Starting your own business

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Thinking about running your own business
What sort of business should you set up?
Your place of work
Planning and research
Funding your business
Managing your finances
Promoting your business
Useful organisations
Further reading

The Royal Bank of Scotland Group has kindly supported the production of this booklet. For further information to help you understand and manage your money, go to FACE2FACE WITH FINANCE www.rbs.co.uk/face2face

This booklet is aimed at people who have experienced mental distress and are thinking about starting up a business. It offers a guide to what you need to think about before and during setting up on your own or in a partnership.

Thinking about running your own business

If you're reading this booklet, then let's face it – you've probably been playing with the idea of setting up a business for some time! If you've had experience of mental health problems, you may be uncertain that this is something you can achieve or if it's really a good idea. Setting up your own business can be one of the most exciting and rewarding things you can do in your life. It can also be very scary and daunting and, at times, stressful. Below are some of the issues to consider.

Advantages

• It can feel very empowering and exciting.
• It can allow you to feel in control and be your own decision maker.
• It can allow a certain degree of flexibility and a choice of working hours.
• It can offer greater freedom from stigma and discrimination.
• It can feel rewarding to be able to contribute to society/the economy, while at the same time reaping the rewards of your own efforts.
• It can build self-confidence and self-esteem.
• It can help you take control of your finances.
• You may be able to work from home if you would like to do so.
• If dealing with people and communicating is difficult at times choosing a web-based business may allow you to get around this issue.

Disadvantages

• It can feel isolating and give rise to feelings of anxiety and uncertainty.
• It can take time to build up a business and will almost certainly require long hours especially at the beginning.
• It may be tempting to take on too much work.
• Anxiety around income, taxes and keeping up with paper work can feel stressful.
• Fluctuating periods of ill health could affect the sustainability of a business.
• You could be taking a risk.

Many of the disadvantages mentioned can be overcome or reduced with appropriate planning, and support. Your chances of setting up and sustaining a successful business are greatly increased by seeking as much help and advice as you can.

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Support

Support can be crucial to the success of your business. If you do decide to go ahead, start thinking about what sort of support mechanisms you'd need in place to feel confident about starting up, and how you can get them.

Business support – you can gain business support from local business advisors, accountants, banks, and training courses (some of these services will require a fee). The National Federation of Enterprise Agencies or Business Link can help you locate a business advisor near you (see 'Useful organisations'). Your local bank may also be able to offer advice.

Emotional support – this is important. Talk to family and friends. Tell them how they can help and encourage you, with your goals. You could also contact your local Mind association.

Practical support – you may need help with childcare, bookkeeping or
housekeeping, for example. You will need to think about how to get the help and  whether you will have to pay for it.

"I can't believe this. I have my own business, yes me. Three years ago I was in hospital and felt as if I couldn't achieve anything. It's been difficult at times, but help has always been there – just use it". Alex

"For the first time in my life I feel in control – my life,finances, everything. I have felt stressed, but planning and the support of my partner and kids has got me through it. I feel proud of my company". Gina

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What sort of business should you set up?

There is an almost infinite range of businesses that you could set up, depending on your skills, experience and the market place.

Choosing an idea

You are more likely to succeed if you are knowledgeable and have practical experience in an area that interests you. This can be anything from setting up a jewellery making business to working as a training consultant. If you have an interest, but little experience in that area, it might be worth considering training or retraining.

There are lots of resources offering advice on ideas and what the likely business trends are. The website www.Bizhelp24.com can help with business ideas; the government agency, The Small Business Service, can help with developing these ideas, including ones for inventions.

If you have an idea or invention, you can find out about patents and design rights by contacting the Patent Office and checking out the Intellectual Property website. (See 'Useful organisations')

Beware of adverts offering quick 'get rich' business schemes, as they are unlikely to fulfill their promise.

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The business structure

You will need to decide on what type of trading format (ie the structure) your business will take. You need to think about what suits you best in terms of manageability, your personal situation and personality. It is always wise to get legal advice before deciding on your trading format. A solicitor will spot things in a contract that may not be so obvious to you. A business start up advisor can help you think through the options, but here are the basic formats to consider:

Sole trader
This is usually a person working alone, who is completely in charge of and responsible for everything that happens within the business.

Pros

• This is the simplest and cheapest way to start a business.
• Sole traders make their own decisions.
• There is less form filling and auditing compared to other options.
• The sole trader keeps all of the profits.

