This blog will focus on the nitty gritty of Profit and Loss forecasting. If you have any other queries, feel free to get in touch with the man himself!

What is a Profit and Loss Forecast?

A profit and loss forecast is a spreadsheet that estimates the profits and losses that your business will encounter in a year. The document is extremely useful if you are pitching for investment. If you, as a startup looking for funding, can produce a sound Profit and Loss Forecast to a venture capitalist, angel investor or a bank, they will be buoyed by your understanding of accounting.

A profit and loss forecast works with this equation in mind:

Sales - Cost of Sales = Gross Profit. Gross Profit - Total Overheads = EBIT. EBIT - Interest = Profit Before Tax.

Before you get your answers by using this formula, you need to understand eaxctly what each heading means. In other words, you need to the acute differences between a 'cost-of-sale' and an 'overhead', for example.

It is useful to note that the same structure and formula can be used when you’re up and running for your Management Accounts.

Sales

Sales are the hardest part of your profit and loss to forecast. It is, by definition, difficult to estimate the sales that you are likely to make.

First off, you need to identify all of your different sales channels. You need to include a monthly estimation for each sales channel. If your single product is t-shirts, for example, you need to project sales made from a market stall, from wholesale supply and online.

Your Sales section also includes any other income except funds raised by selling equity. Equity investments are not sales, they are funding agreements. If you win any competitions or receive any business grants, these need to go into your Sales column.

Also, it would be extremely wise to include 'assumptions' in your spreadsheet. Assumptions are simple formulas that can be built in that allow for variations in your predictions. For example, what happens if you make 15% more sales than you estimate? Or 15% fewer sales than you estimate? If you build in a formula that multiplies all of the sales estimations by a fraction (x 1.15 for 15% more or x 0.85% for 15% fewer), this will blow the socks off potential investors. They will appreciate that you understand the volatility of starting up.

Cost of Sales

When you have worked out a figure for your sales, you need to subtract the cost of sales from your sales sub-total to work out your Gross Profit. Or, to return to the formula:

Sales - Cost of Sales = Gross Profit.

To work out your 'costs of sales' you need to add together all of the costs that are incurred to make your product. For t-shirts, this would be materials and printing costs. For sandwiches, this would be bread, butter, cheese and pickle, for example.

It is best to carry out substantial research into the cost of sales before you make your predictions. It is wise to ask questions of experienced professionals in your industry.

When you have estimated your cost-of-sales, subtract this number from your Sales. The resulting number is your Gross Profit!

Gross Profit

Gross Profit is, as you will have worked out, the money you have made before you subtract your overheads and interest! Your gross profit is useful to know as it gives you the value of your product.

Furthermore, If you express your gross profit as a percentage of sales, this enables you to quickly recognise a downturn (or upturn!) in sales. Viewing your Gross Profit as a percentage of Sales is know as your 'Gross Profit Margin'. The percentage demystifies number, you could have made £300, £300, £600 and £2000 in Months 1, 2, 3 and 4; however if the GPM  trend is: Month One: 50%, M2: 50%, M3: 50%, M4: 12% - it becomes apparent that there is an aberration that you need to analyse!

Overheads

Overheads is a term that we’re all familiar with. The term 'Overheads' refers to all of the 'indirect costs' that your business incurs - any cost that isn’t included as a 'cost of sale'.

Including within Overheads are things like: Labour (or, your current salary), marketing, accommodation and office space. Furthermore, If you have purchased a computer, or a similar piece of expensive technology, for your business, you also need to include a column similar to 'Computer Depreciation'.

Johnny explained that you include a depreciation column for several reasons: your Profit and Loss spreadsheet is a tool that calculates the value of your business at a given time. ^ months from M1, your new Mac isn’t going to be worth what it once was. If it depreciates at a rate of £10 a month, this is what you need to include, as an overhead, in your 'Computer Depreciation' column.

Depreciation is also a method that spread the cost on a single purchase over a longer time. A £360 purchase could be recorded as 36 £10 installments in a depreciation column, rather than one hit.

When you subtract your Overheads from your Gross Profit you are left with your EBIT, or Operating Profit.

EBIT, Interest and Profit Before Tax

After subtracting your Interest from your EBIT, you are left with your profit before tax. The profit before tax is the last sector of your Profit and Loss forecast! I hope the figure that falls out of the bottom is far larger than you first estimated.

Thank you to Johnny for sharing his wisdom, and thank you to the BIPC for being so welcoming.

Image: mikekorn

The sight got me thinking of humans and ideas. As human beings, when we come up with a new brainchild, we molly-coddle and guard it. Consciously or not, we try to protect it from any external
influences, further brushing it under the carpet. And in the end, we often end up burying it completely.

Think about it: what happens to children as a consequence of ‘helicopter-parenting’? As a rule, an overprotective parental approach leads to adversity or possibly even, results in opposing consequences. Children brought up in such environments, being ‘padded’ from every angle possible, struggle to develop adequate personalities and fail to cope with future conflicts and relationships. On the other hand, a reverse ‘Free Range Kids’ approach may lead to a complete loss of a contact between a child and its parents.

Hence, it seems, the most apt parenting manner lies somewhere in the middle. Similarly, when we nurture our ideas, balance is the key: we don’t want ‘the ball’ to bounce too much and deflate, leading to a loss of our personal connection and motivation, but just enough to give it a gain of momentum. Sharing a thought would generate fresh perspectives, which are invaluable. However, to let our ‘idea boomerang’ fly we first need to trust the people we share it with. Moreover, to build trust we
initially, need to be able to recognise and appreciate the value of the opinion-former’s perspective.

