Becoming an Entrepreneur in Finland - Finnish Enterprise Agencies www.uusyrityskeskus.fi
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Becoming an
Entrepreneur
in Finland
CERTIFIED BY
ISO 9001
www.uusyrityskeskus.fi Finnish Enterprise Agencies
Preface
For an entrepreneur, freedom brings also contains information on services
along increasing responsibility for one’s provided by the Enterprise Agencies in
own success. Successful business Finland. Successful business
requires that you fulfill the obligations
and keep up the motivation for work. The Enterprise Agencies in Finland aim requires that you fulfill
You may sometimes feel lonely as an not only at helping the start of busi- the obligations and
entrepreneur. Therefore it is important nesses but also at facilitating the first
that your entrepreneurship is based on steps of profitable enterprises. keep up the motivation
a strong will to work.
The purpose of the guide is to give an
for work.
Becoming an entrepreneur requires outlook on entrepreneurship and to act
careful consideration of the mat- as a preliminary guide to new entrepre-
ter from different angles. Letting the neurs. Study the guide carefully and
thought ripen is a useful way of pre- visit our website:
paring for entrepreneurship. If you
wish to start your own business, read www.uusyrityskeskus.fi
through this guide carefully! The guide www.perustamisopas.fi
2
Becoming an
Entrepreneur in Finland
Contents
What is entrepreneurship? 4 Knowledge adds security
So could you become an entrepreneur? 5 - protection brings a competitive advantage 30
The various forms of entrepreneurship 6 Registration issues 31
Stages of establishing an enterprise 8 Bookkeeping and financial statements
Turning an enterprise idea for the enterprise 33
into a business idea 9 Income taxation and VAT 35
Business plan 10 Insurance 39
SWOT analysis 15 Entrepreneur’s pension insurance (YEL) 40
Risk management 15 Entrepreneur’s unemployment benefit 41
Marketing and advertising 16 Employment of employees 42
Pricing 18 Business culture in Finland 43
Funding for a new business start-up 20 Environmental responsibility
Start-up grants 21 of the business 44
Permits and registrations of foreigners and Important links 45
persons residing abroad 22 Checklist for the new entrepreneur 46
Licensed industries 24 10 Steps to success 47
Forms of enterprise 26 Checklist 48
Business dictionary 50
Finnish Enterprise Agencies
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information and news on entrepreneurship
as well as related issues.
This guide has been drafted in cooperation with the network of Finnish Enter-
prise Agencies and its member enterprises. The purpose of this guide is to give a
general view of entrepreneurship as well as to act as a preliminary and instructive
guide to novice entrepreneurs.
Publisher:
Suomen Uusyrityskeskukset ry www.uusyrityskeskus.fi
Texts: www.perustamisopas.fi
Uusyrityskeskusverkosto
Graphic design: © The Finnish Enterprise Agencies 2014
Unikuva / Mats Vuorenjuuri All rights reserved.
Update of information:
Asiatieto Oy / Tuulikki Holopainen
3
What is entrepreneurship?
The aim of a business is that it suc-
ceeds and makes a profit. Entrepre-
neurship, or enterprise, is about iden-
tifying the risks relating to a business
activity and about preparing for them,
i.e. the skill to make a business opera-
tion profitable.
Enterprise is also about belief in one’s
own business idea. Enterprise may be
a way of life or a means of providing a
livelihood and employing oneself. En-
terprise is also about making good use
of your professional skills, social skills
and language skills, and immigrants
can use these to enrich our business
world and bring an international quality
to it.
What is an entrepreneur?
The official definition of an entrepreneur
in Finland depends on the authority
concerned. The term “entrepreneur” is
defined in different ways in corporate
law and in pensions and unemploy-
ment matters. Here is an example: The
entrepreneur is a person who, alone or
together with others, carries out activi-
ties in a business whose objective is to
make a profit. These activities include a
degree of risk taking.