Cons

• It may be more difficult to obtain start up funding.
• It may be perceived as less accountable and therefore a greater risk to do business with than a company.
• The sole trader is liable for all losses and debts.

Partnership
This is when two or more people start up in business together. One partner can make decisions without the consent of the other partners.

Pros

• A partnership will mean that all business responsibilities are shared.
• Initially, there may be more money to invest, as there are more people involved.
• There should be a greater skill set to share.
• Partners can provide both emotional and practical/business support to one another.
• Risks are shared.

Cons

• If one patner cannot pay their share of the partnership's debts the remaining partners become responsible for them. This is known as 'joint and several liability'.
• If a partner makes binding business decisions without the consent of other partners, ALL partners are responsible for the delivery and outcome of those contracts.
• Profits are shared with all partners.

Limited Company
A limited company can be set up by one or more people. If there is only one person involved they will need to find someone willing to act as Company Secretary. This position can be filled by a relative or friend in a voluntary capacity. The main duties of a company secretary are to sign off and send required documentation to Companies House (see 'Useful organisations) – directors are responsible for the contents of the documentation. Personal risk is limited to how much is invested in the business and any guarantees you have given to secure funding.

Pros

• Higher start up credibility (although some businesses offering contracts prefer limited companies to have a three-year history that they can check out).
• It may be easier to raise funding, including investment in your company's shares.
• Limited companies are usually exempt from auditing if the turnover is under a certain amount.
• Less personal risk owing to limited liability.

Cons

• More complicated and expensive to set up than a sole trader or partnership.
• Keeping records is more complicated as you must disclose a lot more financial and company details than if you were in a partnership. This includes information for Companies House and HM Revenue and Customs.
• There are also some fees to be paid to register certain business information. (Advice from a solicitor and a business advisor is essential.)

"We started off as a partnership. M is better with sales and I've got more of an eye for print design. As our graphical design business took off we were offered bigger contracts. Cool, a bigger turnover. Some of the big contracts involve longer periods of time in both creating the finished product, and being paid in full. As some of our suppliers needed paying upfront our accountant said we were more at risk from cash flow problems and advised us to become a limited company. This seems to be working well for us." Zac

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Other options to consider

A franchise
Taking on a franchise means buying a license from an existing business to use their trade name, business idea, products and services. Franchising allows you to enter into a business with a proven track record, but it can be costly to buy a franchise, and there may be less control over how the business is run.

A social enterprise
Social enterprises are businesses with social objectives. They can still make profits, however the profits tend to be reinvested for the good of the business or the community rather than distributed as dividends to share holders. Social enterprises can take on many forms, including limited companies, community interest companies, social firms and co-operatives. Advantages include community and ethical beliefs being upheld, having shared responsibility, and possibly finding it easier to raise funds. Disadvantages include differences of opinion regarding decision making (it is worthwhile to draw up agreements), administration, and sustainability if members' needs evolve or change.

A charity
To set up as a charity you will need to register with the Charity Commission (see 'Useful organisations'). The advantages include meeting social or ethical needs, and certain tax benefits. The disadvantages involve restrictions on activities and use of funding.

Employees
As well as thinking about the financial aspects of hiring people, you will also need to consider what the legal requirements are. If you want to employ workers then it is worth checking out the Business Link website (see 'Useful organisations'), and human resource related information, as well as taking advice from your local business advisor.

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Your place of work

The location and actual type of venue you work in is very important. It is important to work out what suits you and your business best. It is useful to talk over your plans with a business advisor as there are legal and financial implications associated with whatever business base you chose.

When choosing a venue, some of the things you will need to consider are:

• disability access
• the health and safety issues for you, your customers and visitors, and any employees
• gaining permission to use the building for the purpose in which you intend
• whether you need to obtain planning permission from the local council
• how your business will impact on the environment; for example, generation of rubbish/waste, increased noise to neighbours. (Your local authority and the Environment Agency can advise you further on package and waste legislation and the affect your business might have on the local environment.)
• whether you need to register or obtain a license from the council before trading; for example, for keeping food on the premises, looking after children, or providing healthcare. Business Link, business start up agencies and your local authority can advise you further.

Working from home
This can be the cheapest and most convenient place to start up your business from. You may be able to claim tax relief on utilities and travel, and it can allow you to work around caring responsibilities. However it may be difficult to switch off from work.

You can run either a 'home-based' business, where you are actually present there for most of the time; or a peripatetic service, where you are out on the road, visiting customers, but use your home as a base for paperwork or storing products, for example.

