The sixth trigger is about starting a company in Finland. What are the necessary steps to take and consider before opening a business? How to finance the business?
Before starting the business, it is useful to consider the following:
• CUSTOMER BENEFIT: What the customer gets, where the customer uses the product or service, why the customer purchases it?
• IMAGE: Why the customer buys from this enterprise, what kinds of mental pictures are associated with the enterprise or its products?
• PRODUCTS: What is produced or supplied, how does it differ from the competitor’s products, what is the price, what kind of packaging is used and how is the product delivered, is advice required via the internet, for example?
• CUSTOMERS/CUSTOMER GROUPS: Who are the customers, where are they and how many are there, how are they reached, how much are they prepared to pay, how will they pay?
• MODE OF OPERATION: Will products be created in-house or will their production be subcontracted, how will products be marketed, how will they be sold?
• RESOURCES: How can you get: business premises, machines and equipment, capital invested, know-how, as well as experience of the entrepreneur and the employees?
(Enterprise Agency 2017.)
(Enterprise Agency 2017.)
1.
How to finance SME in Finland?
There are two basic ways to finance a small business: debt and equity.
Equity:
share capital, personal cash investments, investments from friends and family,
loans from shareholders, capital investments (business angels or capital-investment
companies), crowdfunding (e.g. Kickstarter), public financing.
Loan
capital: bank loans, Finnvera loans, other loans, credit card.
(Enterprise Agency 2017; Gleeson 2013; Inc. Staff 2017.)
2. Mandatory steps to take before opening a business.
To establish a company, it is necessary to prepare
a business plan, acquire funding, plan marketing, sales and advertising, think
about pricing and analyse risks.
SWOT
analysis is quite useful. It shows the Strengths, Weaknesses, Opportunities and Threats for the
business idea, the entrepreneur and the enterprise.
Food establishments,
such as restaurants, shops and kiosks must file a written notification to the
local food control authority before the beginning of operations or any
substantial change in operations.
Other things
to remember: bookkeeping arrangements, insurances, occupational health care, unemployment fund and legal advice.
VAT is a
tax on consumption, which the seller adds to the sales price of goods or
services. Almost all businesses who sell goods or services are obligated to pay
value added tax. VAT for restaurant services is 14%.
(Enterprise Agency 2017.)
(Enterprise Agency 2017.)
Company types
PRIVATE TRADER (OWN FIRM)
An
individual with permanent domicile in the European Economic Area (EEA) may operate
as a private trader in Finland. A person who lives outside the EEA needs a
licence from the National Board of Patents and Registration of Finland for establishing
a business.
ENTREPRENEURSHIP AS A FRANCHISEE
Working as
a franchisee allows a person to start up a business without having an own
business idea. Franchising is a long-term collaborative agreement between two
independent enterprises.
The franchisor
grants to the franchisee (of whom there may be many) the right to use, in
return for payment and in accordance with the terms of reference, the business
idea that the franchisor has developed and devised, and which it controls.
“LIGHT ENTREPRENEURSHIP”
So called
“light entrepreneurship” is a form of employment where a person acquires
his/her own work and defines a price thereon. Invoicing and salary calculation
have been outsourced to an external billing service, which charges its own service
fee from the total amount. The billing service takes care of the “light
entrepreneur’s“ tax withholding, insurances (accident insurance, liability
insurance) and other statutory employer contributions (health insurance contribution,
pension insurance premium and unemployment insurance contribution as well as
group life assurance premium).
PART-TIME ENTREPRENEURSHIP
Starting
up a business part-time, for example in addition to a main job or studies, is
recommended if the person is not sure whether the business will be profitable –
at least to begin with.
STARTUP ENTREPRENEURSHIP
Startup companies
are usually newly created companies in their early stages in the technology field
whose business concept contains something new and different. The operations are
financed with risk financing as the company does not yet make profit. The aim
is to achieve fast growth and internationalising.
PARTNERSHIPS:
GENERAL PARTNERSHIP AND LIMITED PARTNERSHIP
To
establish a partnership, a person needs at least two partners (i.e. people).
Generally, these are natural people, but a partner can also be a legal person
(an enterprise or organisation).
TEAM ENTREPRENEURSHIP
Several
people who wish to become entrepreneurs establish a business together.
LIMITED LIABILITY COMPANY (OY)
A limited
liability company may be established by one or more people or organisations.
When the company is being set up, the founders register all the company’s
shares. In a private limited liability company, the share capital must be at
least €2,500.
CO-OPERATIVE
A co-operative is an association, which has
one or more members. The members may be private individuals, undertakings or
other associations. Founding of a co-operative does not require a minimum
capital. A co-operative is a flexible form of business where the number of
members may increase or decrease during the operations as required.
(Enterprise Agency 2017.)
3. Cost-Profit / Finance management in SME.
A. INVESTMENT CALCULATION:
This is used to show the sources of funding
and the expenditure requirements for the business in its initial stages.
Expenditure requirements include those investments that must be made in order
to launch the business’s operations. Among other things, initial stock purchases,
machines required for production, registration fees and security deposits as
well as working capital for a 3-month period (for instance) would be included
in expenditure requirements. In the working capital provision, an estimate is
made of those fixed costs (wages and salaries, rental, insurance, bookkeeping,
etc.) that must be paid even when the business does still not generate sufficient
sales to cover costs. For this reason, working capital is added to investment
requirements for the initial stages. In addition, in the funding calculation,
the sources of funding are shown for an amount equal to the investment sum; the
sources of funding must cover the expenditure requirements. The sources of
funding may comprise shareholders’ equity and property given as a capital
contribution, loans, business subsidies and external equity investments. Business start-up funding should not be regarded as one of these
sources of funding as it is intended for the entrepreneur’s own subsistence.
B. PROFITABILITY CALCULATION:
The profitability calculation is used to estimate
where the break-even position (critical point) arises for a given price level and
pro t margin, as sales volume is varied. This can be used to analyse whether a
sales target is realistic. The sales target (net sales) can also be calculated
as a monthly, weekly or hourly sales target. Alternatively, it is possible to
analyse whether it would be worth-while changing the margin and sales price, if
the sales volume seems unrealistic. Thus, a simple sensitivity analysis can be
created, showing how big an effect there is on the profit forecast if the price
is changed.
C. SALES CALCULATION:
In the sales calculation, the minimum
invoiced sales tar-get indicated by the profitability calculation can be apportioned
among the various customer groups. This makes it easier to assess the importance
of the customer relationships; any discounts and variable costs for products
being sold shall be taken into account.
(Enterprise Agency 2017.)
Sources:
Enterprise Agency 2017. Guide: Becoming an Entrepreneur in Finland 2017.
Gleeson, B. 2013. 4-realistic-ways-to-fund-your-small-business. https://www.forbes.com/sites/brentgleeson/2013/08/29/4-realistic-ways-to-fund-your-small-business/#1d6acda340be. Accessed: 20.11.2017
Inc. Staff 2017. 10 Ways to Finance Your Business. https://www.inc.com/guides/2010/07/how-to-finance-your-business.html. Accessed: 20.11.2017
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