Enterprise is also about From the viewpoint of unemployment 15 % or his/ her family members
benefit, a person is regarded as an en- or s(he) together with family mem-
making good use of trepreneur when (s)he: bers owns at least 30 %, or
• is liable to take out insurance as • works as an employee in an enter-
your professional skills, specified by the Self-Employed prise whereof (s)he, his/her family
social and language Persons’ Pensions Act, or members or all of them together
”
• works in a managerial position own at least 50 %.
skills. (managing director or member of
the board of directors) in an enter- When the share of ownership is cal-
prise where (s)he owns at least culated, indirect ownership via other
enterprises and organisations is also
taken into account.
4
Becoming an
Entrepreneur in Finland
So could you become an entrepreneur?
Personal qualities and skills lay the • you can determine your own work A person planning to set up a business
foundation for a successful business. tasks must be familiar with the field where (s)
Different fields require different quali- • you can determine your working he intends to establish the business.
ties and skills. Think about your own hours In addition, (s)he must also know the
strengths. What do you still have to • there is the opportunity to make bases for financial management, pric-
develop? a financial success ing, budgeting and marketing. It is
• you can fulfil your dreams possible to gain or improve such skills
Good qualities for an entre- • you can employ others and knowledge with the help of train-
preneur to have include: ing or experts.
• hard-working Challenges in starting up as
• creative an entrepreneur: It is worth remembering that becoming
• bold, works on one’s own initiative • arranging finance an entrepreneur does not mean that
• strives for good results • lack of expertise and experience you have to work as an entrepreneur
• determined • lack of knowledge of legislation, for ever. You can think of this as one
• knows how to sell his/her product taxation and setting up contracts phase of your life and as a part of your
• prepared to take risks • insufficient skills in the Finnish whole career.
• can cope with uncertainty language
• lack of familiarity with Finnish
Things that motivate people business culture
To be an entrepreneur
to become entrepreneurs: • time management (work/study, can be a part of your
• you can become your own boss family/spouse, free-time, etc.). whole career.
5
The various forms of entrepreneurship
Establishing a new enterprise
Completely new business idea
An enterprise may be set up to com-
mercialise a completely new business
idea, product, service or invention. This
is the most challenging way to start
a business, and it includes the most
risks.
Existing business idea
The most typical way to start a busi-
ness is to use an existing business
idea but implement it in a new and
more competitive way or in a new mar-
ket area.
Buying a business that is
already operating
In Finland, there are many businesses relating to its business. Financial-man- ciple in a franchising business is that
that need someone to continue their agement professionals (accountants, the franchisor can duplicate an idea,
operations. The unearthing of such a auditors and corporate acquisition i.e. set up many enterprises using the
business could be the impulse to start consultants) will advise you on wheth- same idea, for example in different ar-
up as an entrepreneur. The acquisition er the business’s operations are prof- eas. Franchising enterprises operate
of a business always includes risks, itable and whether its accounting is in Finland in the kiosk, cleaning and
but this provides the new entrepreneur reliable. Before you sign the contracts restaurant trades, for example. Further
with a simple way of setting up and the and other documents, you should also information is available from the Finn-
possibility of starting business opera- seek advice from a legal expert. ish Franchising Association’s website,
tions straight away, as the business will www.franchising.fi.
already have customers and sales. However, buying the business op-
erations alone is a safer option than Part-time entrepreneurship
The options are: buying the whole enterprise, because Starting up a business part-time, for
1) to buy the whole of a working then the old liabilities and debts of the example in addition to a main job or
enterprise enterprise are not transferred to the studies, is recommended if the person
2) to buy part of an enterprise (one new owner. is not sure whether the business will
function) be profitable – at least to begin with.