By this point of my walk the Dachshund’s owner was trying to pull the poor thing over a humongous puddle. Have you ever tried to see a giant puddle from a dachshund’s point of view – literally?

“The world as we see it is only the world as we see it. Others may see it differently.” - Albert Einstein.

Here we go. Countless ordinary negative conflicts arise from the failure to consider relativistic reality,
leaning towards absolutism in domains of relativity. The reality we see and experience is an interpretation of the efforts of our personal sense organs and perception. Whereas, people around us see and experience their ‘own’ reality.

“Relativity teaches us the connection between the different descriptions of one and the same reality.” -
Albert Einstein.

Reality has a multiplicity of facets; it is subject to our personal interpretations. Its establishment is the
same, but its appearance may vary significantly. Our individual subjective views would tend to be rather flat, and no matter, how many different ‘hats’ we can wear, we always tend to ’style’ them in our distinctive, individual way. 

On the topic of styling - a few years ago I had a pleasure to work as a stylist on a few editorial projects
with a beloved friend of mine, who is now based in NY. Recently she got in touch with a project proposal – a truly thrilling prospect!  However, from my personal experience, I know that a successful collaboration requires understanding and trust. Surely, we develop as individuals while walking along
this devious path called Life.

No doubt, throughout the past two years, both of us have evolved as individuals. Given the time spent apart, do we still hold those mutual traits? Can we still do it? Can we empathize with each other’s aspirations in relation to the project? Can we avoid misunderstandings and negative conflict?

We need to catch up. Our collaborative project, which is currently being discussed, would involve
photography. So here came my idea: we’ll explore each other’s frames of view literally, through a ‘double exposure’ experiment. Here’s how it works: a double exposure occurs when two images get
exposed onto the same frame of a film, which results in a fascinating blend of both scenes overlapping. 

With this in mind, I shot a 24-exposure film and posted it to my friend, in order that she could have her
personal take on it. She did the same. Since giving the film in to be developed, I find myself bursting with impatience to see the final results – to see the world the way my friend sees it – so far away, yet in the same frame. 

Thus, we CAN appreciate perspectives.

by @Olga_Dukova

http://www.wearecan.net/

@WeAreCAN_Global

http://wearecan.tumblr.com/

What is MicroFinance?

When a startup starts up, it may not be looking for a huge cheque. Not every startup is looking for that VC-sized, million-pound investment. A young startup may require a sum in the hundreds and thousands, rather than amounts equivocal to Premier League transfer fees. This is where microfinancing enters the fray.

We went along to Startup Britain’s MicroFinancing panel event to hear four experts speak about different ways by which UK startups could boost to their fledgling finances. The panel was chaired by Emma Jones, Founder of Enterprise Nation and cofounder of StartUp Britain.

The Experts

Russell Gould is from Wonga, the short term loan specialists. He explained that Errol Damelin, Wonga’s CEO, considers the business to be placed in the 'tech' sector, rather than in the 'finance' scene. According to Errol, Wonga’s primary aim is to disrupt the money-lending marketplace.

Russell made it explicit that Wonga’s loans were quick-fixes, not long term finance solutions. Wonga realises that cashflow can cause a lot of small business heartache. That’s why they have engineered short-term loan-packages for startups and SMEs. These small injections of cash can alleviate the pressure of small business financial-management.

However, Russell made it clear that Wonga’s loans are for the short term. It is true that the interest on a Wonga business loan can reach 104% in a calendar year, however if the loan is payed back within a week, the interest will be capped at a more manageable 0.5-2%. Perfect, Russell argues, for an entrepreneur riding a cashflow hump.

Ginny Lunn, from The Prince’s Trust, spoke next. She explained that the Prince’s Trust offers Startup Loans to young people. These loans come hand-in-hand with a business mentor. Another stipulation is that the recipient of the loan must be unemployed.

Ginny explained that the loan, usually around £2,500, comes directly from the Prince’s Trust. This is good news as there are no complicated tie-ins with banks. Ginny offered this stat: 85% of the startups who receive the 85% startup loan succeed. That is a n industry defying percentage!

A heartwarming fact rounded off Ginny’s intro: the Prince’s Trust recently received a charitable donation of £250k from a business that it helped start with a startup loan!

Stu Anderson spoke next, on behalf of Shell Livewire UK. Stu divulged that Shell Livewire’s monthly competitions give away four bundles of £1k to young businesspeople. These competitions are judged mostly by an expert panel. Even though part of the decision-making-process is given-over to a public vote, the judges are the real decision-makers.

It is the expert judges that give the Shell competitions their real prestige. Feedback from five industry giants can’t be sniffed at! Furthermore, due to the involvement of the experts and the leverage of Shell’s brand-name, winners of the £1k bundles are well positioned for PR activity on local and national levels after their win!

Erika Watson from Prowess 2.0 was next on the mic. Erika spoke about CDFI Loans. She explained that CDFI loans usually amass an interest rate of 17-30%.

Erika explained that it is nigh-on impossible for microbusinesses to successfully pitch for corporate contracts. She preached the benefits of partnering with other organisations in order to ascertain larger contracts.

The Audience

In addition to Russell, Ginny, Stu, Erika and Emma, the other expert contributor to the day’s proceedings was the audience.

A bone of contention for many thirty-somethings in the audience was this: there are plenty of incentivisation schemes for young people and for the ever-growing silverpreneur community, but there is very little on offer for the inbetweeners who form the vast majority. Do you know of any financial boosters that are open to entrepreneurs of all ages?

