Business121 Small Business Newsletter #37

In this week's Business121:

1. Remember the "Opportunity Cost"
2. Business Plans for Business Angels
3. Top I.T Tips for small business owners
4. Insurance proving to be a risky business
5. UK entrepreneurs "too busy" to sort out their personal finances
6. IT Contractors - Limited or Umbrella Company?
7. Start-Ups launch with less capital investment
8. Hold in interest rate for commercial late payments
9. Latest update for taxpayers on Government's war on tax-avoidance

Remember the "Opportunity Cost"

It was interesting to see research this week that shows more and more small businesses are being started up with less and less capital, with 32% of entrepreneurs successfully launching their business with less than £10,000 (see news article below).

The 'knowledge economy' is certainly helping the entrepreneurial spirit to flourish as it lowers the start-up costs for many new business opportunities. Bytestart and Business Bricks are good examples of businesses that didn't need a capital investment to get them started. In each case we started with nothing more than an idea and our own labour.

The costs of starting a virtual business can be 'virtually' zero, so it's hardly surprising that these type of businesses are proving popular for new start-ups.

Though many of these new businesses don't need start-up capital, there is a another cost that needs to be considered - and it can be significant. The start-up cost that most people overlook is the 'opportunity cost'.

Forgive the economics terminology here but, the true cost of something is what you give up to get it. This includes not only the money spent in buying (or doing) the something, but also the economic benefits (UTILITY) that you did without because you bought (or did) that particular something and thus can no longer buy (or do) something else.

So, the opportunity cost of starting a business is not just the money you invest in starting the business but also the fact that you are no longer earning a full-time salary. In economics terms the 'lost opportunity' of earning a salary needs to be factored into the equation as you have suffered a loss of 'utility'.

In my case, the businesses have only needed a few thousand pounds of my hard cash in start-up capital but the opportunity cost to me has been around £60,000 in lost income.

Don't measure the opportunity cost in financial terms alone

But the opportunity cost isn't measured in financial terms alone. When you're considering the utility of starting a business you should also take into account other benefits which may include; greater flexibility, less stress, more control over your own life, spending more time with your family etc

In economics the notion of opportunity cost plays a crucial part in ensuring that resources are being used efficiently.

Considering the opportunity cost of your actions when you're running your business can be a useful discipline to instil in yourself. It can help you to focus your 'resources' on the most important tasks - those that will give you the greatest 'utility'.

Everything you do has an opportunity cost and recognising this cost should help you to efficiently allocate that most precious of resources for a small business owner - your time.

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Business Plans for Business Angels
There are many guides and books on writing business plans - all the banks provide a handy checklist for example. Yet business plans should always be written with the audience in mind. This short guide is therefore aimed at helping you put your message across to one particularly critical audience - the business angel;
http://www.bytestart.co.uk/cgi-bin/click.cgi?id=28

Top I.T Tips for small business owners
Tips for small business owners and managers on to review their IT infrastructure and invest in getting it up to date, or risk losing out to the competition.
http://www.bytestart.co.uk/cgi-bin/click.cgi?id=30

Insurance proving to be a risky business
Over one million small to medium size businesses in the UK are facing serious risk for not having proper business insurance cover according to new research;
http://www.bytestart.co.uk/cgi-bin/click.cgi?id=31

UK entrepreneurs "too busy" to sort out their personal finances
UK business owners are putting their future wealth at risk because they are too busy running their businesses to plan for the impact that divorce or recent changes in pensions laws could have on their personal finances;
http://www.bytestart.co.uk/cgi-bin/click.cgi?id=32

IT Contractors - Limited or Umbrella Company?
How making the right choice between a limited and umbrella company can affect your take home pay if you're working in business as an IT Contractor;
http://www.bytestart.co.uk/cgi-bin/click.cgi?id=33

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SMALL BUSINESS NEWS
===================

Start-Ups launch with less capital investment
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New research has shown that it is now possible to successfully start your own business with less capital than ever before;
http://www.bytestart.co.uk/cgi-bin/click.cgi?id=34

Hold in interest rate for commercial late payments
------------------------------------
The late payment interest rate for overdue payments remains at 12.5% for the second half of 2006;
http://www.bytestart.co.uk/cgi-bin/click.cgi?id=35

Latest update for taxpayers on Government's war on tax-avoidance
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The Chancellor's latest campaign in his war on tax avoidance will affect more taxpayers than ever before as the Finance Bill extends the battlefield to include the tax treatment of trusts and a number of so-called 'reforms' to corporation tax;
http://www.bytestart.co.uk/cgi-bin/click.cgi?id=36

** For the latest Small Business News, visit http://snipurl.com/Bytestart_News **

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(c) Business121.co.uk 2006