Learning Objectives
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Unit 1: The Pros and Cons of Self
Employment
Unit 2: Generate An Innovative Idea
Unit 3: Implementing your Action Plan
Unit 4: The Practicalities Self Employment
U. 1
• It:
can be profitable
can be varied
The ‘Cons’
• It can be lonely
• If you don’t work you don’t earn – no ‘sick leave’; holidays
cost you in time away from the business
• Owner/Managers have to fulfil all roles – a huge time
commitment – long and irregular hours
• Expect the unpredictable.....
• Can be a long period before owner/managers can draw wages
and thereafter additional profits – or before shareholders see
a dividend
• Can be ‘feast or famine’ – takes a long time to smooth out the
peaks and troughs
• Over-trading (trading in business much of which won’t be
delivered) can often be a bigger problem to manage than
finding the sales
U. 2
Generate An Innovative Idea
•Knowing yourself...
- Self-awareness
- scope for self advancement
- recognise then overcome your personal barriers
‘Push’ = necessity
‘Pull’ = opportunity
-
Innovative thinking:
• Observe……..
Imagine:
Thinking…..
• Acting on your
idea…..
Planning for innovative self
employment.....
A Self Employment ACTION PLAN…
implementing an idea to do
something new
WHY? WHEN?
HOW?
WHO?
WHERE? WHAT?
U. 2
Exercise:
Research
International R&D
Networks
How to make collaboration
work for you.....
• But HOW?
How to make collaboration work for
you.....
Step 4: Implementation
U. 4
The Practicalities Self Employment
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• Disadvantages
Advantages
– Fully
Easy to
liable
set for
up debts
– Income
You have taxfulliscontrol
paid on profits not
– drawings
No audit required
– It
– can prevent
Minimal reportinggrowth due to lack of
capital
Self Employment Option 2 -
Partnership
• It is advisable to
seek legal advice
and draw up a
partnership
agreement
Self Employment Option 2 -
Partnership
• Disadvantages
Advantages
– Each
– partner
Pooling fully responsible for all
of skills
debt
– Increase in resources
– Difficult to introduce new partners
– The risks are shared
– Personality clashes can become a
– Easily
problemset up
Self Employment Option 3 – Limited
Company
• The Company is
managed by
‘Directors/Executives’a
• Company is seen as a
separate legal entity
from the individuals own
it and the executives
who manage it
Self Employment Option 3 –Limited
Company
• Advantages Disadvantages
• Owners are not personally • Much more legal
liable for the debts of the regulation involved
company
• Equipment / Vehicles
• Stock
• Legal / Professional
• Advertising
• Accommodation costs
• Interest and charges
• Wages or drawings
• Other unanticipated
costs
Sources of finance
• Personal/family
investment
• Bank finance
• Business Grants
• Asset Finance
• Alternative loans
• Investors –
Equity/Angel
Personal Investment
• Personal savings
• Family & Friends
• Use of equipment
Bank finance
• Overdraft Facility
• Credit Card facility
• Term Loan
Bank finance
- Character
- Capacity
- Capital
- Collateral
- Conditions
Bank finance
• Character – Good character - honesty, integrity ,
reliability , hard working……
• Overdraft Facility
• Term Loan
• FIXED COSTS
– Costs which are not affected by the
level of activity of the business:
premises (rent, rates), vehicles,
equipment, insurance, bank interst...
• VARIABLE COSTS
– Costs which are directly affected by
the level of activity in the business:
staff, inputs/raw materials,
electricity, fuel (eg: delivery costs)....
Examples of Typical Profit Margins
Survival chances
• Profit with Good Cashflow
Excellent
• To identify
potential cash
shortfalls before
they happen.....
Do the sales of the
business have a
seasonal nature?
Purpose of a Cash Flow Forecast
• To act as a
management tool in
making decisions.
– Example:
Expenditure may be
deferred until cash
position has
improved.
Purpose of a Cash Flow Forecast
• The Cashflow
forecast
confirms for the
bank .... How
much finance the
business needs and
that the business
the ability to repay.
Indications of Cashflow Problems
• Overtrading –
failure to fulfil
orders on time
• Returned Cheques
• Supplier problems
Meeting Your Legal Commitments
•Registration with Government (UK - HMRC;
Ire - Revenue)
•Income Tax – tax return every year - severe penalties for
non-disclosure and interest on late payments
•Business (Corporation) Tax – charged on the profits of
Limited Companies – annual returns
•National Insurance
•Tax on goods and services: VAT (turnover threshold UK =
£82k p.a.) – usually quarterly returns - supported by full
records of all transactions – costly penalties
•Accurate record-keeping is vital – sales and purchases.
invoices -also allows you to monitor & control-5/6 years
THANK YOU