Another sticky-wicket was that to be a recipient of the Prince’s Trust’s funding, you have to be unemployed. This was deemed 'unfair' by many entrepreneurs who felt that it is necessary to maintain self-employed status before starting-up. It was argued that without an income, it would be impossible to meet event the most meagre living costs.

Emma Jones also offered another alternative to the four options offered by the representatives from Wonga, TPT, Shell and Prowess 2.0: Credit Cards! If all a business requires is a short-term monetary tonic whilst their finances whir into action, simply using a credit card can provide this fiscal respite.

Thank You

Thank you again to the excellent Startup Britain team for hosting the event, and to the four expert speakers.

On the evening of Thursday 17th May, Ann Hermann-Nedhi came along to our Club venue at the Clerkenwell Workshops to explain how you could build your presentation skills by better understanding the 'Hermann Whole Brain Model.'

Ann Herrmann-Nedhi is the current CEO of Herrmann International and an expert in the field of Whole Brain Thinking. Herrmann International was founded by Ann’s father, Ned Herrmann, the scientist and author of 'The Whole Brain Business Book', who developed the eponymous brain model. Thursday’s event was hosted by Miradorus who were supplied by PCG.

The Fist Metaphor

The workshop kicked off with Ann asking every audience member to find a buddy, and to compare foot sizes. 'Bigfoot' had to make a fist, 'Littlefoot' had to attempt to break that fist.

Some used physical force, some tickled, some bargained and some bribed!

This fist-metaphor exposed the different problem-solving methods that a small sample of 40 people called upon when faced with exactly the same problem. How is this experiment relevant to presentations? When delivering a presentation, you need to be mindful that your audience will be comprised of people who think in different ways.

The Hermann 'Whole Brain Thinking' model helps you understand different types of 'thinkers'. By better understanding the thinking-trends of others, you can more effectively gear your presentations to appeal to a diverse audience.

The Whole Brain Model

According to the Whole Brain method, the brain can be separated into two halves. The left half is analytical, the right half is creative. These two halves can be split once more. The quadrants on the left side are 'analytical' and 'organisational.' The two creative quadrants on the right side are primed for 'strategising' and 'personalising'.

The 'analytical' quadrant is statistical and logical. It thinks objectively and critically. It is money-minded and understands how things and systems work. The 'organisational' quadrant takes preventative actions. It realises risks and established procedures. It writes lists and creates itineraries.

The 'strategising' quadrant is a risk taker. It is impulsive. It always has an idea and doesn’t care about failure. The ‘personalising’ quarter is chatty, expressive and empathetic. It focuses on people, it tells anecdotes.

Another important thing to note is that you cannot pigeon-hole people into quadrants. It is unlikely that a person’s thinking is 100% dictated by one-quadrant. People are usually led by a mixture of two, three, or all four quadrants.

How To Satisfy a Whole Brained Audience

Ann explained to everyone that the world is 'whole brained'. In other words, if you were able to take a global average of 'brain types', there would be no dominant quadrant. Therefore, it is extremely likely that your audience will be 'whole brained'. In order to satisfy this audience, your presentation will need something for everyone.

To achieve the perfect 'holistic' presentation, you need to stand-by these watchwords: Structure, A Big Idea, Clarity and Empathy.

Structure is self-explanatory. Ann explained that presentations rely on narratives. A good presentation will be clear, linear and purposeful. Each slide will logically follow from the last. There will be no clunky transitions or awkward logic. A sound structure will satisfy the organisational left-brainers.

A Big Idea is a great device to include in a presentation for several reasons. For one, it provides an attention-grabbing precis of your presentation’s main aims. Furthermore, if you pitch an idea before you delve into the details, this will please the right-brained 'strategisers' in the audience. They don’t like getting bogged-down in facts, they would rather work with ideas and concepts.

Clarity is very important. Before you prepare your presentation, ensure that you thoroughly understand your subject matter, as this will aid the clarity of your delivery. Clarity is most important for communicating statistics and 'facts'. If the facts of your presentations aren’t presented in a clear and easily comprehensible manner, the 'analytical' members of your audience will be riled.

Speaking directly to your audience and using anecdotes to illustrate a examples are ways in which you can use empathy in presentations. The 'personalisers' in your audience will appreciate this. Personalisers are more likely to understand and remember the main-points of your presentation if you embellish them with anecdotes.

Presentation Tips

As well as the four golden words, Ann also provided the audience with a treasure trove of hints and tips.

She recommended that 'most people' aren’t very good at writing presentations at the eleventh hour. Even if you think you’re good at it, you will probably fare better if you give yourself more time. Ann explained that the brain’s ability to process information and learn is compromised when operating in this last-ditch manner.

Ann explained that you should use 'visualisation' if you have a presentation on the horizon. If you visualise yourself doing something well, this imagined-consequence is more likely to occur. As you have mentally rehearsed the situation, your brain believes that it has done it before. Therefore you brain does its best to replicate the situation, rather than having to create afresh.

In this age of smart-phones, tablets and laptops, Ann explained that you shouldn’t worry if your audience appear to be multi-tasking when they’re listening to you. The brains of your audience members are able to take small dips into the online world and still grasp what you’re communicating.

If you need to communicate facts and figures to a right-brained crowd, this may alienate your listeners. If you ask questions of the crowd, use humour or make the audience carry out physical actions, you can pull them back in.

Thank You

A massive thank you to Ann of Hermann International, to Sue and Jenny from Miradorus and to PCG. Thank you for reading, also! I hope this blog has given you new weapons for your presentation armoury.

