Government austerity measures are likely to have a severe impact on John Wilkes’ business, but he’s already planning for survival.

The biggest issue John Wilkes and his firm ANDS faces is the current cutbacks in the public sector. And while business is good at the moment, he’s  well aware that now’s the time to prepare for a downturn.

ANDS offers training and recruitment services to local authorities and their providers. “We tend to work in the areas such as land maintenance, waste management, low level IT and – which is our biggest areas – parking enforcement,” explains John. “When I tell people we recruit and train traffic wardens, we’re suddenly their least popular contact. But it is a vital part of how the country works.”

John’s business model is to sign long term contracts with local councils with an agreement to recruit and train a certain number of people per year, either in one specific area or across a range of different roles. While never the staff’s employer, ANDS is also responsible for performance measurement and ensuring the staffing levels remain at the required rate. “So we may have a contract to bring eight people on board a year, but if two of those leave within that year, it’s our role to replace them.”

The actual recruitment of people is not that difficult, says John, despite the reputation of many of the roles he recruits for. “Our main purpose is more on the administration side – most of the positions require criminal record checks, and we need to be very careful that those we do hire have the right to remain and work in the country. It’s also in our best interest to ensure they are genuinely keen to do the job, because the cost of replacing people also falls to us.”

Starting up

John started ANDS with two colleagues six years ago, when the local authority he was then working for decided to outsource the operations for his business. The trio would have either been made redundant or been transferred to a new employer, so they thought that with their knowledge of how the system worked, they should form a business and bid for it themselves. “The council was initially a bit unsure about using us – we’d done a good job for it but we were a new company. And while the first contract was small, it didn’t want anything to go wrong. It took us a long time to even convince them that we should be taken seriously. Even then, we didn’t get any preferential treatment, our bid was decided on its own merits and we were up against two other providers, each of whom had far more experience.” Fortunately, John’s business won the contract, and from that moment on, events moved at a rapid pace.

“All three of us had only worked in local government for our whole lives and we didn’t have any experience of running our own business, so it was a steep learning curve!”

Each partner put in an initial £20,000 to get the business started and agreed to defer salaries for three months. “Our start up costs weren’t that high,” explains John. “We already had the first contract so we would be working on that to start with, so we needed office space, IT and some funds to pay for recruitment and training costs.”

Even though its first client was a central London council, the new company felt that there was no need to pay the high commercial rents of central London and instead took a suite in a serviced office out in the suburbs.

“Taking an office in the centre of the city would have cost us at least a thousand pounds a week,” he says. “We now don’t even pay that a month.”

Once the first contract was up and running, the main priority for the company was to bring in additional business. “This first job was a good one, but it wasn’t enough to sustain the three of us in the long term,” explains John. “But we wanted to show that we were able to do a good job so we didn’t bid for anything else for the first six months so we could build up our reputation. Our timing proved to be good, as a number of tenders came up about five months after we started. We bid for all the ones we thought we could do, which numbered about 11 different contracts, and we managed to secure two of them. We were actually quite disappointed that this was all we got, but in the event it turned out for the best – we couldn’t have coped if we had any more.”

Since then, the business has grown steadily. With each contract lasting for an average of two years, the company has picked up a net average of three a year,
and now works for eight different local authorities on 15 different projects. The three founders are still part of the business, which has hired a further six full time staff as well as a number on short term or part time contracts for busy periods or when additional specialist skills are required.

“We’re not exactly millionaires,” says John, “but we’ve done pretty well and I’m happy with the way the business has developed. We’ve built ourselves a good reputation to the extent where we are now invited to tender for projects rather than having to push ourselves in. We’ve got good relationships with most of our
clients, and also with our suppliers, such as recruitment agencies and specialist training organisations.”

Finances

ANDS launched with a basic bank account from HSBC, and has never seen a need to switch. “We don’t see a lot of different payments go through, we are not a cash business and I can do almost everything with internet banking, so the actual bank charges are fairly irrelevant to us,” explains John.

One of the issues the company does face is late payment. “We only have a few clients, so if more than one wants to wait until the new financial year before paying us, it can really knock us out – this happens more than you think, there have been a couple of years when no-one has paid us until April!” The firm has an overdraft facility with HSBC for such an eventuality, though it has also built up reserves which, says John, can fund the business outright for three months. “Wherever possible we try not to use the overdraft because it can get expensive, but it’s a good safety net for if we ever need it.

The other key area for the company is insurance. “We’re an employer, so we have to have employers’ liability insurance, and we also protect our equipment with a contents policy. But because we operate recruitment and training schemes, there is the possibility of huge legal claims – we haven’t had anything of that nature, thankfully, but we make sure we have the right insurance policies in place if ever there was a claim.

