Self employment...Advice Please! - Page 1
Forum section: electronics / general

author: JGE_Engineer
author_rank: Newbie
timestamp: January 15, 2015, 01:24:06 am
content: Hi fellow Bloggers.I am a frequent contributor to this forum under another user name, however, I have created this "new" user account as my original one is well-known within my workplace, and the question(s) that follow will explain why I have had to do this and remain anonymousI work in the UK for a company producing electronic equipment for a particular sector, however, new year, new me blah blah blah, I have been considering starting my own company for a few years now but as it goes, never got around to doing it, I used to have access to a brilliant website called Business Link, which has now ceased to exist.Before starting anything "serious" I will of course speak to an accountant etc, but I wanted to get peoples opinion of if I am going down the sensible path.I have read my employment contract and it states I will not compete with them within 25 miles of their location, I am > 35 miles away from my work place, so no issues with distance, I do not plan on competing with my existing employer in any way, shape or form, as I mentioned, it is a particular sector and somewhat specialist, and regardless of morals etc, no I am not going to tell them!I am looking at running a business whilst being employed, so I am treading carefully here on keeping this somewhat secretive, I can definitely do both, no problems with time commitments, I believe it to be a better option to at least try and do it whilst being employed in case it all goes tits up all I would have lost is a bit of cash, although most of the tools etc that I would need I already have of my own.For those UK savvy, I have looked into HMRC and come away a dribbling idiot :p I think I understand most of what is required, the blanks and / or wrongly assumed I guess an accountant will be able to enlighten me on.Now, the questions1. For my situation, is it better to go sole trader and get independent liability insurance, or is it better to go Ltd. The only downside to Ltd is the corporation tax as far as I can see, the rest appears on the face of it to be beneficial, especially as I own my house etc, if the Ltd company got into trouble I wouldn't have to worry about my other assets, but sole trade everything is "at risk", I believe even if Ltd you still need / would benefit from liability insurance in any case, so you wouldn't save that much in comparison.2. Will my existing company find out about my own company? I.e. through tax codes, or NI contributions?Now, one thing I have always been keen to learn more about is market research, I live in a small-ish town, there are a few computer shops, nothing solid in the field of electronic repair / design though. If I were to start a company doing pretty much what I do as a "hobby" / for friends + family now, which is repair computers (hardware + software issues) and make electronic devices (gadgets and fun things at the moment), because my knowledge is quite diverse, i.e. motor control, RF modules, how do you go about marketing / gaining business from these kind of diverse? skills?I guess that was q #3, the final one I would like to know is how do you manage the time when you are fully employed? I mean, if someone wants you to fix something during a working day, you have to take time off your existing work etc as far as I can see, is this the "norm"?I understand that there is a whole new world to running a business, and I don't expect to get all of the answers I need in this one blog post, I am more interested, whether you are in the UK, USA, AUS, or anywhere else, what your experiences are running a business whilst being self employed, especially in the EE / Computer repair field that I am looking into. I understand that sometimes it can be a bit to general to reel in a particular single market.Another question I find myself wondering is, do I produce "products" or do I just do contractual type / consultancy type work, or not explicitly tie myself down to one, I am keen to accept most types of work, and I believe being in the position I am in with my current employment, I can spot most of these "time wasters" as I tend to deal with one or two of them every week.As you can tell, I am quite new to the business side of things, so any advice is welcome, I think I have to come to the point now where the only way to get job satisfaction is to do my own thing, I have changed jobs several times to try and accommodate my thirst for engineering, but I only really "enjoy" my own projects.Thanks in advance!"John"

author: dannyf
author_rank: Super Contributor
timestamp: January 15, 2015, 01:37:43 am
content: I don't know the UK but some general business advice.1) ask yourself why you are starting this business. If you think you have a good idea, have identified an unserved/underserved market / new customers, etc., do it. If you think you have a good product, don't do it. You will quickly realize that the most difficult thing in starting a business is to find customers.2) ask yourself if you are in a position to take risk. Don't kid you that you can do both. Sooner or later, you have to make a choice: full-time employment or full-time proprietor. Employment offers a steady but low income. Proprietorship offers high risk but potentially huge payoff. However, many people don't quite make it that far. Are you one of them?3) ask yourself how much money you can risk before calling it a quite. It is best to start with other people's money but if you cannot, how much of your own money can you throw away at this before you say "I have tried it"?Starting a business is hard, very very hard. That's why you need to be paid handsomely for taking that risk.

author: wraper
author_rank: Unknown
timestamp: January 15, 2015, 01:55:30 am
content: I would say, stay away from computer repair and probably repair at all, unless it is some really specialized and expensive stuff. Are you willing to be among zillion low qualification technicians who swap the boards in consumer electronics? Especially considering UK wages I see no reason for EE to do component repairs for computers. Better design something and sell. Probably try to sell something at ebay/make own website. See if product goes, start from something simple. At least it won't interfere with your job at the start until you are ready to leave for a big deal. If you can find customer who is ready to buy your skills to design something, do it.

author: coppice
author_rank: Super Contributor
timestamp: January 15, 2015, 02:08:29 am
content: Quote from: JGE_Engineer on January 15, 2015, 01:24:06 amSplitting your time sounds great until you try it. Its really tough, because people need you at all sorts of odd times, and you get tired. That said, if you get well prepared for your new business while remaining employed that is an excellent move. It means you can take your time to line up opportunities, get well prepared, and its easy to walk away if things aren't playing out well. If you achieve any success, though, you will be quickly required to make a choice. There are famous cases of people getting a long way with their own business before quitting their day job, such as Steve Wozniak starting Apple while at HP, but they are rare.Dannyf said the hardest thing is to find customers. Actually, both good customers and good suppliers are hard to find. I think most people who start their own successful business don't do so just because they want to run a business. They connect with potential suppliers and customers, see an opportunity to sit between them, investigate how they could respond to the opportunity, and then start a business to respond. Make sure you do things in the right order.Oh, and stay away from repairs, unless you have found some niche doing really high value repairs. These days almost everything is considered disposable, and a repairer is competing with the waste bin.

author: KJDS
author_rank: Super Contributor
timestamp: January 15, 2015, 02:21:16 am
content: Most UK employment contracts will have a clause relating to working a second job.If you're just repairing a few things then I'd go sole trader, otherwise Ltd makes a lot of sense from a liability perspective. You'll still need liability insurance, both professional indemnity and product liability. If you go Ltd you'll end up paying at least £1k a year in accountancy fees.

author: coppice
author_rank: Super Contributor
timestamp: January 15, 2015, 02:35:56 am
content: Quote from: KJDS on January 15, 2015, 02:21:16 amI remember having those when I lived in th UK, but they were always worded such that I was never sure what I was and was not allowed to do.

author: KJDS
author_rank: Super Contributor
timestamp: January 15, 2015, 03:32:45 am
content: Quote from: coppice on January 15, 2015, 02:35:56 amThat's because they are written by people who then get paid much more to present their interpretation of the clause to a tribunal or judge. Were the clause to be free of ambiguity their earnings would be lower.

author: coppice
author_rank: Super Contributor
timestamp: January 15, 2015, 03:38:57 am
content: Quote from: KJDS on January 15, 2015, 03:32:45 amThe reason for the obscure wording is obvious, but it was frustrating. I wanted to do free voluntary engineering work on a few occasions, for good causes, and the wording even made it unclear whether that was OK.

author: IanB
author_rank: Super Contributor
timestamp: January 15, 2015, 04:16:26 am
content: In the UK you will have an employment contract, and having been drafted by lawyers and HR people it will contain a lot of stuff limiting what you can do while employed. Almost certainly it will say you can't have a second job in any field related to your employer's business, and it will say you can't have a second job of any kind that stops you doing your first job effectively (whether due to time, tiredness, competing commitments, or whatever).If you do take on a second job your employer will find out about it sooner or later, so you may as well make sure that if they do they won't be upset about it.As for sole trader vs limited company, I think only an accountant or a solicitor can properly advise you about that. In most cases I have heard of, the limited company seems to be preferred.

