Question: I have an idea for a business but in the current economic climate I'm not sure it's the best time to start up. Do you have any advice?
Alastair Higgins of the Invest Northern Ireland Entrepreneurship Development Team replies:
A: You are understandably cautious but if you have a sound business idea, have researched the market and identified an opportunity, there is no reason why you shouldn't consider starting up.
You could use the current economic climate to your benefit by identifying areas or sectors which seem to be recession proof. You can adapt your business idea to fit the more difficult trading conditions.
In today's environment start-up capital is difficult to secure and, prior to lending, all lenders will request a business plan in order to assess the risk within the business. Your business plan should therefore be concise, persuasive and realistic.
Invest NI's new Enterprise Development Programmes (the Go For It and Growth Programmes) can provide advice, training and support to both new and existing businesses throughout their start-up and growth stages.
The programmes will provide assistance with developing the business plan. There are a number of ways to join these programmes: call 0800027 0639, register online www.goforitni.com , www.growthni.com , or visit your local enterprise agency.
The nibusinessinfo.co.uk website has comprehensive and plainly written advice for anyone starting up a business or growing a business.
See in particular the sections on Starting a business during an economic downturn which includes a useful checklist and several interactive tools that can help you with everything from tax and accounts to taking on staff.
Question: We own a manufacturing company and we have several large customers which account for 80% of our turnover. To date we have been fairly relaxed about documenting any of the arrangements with our customers because we have known them for years and the relationship is good. However, we are concerned that if we lose one of our customers this would have a serious affect on our business. What are our options?
Leanne Whaley associate, corporate finance Carson McDowell replies:
A: The issue you have is that, in the absence of a contract, you have no protection should your customer either decide to go elsewhere or get into difficulties.
A well-drafted contract would protect you in a number of ways. It could give you the protection of minimum order quantities, which allows you to forecast your production requirements and guarantees revenue for the period of the contract.
A reasonably long notice period to terminate the contract would also offer a buffer against the loss of a customer and allow you time to generate replacement business elsewhere.
There are many other benefits to having a contract in terms of limitation of your liability should something go wrong and the ability to terminate the agreement should the customer get into difficulties.
You should remember however that a robust contract is no substitute for checking the creditworthiness of your customer and ensuring that your credit control procedures are working properly.
Question: We have managed to secure a substantial bank loan for equipment over a 10-year deal. How do we protect the business if things go bad?
Stephen Hill, senior partner of S Hill & Co investment advisors replies:
A: It's a good question and one that many businesses need to face these days.
It's amazing how many business owners or self-employed people fail to protect themselves in this recession.
It's hard enough to obtain a capital loan at the moment but if you don't put in place business loan protection, you could find yourself regretting it.
Business loan protection can provide businesses with a cash sum that can be used to help repay a loan on the death, or, if required, earlier critical illness of a specific employee.
If, for instance, your loan was signed by yourself as managing director or one of your business partners, you really need to consider not only how to meet any ongoing repayments but also how to finance full repayment should the lender call-in the loan prematurely.
A commercial lender will often make a business loan subject to repayment on the death of a certain, often key, individual, such as a partner or director.
Alternatively, if finance has come from a director's loan account, and the director were to die, then their estate may demand repayment of the outstanding loan.
So while you are visualising what good things will happen for your business if you secure the business loan, etc, you must also consider the bad things. You will need to research providers to get the best deal and seeking independent expert advice should also help as well.
To misuse the old property adage, think 'protection, protection, protection' in this tough climate.