The future

Government cuts could have a major impact on ANDS, but any impact is yet to be felt. “We know that local authorities are cutting services and freezing recruitment,” says John, “so we have to prepare for that.” Because the length of the average contract is so long, the company still has plenty of business but they are keeping control of expenses and looking for new avenues. “A year or so ago, we started looking at what we could offer the private sector – perhaps recruiting and training security guards or other, similar, levels of staffing. We also don’t do a lot of training for people who are already in employment and that’s an area we should explore.

“But really it’s about keeping the contracts we have and keeping the costs down. One of our staff is due to leave just before Christmas as she is moving away from the area, and we’ve taken the decision not to replace her straight away. We’re going to batten down the hatches and ride out the storm – it’s better to survive than try too hard and lose the business.”

John Sollars is now on his third business; Stinkyink.com an online superstore selling printer ink cartridges for every make and model of printer in the market.

But this wasn’t his first step into the world of business. “My first business was a retail shop in Kidderminster that I set up in 1982,” says John. “It sold CB radios and electronic equipment. I closed it down because it just wasn’t making enough money.

“My second business was based in Wrexham and we subcontracted electronic assemblies – we went out of business, which was a tough time and definitely not to be recommended!”

John Sollars started Stinkyink.com in 2002. He recalls that, “It was down to my kids in a way – my daughter said that everything was going to be online very soon and it was the business to get in.

Then my son needed a new cartridge for his printer – I went to every superstore and none of them had the right one. So that’s when I decided to get involved.

“There was never any doubt in my mind that it would succeed – even though my son described the business as selling a product I know nothing about through a medium I know nothing about.

“I financed the business by remortgaging my house, and using my credit cards and overdraft. My previous experience is that the banks aren’t your friends and if you can run a business based on a set overdraft, you can equally easily run it based on a zero overdraft facility. I hate debt, it’s a core philosophy of my business. “

Because of his lack of technical knowledge it was important to find the right web experts who would hold his hand. He chose Teclan, the internet retail specialists who built the initial website using Actinic ecommerce software. “Actinic has been the bedrock of my business for the last nine years and has enabled me to grow to where I am today,” John declares, adding, “The guys at Teclan were a big help when I was starting up; they even sent down a chap from Slough up to Shropshire to train me so I could maintain the site myself. And now they still do the hosting and always respond magnificently if we have a query.

“I got started by creating a printer and cartridge database and sourcing suppliers – our first order was taken on January 22nd, 2002.”

Fraud almost stops play

However, within weeks of launching the website he became the target of a ring of fraudsters based not in Nigeria or Russia, but all over the UK, and the police could do nothing to catch them or get his stock back.

These were early days for online trading and the problem that John found was that he didn’t know which transactions were fraudulent and which were legitimate. It meant he had to refund virtually everyone who had placed an order.

“The fraud we suffered was a big issue for several years. In August 2002, when we had been in business for only a few months, our card processor said there were a number of fraudulent transactions going through our business. We ended up having to refund almost every order we had received – around £32,000 worth.”

On the verge of bankruptcy John remembers that, “Early in September 2002 I was sitting with my dog in the office at home when the full enormity of what had happened sunk in. I had to make a decision whether to bother going on, or to get out and go back to a ‘proper’ job. But I picked myself up, resolved not to trust anything or anyone in future and got on with it.”

Nowadays Stinkyink.com has protection because Actinic’s software incorporates The 3rd Man anti-fraud screening service that claims to detect around 97 per cent of all bogus orders. It takes the headache out of manual checking, gives John peace of mind and saves charge-back costs. “Since we started using 3rd Man, we have had less than £1,500 in chargebacks.”Indeed, John’s security is now so good that he recently helped the BBC with an investigation into online fraud.

Then he had another knock: In March 2005 the alarmed and barred warehouse he’d just moved to was burgled and his whole stock worth £50,000 disappeared.

As a ‘commercial’ incident the police were again not interested despite the value of the products, and it was fortunate that everything was fully insured. “The insurance worked really well and we were able to replace our stock quickly. But I didn’t realise we weren’t covered for our office equipment.”

John fought back from these calamities. Using email marketing and search optimisation, he grew the customer base and website traffic so within two years was in profit – a remarkable achievement. John recalls how tough the early years were:

“The fraud issue really coloured the first four years of the business as it made it hard to get credit with suppliers as our balance sheet was so weak. It taught me the importance of having cash in the bank and watching my P&L like a hawk – I review it every month.”