author: ozwolf
author_rank: Regular Contributor
timestamp: January 15, 2015, 04:32:37 am
content: You've done one thing right and that's ask for advice. Well done.Short background on myself so you know where I'm coming from;Since arriving in Australia in 1992, I've been self employedFirst 5 years, I owned and managed an automotive service centre, sold it in 1997From 1997 to current date, I've been in the finance business, ready to retire in about 5 more yearsFor both businesses, I did marketing plans and business plans. Boring I know, but don't all good EE's start with a circuit diagram for a new circuit or product? It's the same for a new business.So, do you have written business, marketing, and cash flow plans? With these in place your chance of success is more likely. Writing these plans will force you to think through and define most of the strategies you will need.In the event your new business needs finance, you will find your bank will ask for these plans.Finally, I offer this -> "Gary's Rule of 2's - it will cost you 2X what you think it will, it will take you 2X the amount of time you thought necessary, and finally you will get inverse of 2 (that's 1/2) of the business you thought you would."If your business plans work under those conditions, then you may have something.Ozwolf

author: LabSpokane
author_rank: Super Contributor
timestamp: January 15, 2015, 06:46:30 am
content: The 2X rule applies to income as well. You'll need to make far more than your current paycheck just to stay afloat.Unless you're repairing medical or industrial equipment, repair is a complete loser of a business.

author: Howardlong
author_rank: Super Contributor
timestamp: January 15, 2015, 07:44:27 am
content: I worked as an independent IT consultant in financial trading for over 20 years as a limited company and did other bits and pieces of electronics and IT support on the side. The IT support was difficult because when someone's system goes down they need you there right away, and by my own admission, I found it difficult, even with remote access, to do a decent job in that practically speaking it wasn't always easy to get up out of the office chair and do those jobs on the side. On the financial side, as i already ran a ltd co, it was no additional work other than a bit of invoicing.As a permie, while your tax code I am sure might change, that is no business of HR: they won't know if you have income from investments or anything else. You will, however, have to do self assessment every year, and have an accountant, as KJDS says, factor in a grand or so for that, but that's before tax of course, you don't get taxed on business related expenses like that.More recently, over the past four or five years, I did more and more electronics design and manufacture, to the extent where I've pretty much given up on the IT consulting, although I keep my toe in the water from time to time, even if it is only going for beers with those that matter: no point in burning bridges I always say, but I haven't sat in an office for 2.5 years as a result.Whether you decide to compete unofficially is up to you: while there may be clauses in your contract, whether they would enforce them or not I couldn't say, but if they are still your bread-and-butter, I wouldn't start giving them excuses to fire you.On the other hand, if you are very lucky and have a compliant employer, it may be possible to fix something up. I know of many people over the years who switched from permie to contract, leaving on the Friday only to return on the Monday as a "temp". It might even be to the company's advantage. Although HMRC can take a dim view of this, and may view it as obfuscated employment from a taxation perspective. If you can maintain multiple sources of income it's a pointer to not being an employee, but there are usually many other things to add to the mix such as mutuality of obligation, how you are managed, ability to substitute, whether it's a fixed price project or simply paid at an hourly or daily rate etc.What I would say is that my view is that there are very few jobs for life these days, and the way HR depts like to churn people (self-serving if ever I heard it!) I don't regret working for myself at all. One contract I had lasted 17 years, and I saw an awful lot of permies come and go during that time! However equally, be very careful about biting the hand that feeds!Whatever you do, get an accountant.

author: AndyC_772
author_rank: Super Contributor
timestamp: January 15, 2015, 08:36:29 am
content: Quote from: JGE_Engineer on January 15, 2015, 01:24:06 amYou need insurance either way. Depending on the nature of your business, it need not be that expensive. I pay around £500 for £2M worth of professional indemnity cover.If you start a Ltd co, then you take on a number of responsibilities in terms of paperwork you need to prepare and file, which in turn means you'll be spending more on accountants' fees than you would if you go self-employed.Which is right for you will depend on how much you expect to turn over. If you're working part time, it may be that the tax you save by having a Ltd co doesn't cover the cost of the extra admin overhead, in which case you're better off self-employed. Accountants will try to encourage you to start a Ltd co earlier rather than later, and although that may be because it's in their interests for you to do so, it's still not a bad idea if you expect your business to grow over time.QuoteIf you start a Ltd co, then your name will be added to the public register of directors at Companies House. If anyone bothers to do a search, they'll find out that you're director of a company.Either way your tax code is also going to be affected, though that's one reason why tax codes exist at all. It tells your employer how much tax to take off your salary, but not why, and they have no right to ask you.I'd work on the assumption that your employer will find out sooner or later, and it might be better to talk to them upfront.If you're designing anything, as opposed to just repairing PCs, then check your employment contract carefully for any clauses relating to IP ownership. What you *really* don't want, is to find that your employer claims ownership of the IP which you've developed independently, or worse, developed and licensed or sold to your own customers. Some companies are very 'grabby' when it comes to claiming IP ownership, and they might use this to make your life very difficult indeed if you're still employed by them.QuoteThis is probably the hardest question. You need a business plan, or at the very least, a few leads to get you started.IMHO computer repair is a complete non-starter, I wouldn't touch it with a long pole.When I started working as a consulting engineer part-time, it was a former colleague who approached me and offered me some work, one day a week. That was enough to get started, and I was fortunate that my employer at the time was open to saving a few quid on the R&D budget by letting me reduce my hours. I didn't have to be secretive about it, and once word got around that I was available to take on contract work, calls from people and companies I already knew started to come in.I now work full time, and I've never had to advertise.QuoteThis is one of the hardest things about running your own business. None of your customers will know, or care, about any of your other commitments, and that means you have to manage your own time as well as your customers' expectations.When I'm asked for a quote to do something, I work on the basis that it's non-urgent, and can be scheduled in after my existing commitments. I make this quite clear when I quote a delivery time. Any project which needs to jump the queue, and which therefore affects the service I'm offering to other customers, carries a substantial price premium - and even then, I'm always free to decline any "urgent" job if I can't do it.Your customers will always want you to drop everything and work on their own particular jobs - but you can't, of course. How you set and manage their expectations is down to your skill as a business owner.QuoteTo some extent, you should follow up on whatever opportunities come your way. If someone offers you a decent wedge of cash to design them a product, and it's something that's within your expertise, then do it! They may turn out to be a customer for years to come, or it may be a one-off, but at least they've got you started.The choice between making your own products vs designing them for others is a big one, though. If you're making products yourself, then nobody will pay you for the NRE (though you may be able to claim R&D tax credits if you're a Ltd company; your accountant will advise). You'll have a lot of upfront expenditure, and will be taking on a substantially greater risk, but the reward is that the business can scale. You'll need to have already had a great idea for a commercially successful product, of course.If you work as a consultant, though, then above all else what you're selling is time. Your earnings can still be good, but they're inherently limited by the hourly rate you can charge and the number of hours in the day.It may be that, by starting as a consultant, you'll end up with expertise in a useful area which will in turn lead to product ideas. You might even be able to partner with one of your customers and form a joint business together, where you share the responsibilities and the profits.QuoteI know the feeling!Don't be afraid of the business side, it's just something to learn. See if you can get a recommendation for an accountant; a good one will do a lot more for you than just fill in your tax return.

author: EEVblog
author_rank: Unknown
timestamp: January 15, 2015, 09:26:24 am
content: Quote from: dannyf on January 15, 2015, 01:37:43 amNot so.The majority of small businesses do not get rich, you just now work for yourself instead of someone else.Some businesses are not scaleable if you are the one doing the work.QuoteI should be very easy tostarta business, if it's not, then you are probably doing it wrong.Making it successful is another matter.My advice, for becoming a company, just be sole trader until you see how it goes.In Oz there is practically no financial benefit to it until you hit maybe $200Kprofita year.Becoming a company just adds lots of accountant expense and paperwork that wastes your time.My accountant has employees and isstilla sole trader.

author: EEVblog
author_rank: Unknown
timestamp: January 15, 2015, 09:31:38 am
content: Quote from: IanB on January 15, 2015, 04:16:26 amAnd what are they going to do if they find out? fire you?Unless you form a rival corporation that is a threat to them, they aren't going to bother suing you.Employment contracts are just designed to:a) Intimidateb) Give them an out to sack you easily and legally

author: EEVblog
author_rank: Unknown
timestamp: January 15, 2015, 09:36:23 am
content: Quote from: AndyC_772 on January 15, 2015, 08:36:29 amI pay about $1200 a year for $10M. Only recently got it. Spent the last 20 years without any liability insurance.A lot people think limited company liability is some magic bullet that protects you from getting sued. It won't in most cases. It's designed to give you an out from creditors if your business collapses.e.g. if you design something that kills someone, they will sueyou, not the company. This is also the same for working for an employer, you as the designer still have personal liability.