Crowdfunding and VC Funding were the topics of the day at 'Access to Finance'. Experts from both fields shared their advice with the audience during two expert panel sessions. The first panel was made up of five market-leaders from the crowdfunding scene, and the second was composed of three Venture Capitalists. Questions flowed thick and fast from the audience that was choc-a-bloc with startups, entrepreneurs and SMEs.

Crowdfunding

For those who aren’t aware, crowdfunding enables startups to secure funding by advertising their idea to an online community of crowdfunders. These online investors are invited to contribute as much money as they want towards the startup’s overall target.

Crowdfunding comes in two flavours. One type of crowdfunding is reward based. Reward based crowdfunding involves startups giving away a product or a gift in return for investment. The other form of crowdfunding is equity based. Much like securing VC or Angel capital, the investor receives a share of the company in return for their investment.

Luke Lang was the first of five crowdfunding speakers to introduce themselves. Luke is a co-founder of Crowdcube. Crowdcube are a crowdfunding platform that impose strict barriers for entry. Crowdcube insist that investment-seekers must first pass rigorous checks.

Amanda Boyle of Bloom VC is at the other end of the scale. Bloom doesn’t predicate any complex barriers to entry. The only thing that potential crowdfundees need to prove is that they are a real person. Thereafter it is up to them to prove their worth to the crowdfunding community.

Paul Higgins of Grow VC explained that part of his organisation enables people to build their own crowdfunding platforms. The service provides the required web infrastructure and back-end behind a successful crowdfunding platform.

Jeff Lyn is part of the Seedrs team. Seedrs is a crowdfunding platform that allows investors to make equity investments in startups. Jeff also proved to be an enigmatic speaker with a touch of Eric Ries’ lean-startupism about him.

The final panelist to say hi, Simon Dixon, is the author of Bank to the Future and the creator of the eponymous website.

The first big question to arise was, 'what’s better: reward based crowdfunding or equity based?' The answer was that both forms of crowdfunding work, but each type is prefered by different people.

The reward based platform is great if you’re an investor who is willing to invest in exchange for a reward and the afterglow of being quasi-charitable. On the other hand, the argument for equity based went thusly: no-one wants to give money to the next Zuckerberg in exchange for a kitschy mug. Investors want the money!

The next question asked whether crowdfunding was a genuine alternative to VC or Angel funding? There were two answers. It certainly can be an alternative, if a startup can ascertain all the funding that it requires by utilising a crowdfunding community, then so be it.

It was also argued, however, that startups could use both crowdfunding and VC capital. A startup could use crowdfunding to ascertain funding at a far earlier stage than either Angels or VCs could manage. A startup could secure a 'first round' of funding on a crowdfunding site and then could graduate to VC or Angel funding for their second round. This approach would enable startups to grow far quicker than ever before. In the words of Jeff Lynch: "VCs are only able to invest in a business, crowdfunding investors will invest in an idea."

Amanda Boyle made a great point about product testing. Crowdfunding provides a perfect opportunity for startups who would like to crowdsource information about their product. If a startup releases a product that is at prototype level to a crowdfunding community and it receives a hundredweight of positive feedback and investment requests, they can swagger into a VC’s den with a bounty of market-research behind them.

A great question came in from the audience: is it wise to crowdfund if you have IP that is essential to your startup? The short answer was: no. If your IP is the epicentre of your project and you genuinely wouldn’t feel comfortable disclosing it, then crowdfunding may not be for you. However, if you can manage to write a crowdfunding pitch that hinted at your project’s usefulness whilst maintaining the chastity of your IP, then go right ahead!

Most crowdfunding platforms charge between 5-8% on the amount of investment raised. Others also charge a similar percentage on the money that is gained by investors. We’ll let you check the individual websites for accurate figures.

Venture Capital Funding

After a short coffee break, the next panel was go.

The VC panel was made up of three distinguished figures from the Venture Capital scene. Alliott Cole is a man who we’ve met before at Club Workspace. He shared his expertise at our SEIS Adivce Event, which was cohosted with Dreamstake. It was great to see him again. Alliott appeared on behalf of Octopus Investments. Octopus invest between £100k and £5m in companies and look to recoup 15x their initial investment. Octopus have invested in Love Film, Zoopla and GymBox.

Mattias Ljungman is part of the team at Atomico Ventures. Atomico were started by the creator of Skype. They prefer to invest in high-growth startups who are looking to break into world markets. In the past, Atomico have funded Last FM & Angry Birds.

David Bagley spoke on behalf of both Venture Hothouse and Startup Yorkshire. Venture Hothouse readies startups for their investment rounds. Startup Yorkshire make VC investments of a value between £50k and £2m.

The first nugget of advice that was provided by the VCs was to do with a startup’s debut on the investment scene.

Mattias advised that it is a necessity for startups to research their investors. There are a myriad of VCs out there, and they are not all cut from the same cloth. Every VC looks for different things! For example, Alliott prefers to invest in British companies as it’s easier to keeps tabs on an organisation who are down the road in London, for example. Mattias, on the other hand, doesn’t mind if your base is in Buenos Aires. If startups go into a pitch with a good knowledge of their Angel’s idiosyncrasies, this will not only look good, but it will save your time and theirs by eliminating potential incompatibilities.

Many members of the StartUp Britain audience wanted to find out what makes a startup investible.

David Bagley insists on a well thought through business-plan. When the time comes for David to read your plan, it needs to be watertight. There may be more that he wants to know after he reads your document, but there must not be any holes in what you give him.

Mattias wants to see progress. You could have the best 'idea' since Facebook, but if you can’t show him progress and traction since your inception, than it will be a very hard deal to make.

Alliott likes big numbers - and that doesn’t mean money! If you can prove that you have impressive user volume, then this is great news for a VC.

