Extension task 3.

Different aspects that can affect a business

 

Regulations and laws

 

I will now explain what would affect my online business of the following regulations and laws:

·         Minimum wage for employees.

 

Employee rights at work depend on Employee statutory rights and Employee contract of employment. Statutory rights are legal rights based on laws passed by Parliament and unless employees are in the group of workers who are excluded, all employees have the following statutory right - to be paid at least the national minimum wage.

The National minimum wage rate per hour depends on age and weather employee is an apprentice. The most recent National minimum wage rates (starting in 2013 from October):

1.       Apprentice -     £2.68

2.       Under 18 -      £3.72

3.       18 – 20 years old- £5.03

4.       21 and older - £6.31

Employees can be paid more but can’t be paid below the minimum national wage. If they are paid less, they have a right to inform HM Revenue & Customs (HMRC). HMRC then will send a notice to employer for the arrear plus a penalty for not paying the minimum wage. If employer still refuses to pay, HMRC can take them to court on behalf of the worker.

 

·         Distance selling act

Distance selling regulations protects customer rights when buying products from a distance e.g. shop online or over a phone. Owner of an online business should be aware of the rights that distance selling act gives to customer.

If you own an online business you need to make sure that customers receive clear information and descriptions about the supplier, goods or services, any guarantees and after-sales services and conditions of a contract. You also have to provide clear information and descriptions about the supplier, goods or services, any guarantees and after-sales services, conditions of a contract, information about the price of goods or services, delivery costs. Customer is allowed to have a cancellation period of seven working days with exceptions and a protection from payment card fraud. Customer also has a right to receive a repayment of credit and interest after cancellation of a related credit agreement and receive a recovery of sums paid by or on behalf of the consumer on cancellation and return. You should also be aware that customer has a right to return faulty goods.

·         Being a partnership

Partnership is a type of ownership which involves two people and both people are responsible for success or failure of a business and mistakes of other partner.

 In limited partnerships the liability for debts that can’t be paid in this type of company is unequally shared by its partners. It means that both partners are personally liable for all the debts that are made in partnership. Owners of this business are only liable up to the amount they initially invest in the business.

In limited liability partnerships partners aren’t personally responsible for the debts that business can’t pay.  They are only responsible for money they invest in the business.

 Lower risk would be to form a limited liability partnership that limited partnership.

 

·         Being a LTD (limited company)

Limited company is a type of ownership when personal finances are separate from business finances.

A private limited by shares company is when shareholder’s liability is limited to the value of the shares issued.

A private limited by guarantee company is when shareholders are financially responsible for a company to a specific amount.

 

·         Needing to arrange the payment of your own taxes

Within 3 months from starting up a limited company you would need to provide HMRC with specific information about your company. This would be : date of starting up, company name and registered number, main address of business, type of business, the date you’ll make annual accounts up to and if you’re a part of a group or you’ve taken over a business.

After doing that, you should receive Unique Taxpayer reference.  This letter tells you about providing HMRC with information in a future. It also gives you information about setting up HMRC online account for Company Tax Returns and Corporation Tax.

 

In a partnership company a nominated partner needs to register the partnership for business taxes with HMRC . Both partners need to complete a Self Assessment tax return and Partnership tax return (this shows each of the partner’s shares and losses). Returns can be sent online or on paper and they should be sent to HMRC as well.

You will need to register with HMRC for paying VAT taxes, if according to HMRC your company is a business, you sell goods or services that are not exempt from VAT and your turnover for the previous 12 months was more than £79,000.  You can register for VAT  online in HMRC website or send papers by post.

 

 

 

Marketing and sales

 

What would affect your online business of the following.

·         An online marketing campaign

Online marketing is very popular these days. It has two benefits – low cost and easily accessible.  Advertising online can be more affordable than doing it on TV, Radio, newspaper and etc. E.g having an online page in Facebook, or creating blog in Google doesn’t cost anything.

Online marketing campaign is easily accessible for anyone in the world. A person should only have with internet connection and computer. Many people use internet every day in works, schools, universities or on free time and it increases possibility that your market campaign will be seen.

 

·         Full page adverts in a major newspaper

Many people read newspapers. For some it’s a habit to wake up and have a cup of coffee while reading newspaper before going to work. People read them every day and everywhere – at home, work, parks and, public transport etc.