author: bookaboo
author_rank: Frequent Contributor
timestamp: January 15, 2015, 09:37:38 am
content: A lot of what I was thinking has already been said but a few pitfalls from my own experience:(1) Don't under price yourself, pretty much everyone I know that started working for themselves made the mistake of thining "40hrs at xx/hr would be great". First you probably will do well to bill for 20 of those hours, then overheads eat a chunk of the rest.(2) Be very careful who you do business with, credit check everyone, seek out reputable companies to deal with, avoid startups and "people with big ideas"(unless you are getting money up front). Look after your good customers and seek more of the same.(3) Hire a day to day book keeper for a couple of hours per week, they do a lot of the basic accounts stuff that a proper accountant charges a fortune for. Keep the accountant for the year end stuff.(4) Have your book keeper relentlessly chase any payments overdue, don't let them linger or before you know it you have bad debt. By having someone else do this job you avoid awkward situations between you personally and customers.(5) Don't keep too much stock, resist the temptation to bulk buy unless you are sure you can turn it over quickly.(6) No free work, no matter how big the firm, how promising the idea or what they offer you for the future - do nothing for free or cheap. Aside from your initial consultancy on a new project which you may have to do to win the business.(7) Charge what the job is worth to the customer, not what it cost you!Good luck

author: Howardlong
author_rank: Super Contributor
timestamp: January 15, 2015, 10:37:33 am
content: Quote from: bookaboo on January 15, 2015, 09:37:38 amIn general, agreed. However very occasionally I will do a freebie if it's clear what's required and it will keep a good customer the way you like them. For example I had a customer who'd spent about $50k with me on one of my products who was having difficulty making it work when out of the lab and in the real world environment he was using it in. I spent a couple of days designing and testing a hardware add on for him as a result. I gained nothing directly from this but I do get further repeat orders. But yes, this is rare.

author: bookaboo
author_rank: Frequent Contributor
timestamp: January 15, 2015, 10:43:44 am
content: Yes I should have been more clear, keeping your best customers happy is key so yeah the occasional little extra is a good idea for them.I've just lost count of the people (usually startups but sometimes big firms too) who want a design done for free on the promise of purchasing X units afterwards, can sound tempting when you are starting up but is practically never a good idea.

author: Howardlong
author_rank: Super Contributor
timestamp: January 15, 2015, 10:50:11 am
content: The customer in question that I mentioned is in fact a start up, in Russia. Russia as with anywhere else abroad, I get payment up front thank you. I relaxed the golden rule once for a well-known R&D organisation based in Germany, thinking surely they'll be super organised. No, they weren't.Chasing up bills is bad enough, but chasing up unpaid bills abroad is like writing a blank cheque.

author: coppice
author_rank: Super Contributor
timestamp: January 15, 2015, 11:04:31 am
content: Quote from: Howardlong on January 15, 2015, 10:50:11 amAn unpaid bill from abroad is basically one that only needs paying if a letter from a local lawyer arrives. Big companies frequently drive small local companies out of business by delaying payments. When the small company is a border or two away what's the point of them ever planning to pay?

author: mikeselectricstuff
author_rank: Super Contributor
timestamp: January 15, 2015, 11:06:49 am
content: I don't think keeping it a secret from your employer is going to be practical.Think about what things you are going to need to do during working hours (especially at short notice) , and how you'd be able to manage that- customer & supplier meetings, trade shows, bank, accountant etc.Even "simple" things like accepting deliveries can cause significant headaches.

author: coppice
author_rank: Super Contributor
timestamp: January 15, 2015, 11:15:37 am
content: Quote from: mikeselectricstuff on January 15, 2015, 11:06:49 amIsn't accepting deliveries at a startup what family members are for?

author: mikeselectricstuff
author_rank: Super Contributor
timestamp: January 15, 2015, 11:20:11 am
content: Quote from: coppice on January 15, 2015, 11:15:37 am

author: AndyC_772
author_rank: Super Contributor
timestamp: January 15, 2015, 11:48:08 am
content: I've been asked to sign an employment contract which would have specifically made me liable for all costs in the event that the company gets sued. Legally enforceable or not, I declined.

author: VK3DRB
author_rank: Super Contributor
timestamp: January 15, 2015, 12:02:21 pm
content: Quote from: EEVblog on January 15, 2015, 09:31:38 amOnce place where I worked the employment contract says "I cannot run any business privately whilst employed there." I told them it is not worth the paper it is written on. What I do in my own private time has nothing to do with them providing it is not a conflict of interest.A previous place, a Japanese electronics company operating in Australia made you sign a contract stating they own ALL intellectual property you develop - even privately. In other words, if I wrote a best seller called Harry Pothead that earned me a fortune, they would own the rights to it.Another place, IBM, stated a condition of employment was that you were not allowed to invest in anything that IBM was involved in. This was contained spelled out in the employee handbook book called "About Your Company". In the 80's I had to get written permission to fix video recorders on the side because they contained microprocessors (I got the permission). In 1987 I wanted to buy $1000 shares in Microsoft. If IBM found out I would be sacked. So I didn't, forever being loyal to the hand that fed me. Bad move. That $1000 would have been worth about $500K by 1998, the year when IBM confiscated $40,000 of my superannuation as they sold me and hundreds of colleagues off to another company against our will. Ironically, "About Your Company" implied you had ownership in it, when in fact they owned you.The IBM lesson taught me a good lesson: Look after yourself first. I was so bitter from the IBM experience I vowed never to work with any large multinational again that exists for shareholder value as their number one goal. You work hard with thousands of unpaid extra hours to help put hundreds of millions of dollars into some CEO's bank account, whose job it is to find out ways to screw you. IBM =.

author: EEVblog
author_rank: Unknown
timestamp: January 15, 2015, 12:19:56 pm
content: Quote from: wilfred on January 15, 2015, 11:40:06 amIt can be, yes. When I worked for a big defense contractor we had high-falutin' lawyers come in to advise all technical staff of their personal responsibility in many areas.Even overall product design that has been checked by the company etc. If you did something deliberate that you know was against best practice or you knew was risky etc, you can be held criminally liable if someone dies or gets injured.Bottom line was:a) Always use "best practice"b) Always document your work and show that you used "best practice".QuoteYes, true, but this was more about criminal liability in terms of someone being killed or injured etc.Sure they'll sue the companies insurer for the money, but that doesn't stop criminal liability in cases of manslaughter etc.And also, this is another thing many people are not aware of. Even having personal liability/indemnity insurance cover doesnotprotect you in criminal cases (manslaughter etc), it only protects you financially. It won't stop you going to jail if you did something reckless that kills someone.

author: EEVblog
author_rank: Unknown
timestamp: January 15, 2015, 12:22:12 pm
content: Quote from: VK3DRB on January 15, 2015, 12:02:21 pmBut even then, what can they do? Fire you is pretty much it.

author: dannyf
author_rank: Super Contributor
timestamp: January 15, 2015, 12:31:12 pm
content: QuoteIn the US, those lawyers would be disbarred quickly.

author: VK3DRB
author_rank: Super Contributor
timestamp: January 15, 2015, 12:33:11 pm
content: Quote from: EEVblog on January 15, 2015, 09:26:24 am$200K profit?No electronics engineers in Australia earn anywhere near that sort of money if they are an employee. If you ran a business with $120K profit doing what you like doing, you should be happy. And you get the tax perks that come with it that employees don't get, like writing off your commuting costs as an expense item.Plus if you are successful in building a business up, you have something to show for it on retirement. Employees in general often end up with sweet f*** all, especially those on lower incomes.But I agree the paperwork is immense, partly thanks to endless government bureaucracy and never ending tax legislation changes. And that puts a lot of people off. And like you said it is a lot of work, and sometimes you don't get the 4 weeks leave employees get. But in many places you don't get the 4 weeks leave you are promised anyway. Fortunately we actually do get our 4 weeks per year where I work.

author: VK3DRB
author_rank: Super Contributor
timestamp: January 15, 2015, 12:39:41 pm
content: Quote from: EEVblog on January 15, 2015, 12:22:12 pmActually they could not fire me... that clause violates the law in this state. And they are not the type to use it as an excuse to fire someone.However, if an employee was running a business that affected his employment work during hours, then that is a problem and it should not be tolerated. Other than that, you should be able to do whatever you want out of hours if it is within the law.

author: AndyC_772
author_rank: Super Contributor
timestamp: January 15, 2015, 01:11:46 pm
content: Some companies use an IP claim as a way to ensure that any bright ideas employees actually do have during office hours are - quite rightly - owned by the company. They don't want employees to claim valuable, patentable technology as their own, on the (dishonest) grounds that they "had the idea while working for another company", 5 minutes after walking out the door at the end of the day. Where someone is employed full-time, I see their point.What this does mean that if you want to work somewhere else doing creative things, it may be a really good idea to ensure your (previous / main) employer knows that you genuinely do invent things and create IP for other people. Crucially, they need to be made aware that they have no claim whatsoever over any IP you generate while doing so.It could get very messy indeed if you invent something cool, make a load of money out of it, and then find an employer claiming ownership of your product based on the terms in your contract. Don't risk getting into this situation.If they won't agree that the IP you generate outside of office hours is yours to do with as you wish, then you need to be prepared to walk away from one job or the other.

