PRIME business club

It’s now possible for anyone to freely access a huge resource library created for small businesses and startups by a consortium of UK universities. You can go straight to the search and browse page of the collection, called VentureNavigator, without having to register or login.

The content includes:

1. Accounting
2. Advisors
3. Angel Investors
4. Brand
5. Business Model
6. Business Plan
7. Communication
8. Compensation
9. Competition
10. Customers
11. Distribution
12. Entrepreneurship
13. Equity
14. Finance
15. Fundraising
16. Human Resources
17. Innovation
18. Intellectual Property
19. Leadership
20. Legal
21. Management
22. Marketing
23. Markets
24. Networking
25. Operations
26. Partnerships
27. Pricing
28. Production
29. Regulatory
30. Revenue
31. Risk
32. Sales
33. Strategy
34. Team
35. Valuations
36. Venture Capital

VentureNavigator is funded by the UK government and was developed by a consortium that includes the universities of Essex, Cambridge, Leeds, Liverpool, Glasgow, Warwick and the Open University. Library House, a research company founded by Doug Richard of Dragon’s Den fame is also involved.

As well as using the resources you can also sign up for free assessments and feedback - though you do have to register for these.

Are some of your customers stars, bringing in money, skills and enhancing the reputation to your business? And are others quite frankly duds, bringing you hassle and actually losing you money on each sale?

Simply asking these questions can lead you into making some useful changes to the way you do business - so you do more work for the customers who are better for you.

But sometimes it isn’t obvious who the heroes and villains are. So here’s a 10-step technique  that will help you identify them.

Calculating what a given client is worth to you

1. This works most simply in businesses where you have a few clients, but if you’ve got a lot divide them up into meaningful segments that you can find or estimate figures for - e.g. those who buy food and those who don’t, the Monday crowd versus the Saturday crowd or whatever. It’s also more accurate if you do it for a longer time period, so quarterly is better than monthly, but don’t worry if your records don’t go that far back.

2. Next you need to know your own hourly staff costs. In an established business this would be the salaries plus all the costs of making someone productive - office space, equipment and so on. However in a start-up where there’s just you and you are not paying yourself much yet it may be hard to come up with a plausible figure. For this exercise a rough approximation will do. So you could just say £10 or whatever you think is reasonable. We are going to apply the same figure to all clients so it still makes for a fair comparison.

3. Now for each client or segment you are interested in tot up the total hours you spent on them last quarter, and multiply it by your hourly staff time figure. Add in any other significant hard costs like travel or material spent on that client. That will give you the cost of that client.

4. Now check what they brought in last quarter. You can keep things fairly simple. If you invoice in bigger chunks divide it up to give you a quarterly figure. And for segments tot up the quarterly income for the group - gross, without deducting any costs.

5. Subtract the cost of the client you worked out at step 3 from what they brought in. The result is a fair approximation to their relative monetary value to you.

6. Next the important bit - the fiddle factors. We all know some clients are reliable and easy to deal with, while others are a pain. So think of a fair monetary value in pounds per quarter for the joy (add) or pain (subtract), and apply this hassle factor to the value score.

7. We also need to recognise that some clients are valuable for strategic reasons - perhaps referring business to us, allowing us to build up valuable expertise or taking us in the direction we want the business to go. So we need another fiddle factor to recognise this strategic value. Again add an appropriate positive amount in pounds to any client taking you in an exceptionally useful direction, subtract money from clients who lock you into dead-end work you’d rather avoid and leave average clients alone. This gives the overall “value” of the client to you.

8. Now repeat from step 3 to 7 for all the clients or segments you wish to compare.

9. You should end up with a set of numbers, with best clients scoring high and your worst low. Note that because of all the approximations and the inclusion of intangible fiddle factors the number doesn’t represent the actual profit from each client. For that you’d need more real data, which you should eventually accumulate.
Nonetheless, this exercise is legitimate and does tell you something important. The high scorers are bringing in the most value to your business in the broadest sense. The low scorers are more of a drain and repay your efforts less. So if you have uncovered any serious duds or brilliant stars you might want to drop the duds and work more with the stars should the opportunity arise.

