Careers: Setting up an agency - Going it alone

Starting your own agency can be daunting, but if you get it right, the rewards can far outweigh the risks.

Three people who have taken the plunge offer Cathy Bussey their tips to succeed. Setting up a PR agency is a long-term goal for many within the industry. While an uncertain economy and public sector spending cuts may put many off from launching a new endeavour, others see now as the perfect time to realise their lifelong dream of becoming their own boss.

In fact, small businesses may be best equipped to survive the turbulent times ahead. Smaller agencies have fewer overheads, and are more able to adapt and be flexible, respond to client needs and offer a more personal service.

And if an agency can survive and flourish in a difficult economy, imagine what it could do once business begins to boom.

With redundancy a possibility for many working in the public sector, now could be the time for the small start-up to shine. With this in mind, PRWeek talks to PR professionals who have set up on their own, and presents practical advice for anyone considering taking the leap.

'THINK ABOUT YOUR GOALS', MELISSA DAVIS, FOUNDER, MD COMMUNICATIONS

Davis was working in-house for the Law Society when she was approached with an offer to set up the PR arm of a company. She had already spotted a gap in the market for an agency servicing legal clients. Initially she was keen to set up as part of a wider company to negotiate the risk factor.

She then met Alan Clayton, a coach who specialises in helping people set up small businesses, and decided the best option was to set up by herself.

'I realised that everything that I would be doing for this other company, I could actually do by myself,' says Davis.

The revelation occurred in February this year, and in August Davis left the Law Society and started working for herself, with the Legal Ombudsman as her first client. She says the expert guidance and mentoring she received from Clayton helped her the most.

'I had never been a five-year plan or ten-year plan type of person,' says Davis. 'I hadn't thought about what my life would be like in ten years, but it was only when I did that I realised what goals I have. You can talk to your friends but it's not the same as talking to somebody totally independent. Friends won't push you on issues such as your USP Every time I came away from a coaching session I felt even more inspired and energised.'

Davis also recommends using services such as Businesslink, which put her in touch with Centra, a social enterprise that helps creative London-based businesses with anything from securing finance to help, training and mentoring. Davis says: 'It's great having somewhere you can go and spend a couple of hours talking about what is working and what's not.'

'FIND THE RIGHT BACKING', CHRIS MCCAFFERTY, FOUNDER AND MD, KAPER

McCafferty put together the business plan for Kaper before approaching potential investors.

He spoke to around six potential partners but says ad agency Karmarama, the one he eventually chose, was the 'clear winner'.

'I was looking for financial backing to take a bit of pressure off, but it was also about finding the right people who understood the vision of the business,' he says. McCafferty's vision was for an agency 'applying ad agency planning and creative to PR'.

'We're trying to create campaigns that are more molecular - that all add up to a bigger and brighter picture,' he says.

McCafferty acknowledges that having an investor means he had to give up a percentage of the company to his partners, but is confident that this was the right decision for him. 'It will grow to a stage where the percentage I get minus the percentage the partners get is bigger than what I would have made on my own,' he predicts.

He says he had been talking about setting up by himself since 1999, but that 2010 felt like the right time: 'The financial climate didn't put me off; if you can succeed now you can definitely prosper in better times. There's an opportunity for smaller agencies to be more mobile, and we don't have big overheads.'

McCafferty advises anyone considering setting up on their own not to wait for everything to be perfect: 'You have to get to the point where you are happy to take a risk, because it is a bit of a leap of faith.'

'CONSULT MANY PEOPLE', SHELLEY FLETCHER, FOUNDER, FIREGRASS COMMUNICATIONS

Fletcher held both in-house and agency roles before deciding to take the plunge in 2010. 'I had been at a PR agency for three years and could not go any further,' she says. She began to seriously plan her business in September 2009, handed in her notice in January and launched this April.

Fletcher consulted a solicitor to clarify areas of her contract of employment that forbade her from contacting current or former clients.