Back office savings

A major reason for the success of the business has been the MD’s attitude towards combining efficiency and quality of service. John is a passionate believer in both and has invested significantly in streamlining the back office systems using axisfirst software as well as attaining accreditations from Investors in People and the ISO 9001:2008 kite mark.

John explains, “In 2009 sales were 70 per cent up on the previous year and growing rapidly. We are a high volume, low margin business and keeping overheads down is crucial. We were struggling with manual, un-integrated systems for warehousing, purchase orders, accounting and order processing.

“As a result of automating many tasks and integrating everything, the overall efficiency of the company increased by over 40 per cent in 2010; net profit grew by 22 per cent; and as our turnover has increased our stock has decreased, improving cashflow.”

Repeat business is up

John’s other focus is his customers, “Customer service is the crux of our business and having ISO9001:2008 we make sure that whenever we can we implement any customer feedback to improve the site or our processes.

“I want to provide, or exceed the sort of service that I expect when I shop online so if an order is hanging around after 24 hours I get really cross. I believe that we provide an exceptional service with free next day delivery and a no-quibble warranty, even freepost labels for recycling old cartridges.

Our efforts are definitely paying off as half our orders are now repeats.”

What next?

All this has released cash back into the business and John has been able to invest in further IT upgrades as well as developing a new, niche web store – WattLamps – that holds no stock but instead utilises electronic data interfaces (EDI) and suppliers’ feeds to create an extension to Stinkyink’s warehouse.

And looking ahead John is already planning further ventures: “Using the existing back office resources coupled with the knowledge my staff have built up, we can dominate new niche areas as the opportunities arise – all with minimal extra overheads: it’s brilliant! It’s difficult to say what’s going to happen in the future – no one knows what’s going to happen in five years.

“The market is likely to vanish as quickly as it appeared.”

Ideally, of course, a banking relationship should be for the long term as your bank gets to know and understand more about your business it should be in a position to provide you with the services you need when you need them.

But that doesn’t mean you have to stay loyal – if you can get a better deal elsewhere, you should move on. Of course, it’s always worth negotiating with your existing provider first, but in a competitive market you need to be sure you are getting the most for your money.

Most banks have special deals and incentives for new customers. Naturally, these offers are aimed mainly at new businesses but in most cases an existing company will be welcomed with a similar deal.

And while the start up incentives can prove to be valuable, remember that it’s in the long term that the true worth of your bank will be tested. When looking at the bank accounts on offer, here are the factors you need to consider:

• Bank charges

With the vast majority of business current accounts, your bank will levy transaction charges. So every time you pay in or out a cheque, or a direct debit, or cash, a fee will be charged. These fees vary dramatically – it’s generally less expensive to pay a bill electronically than by cheque, for example and they also vary from bank to bank. So if you’re a mainly cash-based business, for example, then you’re going to need to choose the bank that has the lowest fees for handling cash.

With most banks, new account holders whether new businesses or companies switching from a rival – will be given a period of free banking. This almost always is just the basic transaction costs – money coming in and money out – you’re not going to get international payments or interest-free overdrafts.
Bear in mind also that some accounts levy a monthly management charge as well.

While the idea of having to pay for an account when you could go to a rival centre stage for nothing may seem strange, bear in mind that the charge will probably give you discounts on your daily banking costs, which could end up an even bigger saving.

• Interest

It’s important here to work out what sort of customer you’re going to be. If you think you’ll mostly be in credit, you’re going to want to look for the bank that pays the best interest. If, on the other hand, you’re running your business from your overdraft, then it’s the lowest amount of interest you’ll pay that’s the most important. It’s unlikely that the same bank will offer both, so choose wisely.

• Overdraft

If you’re a start up you’re going to have to really prove the potential of your business before you are granted a respectable overdraft and even if you’re established questions will be asked.  At the moment, banks are reining in their overdraft lending and you’ll have to be a very good customer to get a good deal.

• Access

Again, this will depend on the kind of banking you need. If you’re taking lots of cash or cheque payments, you’re going to need a branch close by where you can pay in your takings. On the other hand, if most of your income comes in the form of bank transfers, this is far less important. Virtually every bank now offers online banking and almost all offer a telephone service too, although their hours and service offerings vary. Banking online wherever possible is usually the cheapest option.

A new report, “The year ahead: a view from Britain’s small businesses”, published by Barclays Business in conjunction with Kingston University Small Business Research Centre, reveals the views of owner-managers in key areas including ambition and optimism for the year head, planned growth, areas for investments and employment plans.