10. One final step may make identification of heroes and villains easier. Divide the value figure for each client by the number of hours you worked for them, which you’ve already totted up at step 3. This removes the amount of business you are getting from them from the equation, and gives you more of a pure customer-quality score. The high scorers are the ones you probably want more business with.

An up-to-date list of the technology used to put to put this web together is given on the Site credits page.

We are not using complicated or expensive tools. If you are interested in building your own site it is getting increasingly easy.

You can get a free web site to experiment with that uses similar tools at Wordpress.com  This will give you a feel for the issues even if you decide against the DIY approach and end up hiring someone to build a web site for you.

The printed paper version of “Working for YOURSELF - a practical guide to sales, marketing and preparing a business plan for people aged over 50″ is now available. You can still download the guide as a PDF, but if you would prefer a paper copy just email us your details and we’ll post you a free copy.

This PRIME guide concentrates on the subjects many people tell us they are least confident with - sales, marketing and putting a viable plan together. It doesn’t cover everything, but at only 40 pages long it’s quick to read and inspiring.

Contents
1. Customers and selling to them
2. Negotiating
3. Marketing
4. Setting prices
5. Business model, business plan
6. Checking with reality
7. Sources of support
Business glossary

If you are downloading the PDF to print out on your own printer, the square format should come out OK on standard A4 paper as it’s the same width.

The production of Working for YOURSELF, written in-house by PRIME, has been partially-funded by the Equal Diversity in Practice project, which is in turn paid for from the European Social Fund.

“Working for YOURSELF - a practical guide to sales, marketing and preparing a business plan for people aged over 50″ is a new PRIME booklet. It is currently being printed, but you can download a free PDF here of the full text.

This PRIME guide doesn’t cover everything, but concentrates on the subjects people are often least confident with - sales, marketing and putting a viable plan together.

At only 40 pages long it’s quick to read and inspiring.

Contents
1. Customers and selling to them
2. Negotiating
3. Marketing
4. Setting prices
5. Business model, business plan
6. Checking with reality
7. Sources of support
Business glossary

If you find yourself short of some reading over the holiday, you can start plotting your new business with this PRIME guide.

The square format should print out on standard A4 paper, as it’s the same width.

The production of Working for YOURSELF, written in-house by PRIME, has been partially-funded by the Equal Diversity in Practice project, which is in turn paid for from the European Social Fund.

If you’re reluctant to sell you are not alone - it is something many people feel when starting in business. But it’s one of those things that disappears with practice - and in particular as you relax and develop your own style. Here are some tips taken from “Working for yourself”, a new guide from PRIME that’s currently in the final stages of production.

Fear of selling

Many people find the thought of having to do selling frightening. And it’s the thought that’s often the problem – not selling itself.

You can do selling any way you like, and you’ll soon develop your own style. It doesn’t have to be the traditional hard sell.

Sell your own way

” The only area where my age might count against me is in sales - because I’m not a brash young salesman. But I really don’t see that as much of a drawback. I have a nice letter that I write to people and that seems to work well.”
Graham Siggs, who started his own electrical testing service after being forced to retire from the civil service at the age of 60.

Reluctance to sell is conquered by knowing your customers well enough to know how to do them a favour - by selling them the right product or service. Being an altruist and being an effective sales rep then become one and the same thing.

Beating obnoxious salespeople at their own game

The reluctance to sell we are assuming here doesn’t apply to everyone, and it probably depends on what type of salespeople you have been exposed to in the past. But it is something many people express to PRIME, and it can be overcome by developing your own approach that simply avoids practices you are uncomfortable with.

Once you start your own business it becomes necessary to find customers on a regular basis. So don’t let bad sales experiences from your past become a barrier to setting up your own independent business. Resolve to do it differently - and better.

If you have a good product or service it stands to reason that there are people out there who would welcome the opportunity to buy it. It may sometimes be hard work, but you owe it to them as well as your own business to find such people and make them a clear offer they can understand. It’s then up to them to make the decision – to buy or not.

You need to find an approach to selling that you are completely comfortable with. You don’t have to turn into the sort of person you don’t want to be simply to sell things. Do it your own way - it may well be more effective and even fun.