3) to just buy the enterprise’s business Entrepreneurship as a Working on a part-time basis, you can
operations franchisee test first whether there are enough
4) to buy part of the business Working as a franchisee allows you customers and assess how the busi-
operations. to start up a business without having ness will develop and whether there is
your own business idea. Franchising potential to become a full-time entre-
You can find details of companies for is a long-term collaborative agreement preneur. Your own financial risk will be
sale by using the search service of the between two independent enterpris- lower because your income is not to-
Federation of Finnish Enterprises at es. The franchisor grants to the fran- tally dependent on the success of the
www.yritysporssi.fi, for example. chisee (of whom there may be many) business.
the right to use, in return for payment
If you intend to buy an enterprise or and in accordance with the terms of However, you should note that your Em-
business, make sure you use experts reference, the business idea that the ployment and Economic Development
to help you assess the financial situ- franchisor has developed and devised, Office will not grant business start-up
ation of the enterprise and the risks and which it controls. The basic prin- funds to part-time entrepreneurs. An
6
Becoming an
Entrepreneur in Finland
xemption thereto may, however, be
e Team entrepreneurship • who have been unemployed
very small-scale entrepreneurial activity. Here, several people who wish to be- jobseekers for a continuous
come entrepreneurs establish a busi- period of 12 months (or are
Startup entrepreneurship ness together. All these people are comparable thereto)
Startup companies are usually newly responsible for the success of the en- • who have received unemploy-
created companies in their early stages terprise. For example, when two busi- ment security on the basis of
in the technology field whose business nesses merge, the partners of these unemployment for a period of
concept contains something new and enterprises may become partners in at least 500 days.
different. The operations are financed the new enterprise. The percentage of placed employees
with risk financing as the company shall always include persons whose dis-
does not yet make profit. The aim is to Social entrepreneurship ability or illness hampers employment.
achieve fast growth and internationalis- A social enterprise may be a sole 2) all employees, irrespective of their
ing. Startup companies are often also trader, a general partnership, a limited productivity, are paid the pay
called growth companies. partnership, a limited company or a agreed in the collective agreement
co-operative. of the said line of work payable to a
Partnership person with full work capacity
Operating as a partner can be a very A business to be registered as a social 3) the working hours of the persons,
entrepreneurial activity depending on enterprise must fulfill the following re- whose disability or illness hampers
how the responsibilities and author- quirements: employment, is at least 50 percent
ity are split amongst the partners. For 1) at least 30 % (percentage of placed of the regular working hours of the
example, in family businesses, the employees) of the employees in an industry, and of others to be in-
spouse and children may be partners. employment relationship (excluding cluded in the percentage of placed
In small businesses, it may be possible the entrepreneur) must be persons employees, at least 75 percent of
to get key people to commit them- whose the regular working hours of the in-
selves to the enterprise and its devel- • disability or illness hampers dustry
opment by transferring stakes in the employment 4) public subsidies are less than half
business to them. of net sales.
A social enterprise may be granted em-
ployment subsidies towards the wage
costs of an unemployed jobseeker.
The Finnish Ministry of Employment
and the Economy (TEM) maintains a
register of social enterprises. The ap-
plication form (TEM309 “Hakemus
sosiaalisen yrityksen rekisteriin merkit-
semisestä”) is available in the E-serv-
ices of YritysSuomi.fi (“Asioi ver
kossa”).
Social entrepreneurship
Social entrepreneurships pursue to
create solutions to social and ecologi-
cal problems. The entrepreneurship
uses most of its profit in enhancing its
social goal wherefore the distribution
of profit to owners has been limited.
Openness and transparency of the
business activities are important.
7
Stages of establishing an enterprise
Business idea What? For whom? How?
Business plan + Cash-flow statements + Profitability calculations
Selection of the form of the enterprise
Resolving licensing issues for the business
Arranging finance
Sole trader Partnerships Limited company Co-operative
(Toiminimi) • General partnership • Private (Oy)
Incorporation documents
Professional trader • Limited partnership • Public (Oyj)
• Memorandum of
Incorporation Association
Incorporation
documents • Rules
documents
• Memorandum of • The minutes of the meeting
• Partnership Agreement
Association of the Board of Directors of
• Articles of Association the election of the Chairman
• The minutes of the meeting of the Board (the Chairman
of the Board of Directors of may also be designated in the
the election of the Chairman Memorandum of Association)
of the Board (the Chairman
may also be designated in the
Memorandum of Association)
Registration of a new enterprise
It is possible to apply for entry to the Finnish Trade Register and the records
of the Finnish Central Tax Administration using the same form
Forms: Branch of a foreign trader:
Private trader: Form Y3 Form Y1 and Appendix Form 3
General partnership: Form Y2 Personal data form
Limited partnership: Form Y2 Note! The home address of a person residing in
Limited company: Form Y1 and Finland shall no longer be notified to the Tra-
Appendix Form 1 de Register. The identification information of
Co-operative: Form Y1 and natural persons shall be notified to the Trade
Appendix Form 2 Register using a specific personal data form.
