I need some advice from a 'buisness minded' person

[Mung]

My brother is talking of starting his own business. He was ready to go to the bank to ask for a business loan, but got a little freaked out by the buisness plan he had to do. When I spoke to him the other day he said that he was just going to get an interest free credit card and use that (my Dad is apparently going to get one too to help him).

I feel concerned that this isn't the best way to go about business, however, I have absolutely no knowledge of this and I cannot find a real solid reason that I can give to my brother. I did say, 'Is this a good way to go about business?', to which he replied, 'Why?' in his defensive way and I just commented that banks ask for business plans for a reason.

Another concern is that I feel that he is a little (NO, lets be honest; VERY) lazy and disorganised. The only reason he wants to work for himself is because he hates answering to others; again not a great reason, as he will be answering to customers, who are a lot more demanding than some boss who isn't spending any money.

I would be really grateful for any opinions on this. Should I just keep out of it and be happy that he is trying to give it a go? I want to be positive about this,as he always looks for reassurance from me, but I am struggling to find the enthusiasm at the moment.

It depends what the business is and what start-up costs are involved...

If he has a trade and already has the necessary tools and van, for example, it is very different to opening a shop, with the rent and cost of shopfitting and buying stock...

He is going to carry on doing his normal job (at first) and rent out 'party tents'in his spare time. He reckons it will take a year to pay for itself and then he can start to expand.

His normal job is a nice safe one at the council.

Start up £8,000

DH is a self-employed driving instructor. I have just spent every lunch and evening for the past 2 weeks sorting out his receipts, income/outgoing figures etc for his tax return. It is (was) very stressful and, although I know he's grateful I'm still a bit peed off he let it get in such a state. I'm not an accountant - just had experience of accounts.
IT might be hard for him to show that spending was for business and not personal use if all on one credit card, plus he might not get as much as he needs to start up.
What line of work is he going to do?

You don't mention what "line of business", but from experience people these days expect the best in all ways. He would have to sharpen his customer service skills in order to be successful either that or employ someone to do this for him. Dealing in the best way with the public/customers is essential.

He thinks he can get what he needs to buy trailer and 2 party tents and a bit of other equipment.

I'm not sure if he has thought about who is going to do his accounts, and the cost of an accountant.

Why would it be hard to show that spending was for the business if it is on a credit card?

I suppose he would have to have a business account to pay the money he earns into anyway.

I am so worried that I will be asked 'favours' here and there and I am SO rubbish when it comes to business.

Good advice justpinions

Just about to start on own business. The Inland Revenue do advice for new business.
There are people out there who can help but you need to look in your local area.
Any one lending money for a business will want to see a business plan.
They won't lend money if it doesn't seem a viable business.

If you are a sole trader you do not need an accountant.

Do you mean Marquee hire? If so, the only business like that I know of also supplies the bar & staff for the events and recommends caterers, etc. I think lots of people would be more interested in a complete package rather than hiring the marquee and then having to sort out all the other bits as well...

I have the same concerns as you Littlelapin, but he claims that he has thought about it carefully.

I really hope I am wrong!

He also needs to make sure he has insurance public liability etc.
There are places that will give grants but you have to put some money in too. They will also do loans and can be more flexible than a bank. He would still need a business plan.

I'm sure your dad is only trying to help his son but setting up a business on a credit card is not a good idea.

If he thinks being self employed is an easy option he is sadly mistaken.

Does he have a track record of 'entrepreneurial' thinking/ventures?
If so, I would leave him to it.
A lot of entrepreneurs come across as completely unreasonable even silly
but it's part of their personality makeup.

It's insane to start a business without a plan, though for you
there are ways to suss him without seeing something in writing.

E.g. ask him to explain to you in detail who his customers are going to be,
how many he thinks he will have within 6/12/24 months, how much he thinks
they will be willing to pay and what informs his answers - has he done
market research? How? Get him to show you.

In a nutshell: Instead of nagging him about the business plan
(he will perceive it as nagging), drill down and ask him questions about the most
crucial aspects of running a small firm:
Cash flow, costs, payment terms, pricing, cash flow, knowledge of the
market and competitors and, of course, cash flow.

I have a business plan format I am happy to email you, if you like.

I used to have a business, and part of that was selling policies & procedures (Risk assessment, company car, terms etc etc) - and business plans! to other businesses.

I still have all the documents, I'm happy to give him the plan format. It helps you to think!

Is it really possible to borrow £8000 interest free on a credit card? Surely it would be short-term only and then a very expensive way to borrow.

His local Business Link will help with the business plan (but may want a fee).

In my job, I see lots of self-employed people. Some are very successful, some are not. The thing the successful ones have in common is that they work incredibly hard, especially in the early days. The ones who seem to have an easy life have established their business over a long and hard period and then employ others to run it, so they can have holidays etc, this does not happen in the beginning.

Most businesses go under in the first year, even those where the owners are prepared to work hard. I would be very reluctant to put any money (thinking of your Dad) into a business, where he can't even manage to find out how write a business plan, there are loads of books, web sites etc. OK it will seem like a lot of effort, but that's what it takes to run your own business.

DaddyJ is spot on re how it should be done. All those answers down on paper for the bank. They'll only want a couple of pages and the cashflow is the most important.

You don't need an accountant if you are a sole trader or ltd company up to a certain turnover (very high), but must understand good book keeping. Plenty of advice on HMRC's website about this.
Sole traders run the risk of losing their homes and personal chattels but Ltd company directors don't - ie in a ltd company if it goes pearshaped then the company goes bust not you.

If the proposed business is a safe bet then I suppose it's not the end of the world to borrow from a cc (I wouldn't advise it though as there is a good reason why banks need business plans and it is in the borrower's interest to write one).
To be honest, if he can't be bothered to write a business plan then it sounds unlikely he will have the necessary 'oomph' needed to work for himself - IME it's terribly hard work for a few years at least.

He is going to borrow £8000. For how long ? Has he worked out how he will pay it back. No small business makes £8000 profit in the first year - well , I have been doing accounts for 15 years & I haven't seen one.

Hecate, could you send me that document?
hjscho at hotmail dot com. That wouil be great.

It seems from your responses that I am right to worry... now I just need to try and speak to my brother about it.

Hey there Mung. I sent you the business plan. Let me know if it's any use to him!

Hi Hecate. Thanks for the business plan. I sent it ot him and he thanked me. I'll give him a while and then see if he has anything more positive to say.