Three neglected facts about selling

1. Selling is not telling
It’s more to do with listening. This is as true when writing an advertisement or sales letter as in face-to-face selling. You need to have attuned yourself to what customers are actually seeking to do it well.
In face-to-face selling, don’t talk too much. Ask questions. Listen intently for what the person really wants. Then talk about those aspects of your offer that are relevant to those desires.

2. Benefits trump features
More customers are interested in benefits than features. Enthusiasts tend to burble on about features, but what most customers are after is what these features can do in practice to benefit them and solve their problems. So when talking to a customer or writing promotional material highlight the most relevant benefits.

For example, uppermost in most people’s minds when buying a pair of secateurs is the objective – bushes neatly pruned or flowers accurately cut. Or they might be thinking about what they want the process of using the secateurs to be like – quick clean cuts rather than a difficult blunt action resulting in crushed stems. They might also want a safe and comfortable grip. These are all benefits.

By contrast the facts the secateurs you are selling are made out of Type 440 high-carbon steel and have a bypass design are features. They are things that a garden-tools connoisseur or metallurgist might appreciate, and they might very well be how the quick clean cuts are achieved. But they are not things on the minds of most people buying secateurs.

Because buyers tend to be most interested in the benefits, you are doing them a favour by concentrating on the benefits first. “These will give you a quick clean cut.” You could go on to say “that’s because of the Type 440 high-carbon steel and the bypass design”. But they might think you a nerd, so you’d be better off with “and they have a comfortable grip”, or simply shutting up.

3. It’s OK to ask for the sale
Once the customer is giving out signals that they are ready to buy, don’t just plough on with your presentation. It’s easy to do this if you are nervous, but it’s a mistake. You are wasting their time and they might get irritated and start thinking of objections just to annoy you. Selling is a human activity after all, and normal emotions come into play.

Most buyers much prefer it if you get to the point. So ask for the sale. Say something like “Do you want the green one then?” or “I can give you two for just £10 more” to move things on the decision. Then go straight to taking the money.

If you have a sincere desire to see the buyer get what they want you will feel satisfaction at the close of the deal, so move to it promptly. Asking for the money should also feel natural, because money is what allows you to provide this thing that they want - your product or service.

A very short guide to sales jargon

• Benefit - something that does good to the customer, and which you believe they may value. Something that solves a customer problem.
• Feature - how a product or service accomplishes something - hopefully a benefit that the customer wants. It’s usually best to skip over features that have don’t have relevant benefits when selling.
• Offer - the bundle of products and services you wish to sell to a particular group of customers. A special offer is a variation on the bundle promoted for a limited time or to a sub-set of the customer group.
• Prospect - someone you believe could become your customer but isn’t yet.
• Solution - just means product. The overuse of this term annoys almost everyone. Use the verb form “solve” instead. Genuinely think about the customer’s problem, and then explain what your product can do to solve it.

Here’s an updated list of common business pitfalls. Below each pitfall there are links to information about how to deal with them.

The revised text comes from the new A5 paper leaflet version of an article that originally appeared on this site. We’ve checked the original links and added some new ones. Comments and suggestions for helpful links related to avoiding such pitfalls are welcome.

1. Failure to sell

New businesses should concentrate on winning their critical early customers before anything else. If you are uncomfortable with selling, try another approach. Selling doesn’t have to be the traditional hard sell, but it does need to be done. Even if you are busy now, set time aside for thinking about where your next customers are going to come from.

• PRIME’s guide to selling for beginners
• Feel bad about selling?
• Understanding customer needs
• Longer description of classic selling technique from HSBC
• Free club course on marketing (audio podcast and workbook)
  

2. Not watching the cash position

Know what you have got from week-to-week, as this is a very common cause of often completely unnecessary failure. A sudden cash shortfall can happen even if things are going well. Indeed the cash can run out just when you get very busy, as you may be spending a lot on stock or materials and not have time to watch out for pitfall no 3.

• Managing your cash flow

3. Failure to chase for payment

Chase up money promptly or they’ll think you don’t need to be paid. Don’t be embarrassed - if you have done the work you deserve to be paid. But don’t take it personally - be businesslike at all times. Regular reminders and clear terms of payment can forestall many problems, but if you have to go to law the small claims court (the county court) is quicker and simpler than many people expect.