The VCs agreed that they usually take an equity share of around 25%. VCs need a worthwhile stake, however they don’t want to take too much. If they were to ask for a 60% share, for example, Alliot explained that this would deincentivise the startup’s team and therefore hinder the progress that the investor would like to see.

The number of 25% is very flexible. Sometimes the startups can hold the whip hand. If there are several VC groups fighting for a startup, the figure can go down to around 15%. However, if there is more risk involved and no competition for the startup in question, the share can rise to around 35%.

Here are some tips from Alliott about how to conduct yourself during your VC pitch.

Number one: Do not be late! This isn’t due to manners or politeness, but a VC’s diary is completely rammed. If you spurn any precious minutes, you won’t get them back.

Number two: When you arrive, do not sit in the reception and wait to be invited in. Get into the pitch-room, set-up, and own the space.

Number three: Treat your VC like a customer. This is the biggest sale you’ll ever make!

Number four: Keep your presentation to below ten slides.

Mattias added this tip about the first contact that you should make with a VC: No more than one page. Your first email to a VC should be a set of eye-catching and provocative bullet-points. Remember, in this first email, all that you’re trying to persuade your VC to do is invest 30 more minutes in your startup. If you do that, then you’ll be able to pitch for their money at a later date.

One last point that Mattias added was an inherent 'fault' in the character of British startups. He said that startups in the UK are likely to be apologetic and self-depricatory about their shortcomings, whereas Silicon Valley startups are far more likely to laud their abilites. Mattias' advice to UK startups? Celebrate more!

Thank You

Thanks to the eight experts for their unbeatable advice! Hopefully it helps some startups out their secure their funding. The biggest thanks to the Startup Britian team for hosting such a useful and beneficial event as part of their immense Finance4SUB week!

'Finance Tools' came in four parts. The quartet of presenters were selected due to their expertise in startup finance. Simon Bailey of Price Bailey covered many bases, but spoke mostly about business structures. Debra Dougal of Haslers shared a booty of VAT tips. Debra let startups know when to pay, what to pay, and how to avoid fines. Clive Lewis of the ICAEW came next, and he took us back to basics. He encouraged prospectives startups to question themselves: am I really ready to become an entrepreneur? After Clive’s BootCamp, Mhairi Carlton of Anderson Barrowcliff rounded off the afternoon of by discussing payroll.

Simon Bailey of Price Bailey - Business Structure

Simon Bailey kicked off his quadrant with this question: Startups! What do you do after you’ve raided the piggy bank and remortgaged your house? Answer: Decide on a proper finance structure!

Simon went on to outline the possible business structures, before drilling down into detail about each option: sole-trader, partnership, LLP, Ltd, and PLC.

As a sole-trader, Simon explained, you are liable. In other words, if anything goes wrong, it’s all on you. If you, as a sole-trader, get into debt, your creditors will be able to make a pretty good claim on your assets. Simon’s message to sole-traders: don’t rack up debt, or you might lose your car.

Partnerships are disappearing! Although there are many examples of the partnership structure in the professional services sector - surveyors & solicitors; and in household maintenance - plumbers & electricians; their numbers are becoming fewer. This is because they are being superseded by the LLP model.

LLPs are limited liability partnerships. Simon explained that LLPs tiptoe between the partnerships and ltd models in legal terms. Simon also outed a common misconception regarding PLCs. Being a PLC does not mean that the company is listed on the stock exchange. If would be perfectly fine for a PLC to remain unlisted.

So, how should startups decide on a structure?

Both the sole-trader and partnership models are very easy to manage if you’re not dealing with staff. For individuals or partners who are in business, both of these models are simple to administrate. However, the liability lies with the person, rather than with the company as a separate entity. In short: your assets are at risk!

To get away from this very personal level of liability, startups should chose the 'Ltd' model. Limited companies (and a PLCs) count as a separate person in law. Therefore 'they' - the companies - can own assets and they can be liable for debt. As the burden of liability is supplanted from the business owner as a 'person' onto his/her business, the business owner’s personal assets become more secure. This may tempt startups to chose the Ltd model.

Another interesting point to note about Ltds, PLCs and LLPs is that they are taxed corporately. The largest amount of tax that they will pay is 24%. That percentage is a lot higher for income tax.

Ltds, PLCs and LLPs take up a lot more of an entrepreneur’s time than becoming a sole-trader, but the Ltd model is favoured - above all other models - by investors. Ltds are easier to buy into and easier to sell.

What is the distinction between a PLC and an Ltd company? To become a PLC you need £50k worth of share capital.

Simon then went on to make many points about shareholders agreements. This advice will be familiar to regular readers of the Workspace Blog. The eminent Michael Buckworth delivered a seminar on Shareholders Agreements not too long ago. The main points? Put a shareholders agreement in place when you are pre-start. Doing so will solve so many expensive quibbles down the line. Avoid 50/50 shareholdings, as these can be a killer. If the company is split 50/50, one person does not have to concede to the wishes of the other.

Debra Dougal of Haslers - VAT

Debra was up after Simon, she shared information about VAT.

The first thing that Debra told us to remember was that VAT is not a form of income tax, it is a transaction tax. VAT is a tax on goods and services. Debra warned that VAT gets a lot more complicated in the services sector.

To unpack some VAT jargon, Debra explained that the 'taxable person' does not necessarily imply a person, it can imply the entity-in-law, such as a PLC or Ltd company.

