New Enterprise Allowance scheme - My story

dktreesea

Stevenb wrote: »

.... to push and make the money I am today . .....

To me that's self employment in a nutshell. Imagine earning money as being in front of two heavy doors. If you accept employment then those doors open a little bit and a narrow stream of income flows your way. If you go self employed, those doors remain closed, or ever so slightly open with regards to NEA and WTC. To get more income you have to push. Hard.

The reward is the more you push the wider the doors open and the more income flows your way, AND there's the possibility of pushing those doors wide open and becoming wealthy.

But for sure, you are right about having to push. The key to success is pushing on, hard.

And loans? Well, I've had long experience with borrowing for the business, usually for working capital as opposed to expansion or starting up. I am obviously not against finance; I use it. But a word of caution. When you are pushing at those income doors, those loans are right behind the doors, pushing back. And they are capable of pushing right back in on your business and killing it dead.

So if anyone wants to take on a loan to grow/start up their business, all I can say is you had better be prepared to make a lot more effort than you are making just now to succeed.

Andy2013

That's such a great way to explain self employment , its so true but to start with you have to be a muscle man because those doors are really heavy.

Im not against loans contrary to some beliefs but when your starting a business its hard to balance the books even without the stress of a loan hanging over you, until the business has a proven formula and money is regularly coming in then for me its a stress I could do without.

The risk of the business not making what you predict could land you with a hefty pay back.

On the other hand once your business is making money and you can see a pattern evolving then to grow the business a loan is not as bigger risk .

Everyone has there own way of doing things .

I sell products on the internet ,im the prime candidate for a loan as I can buy more stock at a cheaper price, but I chose not to so as to avoid a higher level of risk/stress in the first 18 months.

So yes it can be done without borrowing money, you just need a business head to figure out how.

Stevenb

My first 4 months were awful that's why I started watching this thread, to try to get inspiration , a loan would have given me nightmares .

Some families live of credit and see no harm or risk but many get in trouble , others are a little old fashioned and are more analytical about paying them back and profit and lose.

I am the second.

dktreesea

Being able to grow organically and not borrow anything at all is a great way to go, just imho. And pre universal credit coming in, (if it ever does come in. I note DWP's latest projections for appeals to the social entitlement chamber, leaked by Judge Martin, where they now forecast no appeals until 2019 http://www.benefitsandwork.co.uk/news/2789-dwp-believes-universal-credit-is-dead-tribunal-president-reveals ) is there any reason not to do just that?

We didn't grow our business organically because we had other commitments that we weren't able to divest ourselves of, so needed a high income from our business relatively quickly. But it's a strategy that's not for the faint hearted.

Andy2013

We didn't grow our business organically because we had other commitments that we weren't able to divest ourselves of, so needed a high income from our business relatively quickly. But it's a strategy that's not for the faint hearted.

Similar with myself , currently business is going well and the profits are very nice but then I have living costs to take out which drops it so any growth is going to be slower than liked but each month we increase sales and stock purchase .

We could get greedy and try to expand using finance but I have a family to feed and a new born on the way so taking risks at this time is foolish because if it does not go to plan I lose my livelihood.

TrueBlue1965

Im not looking for an argument or to tell you what to do, Andy2013. However, I would like to suggest something to you. A small loan of as an exmple £5,000 could be paid back over 5 years. That would work out at around £100 per/month or £20 per/week.

Based on the profit you suggest your already making. £20 per/week would not kill your business but would potentially allow your business to grow. The only risk in taking out such a loan would be if your area of sales is already at its peek and there is no room for growth.

No idea what your prices/profit is for the items you sell. £20 per/week in my case would be one extra sale to cover my loan repayments. Thats 35 minutes work! Two extra sales on top of what im already selling and im growing my business by £1,040 each year and the loan is covered.

The higher loan im after will only be granted if the proved sales figures for my business can with stand the loan repayments and offer a good chance for growth. My business has massive growth potential but im also able to survive if the growth never happens.

You know your business better than anybody. Can your business reasonably withstand repayments of £20 per/week or to put it the other way around. Would your business fail if your sales dropped by £20 per/week for 5 years?

The other question is would £5,000 be enough to grow your business and offer the profits your after for that investment? If the answer is no. Then, it might be that your business is close to its peek profits its able to generate. Only research, planning and testing you markets will answer that question. But,you know your business better than me!

Any loan is a calculated gamble. The question you need to ask yourself is would a £5,000 loan offer enough profit to justify the risk. As you suggest. Give you £1 and you can make it into £5. If the market is there. Then, its a no brainer. Thats something you need to workout with more hard work!

Stevenb

Can you not read, the guy has a family to fund, a newborn on the way and living expenses to pay and he is delaying expanding until next year.

