confidentiality Agreement. It gives you some protection and discourages these businesses from taking off and copying your idea. Any business that declines to sign an agreement isn’t a business that you should talk too or work with.
You can find these types of agreements from searching Google. But below is a link I prepared earlier
The world is built on relationships, it doesn’t matter who you are, where you’ve come from, or where you are, you’ve got there from some form of relationship – whether it be from gathering some investment money or from a business or consumer buying your product. Everybody has some form of connection, some of which can be capitalised on and used to your advantage – so building the right relationships and networking intelligently can be an invaluable tool to building your business.
You need to make sure you build the right team around you and make sure you find the right contacts to move your idea forward. A real entrepreneur understands that they can’t do everything themselves. Real entrepreneurs recognise their pitfalls and bring in the right people to support them in these areas.
To make sure you find the right movers and shakers you must find the right companies to accompany you on your journey, these include:
- High quality, reputable accounts
- A high quality attorney, who will work for you and not by the hour
Your accountant and attorney will need to be forward thinkers, not people who are just looking at what they can get from you at present, but further in the future when you’re generating a high income or looking to possibly sell the business, and so forth. This doesn’t mean you should expect to get them working for you for free now, but it should be at a considerably knocked down price.
The government is striving to help small businesses whilst simultaneously protecting investors who are willing to take risks with their money on these businesses. There are currently two schemes available.
- Seed Enterprise Investment Scheme (SEIS)
Private Investments through the SEIS can input £100,000 in a single tax year which can then be spread over a number of companies. However, none of the companies can raise more than £150,000 in total via the SEIS investment. Investors cannot control the company receiving their capital and have more than a 30% stake in the company. Investors can receive up to 50% tax relief in the tax year the investment is made, regardless of their marginal rate. The company receiving investment must also be registered in the UK and have fewer than 25 employees.
In the 2012-13 tax year, tax payers could roll a chargeable gain on the disposal of assets in the tax year in to shares qualifying for SEIS income tax relief, with full capital gains tax exemption. If the company is the parent company of a group, that figure applies to the whole group. The company’s trade must be no more than two years old, and the industry must have assets of less than £200,000. The company would also need to trade in an approved sector – generally not in the finance or investment industry, such as, for example, a property company that raises capital as SEIS.
- Enterprise Investment Scheme (EIS)
EIS offers tax incentives to investors buying shares in companies that find raising money from banks difficult because of their short trading history or risky business sectors.
An investor’s income tax liability is reduced by 30% of the amount spent on subscribed shares for the year the shares were issued. An investor cannot sell EIS shares until three years after the date of issue or, if it’s later, three years after the company has started trading. As long as the EIS relief has not been withdrawn, no capital gained tax is payable when the shares are sold. If the shares are sold at a loss, then the investor can set that amount against income made in the year, less any income tax relief. The investor does not need to be from the UK when shares are issued, but will need to be paying income tax in the UK. Other restrictions include: investors cannot have any connection with the company or employees, nor will they be able to gain tax relief if investing in the company they work for.
In any 12 month period, an EIS company can raise a maximum of £5 million but this figure also includes money raised via a corporate venturing scheme and a venture capital trust scheme.
To comply with the rules for EIS relief, the share issuing company, and its subsidiaries cannot employ more than 250 people.
When you start analysing the data you’ve obtained from consumers and / or businesses it is time to start building your documentation to support you when you go out looking for investment. These include:
- Company Overview – This is a maximum of two pages. It should detail the following:
- Who you are
- How you came up with the idea
- What the idea is
- Summarised analysis from your research
- Determine the right investment scheme for the investor and protect as much money as possible through these schemes
- How much you need
- Full Business Plan
- Marketing Plan
- Financial Plan and Forecasting for 1-3 years
The old model of getting your family and friends to invest in your idea is dead and quite frankly, thank god! For far too long parents, aunts, uncles and so on, have been investing in their family businesses mainly because they are relatives and therefore view the potential business with rose tinted glasses. Investments made by friends and family have unfortunately caused too many crap business ideas to come into fruition, many of which have often resulted in family break ups when they end up going disastrously wrong.
This is the stage where your accountant and attorney come into hand, and if they can’t help you here it’s time you found yourself someone new.
Your accountant will advise you on the best scheme available for investment and should get you approved. Once approved your accountant should help you by providing your information to wealthy business investors who favour these types of investments. The accountant won’t be able to recommend the investment, but the fact that your plan is presented in front of the investor in the first place……
If a suitable private investor cannot be found then it’s time to start looking at crowd funding. Crowd funding describes the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations.
Don’t panic, the fact you’ve got your SEIS or EIS approval is still a bonus as more and more private investors are now investing through crowd funding websites.
Some crowd funding websites that have featured in the news, include:
Crowd funding is a great way to get yourself funded. Usually you have 90 days to gain your investment at a cost of 3-5% for the overall investment cost.
Negotiate on everything…I do!
It doesn’t matter if you’re buying a pint of milk or a desk. Research the best prices using the phone, people you know and the internet. You never know who may be able to help you with setting up your business.
When you have an investor making an investment through one of the above schemes remember this, this is your bargaining chip. Investors have protected their investment whether it goes north or south, so no signing over 20 or 30% of your business.
THE HIRING AND BUILD
So you’ve found the right accountants, attorneys and you’ve found your cash. Now you’re at the stage where things are concrete and you need to start hiring for positions, which is the really tricky part.
Due to a poor education system and a lack of investment into computer science in the UK, this has created a developer vortex leading to poor developers charging extortionate amounts of money offering B-grade skills. One great option is to team up with a reputable university who can present you with graduates suitable to your requirements, which evidently aids you in your cause.
The alternative and an increasingly popular route to take would be to gain the knowledge required yourself. A growing range of code teaching websites can now teach you, Codecademy is a great example of this.
This is the fun part, telling people about your new idea. Of course only once it has been developed.
The best and most effective way to market your business to reach the most amount of people in this day and age is to take advantage of digital marketing. Set healthy budgets for your advertising on:
- Bing Ads
- Facebook Ads
Start building a blog to post information on changes/developments within your business, which will also allow other businesses and consumers to engage with you on your website and follow your company’s progression.
The process you have to go through to become the next big thing can be pain staking, but at the same time it will be the most enjoyable thing you will ever do. If you have the right idea, build the right team around you and keep things simple, the world is your oyster.
N.B – None of the above should be construed as advice and I am not liable for any problems you may incur along your journey setting up your business. Each and every person’s experiences are completely different.