'I had to be careful about what I could and could not do and I wanted to be whiter than white about it,' she says. She used holiday days and lieu time to network and meet with potential clients, and made the most of contacts and local business networks. 'In Devon and Cornwall there are some fantastic business networks. Everybody hands out business to everybody else.' While working out her notice, Fletcher spent evenings and weekends planning, generating new business and setting up her website.

She acknowledges the risk, as even though she was meeting potential clients, 'nobody knows 100 per cent that they will have a guaranteed income when they start up. People say they will give your business but you don't know for sure until it happens.'

She advises anyone thinking of setting up on their own to consult as many people as possible: 'I spent a lot of time at networking events talking to people who had set up their own business. The things that stuck with me were the silly things - like don't buy too much branded stationery at first. It's easy to get carried away and think you need lots of things, but if you're delivering a service, you don't actually need much at the start.'

ACCOUNTING, WHAT YOU NEED TO KNOW, ESTHER CARDER, PARTNER, KINGSTON SMITH W1 ACCOUNTANTS

Business structure If you plan to operate as a freelancer the sole trader route is the simplest option and avoids a lot of the administration and public filing of information that comes with other structures.

However, if you are likely to bring in other partners, or take on employees, you will need to choose a more sophisticated structure such as a limited company (LTD), limited liability partnership (LLP) or a partnership.

With limited liability comes the requirement to file information publicly and thus additional administration and cost. A partnership structure without limited liability can get around some of this. However, in my view, the protection that limited liability affords you far outweighs the negatives.

Taxation In a LTD you will remunerate yourself with salary and bonuses that will be subject to PAYE. Any profits remaining are subject to corporation tax, and you can take out dividends that are subject to income tax.

In an LLP, all the profits are subject to income tax in the hands of the partners. LLPs also offer savings on employers' national insurance for those who are partners rather than employees.

VAT Registration is required when your turnover for the previous 12 months is more than £70,000. You must continually assess this on a rolling monthly basis - not just at year end.

Voluntary registration may be beneficial if your clients are able to reclaim VAT.

Cash accounting for VAT may be a wise option, particularly in the current climate when clients are likely to be taking longer to pay you, as this enables you to delay paying the VAT until the client has actually paid you. You can continue to use cash accounting until turnover exceeds £1.6m.

If turnover is lower than £150,000, you could simplify things by using the flat rate scheme, where you calculate VAT as a percentage of turnover. This reduces administration.

SETTING UP, HOW TO PLAN YOUR BUSINESS, ALAN CLAYTON, CO-FOUNDER, CLAYTON BURNETT COACHING CONSULTANCY

1. Plan your life A lot of people have a gut feeling that they want to start their own business, but are not sure why. I spend a lot of time plotting out why they want to do it, what their ambitions are, and what their life plan is. This way, it becomes obvious very quickly what they need to do in terms of lifestyle, self-belief and finance.

The key thing is to define your business aim. If you're starting up because you want a freelance lifestyle you have to start up in a certain way, and if you want to start a business you can sell and make lots of money from you would set up in a different manner.

2. Accept risk Most people realise that going into business involves risk. So a lot of people spend a lot of time thinking about how they can manage or avoid the risks. The short answer is, you can't.

So the problem becomes how to deal with the psychological aspects of risk. How do you prepare for moving from being safely employed to being reliant on your own initiative to pay the bills?

3. Speak to people who have done it If you are currently employed, you will be working with people who are used to being salaried, and therefore taking advice from people who are employed. You need to talk to people who have set up their own business. They don't have to be working in your sector, just anybody who has done it, because it's a mindset. I have advised people before if you want to set up a successful business change your friends. Friends are almost never objective and often give you advice that is based on jealousy or reminding you of the risk factor.

4. Remember cash flow I find most people who want to set up a business are very passionate about doing a good job. You need to be as passionate about driving cash flow as you are about doing a good job. There are lots of people who can advise you about tax issues, but fundamentally if you sell enough, your business will be successful.

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