author: JGE_Engineer
author_rank: Newbie
timestamp: January 15, 2015, 04:45:25 pm
content: Wow!First of all, thank you, to all who commented and gave advice, there are a lot of points that I already knew in the back of my mind, but it is 100% better when several people confirm.I have designed a website, I have business plans already written, albeit they need updating and reviewing, I never fixed on a name but that's trivial for the paperwork and website / logo.I guess with regards to repairs, I am frequently repairing electronic gadgets and computers for friends and family and friends of, I guess the advice I can take is not to go seeking repair work, but not turn it down if I can and it comes my way.Suppliers, yes, I can see how that can get messy, however, due to the nature of the work I do, I am in contact with a lot of decent suppliers, but yes, you still have to be careful who you go with just in case they mention to someone else and things escalate where I don't want them to.I have family who do book keeping and family who are sole traders and they are willing to help, I have family who are home all day willing to take delivery of goods for me, I am very lucky in these respects, I can get a fully qualified accountant to do the necessary for a bit less than the £1k advised figure.I am under no false illusion that I will forever be able to manage both, I wouldn't want to, I would quite like to start small, and grow, rather than try and "explode" onto the scene, advertising would be difficult in any case whilst still employed.With regards to the employer, I have a full copy of my contract, which I have gone over by myself and with several others looking for anything that will potentially stand in my way.There is no clause in there that states an form of IP will be retained whilst being employed, the contract was not written by the HR manager but in fact by the QA manager, over the many years I have been at this company I have seen people come and go and start their own businesses in similar fields as it turns out, but not one of them has had any comeback, one employee asked about going P/T to run a business and the MD said no, either stay employed or go fully on your own, so this is one reason I don't want to tell him, as it would then put me in the spotlight.The only clause written is that "I will not run a competing business within a 25 mile radius whilst being employed by the company", that is it.I can see the point about everything costing 2 x what is expected (money and time wise), and I am aware that I will need some kind of liability insurance, I have had a look at this and it seems that for £150 a year you can get fairly decent cover for what I would need.I was going for the do whatever comes my way approach, but wanted to double check as sometimes there are ways that worked better for others, so it's pro's and con's for both as each situation is different.I read a business case study where a ltd company director was working for a company, and his own company grew so rapidly that he had to employ staff, and when he handed his notice in he already had 50 or so people working for him, crazy!One thought that led me to the sole trader vs ltd company route question was that I don't know if it is such an issue these days, but some suppliers or customers would deal with you unless you were ltd, apart from the up front vs 30 days on account benefit for a ltd company you have now I am not sure there is much in the way of difference from that point of view.

author: Corporate666
author_rank: Unknown
timestamp: January 15, 2015, 05:00:56 pm
content: Quote from: EEVblog on January 15, 2015, 12:19:56 pmThis varies by country - it makes sense to talk to a lawyer if the OP is serious about branching out on their own. It's always surprising how much people often misunderstand liability and insurance. Having insurance doesn't mean the OP won't get sued or that he will be protected if he's sued and loses... if he has $1mm of insurance and loses a suit for $2mm, he has to pay the other $1mm if a sole proprietor or his business must if he's incorporated.In terms of criminal liability, that varies by country as well. In the USA, you are well protected by being a corporation even if you don't have liability insurance. They can't successfully sue personally unless the corporation was run fraudulently. For anything to be a crime, there must be "mens rea" - "a guilty mind". And in criminal negligence, there also has to be a specific act that was "guilty". That guilty act can be such extreme recklessness that it was foreseeable to a reasonable person that something bad could happen. So a manager letting his high school kid design a power supply for use in medical equipment would be so reckless and likely to lead to harm that to do so would be evidence of a guilty mind and criminal liability. But just doing something like a bad ground method on a plug-in device wouldn't rise to that level.I'm guessing the lawyers wanted to put some fear into the engineers to help reduce the company's liability. It's a pretty shitty thing to do - telling people they are responsible for things they aren't, but I can see why they do it.

author: Corporate666
author_rank: Unknown
timestamp: January 15, 2015, 05:09:42 pm
content: As far as the original question, Dannyf and the guy in Spokane pretty well hit the nail on the head.It is *extremely* difficult to find a business/niche that produces enough revenue to satisfy the salary of a single person, let alone that of a corporation full of people.Imagine someone earns $75,000 a year (a reasonable salary for an EE). There is easily 25% overhead for a regular worker (costs of payroll and accounting, benefits, etc), so you need $100k in profit to be able to earn $75k in salary. A business might be considered to be doing very well if gross profits were 50%... and if half your time is spent earning money with customers and the other half in finding business and handling administrative work - that means you need to have $200k in sales to be able to pay yourself that $75k.$200k in sales per year is $4,000 each week - every week - for a whole year. That's $800 per day, or $100 per hour just to take home $75k. And if half your time is spend developing business/sales/administrative, you need to be able to bill $200/hr for time spent working.That is a tough nut to crack... and in reality, if you're just going to get $75k/yr out of it... you're better off just going to work for someone else and having job security and a much more stable and less stressful job. So to make it worth it, you need the potential to earn a lot more than $75k, meaning a lot more than $200k/yr or $200/hr in billable time.It is exceptionally hard to do that in a business like repairing stuff. I'd say it's virtually impossible. The only folks you see doing such work around here are the small TV repair shop type places that have been in business for 30 years and the guy is known for miles around and works out of his home with no mortgage and low expenses. Or you get places like Geek Squad where they bill out people at $30/hr (or whatever) and pay them $20/hr and make (a little) money on the spread - then just have a TON of people doing it so they make money on the spread of hundreds instead of just a few.As dannyf said... if you're going to do it - make SURE you have the customers lined up before you go fulltime.

author: ajb
author_rank: Super Contributor
timestamp: January 15, 2015, 07:55:23 pm
content: Quote from: EEVblog on January 15, 2015, 12:22:12 pmIn the US at least, it's not uncommon for more savvy employers to specify liquidated damages in non-compete and non-disclosure agreements, which means they can claim that amount from you in case of breach of contract. Without a contractually specified amount, the employer would have to prove the actual amount of money you cost them by, say, luring customers from their company to yours in order for them to make a legal claim for damages, which is extremely hard to do. Of courseclaimingdamages andbeing awardeddamages are two different things, and offhand I'm not sure how enforceable liquidated damage clauses are in employment contracts.

author: nctnico
author_rank: Super Contributor
timestamp: January 15, 2015, 08:34:27 pm
content: Quote from: JGE_Engineer on January 15, 2015, 04:45:25 pmI'd be carefull with spending that money. I have been looking for a real liability insurance for my electronics consulting business but I have not been able to find one which actually covers something. I have limited the risk by limiting the damages to no more than what a contract is worth. Even if you have insurance then it is wise to put such a clause in contracts or your 'terms of sale'.

author: KJDS
author_rank: Super Contributor
timestamp: January 15, 2015, 08:41:06 pm
content: I had an interesting conversation a few years ago with a liability insurance broker. The were going through their standard set of questions and asked, "if the product goes wrong could it kill someone."They declined cover when my reply was "I hope so, that's what it's designed to do."

author: nctnico
author_rank: Super Contributor
timestamp: January 15, 2015, 08:49:36 pm
content: And setting up an Ltd (or equivalent) isn't going to help much either. At least in the NL they can still get to the owner in certain cases.

author: mikeselectricstuff
author_rank: Super Contributor
timestamp: January 15, 2015, 08:55:49 pm
content: Quote from: JGE_Engineer on January 15, 2015, 04:45:25 pmProbably not a big issue, specially if you choose a company name that is sufficently vague that people assume it's more than a 1-man band.e.g. MegaWidgets is better than Fred Bloggs GadgetsAs regards 30 day credit - Credit cards are often a viable option to achieve nearly the same thing without the hassle of applying for accounts. IME companies (e.g. PCB shops) will offer some credit after an intial pre-paid or paid on delivery order

author: mikeselectricstuff
author_rank: Super Contributor
timestamp: January 15, 2015, 08:58:39 pm
content: Oh and another thing, as nobody uses cheques nowadays, unless you actively need "business" facilities, there isn't a need to get a "business" bank account in the company name, which is vary hard to find without charges nowadays - a seperate (free) personal account will often do fine.

author: nctnico
author_rank: Super Contributor
timestamp: January 15, 2015, 09:04:24 pm
content: When I listed my firm the tax inspector didn't like me using a personal account. He rather had me setup a seperate account for business because it is easier to seperate private and business money streams.

