Bankers still have last word for small business

CONSIDERING all the antagonism between banks and small businesses, it is a little surprising to see a publication by a high-street clearing bank aimed at would-be entrepreneurs.

But then, as the cover of the Lloyds Bank Small Business Guide makes clear, this is the seventh edition. And with 300,000 copies sold, it is presumably felt there is no point abandoning a winning formula for the sake of a few cross words.

In fact there is plenty of reason for a bank to support a publication of this kind. Recent surveys have found that start-up businesses are still overwhelmingly reliant on bank funding. Indeed, those running small firms often view their business and personal finances in very much the same light.

But, given the antagonism not only with banks but also with late payers, the Inland Revenue, the VAT process and the people running the quality standard BS5750, why should anybody want to go into business? And particularly after a period of unprecedented levels of failure?

Sara Williams, the book's author, knows a lot about motivation. Besides producing seven editions of this guide, she has written Break Out, a study of people who left corporate life to set up on their own. She also helped to found Vamp, a computer company serving the medical profession. (It was the first to head the Independent on Sunday's league of fastest-growing private companies.)

At the end of the 1980s, Mrs Williams points out, 'optimism was incredibly high, fortunes had been made relatively easily . . . and there was a belief that this might carry on . . . The picture now looks very different'. But her meaning is less obvious than it may seem.

Just as the end of the last decade can, with hindsight, be seen as the worst time to set out on the entrepreneurial trail - since the operation of the economic cycle meant that the downturn must be around the corner - Mrs Williams argues that there could be no time like the present to have a go. 'In many ways, starting a business when the worst of the recession is over can be perfect timing, if the business is set up in a conservative manner,' she says. The trick, of course, is judging when the bottom has been reached, as demonstrated by the fact that the author was making much the same case last year.

And, while there is some justification of her point that a fresh organisation is in a good position to gain from similar operations exhausted by half a decade of struggle, it is worth bearing in mind that all the sages are predicting that the end of recession will not necessarily herald a return to the heady days of the past. Rapid changes and ever-increasing competition are likely to make the going tough for some time to come.

Mrs Williams tempers her enthusiasm for such advantages as the low cost of premises and equipment by warning that there are a number of disadvantages to setting up now, notably the uncertainty of demand. As she says, planning is the key.

It is in this regard that the book is most useful. After having tested the mettle of the individual, and the strength of his or her business ideas, she then asks all the questions (and more) that a bank manager is likely to put to a wide-eyed entrepreneur.

There is a long look at marketing - determining who will buy and why, and how much and at what price. Only after these and other hurdles have been cleared will there be any use for the wealth of material on such matters as keeping records, employing staff and staying ahead of the tax authorities. All this makes it difficult to argue with the publisher's claim that the guide is a bible for small business.

Lloyds Bank Small Business Guide is published by Penguin at pounds 15.