Most small businesses know that once you make over £77k a year, you have to register for VAT. However, what many startups didn’t know is that a 'year', in VAT terms, does not refer to tax years, or to 2010, 2011, 2012. In VAT terms, a 'year' is a rolling definition that is taken to mean, 'twelve months from now.' Therefore, as soon as you have accrued £77k or more in turnover in a twelve month period, you must register for VAT within 30 days.

There are certain categories of VAT that startups may come into contact with. Standard VAT at 20% is most regular; reduced VAT is at 5%; Zero Rated, Exempt and OS (Outside of the Scope) VAT ratings all result in there being 0% VAT.

What products and services Zero Rated? Food, books (not e-books), newspapers, children’s clothing, residential caravans, houseboats, certain goods for the handicapped, certain ships & aircraft and residential new builds, to name but a few.

What services are Exempt from VAT? Burial and Cremation services, Health and Trade Unions.

What is Outside of the Scope? Now this was the complicated one. This term refers to any transaction that is outside of the scope of UK VAT, but is taxable somewhere else. If you are dealing with consumers (rather than businesses) in Rome, the transaction will be outside of the UK tax-scope, but will be liable for tax in Italy. The HMRC set clear guidelines for dealing with VAT with EU and Non-EU customers. Please follow this link to find out more.

Clive Lewis from ICAEW

Clive Lewis tested the mettle of the Finance Tools attendees who were pre-start. He interrogated the audience: Are you ready to startup? Do you have the industry knowledge? Are you ready for the hours? Are you ready for the loneliness?

But, for those who passed the test, Clive gave out his ten tips for startups:

-  Do Your Research. Who else is doing what you do? What do you do differently? How much do they charge? Where are they doing it? Also, if you deal with a product - do product research too! Keep testing it with pop-up shops and via crowdsourcing and crowdfunding platforms.

-  Write a business plan. Write a plan even if you’re not looking for finance. Update it every so often, too. You’ll be surprised about how off-piste you were!

-  When securing finance, do not ask for too little. Secure all the money that you need, as underestimation will lead you down a hard road.

-  Build in contingencies. At the very beginning, ask yourself: if set up takes longer than predicted, what are you doing to do? If you need a health and safety check before you open your premises, get the appointment booked!

-  Hire the very best people that you can afford. Do not compromise. They will be worth their weight in gold.

-  Find a Mentor. Find someone who you can chat to. Make sure they know about your industry, or they know about starting a business. You will need someone to bounce your ideas off. It can get lonely without a mentor!

-  Financial information is vital. If you cannot control the financial side of your business, you will be in hot water.

-  Be alive to possibilities. Learn from your mistakes and from your successes. When you start, you’ll have the yellow brick road all mapped out in your mind - be prepared to take several diversions. Versatility is your ally.

-  Remember that Starting Up is a learning experience. Use mistakes and mentors to aid your current project, or your next one

-  Minimise your risks: shorten the learning curve by gaining experience as quickly as possible. Manage your overheads with an iron rule and protect your personal assets.

Mhairi Carlton from Anderson Barrowcliff and Payroll

Mhairi was last up to the plate, her specialist subject was payroll.

Mhairi told us that PAYE and NIC collected by employers accounts for approximately 50% of all tax in the UK.

When it comes to your business' payroll, Mhairi explained that HMRC performs very few truly 'random' checks, most are triggered by an event or reason. The common errors that provoke the HMRC include not using the correct, up-to-date tax codes and issues concerning employees' expenses and reimbursement.

In terms of reimbursements and expenses, there must be 'evidence' that the costs incurred are for business purposes. If there is insufficient evidence that the costs were for business purposes, these costs will be treated as private by the HMRC

Mobile phone contracts are a minefield. If you reimburse a staff member for the costs incurred on their private mobile phone, you could get into hot water.

Another reimbursement issue is petrol. If you have employees who commute, you must be aware that there is a 'set mileage reimbursement' of 45p per mile. If you, as an employer, want to reimburse employees an amount that exceeds the 45p per mile, you are obliged to pay tax on the amount over the 45p. If you reimburse them 55p per mile, you pay tax on every 'extra 10p' given out.

Thank You

A massive thank you to the Startup Britain team for organising such a great event and to the four presenters that shared their insider info. If you’ve made it to this point in the blog, a massive thank you to you too. Please get in touch over twitter, or get involved with the #Finance4SUB tag. 

Life is the sum of all your choices - Camus

We tend to think deeply about the individual decisions we make but we rarely think about the framework of how we make decisions. Instead, we default to the belief that there exists an optimal solution that we should aim for when solving a decision problem. This is a messy idea when mixed with real life.

It is messy because a decision cannot be separated from its environment. We can see environments as a continuum from closed to open, from predictable to less predictable. Each requires a different approach.

If we play chess the environment is closed, every choice and outcome can be known and the results predicted - an optimal choice is possible. However games such as no-limit poker are trickier. It is mostly closed but contains unstable elements as a player can bet as much as they like and bluff - this makes it seem simple but it is not. At the furthest end of the continuum are any domains involving many actors and an open structure - from addressing a market to reaching a group decision. In these domains the environment optimality is out of our hands as the environment is as important as us.

This approach allows us to better assess the system and ourselves as part of it - the payoffs, opportunity costs and consequences of our decision options.  This is important, as a business and as an individual you must make repeated decisions. Your brain has limits - each decision is wearying. At some point when you have nothing in the tank you'll give up, make errors or take reckless decisions. 

This leads to an interesting insight - in an uncertain environment the best 'realistic' decision can often be reached using only a few pieces of information. Adding information tends not to consistently lead to better decisions. Why? Because without knowing the future you cannot know which information cues are the best to use - you cannot know which will be the most salient, to what degree and at what time. It is immensely difficult to be exact.