Things to consider:

• whether or not your deeds, mortgage or tenancy agreements prevent you from running a business from home
• whether or not your home insurance covers you for working from home, especially if you need to store chemicals, foods, or products you are going to sell
• if you need to pay the council business rates for the part of the home that you operate a business out of. You may not, if you are just using a desk and computer, but double check with your local authority first.

Tips for working at home

• It can be useful to operate a starting and closing routine to differentiate between your work time and your home time.
• It is good to make other people in your household understand that you are at work and that you are not available to do chores during these hours.
• It may be useful to have a different phone ring or line to distinguish business calls from domestic ones.

"To get myself in the right frame mentally, I put on smart clothes and go out my back door and come in through the front door. I then feel ready to start work". Guy

Business venues
It is useful to rent out a business venue, such as an office or shop, if your trade requires a lot of customers coming to you, or if you need special facilities or a particular image. It is, of course, an extra expense.

Things to consider:

• the cost of rent
• possible service charges
• the length of any contract and the notice needed to quit – by both parties
• possible development plans in the area and potential impact on your business
• the location, and it's appeal to any potential visiting customers
• nearby parking or transport routes, for both you and your customers
• nearby competition and other types of business in the area – this can be a help or a hindrance depending on the type of business you are setting up

Incubators
These are specially designed units for start up and small businesses, and are usually part of a building or floor that other businesses are also using. The rents may be lower and there may be additional shared facilities and support such as photocopiers, answer-phones and even a receptionist. Contact Business Link, local business start up agencies and your local authority for more information.

Things to consider:

• the cost of rent
• how long you can lease the space for – is there a maximum or minimum time period?
• your responsibilities as a tenant
• access to additional facilities in the building
• the other businesses sharing the building – you may not want a noisy workshop next door, or to feel uncomfortable if you are a noisy workshop yourself!
• the location, and it's appeal to any potential visiting customers
• nearby parking or transport routes, for both you and your customers.

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Planning and research

As well as helping you formulate your business idea, planning and research will allow you to devise a business plan, which is especially essential if you are looking for funding. You will need to consider market research, financial planning and your individual needs.

Researching the market
Market research allows you to find out whether there is a market or demand for the service or product you are thinking of providing. It can help you determine what place you want to occupy in the market; for example, value for money or high quality. It can also help you find out who your likely customers are and therefore the best way to reach them. Research will allow you determine what your share of the market is. It is useful to find out what your potential competitors are offering and how you can compete with them. What is unique about your product, and how does it meet your customer's needs. Why would they select your product or service? Can you meet demand?

You can collect research information by:

• using the library and the internet to check out products and services in existence
• reading specific industry reports for data (make sure it's recent) – some reports you can get for free and others you will have to pay for.
• requesting information packs and annual reports from other companies in your chosen sector
• conducting your own questionnaires and surveys.

Your local business advisor will be able to advise you further about research.

SWOT analysis
It is useful to carry out a SWOT (strengths, weaknesses, opportunities, and threats) analysis for both your business and your leading competitors.

Example: mobile hairdressing

Strengths

• friends and associates are a readymade customer base
• already have hairdressing qualifications
• am up to date with latest techniques and trends
• limited overheads
• flexibility to work around childcare issues

Opportunities

• take a training course in confidence building
• develop a more varied customer base.
• use family and friends to distribute adverts through their networks.
• develop special deals for families/households or specific hair services

Weaknesses

• uncomfortable about charging friends and family
• limited space for storing chemical products
• household facilities may be limited
• difficult to access some professional products, especially in small amounts

Threats

• cash flow issues over buying of products and equipment
• local hairdressing salons offering cut price deals and processes that are difficult to achieve successfully in a home environment.

A SWOT analysis can help you turn your weaknesses and threats into opportunities, help you with decisions around your product and service and where you want to place yourself in the market. It can also help you identify your competitor's strengths and weaknesses and thereby allow you to capitilise on possible gaps in the market.

This, in turn, can help you decide on the best way of advertising and promoting your service in the future. (See 'Promoting your business'.)

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Financial planning
Careful financial planning will increase your chances of business success. When you are planning your business finances you will need to consider:

• how much money you will need to make in order to survive (see Mind's booklet Money and mental health: looking after your personal finances) – you will need to include any tax and NI payments
• what you will need to set up your business and how much it will cost to cover marketing and promotion needs
• how much money is currently available to you and how much you will need to raise
• how much you will need to charge and how long it will take you make a profit (break-even point).
• how much business you will drum up (a sales forecast)
• when you are likely to have money coming in, coming out and when you can access your cash (cash flow forecast).