According to the report, two thirds (66 per cent) of owner-managers are expecting to grow in 2011, with positive action being taken in areas that include entering new markets (35 per cent) and strengthening existing client relationships to potentially increase sales and improve credit management conditions (34 per cent).

The research also suggests that despite the challenging economic conditions, SMEs are still planning to invest next year, although they are being increasingly strategic about where they invest their cash, focusing on where it will have maximum impact.

For example, nearly half (43 per cent) are looking to up spend on marketing to increase sales, whilst almost a quarter hope to increase spend on product development and innovation. Two thirds (66 per cent) intend to at least maintain their investment in innovation, underlining the forward thinking mindset of the country’s owner-managers.

Commenting on the findings, Travers Clarke-Walker, a director at Barclays Business, said: “The importance of SMEs has been acknowledged for some time, but never more so than at now, with their performance forming a central component of the recovery, its speed and outcome. “The research reveals that owner managers have been actively managing their businesses to reposition themselves for survival and growth in 2011.

This is far from the alternatives of retrenching, cutting prices and reducing their profits; strategies that are unsustainable and only add further to any downturn in the economy. In addition, the fact that SME are seeking to grow and to enhance their profitability suggests a sense of optimism and a stepping up to the challenge of recovery.”

Professor Robert Blackburn, Small Business Research Centre, Kingston University, continued: “Our analysis shows that SMEs are able to make a significant contribution to the economy in terms of their employment, sales and innovation activities. Thus the emphasis by the Coalition Government on the central role of SMEs and the economy is not misplaced, as these firms have the potential to meet the expectations that the government has for them during the recovery.

“However, it is worth noting that whilst owner-managers are proactive in terms of planning for survival, development and growth, their success is partly dependant on the level of demand in the economy for their goods and services. Government supply-side measures, including the increased provision of finance, appear to be less popular amongst owner-managers
than stimulating demand for goods and services.”

So while SMEs are planning for growth, is the funding to support them out there? A recent Government report has highlighted how the banking sector has not been able to address the requirements of small businesses. The report, Competition and Choice in Retail Banking, found that the lack of branches, as well as a reduction in funding, was making it more difficult for
SMEs to access services – most importantly loans and other forms of credit.

The report noted that the debate on SME banking has too often only been focused on the availability and cost of credit. Good customer service for SMEs can be as, or even more, important to SMEs.

Competition and the ability to switch is the most important spur to better service. However, it’s not all bad news. Britain’s biggest banks – along with smaller providers such as Aldermore and Bank of Cyprus – are making a concerted effort to get funding out to SMEs.

RBS, for example, has joined the Community Development Finance Association (cdfa) to help make finance more accessible for the small grass roots businesses that are vital to local communities. Whilst the businesses themselves might be small, the sector is growing rapidly. Last year the cdfa increased lending by a record 77 per cent, with applications for credit now approaching £500 million.

Bernie Morgan, chief executive of the cdfa, said: “The CDFI sector takes a huge step forward today with this initiative. Change Matters will provide CDFIs with the tools they need to develop their business and attract a wider range of investors than ever before.”

Peter Ibbetson, small business chairman, RBS, said: “It’s vital all businesses, however small, get the help they need to thrive. This initiative will make a huge difference for those businesses that normally fall outside of mainstream lending.” RBS will also be providing funds to help finance the operational changes required to build the CDFIs capacity to increase
support to the sector.

Meanwhile, Santander (which does a lot of SME business through the RBS branches it purchased) plans to increase gross SME lending by 25 per cent and total lending to UK businesses by 12 per cent to support economic recovery. Santander has agreed to deliver £6.7 billion of gross new lending commitments to support UK businesses this year, following direct negotiations with the Government. Of this, almost £4 billion will be used to support small to medium enterprises (SMEs). This represents an increase of 25 per cent for SME lending and of 12 per cent for its total business lending.

Ana Botín, chief executive, Santander UK, said: “We are fully behind the government’s growth agenda and focus on supporting SMEs. Our objective is to continue to increase the number of businesses we work with. “Santander will continue to increase its lending to SMEs and its market share, as it has done for the past two years. The bank has very much been ‘open for business’ throughout the economic downturn, delivering £6 billion in gross lending to UK businesses, including £3.2 billion to SMEs, in 2010.”

In the current economic climate, banks are much more cautious about lending money – start ups without a track record, for example, are unlikely to get far.

• Term

Loan terms can be anything from just a few hours to a million years, yet the likelihood is that with a business loan you will be looking at between one and 10 years for repayment.

It’s fairly simple: the longer the term, the lower your monthly – or quarterly or annual or whatever – payment will be. But the shorter the term, the less you will pay in total interest. If for example you borrowed £1,000 at 10 per cent interest for a year, you will repay a total of £1,100 within that year, because 10 per cent of £1,000 is £100.

