When faced with a claim, the expenses can be quite overwhelming. In some instances so much that it could cause more of an impact than a business can endure. However, this need not happen with adequate professional indemnity insurance. Expenses for such claims would include hiring legal representation to defend the engineer or the firm. In some situations the legal representation is needed for negotiations to avoid a legal claim going to the courts. Professional indemnity insurance would cover both of these types of legal costs. Professional indemnity insurance also can help in situations where documents have been lost. Also, situations involving dishonest behaviour or fraudulent filings can also be covered.

Professional indemnity insurance from Markel UK also covers any damages that made be awarded to the claimant. Often these awards can be rather lofty and can possibly be another stressor on the financial health of any business. Coverage can often be back dated to cover previous projects. This only hinges on if there have been no claims made.

Some engineers might be reluctant to take out a professional indemnity insurance policy due to costs. However, if you calculate the long term benefits and take into account what one claim could cost, it is actually a very responsible business decision. Most insurers offer professional indemnity insurance with high limits.

Starting a new business or growing an existing one is particularly challenging at the moment. In all my years of business I have never seen such an uncertain economic outlook. Yes we have been through a number of past recessions, this is my fifth, but there was always a degree of certainty – albeit not always positive!

However, uncertainty creates opportunities for those who can see past the present negative press reports. In my experience an economic downturn can provide as many opportunities as boom times and sometimes even with less risk. Yes, I did say less risk. In a downturn people take more care and are more alert to risk whereas during an economic boom they can be careless, as we have seen all too clearly in the last couple of years or so. But the key business factors never change:

• Clear and specific business objectives and business plan
• A hungry market with specific needs or wants
• A quality product that delivers exactly what they want at an affordable price yet still produces a profit
• Customer service and reliability that gains trust and a good reputation
• Active and consistent targeted marketing
• Fast response to enquiries and systematic follow-up
•  Sound cashflow and financial control
• Minimal borrowings relative to cashflow
• A positive attitude to your market place and your business and a willingness to ‘go the extra mile’ to satisy your customers

So, where do you want to be at the end of this year? How do you propose to get there? Whose needs can you best serve? What can you do for them that will please and delight them and ensure that they will tell all their friends?

Somewhere out there are people who need what you have to offer, all you have to do is find them and tell them what you have and how it will help them, then over deliver to the best of your ability.

Good luck and have a great year.

The UK Financial Services Authority have had concerns for some time that financial services products are too often recommended by unscrupulous financial advisers on the basis of the amount of commission they receive rather than being the best product for the client.

The majority of professional financial advisers in UK, and elsewhere, take pains to provide clients with the best advice they can but there has been a persistent band of rogue advisers who think only of themselves.

If your business is in financial services you will probably have seen this coming. But read on as I shall be coming back to you later…

If you are not in financial services then this doesn’t affect you, does it?

Well, yes it does! Especially if you have been used to getting your financial advice for free. Or apparently for free…

Most people in UK don’t pay an adviser for recommending life insurance, investments, pensions etc. because the adviser has been remunerated by the life, investment or pension company by way of commission on the sale. Obviously the companies paying this commission have to make it back in some way and that is by some form of management charge built into the product. This means that the client is actually paying this commission indirectly.

Under the new system, the client (you) will be expected to pay the adviser a fee for the financial advice given. This should mean that the product should be better value for money as there are no commission charges to account for and your adviser has no reason not to recommend the best product for your needs.

However, if you take financial advice but take no action on that advice you will still have to pay the adviser’s fee. Unlike in the commission situation where you can just walk away leaving the adviser with nothing.

Now, back to the financial advisers out there.

The good thing about this change is that you will always be able to get paid for financial advice you give regardless of whether the client takes that advice or not. You will be free to advise the client on any course of action you feel is appropriate to their financial circumstances without any concerns about likely remuneration.

Your only problems, if you have not been charging on a fees basis up until now, is one of educating the client in the new ways of financial services and setting up the appropriate contracts and procedures to handle the new regime.

I’ve been talking to a very senior financial adviser about this as he has operated a fees based financial service for over twenty years now. He certainly understands the problems facing commission based financial advisers over the next couple of years.

In fact he has been helping many financial advisers move over to a fees based system for the last ten years or so.

His name is Terence P O’Halloran, ‘ Terry’ to his friends, and he has been a major player in the industry for well over thirty years. Terry first unveiled his Fee-Pac product for financial advisers over ten years ago and has steadfastly kept it up to date, improved, evolved and expanded it over the years into a major package suitable for any fees based profession.

Fee-Pac now includes a full video training seminar on setting up a fees based business, complete client and adviser documentation as well as all the admin files needed to set up a successful fees based practice. This is an extremely professional piece of kit.

If you are a financial adviser or thinking of getting into that business then check out Fee-Pac here. I can’t believe how little he is charging for it considering its potential value to you in the coming months.

Interesting times ahead!

Way back in the dim and distant past I was introduced to the concept of working on my business instead of working in my business. This was quite a revelation and is actually the key difference between creating a job and building a business.

Working in your business means spending your time doing all the work involved in getting customers, providing them with the products or services you sell and doing all the admin stuff that goes with it all. This means that growth is limited by the time you have available. Even taking on staff to do some of the work can often involve you in more work training and managing the staff.

The magic formula for getting you as a business owner off this endless self-imposed treadmill is systems. The systems I have applied  to my business have given me time to plan strategically and, more important, given me more time for myself and family. In fact I now work only 3 days a week and yet the business keeps running just fine.

Setting up systems can take quite a bit of time initially, but will pay dividends for years to come. The first thing to do is to list all the jobs and tasks that need to be done on a day to day basis. Then for each task identify all the steps in the order they are carried out and the specific ‘how to do it’ process. Then write a detailed description or procedure for each task. The real trick is to document the procedure in such a way that anyone with the necessary skills could just walk into the business and take over that task with the minimum of training.