Insurance
Organisation of accounting
Set-up of an enterprise includes all of the stages mentioned above, but often the various stages are sorted out at the same time.
8
Becoming an
Entrepreneur in Finland
Turning an enterprise idea
into a business idea
An enterprise idea indicates what the
new enterprise intends to produce.
The enterprise idea is defined in more
detail and gradually shaped into a
business idea. The business idea in-
dicates what the enterprise will do and
to whom it will sell, how the enter-
prise will implement these things, and
in what markets it will operate. The
business idea answers the questions
What? To Whom? How?
Think about whether your products
will be able to succeed in the market-
place? Which markets will you oper-
ate in? What is different about your
business idea? Make sure you con- tional pursuits. Be realistic in terms of of the entrepreneur and the em-
sider your business idea from the point demand for goods or services. You will ployees.
of view of the customer in particular. improve your chances of success with • market size
The product (goods or a service or a careful planning. Consider the follow-
combination of these) must be some- ing: Industry and competitive
thing that the customer is prepared to • customer benefit: what the custom- situation
pay for. Determining customers’ needs er gets, where the customer uses Industry refers to that field in which the
is important so that it is clear what the product, why the customer pur- enterprise operates, for example cater-
qualities they value. Is your product, for chases it ing (restaurants and cafes), financial
example, more effective, cheaper, of • image: why the customer buys services (banks), building or cleaning.
higher quality, more pleasant or simpler from this enterprise, what kinds of In some fields, there are a lot of opera-
than that of your competitors? mental pictures are associated with tors, i.e. there is a lot of competition.
You will get the best insight when the enterprise or its products In such cases, the opportunities to
you test it in practice, for example • products: what is produced or make a profit are small, because the
with a small market survey. The most supplied, how does it differ from entrepreneurs must sell their product
genuine feedback about your product the competitor’s products, what cheaply. The lower the novelty value
will come from your potential custom- is the price, what kind of packag- and the more established the field, the
ers. Nevertheless, an opinion poll does ing is used and how is the product greater the competition faced. That is
not always necessarily tell the whole delivered, is advice required via the greater the number of competitors of-
truth about customers’ buying habits. internet, for example? fering a similar product.
Market research can also be bought • customers/customer groups: who
from external experts, but it is generally are the customers, where are they Try to find an innovative business idea!
expensive. and how many are there, how are The more unique the product, the less
they reached, how much are they competition you will face. On the other
The business idea prepared to pay, how will they pay hand, in such cases it is difficult to es-
must be viable • mode of operation: will products timate the profitability of the business
Implementation of the business idea be created in-house or will their or compare the business idea to other
requires know-how on the part of the production be subcontracted, how operators, because there are only a
entrepreneur(s) as well as capital that will products be marketed, how will few other operators. In such circum-
is needed for working capital and initial they be sold stances, the size of the market and the
investments. Know-how and familiar- • resources: business premises, ma- structure of demand must be estimat-
ity with the field can be acquired via chines and equipment, capital in- ed, and profitability calculated on the
training, work experience and recrea- vested, know-how and experience basis of the estimates.
9
Business plan
What is a business plan? terprise intends to market its products.