Only an idiot would risk everything a few months from having a new baby, he is being responsible and looking after his family I respect that , so back of with the advice I think he has it covered.

firestop

TrueBlue1965 wrote: »

Andy2013, its Manchester City Council/Housing Benefit who are messing leonski around. Housing benefit has nothing to do with NEA. How can you blaime NEA for leonski,s problems?

It is possibly worthwhile to make people aware of potential problems they may face once they embark on self employment.

Working tax credit - thank God I don't have to rely on that lot anymore and I hope I never have to again. If they can mess something up, they will - in triplicate. I was forced to turn to my MP to intercede on my behalf.

Housing/Council tax benefit - this crew make the first lot look efficient. As a self employed person you are a square peg in a round hole. They simply do not know what to do with you. I ended up being interviewed under caution and accused of fraudently claiming over £2,000. Turned out they'd forgotten to include the working tax credit payments in their calculations! Once again it was time to turn to the MP.

In any dealings with these people, ALWAYS ask for the name of the person you're speaking to, ALWAYS ask for a receipt for anything handed in and keep records of all conversations and meetings.

Andy2013

firestop did you not turn to your mentor when the issues started ?

Can you not read, the guy has a family to fund, a newborn on the way and living expenses to pay and he is delaying expanding until next year.

Steve I had no idea what true responsibility was about until the last few months, it puts things into perspective and although I will grow my business for this year my focus is providing for my soon to expand family.

2015 will be the year to grow the business once life settles into a rhythm again.

dktreesea

TrueBlue1965 wrote: »

Im not looking for an argument or to tell you what to do, Andy2013. However, I would like to suggest something to you. A small loan of as an exmple £5,000 could be paid back over 5 years. That would work out at around £100 per/month or £20 per/week.

Based on the profit you suggest your already making. £20 per/week would not kill your business but would potentially allow your business to grow. The only risk in taking out such a loan would be if your area of sales is already at its peek and there is no room for growth.

No idea what your prices/profit is for the items you sell. £20 per/week in my case would be one extra sale to cover my loan repayments. Thats 35 minutes work! Two extra sales on top of what im already selling and im growing my business by £1,040 each year and the loan is covered.

The higher loan im after will only be granted if the proved sales figures for my business can with stand the loan repayments and offer a good chance for growth. My business has massive growth potential but im also able to survive if the growth never happens.

You know your business better than anybody. Can your business reasonably withstand repayments of £20 per/week or to put it the other way around. Would your business fail if your sales dropped by £20 per/week for 5 years?

The other question is would £5,000 be enough to grow your business and offer the profits your after for that investment? If the answer is no. Then, it might be that your business is close to its peek profits its able to generate. Only research, planning and testing you markets will answer that question. But,you know your business better than me!

Any loan is a calculated gamble. The question you need to ask yourself is would a £5,000 loan offer enough profit to justify the risk. As you suggest. Give you £1 and you can make it into £5. If the market is there. Then, its a no brainer. Thats something you need to workout with more hard work!

I also don't have a problem with finance, as long as I end up on the positive side of the loan, so to speak, at all times. The loans we have pay for themselves and have been worth the risk.

However, over time there can be downsides to paying back a loan, even if it is only £20 a week over 5 years. Even if you did end up with 520 extra sales over the 5 year period, that's still 260 sales, one a week, that you are committed to, just to cover the loan. I know this doesn't sound much, And you've had the profits from the extra 260 sales you have been able to finance, if all goes to plan.

But say it doesn't. Then you are going to need a fall back position. In the event, however unlikely, that the business sales won't cover the loan, how do you intend to cover it?

The thing is with overheads, like loan repayments, premises and the like, it's like being on one of those rat wheels, having to run faster and faster just to keep up. Yes you have a bigger business, and more work with it, but at the same time I have found having both loans and premises restrictive. Plus I have had to keep extra cash in reserve, to cover our fall back position, and even then, it's only enough to cover 6 months out.

To illustrate, the guy who lives across from us has a similar business to ourselves, but no loans, nor premises. So, being debt free, whenever he feels like going skiing (his passion) he just puts his business on holiday settings and takes off. He doesn't have even a third of our turnover, but all his profit is his. He has no cash flow problems, because he doesn't incur major costs, like postage and packing until he has a sale. The most he has to finance ahead, as regards his business, is a fortnight.

Even though we have a bigger income, we also work three times longer hours than he does. I know this because he aims to finish work by 1pm every day. And he only works 5 days a week.

My conclusion, with over 10 years of hindsight, is we might have had a better quality of life if we had grown organically, forgone the premises, and not had any debt. Yes, lower income, but a lot more free time and we probably could have managed a holiday every year.