One example proving that newspapers are very popular in the UK is public transport. Public transport is highly used in the UK. London underground carries more than one billion passengers in a year, so it’s approximately 2747252 in one day. You can always see that many people read newspapers when travelling with trains. People like them because they’re most of the time free and you can find them almost in any carriage. There are more popular public transport services in the whole UK e.g. National Rail Services, Overground, Buses, where people read free newspapers.

There’s no real number how many newspapers are read in a day, but it’s probably very high. This means that advertising in a newspaper is a very good way to promote a business.

The price of adverts depends on where the newspaper will be sold – nationally or regionally; size of your advert and colour scheme – colourful or black and white only. Having full page advert, which will be sold in the whole UK, with colourful colour scheme, would be the most expensive. Less expensive full page advert would be in black and white colour scheme and sold regionally e.g. London only.

 

·         How could you encourage repeat custom

It’s very important for business to attract new customers, but the same important is to have regular customers. Having regular customers means that they’d always come back to you to buy product or service you sell when they’d need, your business would be their priority.

To encourage repeat custom you should make sure that you provide good customer service and good after sales care. Everyone wants to be respected and if people like the way you treat them they’ll come back to you when they’ll need your product or service again.

It is also good to make some discounts and offers that always attract people as they expect to buy something good but with lower price.

Loyalty card is also a good idea. If a customer has your company’s loyalty card, there’s a higher possibility that they’ll buy from you to gain points and get more discounts.

 

 

·         What would you do if sales were low

Sales can be low because of many reasons. To high prices, poor quality services or products, bad customer service, unpopular location, hard accessibility and etc.

The first step to solve this problem is to identify a reason of low sales. Sometimes it’s easy to do that and you know all weaknesses and strengths of business. It’s hard to do when you think that you did everything you can to make business successful and you can’t understand what else you should do or what you did wrong.

Making a customer survey can help. You can make a customer survey online, in a street or in your shop. This will help you to understand what dissatisfies your customers and what their expectations from your business.  You’ll just need to make sure that your questions are easy to understand and answer, that you don’t ask too personal questions and that you have the right number of questions – not too much and not too less, to receive enough information and not to put off your customers, because no one likes spending hours doing something that they don’t want to do, didn’t expect to do and are not paid to do.

When you find out the reasons why your sales are low, it’s is easier to make positive changes to your business. It’ll also help you to avoid or identify problems that could happen in a future and be ready for that.

 

 

 

 

Financial issues

 

I will now explain what would affect your online business of the following financial issues:

·         Borrowing money to start your business from friends or family

To start business you will always need a budget. Borrowing from friends or family can be the best solution if you have bad financial records, low credit rating or are not eligible for bank low. Most of the time, there’s no or low interest when borrowing from friends or family. You can also have flexible repayment. When borrowing from a bank you have to do payments every month and interest fees add additional cost.

Bad point of borrowing money from friends or family is that you haven't worked for it and money got easily are spent easily as well.

 

 

·         Borrowing from the bank

Borrowing from the bank is good if you want to keep equity and privacy of your business. Only you and your bank have to know that you borrowed money from them. Bad point of this is that bank loans usually have high interest - about 7%-8. You also have to do and regular repayments - every month. You can't delay your payments otherwise you'll get low credit rating which could cause problems in a future to get another loan, buy or rent property and etc.

 

·         Costs being greater than profits

It is very important to control your business expenditures as if costs are not controlled you can’t make revenue and get a profit. If your costs are higher than profits, you should lower your costs. The easiest to change are start up and variable costs, because you can change them without making big damage to your business.

It would be hard to lower other two types of costs. Fixed costs can’t be changed at all as they don’t change with a change in use. Operating costs is what business spends money on to keep trading. Quality of business procedures, products or services has big dependence on operating costs, so it would be better not to lower them.

When costs are greater than profits and your business is already trading for some time, the easiest and most productive solution is to lower variable costs. If your business is new or you are just making plans for your business and notice that costs are not controlled and affecting your profits in a bad way, you should also lower your start up costs.

 

·         Not maintaining accurate financial records

It’s very important to maintain accurate financial records. They help to understand current situation of your business and predict your business success in a future. It’s also important for tax payers. E.g. If turnover in a previous 12 months is lower than £79,000, you don’t have to pay VAT taxes, so having accurate financial records helps you to pay the right amount of taxes as well.