• Dealing with late payment excuses
• How to get paid on time
• Checklist on controlling credit

4. Underpricing

Pricing is one of the most difficult things for a new business to get right, because you don’t yet know all your costs or have much evidence of how your customers respond to price. A common mistake is to overlook some major costs and thus price too low. It’s hard to increase prices later to the same customer. If on the other hand your prices are too high then achieving sales will be difficult and your marketing costs will be high. If you suspect this is the case experiment with lower prices through time-limited sales or trial offers to particular customers.

• The dangers of competing on price alone
• Regrets charging too little for too long
• Lloyds TSB on pricing your product or service
• Three firms find out how low they can go (article and audio podcast)

5. Failure to do a reality check on your basic business idea

Any entrepreneur needs enthusiasm to overcome the inevitable obstacles, but don’t let this blind you to fundamental flaws in your business idea. Think of all the dreadful singers that enter The X Factor. Though their mum likes them, and their friends say they like them, neither is the audience they need to impress. Look at your business from the point of view of your real audience, the paying customers. Are there enough of them, and will they pay enough to give you a good income when all your costs are taken into account?

• How to thoroughly research your market
• Reality check from Dragon Peter Jones

6. Ignoring seasonality

It is amazing how many types of business show a strong seasonal pattern of demand that is not obvious to the outsider. It’s not just toys, ice cream and fireworks but journalism, dog kennels and car parts. When you enter a market do all you can to quiz people in the know about its distinctive seasonal pattern. Methods used to counter big seasonal swings include adjusting pricing (as in the holiday industry), diversifying into a market with an opposite pattern and exporting to somewhere with different seasons.

• Advice for seasonal businesses
• Coping with seasonality

7. Forgetting about the competition

It’s a rare business that has no competition, so you need to think up good ways of dealing with it. Avoid entering a crowded market unless you have a very good plan for winning customers. Aromatherapists abound in some localities - which makes it difficult for any of them to make a profit. Try to make your product or service unique in some way that matters to the customer, so you are not competing head on. Take a lesson from the animal world and search out your own niche.

• Finding space in a crowded market - operating in a niche
• Changing marketing tack to beat competition

8. Ignoring legalities

Only take risks in the area you are most confident in - which for most people isn’t the law. Minimise risks everywhere else so you have less to worry about. Always check the small print in contracts before you sign. You don’t need to be obsessed with regulations, but watch that you have the necessary licences if for example you are street trading, that you obey hygiene laws if handling food and that you know the basics of employment law if you take someone on to help. Legal wrangles can waste a lot of your time or even close you down if you get it wrong.

• Health and safety basics that no business can ignore
• Check for government regulations that might apply to your type of business
• Top data protection pitfalls for small enterprises
• The legal aspects of taking on new premises

9. Taking too much money out too soon

Until the business has been running for some time you don’t know how much money to keep in reserve to cover late payment, bad debts and unforeseen expenses. So put off major expenditure on kit, advertising or yourself so you always have some money in reserve.

• How much to pay yourself during startup
• Compare yourself to others but be realistic

10. Getting trapped in long-term arrangements

New businesses are usually best off keeping things flexible, so they can move to where the money is. You don’t want to get locked into anything you can’t get out of easily. This applies to premises, hiring staff and contracts with suppliers. The big strength of small businesses is that they can quickly change to take advantage of the opportunities they discover. Don’t throw this advantage away.

• Getting the right deal - negotiating skills

The customer is not always right, argues this article from Business Week. If they are taking up too much time sometimes it’s better to part company and put the effort into finding new business.

“All that time and energy I had spent on resolving conflict was now spent on getting new customers”, reported one business owner whose revenues were up by a third six months after the split.

“When, Why, and How to Fire That Customer” also goes into less drastic ways of dealing with problem or unprofitable customers. Sometimes you can save them by re-negotiating the terms of the relationship.

There’s also a useful graphic that shows how to work out the profit on a given client.