Business plan is a formal set of busi- The business plan also estimates, with
ness goals, the reasons why they are the aid of calculations, profitability and Create a business
believed attainable and the plan for the sum of money that is needed for
reaching these goals. starting up the business’s operations plan using our handy
(investment requirement). online service at
Business plan refers to a written plan
for the business. It describes how the A good plan also highlights the risk oma.yrityssuomi.fi
business idea will be implemented in factors that may affect the success of www.business-plan.fi
practice: the operating environment of the business.
the enterprise, and its working practic-
es and objectives. It is a comprehen- In addition, the business plan is a tool
sive and detailed presentation with a that enables entrepreneurs to plan,
specified timescale. The business plan and it can also be used in negotiations
also includes longer-term objectives with possible investors, business part-
and quantitative targets in the form of ners, lessors or suppliers, for exam-
profit budgets and cash-flow state- ple. With the help of the business plan,
ments. the entrepreneur can prove that the A business plan is also needed when
enterprise will succeed when, for ex- start-up funds are applied for from the
The plan goes through the features of ample, financial-statement data is still Employment and Economic Develop-
the product, the customer groups, the not available. A well prepared business ment Offices or when business subsi-
competitive environment in the market- plan gives an idea of the profitability of dies are applied for from the centres
place, and training and expertise of the a business and its future prospects, for Economic Development, Transport
entrepreneur(s) as well as how the en- and it helps in sourcing finance. and the Environment (ELY).
Start-up funds
External investors
from an Employment
(business angels and
and Economic Devel-
capital investors)
opment Office
The business plan
gives an idea of the
profitability of the
business’s operations
Loan finance
- Bank loan Business subsidies
- Finnvera loan - ELY centre
- other loan - Tekes (Finnish Funding
Agency for Innovation)
10Becoming an
Entrepreneur in Finland
Elements of the
business plan
It is worth revising and updating the
business plan on a regular basis.
Model plan
1) Description of the business
idea:
The business idea says what the busi-
ness will do, to whom it will sell its
products, and how the business will
implement these things. What is the
novelty value of your business idea (i.e.
what is new about it) and why would
customers be interested in your prod-
uct? A SWOT analysis should also be
included in this section, see page 15.
stead of a conventional hairdresser’s? stand out from the competitors? How
2) Description of expertise: Analyse the strengths and weaknesses do you arrange your sales work?
Expertise among the entrepreneur and of your key competitors, and compare
the employees must support the busi- your own business idea against them. 8) Risks:
ness’s operations. List their education- A business’s activities are subject to all
al backgrounds, their work experience 6) Scope and development kinds of risks. Analyse the business’s
and their strengths and weaknesses. of the market: risk factors in the short- and the long-
Give details of the number of custom- term. How will you get a key person to
3) Description of the product: ers in your product’s market, the com- commit to your business and what will
Describe the product critically from petitive environment and the prospects happen if (s)he decides to leave? Can
the customer’s point of view. Explain for growth. Explain which markets you your business idea’s features be cop-
the product’s features compared to are targeting: a certain area, the do- ied? And how sensitive is your busi-
the competitors’: pricing, advantages, mestic market, Europe or the global ness idea to fluctuations in the econ-
uses and weaknesses. market. Could your business possibly omy? Risks can not be completely
be extended to new markets later on? eliminated, but with effective planning
4) Customers and customer How would this happen? Explain what they can be reduced.
requirements: obstacles there may be for entry to the
Describe who your customers are, marketplace: regulations, constraints, 9) Intellectual property rights:
how many there are, where they are, customs duties and other risk factors. Plan for the safeguarding of your key
on what basis they decide to make ideas in accordance with legislation
a purchase, what customers value in 7) Marketing and advertising: on intellectual property rights. This will
your product. What is the customer Write down what marketing measures help you reduce the risk from copying.
problem or requirement for which you you would use to reach your custom- Do you need, for example, a patent
have a solution? ers and inform and convince them of for a technical invention (which lasts
the benefits of your own product. Also, 20 years), utility-model protection (i.e.
5) Industry and competition: pay attention to how your customers a four-year ”small patent”), trademark
Describe your industry and the com- will find you, for example via the inter- protection (an identifying mark for a
petitive environment. Will you bring in- net. How will you direct your advertis- good or service that is registered for a
novation (something new) to the indus- ing at specific customer groups? Con- specific area, such as the Apple trade-
try? Or will you offer the same as your sider what the look and name of your mark) or a design right that protects
competitors? Try to stand out from the enterprise, amongst other things, say the appearance of an item? Only copy-
competition. Are you able to set up, for to the customer and what your enter- right protection does not need to be
example, an organic hairdresser’s in- prise’s brand comprises. How do they applied for separately. Non-disclosure
11agreements are one way to prevent a customer or collabo- EXPENDITURE REQUIREMENTS Eur
rative partner from telling others about your unprotected
Cost of establishing the business 100
business idea.
