Starting a business - income?

JWIOW

I am looking to launch my own business within the next few months. I'm 21 and am confident that the business should keep ticking over nicely (web based, classified ads with revenue from ads sold locally - no competitors and unique design/features) .

I am investing £1000 of my own money to have the whole site built, first years hosting etc so very minimal outlay. Once I have the site built, I am intending to apply for a £3-5k loan to actually have some money in the account and keep it running.
This is the first business I will have started, and, I am currently working full-time to assess whether this is something I can push with as a full-time or even just a part-time role. I have a couple of questions.

When should I start to take a wage from the business and how is it decided how much I can earn from it?

I will be the only employee and I intend to keep it that way.
I expect within the first few months the site will be bringing £3-£5k a month without too much input from myself (other than small tweaks and occasional moderation). I was recommended to register as a Limited company once the website is completed and I have advertisers on board.

Just to add:
The site's design is completely unique for the sector and it has features that are not yet used on similar sites. If this is successful, I will look at creating the system as it's own product for franchise/resale opportunities, or even just replicate the site for a new location.

Any help or advice would be much appreciated.

MrJester

JWIOW wrote: »

I am looking to launch my own business within the next few months. I'm 21 and am confident that the business should keep ticking over nicely (web based, classified ads with revenue from ads sold locally - no competitors and unique design/features) .

I am investing £1000 of my own money to have the whole site built, first years hosting etc so very minimal outlay. Once I have the site built, I am intending to apply for a £3-5k loan to actually have some money in the account and keep it running.
This is the first business I will have started, and, I am currently working full-time to assess whether this is something I can push with as a full-time or even just a part-time role. I have a couple of questions.

When should I start to take a wage from the business and how is it decided how much I can earn from it?

I will be the only employee and I intend to keep it that way.
I expect within the first few months the site will be bringing £3-£5k a month without too much input from myself (other than small tweaks and occasional moderation). I was recommended to register as a Limited company once the website is completed and I have advertisers on board.

Any help or advice would be much appreciated.

Firstly, I think you should be applying for a loan as start-up money BEFORE investing your own 1k, because that 1k could just go down the drain if you don't get the loan and the business isn't viable.

I don't know exacts but unless you get a considerable loan which encompasses your own base salary (min wage), then it will be a long time at least a year before you even begin to pay yourself an actual wage, for a long time you will just be taking out of the company funds as and when you need to, you and the business/company are essentially one pot until you can guarantee yourself an actual wage. Some people rarely ever get to that point, and continue to be 'one big pot'.

As you are undetailed, I don't know what you will sell/what your business will do exactly, but isn't bringing in 3-5k both a vague estimate, as well as a very large over estimate by the sounds of it. There are very few start-up one-man businesses that earn this much a month, and particularly with occasional moderation.

I would advise most to do whatever you can to continue a full time job and do the business in your spare time if possible until you are CERTAIN you can pay yourself a wage, or if it begins or just does take/need more time then keep a part-time job for as many hours as possible to keep the income flowing.

Kayalana99

There is a very vague amount of information here (and I don't blame you for that) so the only advice people can really give you is speculative.

As for when to take a wage, well yes that depends how much you're earning but I must say this doesn't add up to me because a website built for 1k needs 3-5k extra for what?

InsideInsurance

JWIOW wrote: »

I am intending to apply for a £3-5k loan to actually have some money in the account and keep it running.

If you are talking about a business loan then speak to people about this first. Getting a startup business loan from a bank etc is exceptionally difficult, especially if you intend to form a Ltd. If its a personal loan then that all comes down to your full time work etc.

As to when to draw income? Well that depends on your business plan doesnt it? How important is speed to market/ growth? What would your ROI be if you used the money to reinvest in the business rather than taking it out of the business? Is your long term plan a small hobby site providing pocket money? Expanding into other locations and establishing a multinational company? Build it quick and big and flog it off to a bigger player?

JWIOW

Thank you all for your responses, sorry I have been very vague. I will try to provide more information without giving too much away.
Essentially the business will be started as a locally-focused community website, yet the system that I am implementing is a completely new system and if it works well locally, I would be looking to expand etc which would be quite rapid growth.

However, the site on it's own I intend to just keep me ticking over.
We are expecting around £500-£1000 a month to come from public spending and £1000-£2000 a month to come from local business advertisers on the site.

The small business loan I believe should be quite achievable and this £3-5k would be used for a large marketing push to begin. The remainder will be used as capital to keep the business ticking over, therefore I guess the best option would be as above, to have a 'pot' and take it out as and when.