Many people worry about financial plans. They can feel out of their depth. Don't – get help from a business advisor or accountant.

Self-management
If you have experienced a mental health problem in the past you may be anxious about managing your mental health and becoming self-employed. Identifying what can contribute to you becoming mentally distressed can allow you to plan and reduce the likelihood of these triggers adversely affecting you and your business.

What could trigger a mental health problem?
Everyone is different. One person's stress is another's positive challenge. There may be no obvious reason why someone develops a mental health problem, however many people do have insight and knowledge regarding their mental wellbeing and understand what contributes to their becoming mentally distressed.

Some of these triggers may include: not getting enough sleep; changing or coming off medication; feeling out of control; mixing with negative or highly critical people; not balancing work, leisure and relaxation; life events; anxiety (for example, uncertainty about the future, money worries, feeling a failure); stress (for example, meeting deadlines, saying no, environmental); business demands conflicting with the needs of family and friends; the time of year (for example, anniversary or changes of season); feeling isolated; lack of support.

Examples: dealing with triggers that may affect your mental health

Trigger: not getting enough sleep
Plan ahead

• Can your working day allow you to get enough hours of sleep?
• If mornings are difficult, could you make later appointments with customers?
• Would work hours have to be reduced or shifted to another time of day – how would this affect custom and income?

Trigger: coming on or off medication
Plan ahead

• Can you plan to start the business after a change/withdrawal period?
• Would you need reliable cover during such a period, or could you afford to take the time off?
• Investigate potential welfare benefits that may cover you during these times (see below).

Trigger: too many demands on your time makes you anxious
Plan ahead

• Do you need assertiveness training if you have problems saying no?
• What about time management training?
• Are there relaxation techniques you could practise before you start the business, so you are prepared?

"Every so often I feel I'm being flooded with feelings of overwhelming fear. I worry about drumming up business and meeting orders. I do breathing exercises, which help. I also phone my friend and she calms me down and then I feel confident to speak with a client". Lucy

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Health planning
Despite planning to remain in good health and reduce the effects of any triggers that are difficult to avoid, periods of mental distress can still occur. It is also good to think about how your mental health problem affects how you feel, think, act and relate to others. Do you need help with motivation? Can you manage anxiety? Does your judgment waiver depending on how you are feeling? Is there someone you trust who you could discuss issues with? Do you need to safeguard financial arrangements to prevent you from massively overspending, or not honouring financial agreements?

Your medication could also affect your thoughts, feelings and how your body reacts.

"My medication affects my ability to judge the speed of cars. I have to cross a busy road to get into work. I phone the receptionist and she comes out and helps me cross the road safely. This way I manage to keep working." Jody

If you find your mental health fluctuates at certain times of the year you may be able to plan workloads so they are less at this time. Perhaps you need to think about arranging cover. Could family or friends help? Can you sub-contract work out (while still retaining a fee for doing so)?

"September is often bad for me. I lost three people who were close to me. I can get really low and not care about anything. I now don't do any training around this time. I just go off for a few days, anywhere really, seasides are best." Eleanor

"The web works for me. I can send emails rather than talking to people. I just can't talk when things are too much, but emails are ok." Jayesh

Crisis planning
If your health deteriorated suddenly, what would happen to your business?

• What emergency plans would you have to have in place?
• Who could help you?
• What support would you need?
• Could you or a friend negotiate with a client to move a deadline or change a meeting?
• Are there any extra financial costs?
• Can you build these costs into your maintenance budget? Note: You don't necessarily have to disclose your mental health problems to any funders, unless specifically asked. You could, instead, state this cost is to cover periods when you might need time out for any reason.

It may be worth looking at sickness insurance, but premiums can be high, so shop around.

Setting up in business as a partnership may help, so that there is at least some cover if you can't work yourself. Talk over this issue with your partner/s and build it into an agreement, so that everybody knows where they stand.

It may be useful to draw up an advance directive with the support of family, friends and health professionals. This will allow you to state what you would like to happen should you become ill and do not have the capacity to let your feelings be known. You can also set up an Enduring Power of Attorney, which will allow another person or group of people to take financial decisions on your behalf. For more information, see Mind's Legal briefing: advance directives and Mind's booklet Rights guide 7: managing your finances.