The world is full of people who can’t sell or don’t want to - often for good reasons. Usually it’s because they don’t want be the sort of person who they think it’s necessary to turn into to sell things.

They may have real examples in mind - obnoxious sales-men or -women they have encountered in their past who bullied, pushed or lied.

However, once you start your own business it becomes necessary to find customers on a regular basis. So you need to put these traumas behind you and find an approach to selling your product or service that both works and that you are completely comfortable with.

Here are some articles by US sales guru Lenann Gardner that suggest ways of finding customers that are different to the practices that have long given selling a bad name.

So don’t let bad sales experiences from your past become negative role models to you - and a barrier to setting up your own independent business. Resolve to do it differently to them - and better.

1. “Selling is not telling”, writes Lenann on the Business Week web site. “Don’t talk so much. Ask questions. Really listen to what this person wants. And then talk only about the aspects of your product that relate to what your prospect desires.”

2. In another article (Your bias against selling is gonna kill your success) she suggests that you “uncover the ways in which you might be helpful to other people, and then make those people aware of the opportunity you represent to them”. It’s then up to them to be “big boys and girls and decide whether they’d like to take advantage of that opportunity.”

3. “Think about your prospective client’s ego”, Lenann recommends on Business Week again. “Damage an ego, and even though you are right, they won’t be buying from you!”

The reluctance to sell we are assuming here doesn’t apply to all people, and it probably depends on what type of salespeople you have been exposed to. But it is something many people express to PRIME, and it can be overcome by developing your own approach that simply avoids practices you are uncomfortable with.

If you have a good product or service it stands to reason that there are people out there who would welcome the opportunity to buy it. It may sometimes be hard work, but you owe it to them as well as your own business to find them and make them an offer they can understand and make their own decision on.

“When selling, one should have a sincere desire to see the buyer get where he wants to go, whether or not it involves buying from you or your firm,” says Lenann. “This attitude transforms the selling and purchasing experience into something much more positive, productive, even pleasant.”

The Treasury has announced the figures that will be used to calculate Working Tax Credit and Child Tax Credit next financial year, which starts in April 2008. The figures should be of interest to many self-employed people, because those running new businesses often have incomes low enough to qualify for tax credits.

The tax credit system provides a safety net so your income won’t fall to zero even if your net profit does - which in the early stages of a business is quite possible. You can find a PRIME’s own independent booklet explaining the tax credit system here.

So what are the major changes just announced? The basic structure of Working Tax Credit remains the same, but from April there will be a big rise in the “first income threshold”, which goes up by £1,200 to £6,420. This means that from April 2008 you will keep the full amount of whatever WTC payments you are entitled to until you reach the new £6,420 threshold.

The government has paid for this change by increasing the withdrawal rate (or “taper”") that takes effect above the threshold from 37 per cent to 39 per cent. So once your income (or net profit) rises above £6,420 you will lose payments quicker than now.

Overall this change benefits those on very low incomes up to about £7,000, and reduces the amounts paid to those making more.

Another interesting figure in the Treasury’s announcement is the “income disregard”, which remains at the very high value of £25,000 for another year. The income disregard is a kind of get-out-of-jail-free card that can be introduced into disputes about overpayment entirely at HMRC’s discretion. It allows the HMRC to ignore overpayments paid to you up to this amount if it feels like it.

HMRC’s generosity is most likely to arise in cases where it itself has itself made a mistake, and fears press or political pressure should it persist in attempts to claw an overpayment back. So the income disregard is not a right you yourself can claim, but a fudge factor that provides wriggle room for the tax authorities in cases of dispute.

The fact the figure is remaining so high indicates that there are still a lot of disputes going on - though most of these to be fair also involve Child Tax Credit, where the rules are hard to interpret.
Among other figures announced for the 2008 to 2009 tax year is the value of basic state pension paid to those over state pension age. This edges up in line with inflation by £3.40 a week for a single person, to £90.70 a week from next April.

The minimum income guaranteed to poorer pensioners (those entitled to claim Pension Credit) goes up to just over £124 a week for a single person.

This isn’t much to live on - which underlines the need to put other arrangements in place to boost your income in retirement while you can.

Here are three good articles on business networking.