But if you borrowed the same amount at the same rate over two years, the interest you have to pay will almost double because the interest is an annual rate so you will be paying it for longer. It’s not exactly double because you will have paid back some of the capital in the first year, but it’s easy to see how the amount you have to pay adds up.

• Flexible

Some loans are flexible, which give you added freedom to let your loan run with the ebbs and flows of your business. Mostly, a flexible loan means you have the ability to make extra payments on top of the regular debit to pay off the loan earlier, but some will allow you to borrow back, take payment breaks and so on.

These can be particularly useful for businesses with a seasonal income – for example a farmer who earns most of his money just after harvest or a shopkeeper who relies on Christmas for profits and has a quiet period in the New Year.

• Security

In some cases, your bank may ask for security for the loan. This usually takes the form of property, though it can be anything of value – an investment portfolio, your stock, vehicles or even livestock (though that’s unlikely). This means that in the event you are unable to repay the debt, the lender has the right to take possession of that security to get its money back.

If you are a business that owns property, it’s fairly straight forward – you put up that property as security and you get the funds you need. But a high proportion of businesses don’t have large assets that they can use as security, and in this case a personal security may be requested, in most cases the owner’s home.

This means that if your business – even if it is a limited company – fails to meet its repayments, the bank will have the authority to collect from your personal possessions.

It’s always worth taking independent advice when you’re considering using personal assets as security for a loan. It’s a sad fact that many businesses do fail, and if yours was one of the unfortunate ones that went under, you wouldn’t want to be responsible for all the upheaval your family will face as well through losing their home.

Over half (53 per cent) of British entrepreneurs put their business success down to their own innate talents which cannot be learnt or taught, according to new research* of 500 entrepreneurs. This compares to 13 per cent who believe that learnt skills or education have been the driver in launching their business idea.

A debate on the research findings by small business insurance provider Hiscox, attended by some of the country’s leading entrepreneurs and business experts reached the conclusion that entrepreneurship is more nature than nurture, although did also suggest that some key business skills can be learnt. The discussion also concluded that the current financial climate presents significant opportunities for aspiring entrepreneurs.

Hosted at the Royal Institution by science journalist Vivienne Parry, the Hiscox sponsored ‘nature or nurture’ debate saw Steve Ridgway, CEO of Virgin Atlantic Airways, Max McKeown, business author and strategic adviser, and Daniel T Jones, founder and Chairman of the Lean Enterprise Academy, argue what attributes they believe contribute to entrepreneurial success.

Entrepreneurship as an art

Max McKeown, supporting the nature side of the debate, said that entrepreneurship is an art, something that comes from a set of abilities that cannot be learnt. He also commented that entrepreneurs need innate qualities such as ambition in order to make the leap from having a great idea to actioning it: “Who’s more likely to succeed – someone with high skill and no ambition, or no skill and high ambition? If you’re an entrepreneur, you can hire as many skilled people for your business as you want.”

Hiscox’s research supports that view, with 23 per cent of entrepreneurs questioned stating they were not university educated and just 13 per cent believing business success is down to education or relevant experience. Respondents also listed innate attributes led by an analytical mind (81 per cent), followed by creativity (73 per cent), drive (66 per cent) and good communication skills (63 per cent) as key to business success.

Entrepreneurship as a science

But the research also acknowledged nurture as an influence: 88 per cent of entrepreneurs worked for another company before starting their own business and 30 per cent had studied business and management, showing that gaining competencies and experience within an established company can be an important part of business success. Professor Jones echoed the need for experience when debating for the side of nurture. He argued that entrepreneurs often fail at first, learning from their mistakes, and that some key entrepreneurial traits, for example problem solving, can be taught.

The lively discussion about the nature of entrepreneurship concluded with all panelists agreeing that post-recession is a time ripe for would-be entrepreneurs, citing successful companies Hyatt Hotels and MTV, which were born in similarly challenging economic times.

Professor Jones said that the recent downturn proved the current business model was broken: “Now is the time for entrepreneurs to really flourish”. Steve Ridgway commented that tough economic times always bring out business talent: “Entrepreneurs will go to hell and back if they believe in an idea.” Max McKeown echoed this thought, saying: “Entrepreneurs don’t believe the future is predictable – but they do believe that they can create the future themselves.”