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Writing a business plan

A business plan helps you to clarify your business objectives, predict and prepare for scenarios, set out strategies and monitor targets. Funders and investors will want to see a copy of your business plan before deciding whether to offer you any money.

A business plan should include:

An overall description of your business and what it will do
The purpose of your business should be made very clear to anyone who might read your plan. If you cannot be specific then you will need to rethink the purpose of your business, what you want to achieve and who your target audience would be.

Business details
These should include the trading format; your aims and objectives; the products or services will you be providing; and who will be involved in the running of your business, their roles and what skills or experience they bring (even if that just means referring to yourself).

Customer base and marketing strategy
You will need to explain who your intended customers will be, how you will market to them, and show (via your research) that they are likely to buy your products or services. (See 'Researching the market' and 'Marketing')

What your business needs to operate
Include staff, premises, licensing, equipment, and suppliers.

Financial requirements and forecasts
You will need to include business start up costs; money you need to live on; money you have and money you need to raise; profit and loss and cashflow forecasts; and a balance sheet. Get advice from a business advisor and/or an accountant.

Business risks
What could go wrong and how would you deal with it? For example, if you borrow money and interest rates increase, or you have a health problem. Note: You don't necessarily have to disclose your mental health problems to funders, unless specifically asked. You could, instead, state this cost is to cover periods when you might need time out for any reason.

Business advisors, Business Link and banks have more detailed information and templates on how to produce business plans (see 'Useful organisations').

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Funding your business

Once you have a business plan in place, you should have a clear idea of any money that you need to raise for setting up your business.

Finding the money

There are four main ways of funding a start up business:

Personal money
This includes any savings you may have and any available money from your personal assets, such as a mortgage.

Debt
This may take on the form of a loan, overdraft or credit card finance. You may be able to get loans from banks and finance companies. Shop around. Check out repayment conditions before signing. Can you afford the repayments, and what would the consequences be if you couldn't pay because of say sickness or problems with your cash flow or sales? (If you need to borrow money it might be worth asking family and friends first. You can draw up an agreement to make sure the loan doesn't affect relationships)

Equity
This is money invested in the business, by another party, in return for a share of the business. Your bank or business advisor may be able to tell you how to get in touch with 'business angels' or venture capitalists who may be interested in investing in your business. Also check out the business sections of some newspapers, such as the Financial Times or The Guardian, for adverts from people looking to invest in businesses.

Grants and awards
These are usually targeted at specific types of business, groups of people or locations; for example, The Princes Trust is for 18-30 year olds. Grants and awards don't normally have to be paid back. Organisations such as Business Link and websites like www.is4profit.com offer information on grants and different types of funding.

Some specific schemes

The New Entrepreneur Scholarships Programme (NES)
This scheme offers training and a small grant to start up in business. One of the criteria for eligibility is geographical location. Check out the NES website for more information (see 'Useful organisations')

Small Firms Loan Guarantee Scheme
This is designed for businesses that have tried, but failed, to get loans from other sources. Some £5,000-£250,000 is available and the loan can be repaid over periods of between 2 to 10 years (minimum loans: sole traders and partnerships – £26,000; limited companies – £5,000). Your local enterprise agency can advise you (Business Link in England and Wales and Business Gateway in Scotland).

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Paying for equipment and overhead costs

When purchasing equipment or services for your business, always shop around for the best deals. It can be time consuming, but in the end it will save you money and ensure sure you get the right product for your business.

Carry out research into what you need. You may be able to get away with an item that has fewer features. If you don't require the latest design it could be more profitable to buy second-hand. Try the classified section of newspapers, specialised selling publications and the Internet.

Even if you do require the latest design, it may be cheaper to buy over the Internet, although you don't have the opportunity to look the item over first, so it's best to know exactly what you want.

Hiring equipment could be more cost-effective than buying, if you only need something for a short period of time. It can also be useful if cash flow is a problem when starting up your business, and until you can afford to buy.

Paying in installments is also a way of dealing with cash flow problems. This can be done via hire purchase deals or catalogues, but this can be slightly more expensive in the long run.

You may be able to save money on utility and Internet server costs if you change your supplier. The Internet is a good source of information, with specialist websites set up to compare like-for-like products for you.

Remember:

• Think about how long you will need the equipment or service for and whether you should buy or hire.
• Decide the quality or standard it really needs to be to help your business to function smoothly.
• Look at your cashflow forecast to decide the best way to pay for goods and services.
• Shop around until you are happy you have found the right deal for your business.