Means of production 2,000
10. Estimates: Funding, Profitability and Sales Equipment installations 500
a) Investment CALCULATION: This is used to show the Computers and software 1,500
sources of funding and the expenditure requirements for Car
the business in its initial stages. Expenditure requirements
Phone/fax/internet 200
include those investments that must be made in order to
Office supplies 300
launch the business’s operations. Among other things, initial
stock purchases, machines required for production, regis- Property given as a capital contribution
(existing machines, work tools and supplies) 500
tration fees and security deposits as well as working capital
for a 3-month period (for instance) would be included in ex- Marketing investment 800
penditure requirements. In the working capital provision, an Initial stock purchases 1,000
estimate is made of those fixed costs (wages and salaries, Cost of establishing the business 100
rental, insurance, bookkeeping, etc.) that must be paid even Working capital 3,200
when the business does still not generate sufficient sales
Cash reserve 700
to cover costs. For this reason, working capital is added to
TOTAL EXP. REQUIREMENT 10,800
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
SOURCES OF FUNDING Eur
of funding must cover the expenditure requirements. The
Equity
sources of funding may comprise shareholders’ equity and
property given as a capital contribution, loans, business Share capital
subsidies and external equity investments. Remember that Personal cash investments 4,300
business start-up funding should not be regarded as one of Property given as a capital contribution 500
these sources of funding as it is intended for the entrepre- Loans from shareholders
neur’s own subsistence!
Loan capital
Bank loans 6,000
Finnvera loans
Other loans
TOTAL SOURCES OF FUNDING 10,800
12Becoming an
Entrepreneur in Finland
b) PROFITABILITY CALCULATION: Monthly Annually
Example of a profitability
The profitability calculation is used to calculation: EUR (12 months)
estimate where the break-even posi- EUR
tion (critical point) arises for a given = Target profit
price level and profit margin, as sales (incl. Entrepreneur’s own target salary) 1,500 18,000
volume is varied. This can be used to + Loan repayments 100 1,200
analyse whether a sales target is real- INCOME AFTER TAXES 1,600 19,200
istic. The sales target (net sales) can Taxes 22% 451 5,415
also be calculated as a monthly, week-
= Funding requirement 2,051 24,615
ly or hourly sales target. Alternatively, it
+ Loan interest 27 324
is possible to analyse whether it would
be worthwhile changing the margin A. OPERATING MARGIN (required) 2,078 24 939
and sales price, if the sales volume Fixed costs
seems unrealistic. Thus, a simple sen- Self-employed persons’ pension insurance
sitivity analysis can be created, show- 18.17 % (annual work-related income EUR
12,000) 182 2,180
ing how big an effect there is on the
profit forecast if the price is changed. Wages and salaries
Indirect remuneration costs
c) SALES CALCULATION: Costs relating to premises
In the sales calculation, the minimum Repairs and maintenance 30 360
invoiced sales target indicated by the Leasing payments
profitability calculation can be appor-
Communication costs (phone, internet, etc.) 80 960
tioned among the various customer
Office expenses 20 240
groups. This makes it easier to assess
the importance of the customer rela- Travel and car expenses,
daily expense allowance 500 6,000
tionships; any discounts and variable
costs for products being sold shall be Marketing expenses 200 2,400
taken into account. Bookkeeping, auditing, tax returns, etc. 100 1,200
Unemployment fund, trade association, etc. 30 360
Other costs (Insurance premiumns, etc.) 100 1,200
B. TOTAL FIXED COSTS 1,242 14,900
SALES MARGIN REQUIRED (A+B) 3,320 39,842
Purchases +materials and supplies (net of VAT) 425 5,100
NET SALES REQUIRED 3,745 44,942
VAT 24 % 899 10,786
TOTAL SALES / INVOICED SALES REQUIRED 4,644 55,728
SALES Product
CALCULATON Cleaning
(Monthly) Cleaning (evenings and Window Floor Spring Other TOTAL
(daily) weekends) cleaning waxing cleaning work VAT 0%
Sales price € 24 € 30 € 35 € 40 € 120 € 28
Costs €2 €2 €5 € 10 € 10 €0
Margin € 22 € 30 € 30 € 30 € 110 € 28
Sales quantity 80 units 32 units 12 units 8 units 10 units 8 units
Total sales € 1,920 € 960 € 420 € 320 € 1,200 € 224 € 5,044
Total purchases € 160 € 64 € 60 € 80 € 100 €0 € 240
13Monthly Annual
(12 mths)
NET SALES (VAT 0 %) € 5,044 € 60,528
NET SALES REQUIRED € 3,745 € 44,942
DIFFERENCE € 1,299 € 15,586
You should also note that it is good for
the entrepreneur to take some holiday,
and because of this annual sales will be
lower (around 11 months’ worth).