Commenting on the debate, Alan Thomas, SME expert at Hiscox said: “One thing that’s clear is that it’s hard to package the profile of an entrepreneur into a ‘one size fits all’ format. While some people have all the required qualifications on paper, they may lack the innate abilities of a natural born risk taker or vice versa. It’s good to see that despite, or maybe because of, recent economic challenges, the spirit of entrepreneurship remains alive and well in this country.”

Hiscox insures more than 100,000 small businesses in the UK, offering a range of business products including public liability insurance and professional indemnity insurance.

The Real Cleaning Company was launched in June 1998, with little more than a good idea and a commitment to doing some hard work, according to its founder and managing director Howard Ashcroft.

“The original idea was to subcontract work from my brother, Richard,” explains Ashcroft. “He already had a successful cleaning business, so I borrowed £4,000 from my dad to set myself up.”

Unfortunately, this didn’t go quite according to plan. Disputes over the amount of work he was getting and the payments for it meant the siblings fell out. “I was left with nothing – all the contracts were his, and I was left to cleaning friends’ flats. I was going to go back and try and get a job in the hospitality industry, where I had come from.”

Then by chance, Ashcroft received a phone call that was meant for his brother – one of his clients had some work that had come up cleaning a shop that had recently been refurbished.

“The client thought I was Richard and simply asked if I could do the job. I kept up the pretence, said yes, and the rest is history!”

This client became Ashcroft’s first direct customer, and the work started to flow for him. And while his firm does carry out a vast range of cleaning services, shop cleaning – after refit or refurbishment – is its speciality.

The company now operates across the UK, and employs over a dozen full time staff, as well as many more on a job-by-job basis.

“In our first year, we turned over £15,000,” says Ashcroft. “In September this year, we reached almost £100,000 for that month alone.” With a number of clients, including shopfitters for the likes of Carphone Warehouse, business looks good.

The toughest part of the job is in planning the work, explains Ashcroft. “It’s seven days a week, 24 hours a day. Jobs come in all the time, and they change all the time – if a tradesperson lets down the shopfitter, they get delayed, which means we get delayed. There are lots of postponements and cancellations.”

“We’re in a very busy period with around 25 projects a week, so we need to stay organised – it’s just my wife and I organising the office, though we’ve just taken on someone to help us. And it’s hard work – the average day is around 14 hours.”

But it hasn’t always been that way.

The downturn

Like many SMEs, Ashcroft’s business started to struggle during the recession. “We almost lost everything last year, we had to cut our prices by 25-30 per cent,” he explains. “We’d always prided ourselves on being a top-quality company, and our prices reflected that. But the top end completely disappeared.

“But it’s been the making of us. We had to think really clearly about how to keep up our levels of service, but at the same time keep our costs down. This has meant planning the jobs better, keeping staff costs down, and being more efficient in everything we do.”

So with a turnover of £380,000 in 2009, and a tough first five months of this year, the Real Cleaning Company expects to turn over around £600,000 this year.

Banking

And all of this was done with very little finance. Although Ashcroft started out with a family loan, he resisted bank finance until he was three or four years into the business, when he took out a bank loan for £10,000 to improve his inventory and equipment. “Never again, it took me five years to pay it back!”

The company also managed to run up a large overdraft, up to £25,000 at one stage, but this has also now disappeared, which means that apart from finance on one of his vehicles, the company is now debt free.

And having banked with Natwest ever since the company launched, Ashcroft is now in the process of switching his business to RBS. “The division I am moving to has just been bought by Santander,” he explains. “We’ve had a recommendation about the bank’s business manager from one of our sub-contractors – he’s apparently very proactive and works solely with companies of our size, and has fewer clients to look after. This means that hopefully we’ll have a more personal service.”

The company also uses an invoice financing provider, to manage its cashflow. “When we start The next step At the moment, says Ashcroft, the company is so busy it has having to turn away business. “It’s very frustrating, knowing that the work is out there, but we are at capacity at the moment. This does give me confidence, though, to rack up the scale of our business.”

Ashcroft has ambitious plans. At the moment, he’s working with a software developer to automate the planning of jobs, which he says will make the business much more efficient. He’s also looking to take his company to the next level, with the possibility of him exiting in the next two or three years. “I’ve been meeting a lot of successful people who have been bought out by venture capitalists,” he explains.

“I’m now looking for an investor who can bring some commercial experience to our operation, as well as taking on a stake in the company.”

The plan, says Ashcroft, is to either sell completely in the near future, or put in place a management team that can run the business while he moves on.

“I’ve been in this business for 13 years and know it inside-out,” he says. “But I don’t want to be running it for ever. I will either sell, or leave it to others to manage and earn an income from it.

“But I’m not just going to retire – I’m the sort of person that has to work all the time. So I’ll move into the hospitality business, maybe a hotel or a restaurant/bar, maybe the events business.