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Managing your finances

To keep track of your finances once you are in business you will need to either employ a bookkeeper or keep the books yourself. You will also need an accountant (these are often best found by word of mouth) to help you with things like tax forms and general financial advice.

Whatever business you run, you will be responsible for paying and accounting for insurance, tax, VAT, National Insurance contributions and benefits for yourself and anyone you employ. You may be eligible for some welfare benefits and tax credits, even if your business is in profit. You will need to keep account of all money coming in and going out.

Banking
Take time to choose a bank account that fits your business needs. It is important to have a separate business account, as this makes it easier to keep a check on business transactions and is less complicated to prove records if you are asked to provide business information to HM Revenue and Customs tax officers. Keeping your personal and business money separate makes sense.

Many banks offer special 'free banking' deals to start up businesses and you should also check out what's on offer particularly when the 'free period' ends.

Remember, cheapest may not necessarily be best and you should look for a bank that provides a good value for money service. Look around for the best deal for your business.

Think about how you will access your money and place deposits. Are you able to get to your bank during the day? Would online facilities be more beneficial to you or would they cause you anxiety?

Is it difficult for you to access a bank account? This could be for many reasons, including having a poor credit rating, being a refugee, or living outside the UK for several years. Your local business advisor should be able to advise you on how to access a bank account.

Bookkeeping
This is very important for keeping your records up to date. There are many different methods of bookkeeping. You will need to find a method that suits you and your accountant. Your business advisor will be able to help you. There is also a lot of information about bookkeeping on Business Link's website. The method you choose will determine what stationery or software you use. Simple spreadsheets can be useful.

"On the last day of each month I send a copy of my bookkeeping to an email account. I know that there is always the possibility of hackers, but I don't know what they would gain. I call the month's record something silly so it is not obvious what the attachments contain. It just allows me to back my records up without worrying about storage space." Jayne

If you are anxious about bookkeeping, or just don't know how to do it, you can take courses, find someone you know to help you, or you may want to hire someone to do it for you, if you can afford it.

Insurance
There are certain statutory requirements, regarding insurance, dependent on the type of business that you chose to set up; for example, you may need vehicle insurance or employers liability insurance. It is possible to obtain insurance for almost anything, but in order to balance covering your needs with saving costs, it is worth talking through your requirements with a business start up advisor or checking out websites providing business insurance information.

Useful types of insurance include:

• public liability insurance covering you against injury or damage to a member of the public and essential for anyone working from home
• public liability insurance covering goods sold
• professional indemnity insurance covering any professional and advisory services you may provide
• building insurance required for property – unless covered by the landlord
• contents insurance

Trade organisations often offer good deals on insurance. It may be possible to gain tax relief on your subscription as a member of a trade organisation if it is officially recognised by the HM Revenue and Customs.

Tax and business expenses
If you are self-employed you must register with HM Revenue and Customs within three months of starting up in business. If you receive payment or send an invoice you will be considered to be trading. You can pick up leaflet SE1 Are you thinking of working for yourself?. The HM Revenue and Customs can provide a lot of help and support to people setting up in business. They can be contacted by phone or through their website (see 'Useful organisations').

How you are taxed depends on whether you are seen as self-employed or an employee. You need to find out what your status is, so that you can keep back money for any tax you may have to pay at the end of the year.

You are likely to be seen as self-employed if you have risked your own money, you are free to take on work, you use your own equipment, you have a lot of control over what you do, and you work for different people.

However, if you are a sole trader or in a partnership you could still be considered an employee in certain situations. This may be especially so in certain fields such as the construction industry. If this is the case, you will pay income tax (excluding allowances) on your profits, not just what you take out as a salary. You must check out your tax status.

If you decide to run a limited company, even though you have set up your own business you will be a director, and you will be classed as an employee. You will pay income tax and National Insurance as an employee, but your company will also have to pay corporation tax based on profits. You must register your pay roll with HM Customs and Revenue.

Whatever type of trading format you use, you will receive a personal tax allowance (for you). The company/business can also claim certain tax allowances and business expenses (especially in the first year of trading). So keep all your receipts for business start up costs and expenditure.

Ask around to find out the name of a good accountant. They can be very helpful in enabling you to claim business expenses and prepare tax forms. You can also contact HM Revenue and Customs for information and advice.

VAT
VAT (Valued Added Tax) is a tax on goods and services. You only have to register for VAT if your business turnover exceeds a certain amount, although you can register voluntarily – this might be beneficial if your business turnover is just below the threshold or in specific situations. There are specific regulations regarding imports and exports.