author: mikeselectricstuff
author_rank: Super Contributor
timestamp: January 15, 2015, 09:17:07 pm
content: Quote from: nctnico on January 15, 2015, 09:04:24 pmI didn't say use your existing personal account. That would be dumb. Open a new personaltypeaccount as opposed to a business one.YMMV in different countries of course. The only thing I ever needed a business account for was to pay in cheques made out to the company name. Now everyone pays by bank transfer, so the customer has no idea they are paying to a non-business account. Might get messy if you need bank refs for credit applications though.

author: jpb
author_rank: Super Contributor
timestamp: January 15, 2015, 09:42:08 pm
content: I don't know how relevant it is but I and two friends started and ran a small business in the UK putting our specific electronic/physics expertise into software.We did this for about 14 years.We didn't make a lot of money though we did eventually sell out to a larger company and made some money (about the same as I would have got if I'd lived off what I lived off and put a salary aside). But it was a lot of fun most of the time.What I would say is, if you want to go for it then go for it - don't try and do it at the same time as being employed. But you may have to go with little or no salary whilst building the business for some time (we did this for nearly two years).Don't think working for yourself allows you more freedom than working for others - you still have to do VAT returns, Companies House returns, Director's expense forms and your personal tax returns are more complicated.We grew our business organically - we didn't borrow loads of money (or any money) from a bank or venture capitalists. This is safe but you're less likely to get rich quick.The other thing we learned was be flexible - we started selling software but saturated the market in the UK very quickly (it was very specialist) and switched to doing contract research work for big companies and the government using our software instead and then we developed a pulsed-measurement instrument for semiconductor devices and it was this technology that we eventually sold on.

author: EEVblog
author_rank: Unknown
timestamp: January 15, 2015, 09:51:57 pm
content: Quote from: VK3DRB on January 15, 2015, 12:33:11 pmThe math isn't that hard to prove it at the basic level.Company tax rate is a fixed 30%. Over $80K income you pay 37% tax, and over $180K it's 45%. But it's a scaled tax bracket. A decent earning employye pays about 30% or less personal tax. i.e. the same level of tax as you would as a business.Being a Pty Ltd company does not mean you pay less tax, in fact you can pay more because it's not scaled.There is some stuff you can do with franked dividends, but it doesn't amount to much. The bottom line is you have to be earning a LOT in order to make a Pty Ltd a tax advantageous system.And no, you cannot claim your travel expenses to and from work just because you are a Pty Ltd. Once again, it's not a magic carpet tax ride.QuoteIndeed. If it's a company you can sell.QuoteThen report them, that's illegal for full time employees.

author: Yago
author_rank: Frequent Contributor
timestamp: January 15, 2015, 10:36:07 pm
content: To reiterate what has been said about doing repairs.Really think about this more.It is one thing to repair for friends and people you know, outside of that is a nightmare IMHE.Before you know it, you soon end up with the mindset of Dr House, everyone lies and everyone is out to rip you off.Soon sucks the humanity out of you, and that is IF they don't somehow get the upper hand in an act of fiction against you and take monies and your reputation.IE claims made a computer repair shop "the unit was ok when I brought it in" (this was said of a laptop smashed into small pieces and carried around in a paper bag, (not me accepted the job btw).Yes a hardened cynic, but I would rather not put myself into the hands of the UK legal system, appears like roulette these days.

author: dannyf
author_rank: Super Contributor
timestamp: January 15, 2015, 10:38:51 pm
content: QuoteAgree wholeheartedly. It is increasingly difficult to make a case for electronics repair - it is either not repairable (designed that way), or so uneconomical to repair.I would think about other services that are hard to be replaced, like cars, home repair, etc.

author: mikeselectricstuff
author_rank: Super Contributor
timestamp: January 15, 2015, 10:42:43 pm
content: Repairs - run, run far, run fast!Unless maybe you find a small niche (e.g. some obscure industrial things, common faults on unsupported devices etc.) where you get to be the "go-to" person who has the knowledge & parts.If you like and/or are good at repairing things, the only way I'd suggest it can be worthwhile is buying/dumpster-diving faulty stuff for peanuts, repairing and selling on. That way you can abandon the hopeless cases, don't have to deal with customers and can do stuff at your own pace .

author: dannyf
author_rank: Super Contributor
timestamp: January 15, 2015, 11:16:33 pm
content: Having said that, a surprising niche for repair is cell phones.It does take a special person to do that, however.

author: IanB
author_rank: Super Contributor
timestamp: January 15, 2015, 11:34:57 pm
content: Quote from: dannyf on January 15, 2015, 11:16:33 pmAlso surprising are YouTube demo videos by "phone repair specialists" in which the clumsy oaf in the video clearly has no clue what they are doing...

author: JGE_Engineer
author_rank: Newbie
timestamp: January 16, 2015, 01:05:26 am
content: Any advice as far as I am concerned is valuable and relevant!Loud and clear regarding repairs though! Mike, that is a good idea about finding broken stuff and selling it (After fixing it of course).I am not so naive that I would rush into something, but there has been some really good points raised from this thread that I find invaluable, so thank you all once again for your advice and input!Everyone has their own experiences or a friends' / family members' experience with business related topics, and I have my own, and one thing I have been told over and over again (apart from run away from repairs) is not to underestimate the amount of effort that it will take to get it up and running (the first year or two at least for example).It is an exciting chapter in my life, and I want to make sure I am armed with enough information and tips even if I don't require them all at the beginning, no doubt they will all be useful at some stage or another.

author: dannyf
author_rank: Super Contributor
timestamp: January 16, 2015, 01:23:16 am
content: QuoteJust so you know that the point of presenting you with all the risks upfront isn't to prevent you from getting into it. Quite to contrary, my experience has been that risk taking, especially when you are able to take risks, is exciting and when done wisely, highly rewarding, both from a career and financial point of view.I look at my own experience and I attribute where I am financially to risk taking early in my career. I would have been just another office worker had I not "gone crazy" when I could.So, if you can take risks and are willing to take risks, do it, because risk taking is a luxury that you may not be able to afford later on in life.

author: JGE_Engineer
author_rank: Newbie
timestamp: January 16, 2015, 01:49:22 am
content: Hi Danny,Yes, I know, it is better to be hit with the potential risks before unknowingly taking them!Wise words, and I agree, if they are worth taking, then why not, before it is too late!

author: nctnico
author_rank: Super Contributor
timestamp: January 16, 2015, 08:55:42 am
content: Quote from: JGE_Engineer on January 16, 2015, 01:05:26 amI started by doing small contracts next to my day job. At some point that started to take off so I finally quit my job. That way I didn't need a lot of money to get started. It also depends on regular expenses like a mortgage, money for food, car costs, etc.

author: VK3DRB
author_rank: Super Contributor
timestamp: January 17, 2015, 02:25:15 am
content: Quote from: EEVblog on January 15, 2015, 09:51:57 pmReport to who to? In the State of Victoria, it is legal not to give employees leave when they want it, or even to let them have leave at all. It has to bemutually agreeable. That is, BOTH parties must agree to when the leave is to take place. One company I know, owned by private equity parasites, pays out some employees' leave in cash (at the higher marginal tax rate) if they forfeit the leave. I think it should not be allowed, but it is legal. Annual leave is healthy. Everyone needs a break.

author: dannyf
author_rank: Super Contributor
timestamp: January 17, 2015, 02:44:24 am
content: QuoteWhy? It is a matter between two parties and why a 3rd party (the government) should be concerned? If someone wants to trade in his time for money, or vice versa, what's so wrong about it?

author: EEVblog
author_rank: Unknown
timestamp: January 17, 2015, 03:51:04 am
content: QuoteYes, do this.Forget business plans, financial plans, and all that formal blah blah people tell you you must do. Just find something you enjoy doing and do it on the side. If it involves finding clients, then find clients, all the while having your day job to support you.If setting up a service oriented business cost you much more than a business name registration, business cards, and a $10 website then you are doing it wrong IME.Once it gets successful then quite your day job, or let it get to the point where you don't care if they fire youQuoteWork yourself toward the position of potentially having a few products that fulfill some kind of niche. Perhaps ones that are easily customisable for clients.Working as purely a service oriented business is not fun. It can be either feast or famine, and you want to avoid that if possible. So having some stock products to bring in some base level income is a really good idea.It's easier to make a successful product oriented business than it is a service oriented business. And it's also easier to manage your time and produce more income in a product oriented business. In a service oriented business you only make money when you charge time, and there is only one of you. But with a product business you can easily have quite a few products for sale that take relatively very little time to fulfill orders for. So you can get more money for less time commitment, and that grows as your product portfolio grows. You can stay a sole trader/one-man-band for a lot longer than with a service business.A service business is also continual risk, one job after the next, you are always afraid that the next job is going to be nightmare that will cost you time and/or money and/or sanity.