Lessons learned

“I made so many mistakes,” says Ashcroft. “If I could go back to my earlier self, I’d say never think I know it all. I nearly lost the business on three occasions and it has been very difficult. At one stage, I was trying to make the business something that the market wouldn’t allow, and that’s the wrong way to go about things.

“Because of the recession, we had to change the format. we had to change the idea of the company to survive.

“Our success is in making it work. We still offer a high quality service and we do a fantastic job. I like to say that we started out as the Gucci of cleaning, and now we’re the Ikea – still great quality, but without so many of the frills.”

Sibling rivalry

And finally, has he made up with his brother? “He’s my best friend now, though I’m not sure if I’m his!

“We’re very different people, but we get on well – I did rub it in a bit, though, when my profit was bigger than his turnover last month!”

Your first start should be your local Business Link. This is a Government agency, organised regionally, that provides information and support for all small businesses – whether they are start-ups, established companies or firms looking to expand. It’s particularly strong on the administrative side of running a SME, with guidance on taxation, employment, finance and regulations. But it also has plenty of useful tips on marketing, international trade and grants, and runs local events that provide advice and networking opportunities.

The Federation of Small Businesses is a member organisation that campaigns on behalf of SMEs. It promotes the interests of small businesses in Parliament and in the media, but it also gives its members a range of benefits. Members are entitled to legal information, and can download templates of legal documents.

Members also get tax advice and there are a number of special deals you can access when it comes to banking, loans and credit cards. “Our purpose is supporting small businesses, and in addition to our lobbying work, we’re always looking for ways to give our members more help,” says a spokesman for the FSB.

It’s also worth visiting the websites of the major banks; they all offer accounts and services to small businesses, and many of them have plenty of advice to companies, which is available whether you are a customer or not. Lloyds and HSBC have two of the better websites, but most will have something of interest. Coverzones has plenty of useful and easy to understand information on specific insurance policies that small businesses need to consider, including laibility and indemnity cover.

As part of the Government’s long-term strategy to get more of its services online, there is now a wealth of useful sources of information for small businesses, many of them available through Direct.gov. The site is generally set up for individuals, so if you’re a sole trader then you can receive guidance on your rights and responsibilities, as well as information on tax and benefits. For larger companies, the taxman will be able to explain all about VAT, corporation tax, employers’ tax and the like. It’s particularly useful for companies undertaking new ventures, such as employing someone for the first time or selling products and services overseas – each of these come with potential liabilities so it’s a good place to start if you’re considering such a move.

The Department for Business, Innovation and Skills concentrates mainly on the regulatory side of running a small business. The site is currently being updated, so at the moment can be a little difficult to navigate, but if you can find it there’s plenty of help available.

But there are no guarantees of success. A significant number of new ventures never reach their second birthday, and failure can affect your personal finances significantly.

So you need to do some homework before you risk your money. Here, we give you ten top tips to get on the right track from the start.

1. Focus on your product

Whatever your business, you need to make sure you really know what you’re doing. Who else is in the market? If there’s plenty of competition, what are you doing to make your business stand out? If you’ve found a niche – either a product that doesn’t exist, or a service not available locally – think about why nobody else is doing it. There may be a good reason for it not being available.

2. What kind of company are you?

“Deciding on what type of company you set up as is key,” says a spokesperson for the Federation of Small Businesses. “It affects the kind of finance you get to work with, the roles and responsibilities of the owners and your tax status.” For start-ups, there are effectively three main options – a sole trader, a limited partnership or a limited company. Each has its own benefits and disadvantages, and it’s well-worth doing some research on each to see what is best for you.

3. Which bank?

Despite the current economic turmoil, banks are still keen for business from start-ups, and many offer a range of incentives. While the benefits of free banking for a year or cheap initial overdrafts may seem vital, it’s more important to look at the long-term value, so compare the fees and charges once your deal period ends before you take the plunge.

4. Other financial services

No matter which bank you end up with, you don’t have to take all the products you need with it. If you need a small business insurance quote or a loan rate, compare the prices of the whole market to get the best deal.

5. Check your liabilities

As a business owner, you have responsibilities to your customers, your employees and your suppliers. If you fail in those responsibilities, you could be held liable for any injuries or damage that result. Make sure you have liability insurance in place to cover yourself against any claims.

6. Take advice

You can’t be an instant expert in all areas of running your business, so don’t be afraid to ask for help. Professional groups, such as your bank, will be able to give you information and advice on some areas, but it never hurts to canvas friends and family for their tips.