The first recommends a systematic approach to business networking, complete with an action plan template you can download and print out.

The article and action plan are both aimed at freelance journalists, but you can apply the principles to many other industries. Journalism is very obviously dependent on networking, but so less obviously is much business-to-business selling.

Many business-to-consumer services that depend on personal reputation can also benefit if you make sure you become known in the right circles.

If you prefer a less structured approach here’s a good list of networking tips from the two founders of Everywoman, who have certainly used it to great effect.

“Networking is a great tool to expand your business – we used it out of necessity when Everywoman was being born, because we didn’t have a budget for any form of marketing.”

Finally here are 20 practical tips from networking guru Will Kintish, who makes a living training people on the subject.

Some common business dangers

1. Failure to sell

New businesses should concentrate on winning their critical early customers before anything else. If you are uncomfortable with selling, try another approach. Selling doesn’t have to be the traditional hard sell, but it does need to be done. Even if you are busy now, set time aside for thinking about where your next customers are going to come from.

• Feel bad about selling?
• Basics of selling explained
• Free club course on marketing (audio podcast and workbook)
  
• Understanding customer needs

2. Not watching the cash position

Know what you have got from week-to-week, as this is a very common cause of often completely unnecessary failure. A sudden cash shortfall can happen even if things are going well. Indeed the cash can run out just when you get very busy, as you may be spending a lot on stock or materials and not have time to watch out for pitfall no 3.

• Managing your cash flow

3. Failure to chase for payment

Chase up money promptly or they’ll think you don’t need to be paid. Don’t be embarrassed - if you have done the work you deserve to be paid. But don’t take it personally - be businesslike at all times. Regular reminders and clear terms of payment can forestall many problems, but if you have to go to law the small claims court (the county court) is quicker and simpler than many people expect.

• Dealing with late payment excuses
• How to get paid on time
• Checklist on controlling credit

4. Underpricing

Pricing is one of the most difficult things for a new business to get right, because you don’t yet know all your costs or have much evidence of how your customers respond to price. A common mistake is to overlook some major costs and thus price too low. It’s hard to increase prices later to the same customer. If on the other hand your prices are too high then achieving sales will be difficult and your marketing costs will be high. If you suspect this is the case experiment with lower prices through time-limited sales or trial offers to particular customers.

• The dangers of competing on price alone
• Regrets charging too little for too long
• Experts answer 10 pricing questions
• Lloyds TSB on pricing your product or service
• Three firms find out how low they can go (article and audio podcast)

5. Failure to do a reality check on your basic business idea

Any entrepreneur needs enthusiasm to overcome all the inevitable obstacles, but don’t let it blind you to fundamental flaws in your business idea. Think of all the dreadful singers that enter The X Factor. Though their mum likes them, and their friends say they like them, a look in their audience’s eyes should alert them to the fact that they are not good singers. Look at your business from the point of view of your audience, the paying customers. Are there enough of them, and will they really pay enough to give you a good income when all your costs are taken into account?

• How to thoroughly research your market
• On the other hand you could be right
• Reality check from Dragon Peter Jones

6. Ignoring seasonality

It is amazing how many types of business show a strong seasonal pattern of demand that is not obvious to the outsider. It’s not just toys, ice cream and fireworks but journalism, dog kennels and car parts. When you enter a market do all you can to quiz people in the know about its distinctive seasonal pattern. Methods used to counter big seasonal swings include adjusting pricing (as in the holiday industry), diversifying into a market with an opposite pattern and exporting to somewhere with different seasons.

• Copying with seasonality

7. Forgetting about the competition

It’s a rare business that has no competition, so you need to think up good ways of dealing with it. Avoid entering a crowded market unless you have a very good plan for winning customers. Aromatherapists abound in some localities - which makes it difficult for any of them to make a profit. Try to make your product or service unique in some way that matters to the customer, so you are not competing head on. Take a lesson from the animal world and search out your own niche.