author: EEVblog
author_rank: Unknown
timestamp: January 17, 2015, 03:53:38 am
content: Quote from: VK3DRB on January 17, 2015, 02:25:15 amYes, but:http://www.fairwork.gov.au/about-us/policies-and-guides/fact-sheets/minimum-workplace-entitlements/annual-leaveQuote

author: DeanA
author_rank: Regular Contributor
timestamp: January 17, 2015, 08:13:31 am
content: Quote from: EEVblog on January 17, 2015, 03:53:38 amI've worked for small businesses here in Sydney that close down for 4 weeks over Xmas new year when the owner/boss wants to take his holidays. That was not "mutually agreeable", at the time I was single and would have preferred to take my 20days annual leave outside peak/school holiday times. Left me with 3 days annual leave per year due to the public holidays over Xmas, so no real chance for annual leave entitlement to accumulate. It was close to home though, gotta take the good with the bad when you're "working for the man" I suppose.

author: Howardlong
author_rank: Super Contributor
timestamp: January 17, 2015, 08:49:46 am
content: Quote from: EEVblog on January 17, 2015, 03:51:04 amAgreed, anyone that talks about a three year plan is wasting your time. For example, I have no idea why investor types seem to value a three year plan, nobody really knows how successful, or otherwise, something is going to be. Even a one year "plan" has no value as far as I am concerned. I generally plan a maximum of three months ahead, that's my maximum lead time for a few line items in one of my products. Beyond that, I rely on my past experience, and that there'll be no armageddon.

author: EEVblog
author_rank: Unknown
timestamp: January 17, 2015, 09:01:23 am
content: Quote from: DeanA on January 17, 2015, 08:13:31 amSmall businesses?Shutting down a company and forcing people to take annual leave is standard fare for large companies and also government departments.Good ones will will allow you to take unpaid leave instead if you want to accumulate.

author: AndyC_772
author_rank: Super Contributor
timestamp: January 17, 2015, 09:50:56 am
content: Quote from: Howardlong on January 17, 2015, 08:49:46 amIf they want to see a return on their investment, then they'll want to be sure that getting a return isn't going to be contingent on extraordinary good fortune. They want to know that, givenrealisticassumptions about a business's likely income and outgoings, itcanmake a profit.Nobody expects a new business to accurately follow the forecast, especially if it's in the early stages with no trading history and regular customers. It would be foolish, though, to invest in a company which can't possibly make a reasonable profit unless things happen to go exceptionally well for it. Drawing up a business plan is supposed to highlight whether or not this is the case.

author: Howardlong
author_rank: Super Contributor
timestamp: January 17, 2015, 10:18:59 am
content: Quote from: AndyC_772 on January 17, 2015, 09:50:56 amWhile I understand what you're saying, my problem with it is that any figures would be complete conjecture, they're completely made up finger in the air, so what's the point? How can you possibly present realistic figures particularly as a start up?What you could do is say that, if we sell 1k widgets it would look like this, if we sell 100k it would look like this, if we sell nothing we'll lose $x. But that's not how they work, they take a single set of figures based on a (typically optimistic) assumption with zero foundation.

author: EEVblog
author_rank: Unknown
timestamp: January 17, 2015, 10:45:20 am
content: Quote from: Howardlong on January 17, 2015, 10:18:59 amYou can't. It's always pie-in-the-sky.That's why investors these days, for hardware in particular, want to see you do a crowd funding campaign first. They use that as a real-world metric of how much demand there is for the idea.Gone are the days of getting a business loan to start a business, you just start the business. Either boot strap your idea, or crowd fund your idea. Of course you can fund it yourself with debt by say mortgaging your house, but you'd be a fool to do so.Smart players have always boot-strapped small manageable product ideas, because:a) you can't get turned down by anyoneb) you can't lose any big sum of money, just your timeAnd with today's marketplace anyone can develop, build and market a product for a fraction of what it used to cost.

author: Howardlong
author_rank: Super Contributor
timestamp: January 17, 2015, 11:02:07 am
content: Quote from: EEVblog on January 17, 2015, 10:45:20 amThat is exactly the way I started with my first product. I funded it myself, and although I did have offers of investment, I couldn't face not being my own man, having others both pushing direction and wanting a piece of the action. I invested a lot of my time, many man months, and about £6k in cash in my first product. Of course without a track record in manufacturing at the time most suppliers wanted the money up front, although this also simplified things too as there were no invoices to remember to pay. As it happened I was lucky, I'd completely underestimated demand, and it took eight months to be in a position to maintain constant stock, with the receipts being re-invested into new stock.(Then there was Paypal, who unexpectedly invoked a payment delay of a couple of weeks in the beginning. At those early times cash is king, and Paypal arbitrarily withholding balances on a whim did not help one iota with cashflow. Even sometime afterwards, I remember making the mistake of accessing my Paypal account from abroad once, next thing I know all of my withdrawals went into pending status for a couple of weeks.)

author: VK3DRB
author_rank: Super Contributor
timestamp: January 17, 2015, 11:14:46 am
content: Quote from: mikeselectricstuff on January 15, 2015, 10:42:43 pmIt is very difficult to make money repairing consumer junk. I tried this in the early 80's as a side line to my main work and earned next to nothing, using my skills to fix a TV for some couch potato who needed his TV back urgently to watch the next exciting episode of Days of Our Lives.However in 1983 I discovered I could buy clapped out TVs from around Melbourne, fix them and sell them in my spare time. I made a bucket load of money... as much as, and often more, than my full time IBM engineer's salary at the time. The bonus was I learn heaps about the practical aspects of analogue circuitry that my degree course would not entail. In those days, TV's were worth fixing and manufacturers gave you heaps of technical information and spare parts were freely available.The bottom line is, running a business fixing things can be in fact be profitable, but you need to be creative as to how to go about it, and go for a market where the profitability would be high.

author: EEVblog
author_rank: Unknown
timestamp: January 17, 2015, 12:04:41 pm
content: Quote from: VK3DRB on January 17, 2015, 11:14:46 amYes, it's possible.Heck, if I worked hard at it I'm sure I could make a meager living from buying and selling ebay test gear and other stuff. No need to repair, you just have to know how much stuff is worth locally.

author: nctnico
author_rank: Super Contributor
timestamp: January 17, 2015, 03:06:28 pm
content: Quote from: Howardlong on January 17, 2015, 10:18:59 amA business plan will show you whether your ideas are feasible and what kind of hourly tarif you need to charge or what margin you have to make on a product. I made a business plan before I started to work fulltime for my own business. I carefully estimated that I should work 9 months per year while generating 30 billable hours per week. That doesn't sound like much but look at how much time of your job you spend on answerring e-mail, phone calls, meetings, administrative tasks, etc.

author: Galenbo
author_rank: Super Contributor
timestamp: January 17, 2015, 11:40:36 pm
content: Quote from: dannyf on January 15, 2015, 11:16:33 pmThat's a full mechanical job !If you arrive to open and close the casing without damaging, you are already top-10.The most repairs are replace screens, cleaning connectors and so on.

author: Howardlong
author_rank: Super Contributor
timestamp: January 17, 2015, 11:50:52 pm
content: Quote from: nctnico on January 17, 2015, 03:06:28 pmThat only works if you know you are going to have work coming in. Say you've been lucky, and landed a year long contract with an outfit that isn't going to fold. When you're inventing widgets and bringing them to market, it's a different story.

author: Galenbo
author_rank: Super Contributor
timestamp: January 17, 2015, 11:51:02 pm
content: Quote from: Howardlong on January 17, 2015, 08:49:46 amThese things are useful for restaurants, bakers and other "mainstream" little businesses.Often, to be profitable, they count more than the habitants of the village as customer, and want to rent a shiny building with 3 employees, and pay all the equipment with a rent in the bank.The numbers in the businessplan the show them to do it otherwise.

author: nctnico
author_rank: Super Contributor
timestamp: January 18, 2015, 12:38:07 am
content: Quote from: Howardlong on January 17, 2015, 11:50:52 pmNo no no and no. A business plan is basically a reality check. I've seen people sink over US $500k into developing a product without thinking about how to sell it. Ofcourse that failed miserablyIn case you want to invent & sell widgets you need to have a good idea about the market they are for and how to penetrate that market. A business plan addresses that before starting development (and potentially wasting money).