A study of the forecasts of foreign policy experts by Tetlock found their predictions were little better than random. In addition they were vastly outperformed by simple computer models. What they were very good at, however, was rationalising and reasoning to explain why things happened as they did and why their insights did not come about.

Our fallibility is often hard to accept. The attempt to optimise is one way we compensate for uncertainty. Others include overconfidence (oh it'll all be fine, let's just do it) or  overvaluing short term choices that reduce the discomfort of not knowing - even if they will hinder us in the longer term (putting your pension in cash for example).

This is a giant topic and I only gently graze the surface here, let me wrap up with a couple of pointers to keep in mind that may help:

1. Know what you want. Our short term preferences are extremely malleable so if you aren't clear on what you want then you will end up where your short term desires take you

2. Have good models - understand the environment and approach it according to the level of noise and uncertainty. Different tools for different situations will make your life much more pleasant and free up time and energy.

3. Respect the effect an uncertain environment has on your ability to succeed with individual decisions. If the environment is wrong the finest decisions will fail.  It is a harsh fact to accept but accepting it will actually help as you will have a better model.

4. Your success or failure is the result of many many decisions - you may think they are mostly independent but there is a constant in each: You. And you bring past experience, emotions, wants, beliefs, fears, desires etc. to each decision – ignore all of you at your peril.

Overarching all this I say only be kind to yourself, making good decisions is hard -  a mindset that expects perfection is a mindset that will constantly be disappointed and likely pickled in recrimination. If we are too busy being disappointed we are in no position to learn, develop or enjoy the gift of all we have.

Good luck, please drop me a line if you have any thoughts or comments.

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Can Esenbel is the owner of Elif Ltd, a strategic consulting practice. He has also been an active investor and trader for the past 14 years with a particular interest in the psychology of risky decision making. Follow him on twitter @mundanepleasure or email him at can@elif.co.uk.

The event saw three speakers, each an expert in their field, take to the stage and share industry tips with the gathered audience. Michael Buckworth of Buckworth Solicitors provided legal info, Ben Sheils from the Micro Business Team gave accounting tips and Gerard Chandrahasen of SC Patents spoke on the subject of IP.

Michael Buckworth on Exit Strategy

Mike has hosted plenty of legal seminars at Club Workspace in the past, and he delivered another quality workshop last night, this time about Exit Strategy.

Mike advised that startups should think about exit strategies up-front, even when you’re pre-start. Having an exit strategy in place before you start saves a lot of money and mess further down the line.

Another thing to get on top of is your IP. Gerard offered up more advice on this later on, but Mike’s advice was short and sweet: make sure your own your IP! If you attempt to exit and discover that you don’t own your IP, this could hinder your exit procedure.

Mike also spoke about which business model to chose. If you’re a social enterprise, you may chose to set-up as a CIC. Michael advised that CIC isn’t the best structure to adopt if you are looking to generate VC or Angel funding further down the line. Michael also explained that LLPs are less investable than PLCs or LTDs. In short: it is far easier to exit/business-transfer a PLC or LTD than it is an LLP.

Another important factor when exiting is Key Man Risk. In other words, ask yourself: can your business run without you? Is your knowledge integral to your success? If you disappeared, would the bottom fall out of your operation? If the answer is yes, than it may prove difficult to exit your business.

Michael advised that if you are a 'key man' to your business, ensure that there is a procedure in place that deals with the eventuality of your exiting, death or incapacitation. If you can 'productise' your knowledge, then do it! Perhaps in a database or similar? Exit will get a lot easier.

Ben Sheils on Startup Accounting

Ben took us through the accountancy necessities for a new startup. He was quick to echo Michael Buckworth, Ben stated that LTDs were the way to go if you were looking to undertake some investment rounds.

However, before you think of funding, there are some basics to tick off the list. You need a Limited Company bank account. You cannot run your business accounts using a personal bank account. If relevant, you need to register for VAT and PAYE, and you will definitely need to make HMRC aware that you are trading. Ben advises that the earlier you register the better.

Ben reminded everyone who is thinking about employing staff about the required National Insurance contributions. Employers are entitled to pay 13.8% of their employees' salary to NI. You will pay £22, 760 for a member of staff whose wage is £20k, for example.

Ben spoke next about the SEIS tax breaks that benefit VC investors and angels. Dreamstake and Club Workspace have hosted an event on SEIS Funding before! Instead of going over old ground, to precis: the investor benefits from tax breaks and Capital Gains Tax relief relative to the money that they have invested. Therefore, this incentivises investors to invest as they stand to gain.

The last subject that Ben addressed was R&D Tax Credits. Innovative businesses can claim £225k worth of tax relief if they spend £100k in Research and Development. There are so may companies out there who aren’t aware of their ability to claim R&D Tax Credit! Ben recommends that you spread the word.

Gerard Chandrahasen on Trademarking & Copyrighting your IP

Gerard began by explaining what qualifies as your Intellectual Property. He listed confidential information, brands, technological ideas, the code and graphics of a website, the design and layout of an app as examples. Make sure that you own these examples of your IP - if you don’t, it can make your business less valuable or less secure.

Another point that Gerard mentioned was this: If you’re in a position where you would like to disclose your IP, put a Non-Disclosure Agreement in place before you disclose.

To clear up the basics, Gerard explained that Trademarks protect brands and names, whilst copyrighting protects the look and design of a product, or your web-code for example. Gerard advised companies to copyright their code and graphics, doing so makes official the presumption that the code and graphics belongs to them.