• Finding space in a crowded market - operating in a niche
• Changing marketing tack to beat competition

8. Ignoring legalities

Only take risks in the area you are most confident in - which for most people isn’t the law. Minimise risks everywhere else so you have less to worry about. Always check the small print in contracts before you sign. You don’t need to be obsessed with regulations, but watch that you have the necessary licences if for example you are street trading, that you obey hygiene laws if handling food and that you know the basics of employment law if you take someone on to help. Legal wrangles can waste a lot of your time or even close you down if you get it wrong.

• Health and safety basics that no business can ignore
• Check for government regulations that might apply to your type of business
• Top data protection pitfalls for small enterprises
• The legal aspects of taking on new premises

9. Getting involved with scams and con artists

The world of business has its seamier side. Be cautious of the off-the-shelf business opportunities market - some venerable scams are still active particularly in self-employed selling businesses, and new ones are always being invented. Franchises should be BFA members. If not why not?

• Is that trading scheme legal?
• PRIME’s guide to buying a franchise
• British Franchise Association site

10. Getting trapped in long-term arrangements

New and small businesses are usually best off keeping things flexible, so they can move to where the money is. You don’t want to get locked into anything you can’t get out of easily. This applies to premises, hiring staff and contracts with suppliers. The big strength of small businesses is that they can learn by doing and quickly change to take advantage of the opportunities they discover. You don’t want to throw this advantage away.

• Getting the right deal - negotiating skills

Comments please. We are preparing this list for a guide which we’ll make available (with links to helpful resources) both online and in printed form. We may also use it in future live workshops.

But have we got the right top 10?

If you use part of your home for business you can claim part of the cost as a tax deduction. But how much should you claim - and if you claim too much will you end up having to pay business rates?

You can find out from the horse’s mouth in the Business Income Manual on HM Revenue & Customs’ site. Here you can read the notes used by HMRC’s own staff to help them judge what to accept as “reasonable”.

The basic policy on home offices / workshops is set out at section BIM47815 of the manual. The good news is that the rules have recently been relaxed. Since the 6th April those working from home on a limited basis no longer need to provide records of every business expense to make a tax claim.

Instead you can make on estimate of how much of your home costs can be apportioned to your business based on the following principles.

Area: what proportion in terms of area of the home is used for business purposes?
Usage: how much electricity, gas or water etc. is being consumed by the business?
Time: how long is the space being used for business purposes, as compared to other things?

Section BIM47825 is most helpful, as it provides examples. Such as:

Bill runs a small business. He uses one small room at home as an office, exclusively for the purposes of his trade. The room represents 5% of the floor area of the house.

His Council Tax, insurance and mortgage interest bills total £4500. He claims 5%, £225.

His electricity bill for heating & lighting is £300. He claims £15, which is 5% of the total.

His total claim is £240 (plus the business proportion of his phone bill).

Although Bill has apportioned his electricity bill by floor area rather than usage, the amount claimed is small and there is nothing to suggest that his business use is significantly greater or lesser than his private use. It can be accepted as a reasonable estimate.

If any of the examples sound like you it might also be worth reading tax consultant Nichola Ross Martin’s comments on them.

What about business rates? Section BIM46840 says “A home in which a trader sets aside a room as an office is likely to attract only a council tax charge”. And a proportion of this may be tax deductible if you are using it for business purposes.

The Business Income Manual is one of many made public in the aftermath of the Freedom of Information Act. Before the manuals became available the most accessible guidance from the HMRC were the notes that came with the self-employment pages of the tax form. The latest notes contain worked examples and are also quite helpful.

Funded by advertising and run as a small business, Armchair Advice was set up by Greg Paine after he unexpectedly found himself without a job in mid career, aged 46. The site is particularly good for those newly-made redundant or worried about becoming so.

The printed paper version of PRIME’s brief guide to Working Tax Credit for the 2007 to 2008 financial year is now available.

You can still download the guide from here as a PDF, but if you would prefer a paper copy just email us your details and we’ll post you a free copy.

We are also distributing the 20-page booklet free to libraries, enterprise agencies and advice shops - so if you are one of those just email us your requirement.

Working Tax Credit is a kind of reverse income tax that you should get if your household income falls below a certain level. PRIME’s guide is written especially for self-employed people over the age of 50. It explains the scheme in only 20 pages and contains worked examples showing how much self-employed people in different circumstances would get.

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