7. Don’t ignore the paperwork

There are legal implications for businesses that don’t keep up with their administration, but a disorganised approach to your paperwork means that you will miss opportunities and fail to spot any potential obstacles ahead.

8. Know the law

All businesses are subject to certain laws, and there will also be rules and regulations specific to what you do. Make sure you keep within the rules – the penalties can be huge and your reputation may never recover.

9. Get the marketing right

Understand where your potential customers are and build up a strategy to attract them – they’re unlikely to come to you. “The best strategies are usually the simplest, so when setting your marketing strategy make it achievable and ensure it fits within your budget,” says Julia Payne, co-founder of The Edge Business Club.

10 Don’t give up!

There will be obstacles and you’ll have good and bad days, but building up a new business is always going to be hard work and the biggest successes tend to come from the businesspeople who try the hardest.

But that doesn’t mean you have to stay loyal – if you can get a better deal elsewhere, you should move on. Of course, it’s always worth negotiating with your existing provider first, but in a competitive market you need to be sure you are getting the most for your money.

Most banks have special deals and incentives for new customers. Naturally, these offers are aimed mainly at new businesses but in most cases an existing company will be welcomed with a similar deal. And while the start up incentives can prove to be valuable, remember that it’s in the long term that the true worth of your bank will be tested.

When looking at the bank accounts on offer, here are the factors you need to consider:

Bank charges

With the vast majority of business current accounts, your bank will levy transaction charges. So every time you pay in or out a cheque, or a direct debit, or cash, a fee will be charged. These fees vary dramatically – it’s generally less expensive to pay a bill electronically than by cheque, for example – and they also vary from bank to bank. So if you’re a mainly cash-based business, for example, then you’re going to need to choose the bank that has the lowest fees for handling cash.

With most banks, new account holders – whether new businesses or companies switching from a rival – will be given a period of free banking. This almost always is just the basic transaction costs – money coming in and money out – you’re not going to get international payments or interest-free overdrafts.

Bear in mind also that some accounts levy a monthly management charge as well. While the idea of having to pay for an account when you could go to a rival for nothing may seem strange, bear in mind that the charge will probably give you discounts on your daily banking costs, which could end up an even bigger saving.

Interest

It’s important here to work out what sort of customer you’re going to be. If you think you’ll mostly be in credit, you’re going to want to look for the bank that pays the best interest. If, on the other hand, you’re running your business from your overdraft, then it’s the lowest amount of interest you’ll pay that’s the most important. It’s unlikely that the same bank will offer both, so choose wisely.

Some banks offer a ‘sweep’ facility’ on current accounts. This means that if your balance rises above a certain figure at any point, the funds above that figure will automatically be swept into a separate deposit account that pays higher interest. Then, when money starts to dwindle, the bank will automatically again place funds back into the main account from the savings.

Overdraft facility

If you’re a start up you’re going to have to really prove the potential of your business before you are granted a respectable overdraft and even if you’re established questions will be asked. At the moment, banks are reining in their overdraft lending and you’ll have to be a very good customer to get a good deal.

There are signs, however, that some institutions are starting to open up once again, so it’s worth phoning around to see what’s on offer.

Access

Again, this will depend on the kind of banking you need. If you’re taking lots of cash or cheque payments, you’re going to need a branch close by where you can pay in your takings. On the other hand, if most of your income comes in the form of bank transfers, this is far less important. Virtually every bank now offers online banking and almost all offer a telephone service too, although their hours and service offerings vary. Banking online wherever possible is usually the cheapest option.

At a glance: Bank incentives

(Last updated 23 September 2009 and, where applicable, we have given the incentives applicable to the accounts with the lowest turnover requirement and where there is no initial monthly fee)

Abbey/Santander

• Free day-to day banking for life
• Interest of six per cent paid on credit balances (limited)

Alliance & Leicester Business Banking

• Free banking for life up to £1m turnover
• UK call centre 24/7 telephone banking
• Free legal and tax advice
• Use the Post Office for payments
• Other business services such as insurance, loans and online advice

Bank of Scotland

• 12 months free banking
• No overdraft arrangement fee for first 12 months
• Barclays (Business start up package)
• 12 months free banking
• Support outside office hours
• Access to seminars
• Free credit management tool
• Free data storage

HSBC

• 18 months free banking
• 12 month fee-free business credit card
• £75 Google adwords voucher
• £50 discount on web build package
• Access to business resource directory

Lloyds TSB

• 18 months free banking (six months for account switching)
• Free Sage Business software and support
• Free business guides

Natwest

• Two years free banking
• Free online start-up course
• Free business planning software
• Free guides