In terms of registering a brand name, Gerard recommended that you chose a 'strong' name that is 'non-descriptive'. To explain what he meant by 'non-descriptive', Gerard offered this example: if your company sells bananas, don’t call it 'Yellow Bananas' - as you will not be protected against other companies using the words ‘yellow bananas’ to sell their bananas. This is because the words 'yellow' and 'bananas' are descriptive words that are widely used.

A trademark can used as an offensive protection of your brand. If someone has set up a bogus Twitter account posing as your brand, for example, a TM can be used to let them know that they have committed an infringement.

A patent can be used similarly in terms of other companies who may be copying your idea. Gerard explained that a patent is basically an agreement between you and the government. You agree to tell the government how you’re developing your new idea, and they give you a time-dependent monopoly on development.

A patent can also be used as a bargaining chip. For instance, if a customer believes that you are the only company in the industry who can offer this specific service, then one can assume that they will be willing to pay well for your ahead-of-the-curve service.

Thank You

Thank you to everyone who came along to Leathermarket for the event, and thank you to Paul Dowling of Dreamstake for hosting the evening. We hope to see you all again soon at Club Workspace.

The Job Crowd is an employer review website that aims to provide potential employees with as much information about a particular job, in order help them make the best decisions.

They liken themselves to a 'trip advisor' review website but specifically for Jobs.  With an emphasis on graduate jobs, they provide the opportunity for employees to write anonymous reviews detailing what it’s really like to do a particular job: what hours are entailed; remuneration; what the best parts of the job are; and the actual duties preformed each day.  The aim of this is to provide anyone (graduates in particular) the real picture of what it is like on the inside of doing a particular job.

For more information, visit their website www.thejobcrowd.com

Listen to their interview on LBC

Sinead and Bridget certainly know how to fill a room! Club Workspace was thronging with excited yoga-fans long before The Business Yogi double-act took to the stage. The book was flying off the shelves at Club Workspace! But not to fear, you can still get your hands on a copy. If you go to The Business Yogi website, you’ll be able to find details about the paperback, the Kindle release and the PDF download.

The time came for Sinead and Bridget to officially unveil 'The Business Yogi: How to be Happy at Work.'

Yogi Roots

Sinead explained that yoga was something that she had discovered during a hot summer in Sydney. She came from a Jazz dancing background and was looking for a new way to keep fit. Ashtanga Yoga provided the answer. Soon after trying yoga, Sinead became an überfan. It didn’t take long for her to realise that yoga isn’t just a keep-fit regime, it is a way-of-life that affects the body and mind.

The Business Yogi book started life as a series of blog posts on Sinead’s website. Sinead teaches digital wellbeing. In other words, she wants to make your work-life less-stressful. She noticed that her Business+Yoga blogposts were going down extremely well. She was onto a winning formula!

Bridget was the missing part of the puzzle. Sinead got in touch with Bridget and - Bob’s your uncle - the perfect co-authoring team was born.

Bridget explained that 10% of all profit made from the book will go to Yoga Stop Traffic - an organisation that raises awareness about human trafficking. Please, check out their video.

Yogi Tasters

After sharing the book’s genesis, Sinead and Bridget gave the audience some tasters of what was inside. Sinead read two passages that Bridget had contributed and Bridget did the same for a couple of Sinead’s extracts. The book is composed of themed episodes that can stand alone from each other. Sinead described the work as ‘the perfect loo book’ - you don’t need to read it cover-to-cover, you can dip into every time you’re on the lav. Or perhaps on the train, or the bus, or... anywhere less gross.

The advice that was shared in these four passages was really uplifting. For someone who hasn’t tried yoga before - like me! - I could easily see how the advice could help in business situations.

One of the passages focused on how yogic teachings can lighten the pressures of the social web. Sinead’s extract explained that Social Media is a powder-keg for the hyper-competitive. There’s always someone to measure yourself against. Social media gives the insecure the opportunity to compound their insecurities. With one easy search and click, you can be belittled by a bragging tweet or a self-aggrandising blog. Yoga teaches a person to exchange this online bragging culture for a fuller, calmer mindset that eschews such workaday pettiness.

Here are a few gems of advice that Sinead and Bridget - the business yogis! - shared with the audience. For more of the same, you’ll have to get your hands on the paperback!

-  When you’re stressed at work, lift the corners of your mouth. Don’t force a smile, just gently. You’ll realise the wonder of what a smile can do.

-  If you’ve got loads of crazy deadlines that’re all in the future, stop thinking about them. Live in the present. Do the work that needs to be done in the present moment. The future will take care of itself.

-  A guru is not someone to whom you hand over all of your power - a guru is someone who leads you to light. Be your own guru!

-  Remember: you are not one character. Don’t try and 'be' a certain kind of person. Don’t strive to become the 'perfect' salesman or the 'perfect' entrepreneur. Discover all the different aspects of yourself. You will become more empathetic, and less reliant on the habitual. A wider capacity for empathy will aid your ability to negotiate.

-  It’s okay not to know things! Accept that you don’t have to know it all. Learning is fine, and it admirable.

-  Yoga lets you get out of your head and into your body. The perfect after-work catharsis.

-  In yoga "your head, heart and belly are like the CIA, the FBI and the Police - they need to communicate!" - Bridget.

Thank you

Thank you, on behalf of Club Workspace, to Sinead and Bridget who have written a wonderful book. Your launch event was an absolute triumph. All the best for success in the literary field and best of luck with the urban retreats too! (Talk to Sinead about those!)

Another thank you, of course, to everyone who came along. After last night’s festivities, Phil & I are both proud owners of ‘The Business Yogi’, and we couldn’t be happier with our autographed editions!