The next thing is to look at each task to see if it can be improved, streamlined or automated. Can the task be computerised or mechanised. Start by looking at what the end result of the task should look like and consider alternative means to the same end. Just because a task has always been done a particular way doesn’t mean that it is still the best way!

Think of it as producing, task by task, a complete operating manual for the business covering every area of the business.

Once the ‘operating manual’ is complete, look at who will carry out each task and what equipment, if any, is needed. Make use of check lists for each task to ensure quality control.

One of the most popular books on setting up small business systems was “The E-Myth” by Michael Gerber. That’s now out of print but was later replaced by “The E-Myth Revisited”.

Operating a business as an unlimited partnership is similar to operating as a sole trader from a legal perspective. The key differences are as follows:

• A partnership has more than one owner
• Accounting and taxation are more complex due to the need to prepare partnership accounts and allocate profit shares for tax purposes
• The business and the partners have ‘Joint and Several’ liability which is unlimited. This means that, any losses or other liabilities fall first on the business, then on the partners according to their share of the business, then fully on each individual partner. This means that any single partner could end up carrying all liabilities personally if the business and the other partners are unable to pay their share.

The last of these is quite a frightening prospect. It is for this reason that the Limited Liability Partnership form of business was created. It is a much safer option for the individual partner than operating as a ‘regular’ partnership.

In either case you should have a partnership agreement drawn up by a business lawyer as well as taking full financial and legal advice from qualified professionals.

‘Personally I prefer the simplicity of the sole trader for the very small ‘one man band’ low risk venture or the formal structure of the limited company for anything bigger or riskier.’

The main point of a limited company is to give personal protection against company liabilities. As long as you comply with the relevant regulations, you will not be personally liable for the debts or other liabilities of your business. It is therefore a more appropriate business structure for any business that might face high risks in business.

There are also tax advantages in operating as a limited company once your business profits exceed the personal higher tax threshold. It may also be possible to get more favourable tax treatment for pension contributions, though this is a complex area needing specialist advice.

Another advantage to a limited company is that it is easier to build up a company as a tangible asset which you can sell in the future, perhaps to retire. This is because it is structured as a separate legal entitity and not entangled with your personal assets in the same way as a sole trader business.

The Companies Act separates out the owners of the company from the managers of the business. The owners of the business are the shareholders, of which there must be at least one. The shareholders’ liabilities are limited to the amount of money they have put into the business as a shareholding.

The managers of the business are the directors, of which there must be at least one. The directors are responsible for the running of the company and compliance with all regulations. They are also responsible for filing of financial accounts and annual return to Companies House as well as filing a corporation tax return to HMRC.

Providing the company is run legally and competently, there should be no liabilities for which the directors are personally responsible.

The regulations can be quite complex, so good legal and financial advice should be sought before proceeding.

Running a limited company can face more red tape and additional costs than a sole trader business, but the benefits usually outweigh the drawbacks.

For more detailed information go to www.companieshouse.gov.uk.

• Register with HM Revenue and Customs (HMRC) - For Tax and National Insurance
• Open a separate business bank account
• Set up a system for recording all sales, income and expenses
• Check to see if your type of business needs any kind of license, there are very few
• If you are working from home, do you need planning permission?
• Check with HMRC to see if you need to register for VAT
• Get yourself a set of guidance leaflets for business from your local Trading Standards office – pay particular attention to Business Names regulations and Consumer Protection

The main things to bear in mind as a Sole Trader are:

You and the business are legally the same. This means that you are personally liable for all the debts and other liabilities of the business to the full extent of your personal assets. If the business goes bust, you could lose everything.

Your business profits are taxed as your personal earnings along with any other earned or investment income you may have. If your profits are high, you will very rapidly become subject to higher rate tax.

In addition to tax you will have to pay two types of National Insurance contributions. Class 2 contributions are a fixed weekly amount, Class 4 contributions are a percentage of your profits between a lower and upper limit. You will be given the current rates and necessary information when you register with HMRC.

For the reasons above it would be wise to consult an accountant experienced in working with small bsinesses prior to starting out.

You can get more information from your local Business Link who will provide you with a business aviser free of charge. Find your local office at www.businesslink.gov.uk.

• How many of you will there be running the business?
• What potential risks and liabilities will you face?
• What are the tax implications of each option?
• How much bureaucracy (red tape!) are you prepared to face?
• Do you want to build a business with an assest value?

If you are setting up by yourself, there are two choices:

•  Sole Trader
• Private Limited Company

If there are two or more of you the choice is wider and adds:

• Partnership
• Limited Liability Partnership

I shall deal with each of these in separate articles to try to keep things as simple as possible!

It’s been rebuilt using WordPress, a great tool for content managed websites, incorporating some of the latest Web 2.0 features. This makes it much easier to incorporate new content, so now I have no excuse for not adding lots of new information on the subject of starting and running your own business . That should keep me busy!

The articles now give you the opportunity to comment and ask questions, blog style, so feel free to join in the business discussion. But please be nice

A few simple community rules:

• No fighting
• No abuse
• No Spamming
• No blatant self promotion
• Don’t include links in posts, put your email address and website in the boxes on the comment form

Your email address remains private, it’s just between you and me. Your website will be linked to from your name on the comment.

Comments are moderated, if they break the rules, they won’t appear!

I hope you like the new site. Join in, learn and have fun!

John

Whether you are starting a new business or growing an existing one, success depends on three things:

A. Knowing where you are now
B. Knowing where you want to be and when
C. Figuring out a route from A to B.

Then all you have to do is follow your route plan.