author: IanB
author_rank: Super Contributor
timestamp: January 18, 2015, 02:27:26 am
content: Indeed. The worst way to fail at business is to spend money now, hoping for a return later. Business is about making money, not spending money. If you don't have a clear and realistic plan for how people are going to hand over money to you, your business is doomed to failure.

author: EEVblog
author_rank: Unknown
timestamp: January 18, 2015, 03:19:10 am
content: Quote from: IanB on January 18, 2015, 02:27:26 amIndeed.QuoteFormal plans are a crap shoot, don't bother.In terms of a product based business, just do some basic research which costs you nothing, make a product you like for as little as possible with enough margin built in, and then suck-it-and-see who wants to buy it.For example, before the blog, I knew that if I got a project published in the magazines then I could easily sell say 100 kits, so it was fairly low risk in buying 100 blank boards (which you had to back then when 100 was almost the same price as getting 2 made). And it's now much much cheaper and lower risk to develop a product these days with crowd funding and low cost prototypes and manufacture.An example I like to give of doing simple product design high risk was Mitch Altman's TV-B-GONE. IIRC he paid over $30K for tooling and kitting up before the first unit hit the market. Sure he got lucky that it was very popular, but it wasn't that popular because he spent $30K tooling up. It would have been just as popular if he spent $3K, or maybe even $300, and used an off the shelf remote case.

author: mtdoc
author_rank: Super Contributor
timestamp: January 18, 2015, 03:31:18 am
content: Quote from: EEVblog on January 18, 2015, 03:19:10 amThat's interesting history. Coincidently, I was recently in San Francisco for a conference and had time to kill one evening. I went the the Noisebridge hacker space just to check it out. Mitch was there teaching a beginner soldering class so I bought one of his TV-B-Gone Kits and joined in just for fun. He is a super nice guy and when I mentioned possibly starting a Hacker space in my small town he was extremely supportive and offered help if needed.I had a blast walking back to my hotel later and turning off TVs in the window displays on Market street.

author: Corporate666
author_rank: Unknown
timestamp: January 18, 2015, 04:02:03 am
content: Quote from: Howardlong on January 17, 2015, 10:18:59 amIf the figures in the business plan are complete conjecture, then the person writing it didn't do their job.You can't necessarily predict sales with a high level of accuracy, but you can make reasonable predictions based on market research. Research will also tell you reasonable growth rates for a new company and what the market is doing (growing, stagnant, shrinking, etc).A potential investor will also be doing their due diligence, so the numbers in the plan better be in line with the numbers an investor comes up with during DD, or they are going to know the plan writer is just talking out of their ass.

author: Corporate666
author_rank: Unknown
timestamp: January 18, 2015, 04:05:04 am
content: Quote from: EEVblog on January 17, 2015, 10:45:20 amThere is billions of dollars being put into small (or start up) companies in the USA every year - the vast majority of them didn't get started with crowdfunding. It's a minuscule minority that go after crowdfunding and in most cases - it's a bad idea to start with crowdfunding, IMO. The reason most of them crowdsource is because VC's wouldn't touch most of those hacks with a ten foot pole. The way most of the run their businesses is laughable. It's a tiny minority who know what they are doing.

author: Corporate666
author_rank: Unknown
timestamp: January 18, 2015, 04:12:37 am
content: Quote from: EEVblog on January 18, 2015, 03:19:10 amIt depends what you're trying to do.For someone trying to make a small business that will give them enough income to be "self employed", then starting small is fine. But Tesla could never have started small, nor could any of the companies making mobile phones, etc.Business growth in a fast growing market can be exponential... which means starting out with a lot of money can put you years ahead of where you would be if you tried to bootstrap. Not to mention, many businesses have a barrier to entry such that bootstrapping is not feasible.Business plans are always a good idea - especially for small business owners. It's too easy to get caught up in the little things and forget the big picture. A well researched and realistic business plan keeps the founder in touch with the big picture, if done correctly.

author: Corporate666
author_rank: Unknown
timestamp: January 18, 2015, 04:18:58 am
content: Quote from: Howardlong on January 17, 2015, 11:02:07 amIt very much depends on each situation.I'm working a deal right now in the automation business. We've passed the seed phase and are looking for $1 million in startup capital. The business plan (based on realistic market research) has us around $10 million in sales by year 5.We could bootstrap it but it's an emerging and fast moving market, and bootstrapping would put us years behind, and significantly compromise our potential. If we hit $10MM in 5 years with fast growth, the hope would be to then sell the company for $20MM and all of the founders do pretty well in the deal.Investors who are investing for the right reasons won't be 'pushing you around', they are investing because they believe the founders are the ones to make the business successful - not so they can tell them what to do. And it's sometimes better to have a smaller piece of a bigger pie than a bigger piece of a smaller pie.

author: IanB
author_rank: Super Contributor
timestamp: January 18, 2015, 04:24:16 am
content: Quote from: EEVblog on January 18, 2015, 03:19:10 amAnd that's your business plan! Your research showed that selling 100 units was probable, so there was a low risk in stocking 100 units in advance. On the other hand, if you had paid for 1,000,000 boards to be made, you would likely be out of pocket.Business plans are nothing more than realistic market research and accounting. They help you to avoid basing your business projections on fantasy rather than reality.Yes, selling 1,000,000 units will yield a huge profit, but failing to sell 1,000,000 units you have paid for in advance will yield a huge loss. Market research allows you to plan appropriately.

author: EEVblog
author_rank: Unknown
timestamp: January 18, 2015, 04:48:28 am
content: Quote from: Corporate666 on January 18, 2015, 04:18:58 amAnd the percentage of business plans that are also based on "realistic market research" that fail in the first year or two is very high. Based on pure statistics, odds are probably against a startup making it to the 5 years as per the business plan.Not saying it's right or wrong, just pointing out to others who may not know, that business plans, no matter how well thought out, often "come a-gutser" as we say here.QuoteBut bootstrapping also gets you runs on the board, and can in fact get you to market earlier.Sitting around hoping for an investor can also put you behind. Not uncommon to take a year or even two to find funding for an idea, and then you have to hire hire and get up to speed before you can even think about hitting the market with something.With the resources available today to the individual, the keen midnight engineer can easily out-start a formal startup.

author: EEVblog
author_rank: Unknown
timestamp: January 18, 2015, 04:51:23 am
content: Quote from: IanB on January 18, 2015, 04:24:16 amCorrect, but the big difference is I never wrote anything down, nor thought about it as business plan, because it wasn't a formal business, it was just an extension of the hobby that turned out to do pretty well for itself.QuoteDon't ever believe any market research that tells you you'll sell a million widgets. Not if you are playing with your own money anyway.

author: EEVblog
author_rank: Unknown
timestamp: January 18, 2015, 04:56:08 am
content: Quote from: Corporate666 on January 18, 2015, 04:12:37 amAnd that's exactly what the OP is trying to do here.So writing business plans and all that formal stuff is the wrong way to go about it in the OP's case IMO.QuoteAnd likewise it's also all too easy to get caught up following some ill-conceived or inflexible business plan into the ground.

author: nctnico
author_rank: Super Contributor
timestamp: January 18, 2015, 11:22:32 am
content: Don't think a business plan is something rigid. Plans always change but if you plan things in an orderly fashion you avoid going left and right instead of forward. I've seen that a couple of times too. When things get tough some people tend to jump from left to right trying to grasp straws. If they sit down, take a look at the big picture / analyse their situation and write down their options they will move forward and be much more succesful in the end.

author: Howardlong
author_rank: Super Contributor
timestamp: January 18, 2015, 02:11:09 pm
content: Quote from: nctnico on January 18, 2015, 11:22:32 amI can only go from my own experience of running my own business for the past 25 years, and while I understand that investors may think that three year plans have value, I can only say that they're almost always not worth the paper they're written on.Now if they were to ask how the financials would look given a few scenarios based on different sales volumes, I would have more time for them, showing how many you need to burn through to break even, what the returns are if you sell x or y thousand. But to base it on a single finger in the air guess of volume makes no sense to me, you might as well build a house on sand.One product I developed was based on a single proprietory chip that was fundamental to it. About 15 months after the product was released, it was still selling well, but then came the bombshell: that chip developer went belly up. Try as I might I could not get the liquidators/receivers/adminsitrators to release product despite offers of cash, and for them to name their price. Despite there being 250,000 chips sitting in a warehouse in Wales, it was going nowhwere. Where would that be in a three year plan?I fear we're going to have to agree to disagree!

author: nctnico
author_rank: Super Contributor
timestamp: January 18, 2015, 03:02:16 pm
content: A semiconductor manufacturer going belly-up or discontinuing a device would have been in the 'risk analysis' section of a business plan.