Obviously as the main source of income will be made from ads, traffic is needed to be able to sell this ad space.
My launch idea is providing 7 local businesses with a banner slot on the website in prime position for the first month, in return for a 'prize' provided by them for the value of £50 or more, which would then be used as Social Media / Local competition prizes - 1 for each day of the launch week. This should drive a lot of new registrations and traffic as well as awareness locally of the site.

The area I live is very local-orientated therefore this should be the best way to go about things.
The bonus of this also, is that of these 7 businesses - even if just one of these businesses then choose to pay for further months - this is still a good start.

The maximum monthly running costs would be around £200 for the site (plus my time - based around my full-time employment to begin) yet once traffic is generated, one banner space will be generating between £150-£250 a month.

Goldstar12

My advice, as a start-up coach, would be not to take out a loan in the first year of trading if you can possibly avoid it. It's hard enough running your own business, and trying to find money to keep going, without adding to the financial burden. However, if you feel there's no option, then try Start up Loans. They offer free mentors for 12 months toi.
Good luck!

paddyrg

Just worth noting that the original features of your site may get copied in a heartbeat if they're really any good. If the site functionality build is just a grand, those features aren't going to be hard to reproduce.

I also suspect getting £1k/month profit from the public is going to be a huge ask, and the rest from businesses - another huge ask. You say it's very locally focused, so does that local community really have £60k/year sloshing around to give to your site?

I'm just concerned you're going to spend a heap of cash and find the market a lot weaker than you hope.

SailorSam

Just a thought but if you're only 21 could you get anything from the Princes Trust ?

http://princes-trust.org.uk/

Carer

Banner prices seem really high, I just don't think you are going to be able to drive enough business to advertisers to make it worth their while spending the money on a banner.

As the owner of a small business there is no way I could justify spending that amount of money a month on a small local website. If I had that budget to spend on advertising I would use Facebook or Google ads or pay someone to do SEO.

SailorSam

I was reading this earlier this morning about starting a web based business, see if there's anything there that may help you get started.

http://alison.com/courses/21-Steps-to-Building-a-Web-Business

JWIOW

paddyrg wrote: »

Just worth noting that the original features of your site may get copied in a heartbeat if they're really any good. If the site functionality build is just a grand, those features aren't going to be hard to reproduce.

I also suspect getting £1k/month profit from the public is going to be a huge ask, and the rest from businesses - another huge ask. You say it's very locally focused, so does that local community really have £60k/year sloshing around to give to your site?

I'm just concerned you're going to spend a heap of cash and find the market a lot weaker than you hope.

The site set up is based on Wordpress with custom widgets to add the functionality.
I picture this as being a card-board prototype of what I wish to achieve. The site will run efficiently and work on a small-scale, thus being the 'prototype'.
If this then proves to be successful, it can continue to earn money as it is - I can then have a new full CMS solely for the purpose of the website field developed with the features of the prototype.

This will then mean I'd have a completely unique full-system, with a lot of features that any competitors will not have.

Carer wrote: »

Banner prices seem really high, I just don't think you are going to be able to drive enough business to advertisers to make it worth their while spending the money on a banner.

As the owner of a small business there is no way I could justify spending that amount of money a month on a small local website. If I had that budget to spend on advertising I would use Facebook or Google ads or pay someone to do SEO.

The website is a classified ads website, the demand for this is something that is only continuing to grow due to the current economic climate. People have turned to selling their unwanted goods to help pay bills, and more and more trading these goods for a profit as a source of income.

As stated above, there is 1 main competitor which members of the public are growing increasingly frustrated with as it is completely outdated, not maintained or updated and slow. This immediately gives us the upper hand to move forward. They already have numerous local businesses advertising and I have copies of their rates, the prices I indicated above are less than our current competitor.

Our competitor currently charges £3 for listing your vehicle (public - discounts for monthly businesses with a fixed amount of ads) for sale on their website, getting between 1000-2000 vehicles listed on there in any given month. This means that they are bringing in £3000-£6000 a month, just from the public on vehicles.
Properties come in at around 500-1000 a month, for which they charge £5.99 per ad. Thus bringing in nearly another £3-6000.

Our intention would be to come in at around half of their costs to the public, therefore £1.50 per vehicle or £3.50 per property.

I do not see that I have underestimated the potential of the business, if conducted properly and we are offering a 10x better service at a lower cost, who will argue with that?