There are different methods of accounting that you can use for VAT returns. You can choose whichever way benefits your business the most. Get advice from your accountant, your business advisor or HM Revenue and Customs.

National Insurance (NI)
Generally, self-employed people pay less NI than employees, but receive fewer benefits.

If you have a limited company, you will need to pay NI for both you and any employees.

This can be a complex area and the best thing to do is contact HM Revenue and Customs, who will try and make the process as easy as possible for you.

Benefits
Tax credits
You may be able to claim tax credits, including working, and research and developments tax credits. You may also be able to claim tax credits along with welfare benefits. Contact HM Revenue and Customs for more information.

Incapacity Benefit
This benefit is paid to people who are unable to work owing to medical reasons and are not receiving statutory sick pay. It is dependent on NI contributions. You may be eligible to claim if you are self-employed and become sick.

Disability Living Allowance (DLA)
If you have a long-term disability or condition you may be entitled to Disability Living Allowance. You can still apply for this benefit if you are capable of working or not classed as being on a low income.

Welfare benefits
If you are unemployed you may be able to get some help and support to start up your own business. It may also be possible to claim some benefits or permitted earnings while you are setting up your business.

For more information on all of these benefits, contact your local welfare rights advisor, Citizens Advice or JobCentre Plus (see 'Useful organisations').

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Promoting your business

Once you've decided on what your business will be, you will have to think about advertising and the image you want to project. You should have a good idea about this if you've already done your market research into the customer base you're targeting (see 'Researching the market').

The name
The name of your business can be very important. It can create an image and help you stand out from your competitors.

If you have set up a limited company you must register the company and name at Companies House (see 'Useful organisations'). You must chose a name that has not already been registered and can check this via their website.

If you are thinking of developing a website to promote your business you may want to include your company's name in your web address (domain name). Again, you must check out whether someone has already registered that particular domain name (see 'Useful organisations' on).

Sole traders or partnerships don't have to register their name with Companies House. If the business name is different from your personal name/s you will need to include your own name/s on business stationery.

Marketing
If you have done your research, you should know what sector of the market to target and the best way of reaching them.

Some examples are:

• placing adverts in newspapers (although this can be costly – check out rates for local papers)
• providing a story related to your idea for the local newspaper or radio station
• networking at trade events
• business cards (make sure they reflect the right type of image for the type of business you want to promote)
• flyers and posters (make sure you have permission to put them up or hand them out, from the relevant authorities or premises owners)
• email promotions (be sure you have 'clean' lists before sending emails, otherwise you could annoy people who are no longer interested in your product)
• the Internet – advertising on other relevant websites; creating your own website

You may want to introduce special 'opening offers' or cut price deals to certain sectors of your market, or for a limited period of time, to get initial interest in your product. It may be that you promote your product or service in different ways to target different customer bases.

You will need to think about costs and value for money and effort. You may find a cheap way of promoting your business, but if your audience aren't targeted correctly, it will have wasted a lot of time and energy.

Again your business advisor can help you with promotion methods and drawing up a strategy and budget for research and promotion. You could also contact the Chartered Institute of Marketing for ideas and marketing training courses (see 'Useful organisations').

"I have a set of cheap business cards that I give out generally. Whenever I go out I leave them around, opportunistically really. I also have a set of more expensive cards that I hand out to people or businesses that show an interest in working with me. I want these cards to reflect my business service, you know – good quality, reliable and effective" Gary

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Useful organisations

General business information and advice

Most banks have business advisors and information packs on starting up in business.

About entrepreneurs
web: www.entrepreneurs.about.com
Information about business start up, funding ideas, copyright and patents.

Bizhelp
web: www.bizhelp24.com
Information on all areas of business, including finance, law, business start ups and business service providers.

British Franchising Association
tel: 01491 578 050
web: www.british-franchise.org
For information, help and advice on franchises.

Business Link
web: www.businesslink.gov.uk
Also see 'The Small Business Service' below.

Chambers of Commerce
web: www.chamberonline.co.uk
Chambers of Commerce are a network of organisations which give information, advice and training to local businesses. Most give free advice to members, but charge for services to non-members. Some Chambers of Commerce serve particular ethnic minorities. For your local branch see their website or your phone book.

is4profit
www.is4profit.com
Free information and advice and business directories for small businesses.

National Federation of Enterprise Agencies (NFEA)
tel: 01234 831 623
web: www.nfea.com
This organisation has a network of enterprise agencies across England that offers business start up advice, training and support. To find your nearest NFEA organisation see their website.