author: Howardlong
author_rank: Super Contributor
timestamp: January 18, 2015, 03:53:59 pm
content: Quote from: nctnico on January 18, 2015, 03:02:16 pmFor an investment of a few thousand, that's just not going to happen I'm afraid.Maybe if you live in the merky M&A world where investments are seven or more figures, but not for a few K.Just sayin'!

author: ozwolf
author_rank: Regular Contributor
timestamp: January 18, 2015, 10:49:58 pm
content: Quote from: nctnico on January 18, 2015, 03:02:16 pm+1Ozwolf

author: JGE_Engineer
author_rank: Newbie
timestamp: January 18, 2015, 11:45:36 pm
content: Thank you all for your advice so far, there is a lot to take in, I am sure I will spend a good while sifting through this post!WRT the business plans etc, yes, I have a plan, no it is not up to dateand it does seem to be virtually impossible to predict what will happen too far ahead from what others have said.There has been a lot of talk about "niche" products, these also seem to be hard to think of!However, say I have a new product which will change the world, or at least be of interest to someone, what is a good way of making people aware, I have read a number of articles on marketing but they seem to be geared towards running a restaurant or printing business, i.e. door to door, press adverts etc, it doesn't seem to be quite the right approach to finding out who in your area would be interested in such a service / product when it comes to EE / IT, I mean I can search on the net for companies within the vicinity of me and see what they do and if they would perhaps be interested, but there must be better ways of approaching people / businesses with potential product ideas.I have found myself almost becoming a PI in what kind of businesses and potential competition around my area, not sure if this is borderline obsession but I find myself particularly in the last year or so, whilst thinking of if I actually wanted to do this or not, every 4-6 months driving around the business parks and industrial estates looking for potential customers / competition.I guess in terms of paperwork and plans etc, I would like to "fund" my first venture entirely, as I feel in years to come, if I am still going, it would be pretty good to look back and know I did it by myself with no help from others, but I am not afraid to approach banks etc for loans if I need to, and if I need to I would do what they require me to do.I have asked a few potential suppliers with regard to credit terms etc, and they seem to say after the first few initial orders, I would be able to apply for credit terms if I required it, maybe it's vain of me, but I am thinking ahead for larger orders.So so much to think about!

author: dannyf
author_rank: Super Contributor
timestamp: January 18, 2015, 11:52:54 pm
content: QuoteEquity is expensive and you should try to use the least expensive form of capitalization - loans from a bank or from friends, etc. Don't raise equity unless you have to.The key, as I stated earlier, is to 1) understand why you are in this business; and 2) know before hand when to let your baby go.Both are incredibly difficult to do when you are emotionally involved with the project and very few people can make a rational decision in those scenarios.

author: EEVblog
author_rank: Unknown
timestamp: January 19, 2015, 12:01:18 am
content: Quote from: JGE_Engineer on January 18, 2015, 11:45:36 pmI've never used credit terms for any parts, always paid cash. And anyway, a credit cardiscredit.A good business will always be cash flow positive and have plenty of cash on hand for those larger up-front orders.i.e. if you are bootstrapping a product and you aren't bringing in enough cash to fund future buy orders, then you have priced your product wrong

author: Corporate666
author_rank: Unknown
timestamp: January 19, 2015, 05:41:27 am
content: Quote from: EEVblog on January 18, 2015, 04:48:28 amIf the business plan isn't done well or correctly, then the majority of those companies will fail inside of 5 years. However, for plans that are done correctly, a majority of them will succeed - actually a pretty high majority. Most professional angels or VC's are estimating that 20-30 of their investments will return nothing, a further 50-60% will return the original investment plus some profit, and 10-20% will return huge profits. The idea that "most businesses fail" is true, but that's largely because they are undercapitalized or the execution was just wrong. A correctly done business plan eliminates both those problems.QuoteWell, in this case you're assuming a binary choice between bootstrapping and doing nothing while waiting for money - but in this case we're not doing that, and most people looking for investment don't do it either. Actually, sitting around doing nothing until you get the $$ is a pretty effective way to ensure you won't get any investment. You still need to develop your product and have all your manufacturing ducks in a row - and if you're smart, you'll have contingency plans for what you do if the investment doesn't come. But starting out small and taking advantage of first mover benefits only works if you're selling into the right market with the right product. Having significant capital behind you allows you to approach that process in a different way and exponentially increase your results. That's what the investor is betting on anyway... they want to know that you will be successful in any case, but with their money you will be really successful.As far as funding timeline... if the idea is good and the business plan is done well, I'd say it's more like 60-90 days from when you are meeting investors until you have a deal closed. But it goes back to the idea that someone sitting around waiting to get an investment isn't going to get very far. The investment process happens concurrently with developing the business. If the idea is solid, the team is good and the plan is reasonable, getting an investment is never an issue. When people can't find $$, it's because one of those elements is missing.

author: Corporate666
author_rank: Unknown
timestamp: January 19, 2015, 05:44:13 am
content: QuoteAnd likewise it's also all too easy to get caught up following some ill-conceived or inflexible business plan into the ground.Any business plan should be updated on at least a yearly basis, if not twice a year - that's par for the course. It's sort of like making a shopping list - if you have one, you're more organized, and if you're expecting someone else to help you shop, having a list is almost a requirement. It doesn't mean you can't buy something else while you're at the store or choose to skip something, but if you write a list and toss it in the trash on the way in - then the person who is helping you shop isn't going to think you're very organized and isn't likely to let you borrow their credit card next time you go

author: Corporate666
author_rank: Unknown
timestamp: January 19, 2015, 05:52:52 am
content: Quote from: Howardlong on January 18, 2015, 02:11:09 pmOf course a business plan should include multiple scenarios for "low, medium and high" sales levels. Catastrophic potential issues aren't included (unless they are foreseeable), because that kind of stuff can happen to anyone - you don't put "and hopefully our warehouse doesn't burn down or our CEO gets hit by a meteor" because such risks are understood and inherent in small business investing.I think the big thing a lot of folks are missing is that a business plan is an exercise in doing research, fact-checking, and making sure you have enough data to "prove" your claims (about what your business will accomplish). If I was writing a business plan about building space ships with $1 billion in VC money, I wouldn't have the first clue what things would cost, what timelines would be like, what the regulatory stuff would look like, etc. And so no investor would take me or my investment seriously because I would be the wrong guy to be investing in for that project.But in a business I know a lot about, and in your business you know a lot about, and in Dave's business - we could all should be able to come up with realistic projections and numbers for what we would be doing. If Dave was starting a new YouTube channel, he'd know that projecting 1 billion views in 3 months is wildly unrealistic, as would 100 views in 1 year be. Same with my business - if I predicted something wildly inaccurate, it would be a red flag and I'd never see any investment.The business plan is a sales tool in many cases, and you're making your case to an investor. There are industry standard investment formulas that they will run on your financials which will quantize the risk and potential return and give them an equity range they need to be in for their investment to produce suitable ROI. Then they will do some due diligence on your projections, market research and financials and management team - if it all looks good, and they are interested, things move forward.That's why professional VC's only lose money on 20-30% of their investments whereas something like 90% of businesses fail. It's not just art, but a lot of science as well - and it's mostly based on the business plan.

author: KJDS
author_rank: Super Contributor
timestamp: January 19, 2015, 09:41:43 am
content: Quote from: Corporate666 on January 19, 2015, 05:52:52 amWhilst that's part of it, if you have the right access to VCs, and a track record of starting businesses it is far easier to get funding. You'll still need a business plan, and the ability to present in a creditable manner to them.A few years back I was buying some computers. The company that I'd asked to quote phoned me whilst I was driving and as I didn't have a hands free kit in the car my passenger answered the phone for me. The passenger was a good mate of the salesman's boss, so I was offered excellent credit terms, otherwise I'd have had to pay up front. People are people and they will help those they trust.

author: nctnico
author_rank: Super Contributor
timestamp: January 19, 2015, 08:23:17 pm
content: Quote from: EEVblog on January 19, 2015, 12:01:18 amThat depends on where you are located. Over here it is normal to get goods delivered and pay within 30 days. As a principle I don't do business with suppliers who demand payment upfront.

author: Howardlong
author_rank: Super Contributor
timestamp: January 19, 2015, 08:54:25 pm
content: Quote from: EEVblog on January 19, 2015, 12:01:18 amThere is another reason to use credit or charge cards to pay bills, and that is for the air miles. Even my usually stalwart accountant understands that, even he has jumped on that band wagon now, having seen the jollies the wife and I get for free. With several longhaul trips at the pointy end per annum it makes a lot of sense.