The Small Business Service
(including Business Link)
helpline: 0845 600 9006
(Mon to Fri 8am to 8pm)
minicom: 0845 606 2666
web: www.businesslink.gov.uk
The Small Business Service is a government agency providing general information on all aspects of starting up a small business. Their Business Link website is particularly useful. Their UK network of local providers give independent and impartial advice.

Specialist business organisations

Charity Commission
tel: 0845 300 0218
minicom: 0845 300 0219
web: www.charity-commission.gov.uk
The regulator of and place to register charities in England and Wales.

Co-operatives UK
web: www.cooperatives-uk.coop
The union of cooperative enterprises.

Disabled Entrepreneurs Network
(England and Scotland only)
web: www.disabled-entrepreneurs.net
The Disabled Entrepreneurs Network is a regional networking service for disabled people. It provides advice and support for self-employed disabled.

Environment Agency
tel: 08708 506 506
minicom: 08702 422 549.
web: www.environment-agency.gov.uk

Instant Muscle
tel: 0845 1300 930
A registered charity helping long-term unemployed people, people with disabilities, and others who may need extra help to set up in business. Local branches in England and Wales.

Local authority economic development units
Some local councils run units staffed by business advisors to provide advice and help to businesses in their area. They may have bilingual advisers. Contact your local authority or check out their website to find out what's available in your area.

PRIME
tel: 0208 765 7833
web: www.primeinitiative.org.uk
Support and advice for those over 50 wishing to start up in business.

Telework Association
web: www.tca.org.uk
For information and advice on all aspects of teleworking.

Copyright, patents and ideas

Nominet
web: www.nic.uk
Nominet is the internet registry for .uk domain names.

Intellectual Property website
web: www.intellectual-property.gov.uk
For information on patents, designs, trademarks and copyright.

Patent Office
tel: 0845 9500 505
web: www.patent.gov.uk
For information on protecting your ideas and inventions, as well as checking out whether someone has had the same idea as you.

Finance and benefits

Citizen's Advice Bureaux (CAB)
web: www.adviceguide.org.uk
For free, confidential and independent advice, including about rights and benefits, see your phone book for your local CAB.

Companies House
web: www.companieshouse.gov.uk
Keeps records of company records for public information.

HM Revenue and Customs
tel: 0845 9000 404
helpline: 08459 15 45 15 (for newly self-employed)
helpline: 0845 60 70 143 (for new employers)
web: www.hmrc.gov.uk
For help with tax, National Insurance and VAT.

JobCentre Plus
web: www.jobcentreplus.gov.uk
For information on benefits.

Openoffice
web: www.openoffice.org
Free software to help with managing a business, including useful spreadsheets.

Funding

The New Entrepreneur Scholarships Programme (NES)
web: www.nesprogramme.org
Helps people living in disadvantaged areas to start in business.

Princes Trust
tel: 020 7543 1234
freephone: 0800 842 842 (to find your local Princes Trust)
minicom: 0207 543 1374
web: www.princes-trust.org.uk
Support people aged 18–30 with advice, information and grants to start up in business.

Marketing

The Chartered Institute of Marketing
tel: 01628 427 500
web: www.cim.co.uk
Marketing information and research sources.

VistaPrint
tel: 0800 028 8251
web: www.vistaprint.co.uk
Offers free business cards.

Solicitors

The Law Society
helpline: 0870 606 6575
web: www.lawsociety.org.uk
The regulatory and representative body for solicitors in England and Wales. Find a solicitor via their helpline or website.

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Further reading

Mind factsheets

Legal briefing: advance directives

Mind booklets
How to assert yourself
How to cope with panic attacks
How to improve your mental wellbeing
How to increase your self-esteem
How to recognise the early signs of mental distress
Making sense of coming off psychiatric drugs
Mind troubleshooters: panic attacks
Mind troubleshooters: sleep problems
Mind troubleshooters: stress
Money and mental health: looking after your personal finances
Rights guide 7: managing your finances
The Mind guide to surviving working life
Understanding anxiety
Understanding depression
Understanding mental illness

For a catalogue of publications that can be purchased from Mind, send a request with your address details to: publications@mind.org.uk or call 0844 444 4448.
Visit the online shop to see details of all the publications stocked.

This booklet was written by Kaaren Cruse. © Mind 2006
ISBN 1-903567-71-8
No reproduction without permission