h e b u s in e ss plan
o t e s c o n cerning t
N
14Becoming an
Entrepreneur in Finland
SWOT analysis
The SWOT four-field analysis is a sim- Example of a SWOT analysis
ple and widely used technique for ana-
lysing business operations. A SWOT
analysis shows the Strengths, Weak- Strengths Weaknesses
nesses, Opportunities and Threats for
the business idea, the entrepreneur • strong expertise • weak language skills
and the enterprise. It is suitable for use • experience • insufficient personal funds
in all forms of enterprise. The review • knowledge of the industry • no experience of working as an
may concern either the whole business • innovative product entrepreneur
or just part of its operations in greater • international contacts • family situation
detail. • new culture
The top row of the table shows the
current situation and issues within the
business. The bottom row represents Opportunities Threats
the future and external matters. The
left side shows positive factors, while • globalization • entrepreneur’s ability to
the right side shows negative factors. • potential for growth run the business
The analysis helps with examining • new products/services • increasing competition
how the strengths can be developed, • new market areas • changes to legislation
how the weaknesses can be elimi- • political situation
nated, how the opportunities can be
exploited and how the threats can be
countered.
Risk management
There are many ways in which an it is systematic and well organ-
enterprise may be harmed or suffer ised. Further information about
losses, i.e. the business is exposed to risk management is available
various risks. However, risk in a busi- from www.pk-rh.fi.
ness may also be an opportunity. The
entrepreneur must be prepared to take
risks in order to succeed. Risks must
be identified, and the business must
tackle them, prepare for them and pro-
tect itself against them. In other words,
the risks must be managed.
The risks in a business may be, for
example, business risks, personnel-
related risks, contract and liability risks,
data-security risks, product risks,
environmental risks, risks from inter-
ruptions to operations, and risks from
crime and fires. Good risk manage-
ment is anticipatory, it takes all the
available information into account, and
15Marketing and advertising
Success in the marketplace demands the product well-known. A satisfied Price: The monetary or other com-
good knowledge of the operational en- customer will come back readily. But pensation paid by the customer for
vironment and the competitors, and it if the advertising does not provide the the product. The determining factors
also requires that the business stands right information about the product’s include the competitive environment
out from its competitors. In market- features, it may be that the customer in the marketplace, market share, the
ing, a business strives to influence will not return. customer’s perception of the product’s
the consumer’s idea and experience value, production and material costs
of the goods or services provided by A good work-tool to help plan market- as well as discounts.
the business – “we are better than our ing is the so-called “marketing mix”
competitors”. Marketing is indeed an model. It comprises the 4 P’s based Place: The location where the product
important part of an enterprise’s plan- on the corresponding English words: may be bought. Often, the term “dis-
ning. Product, Price, Place and Promotion. tribution channel” is used. This refers
From these, you can choose the mar- to both concrete business locations
Firstly, it is good to know the difference keting mix desired according to your (i.e. stores) and virtual business loca-
between marketing and advertising. customer target group, and you can tions on the Internet, such as an online
focus on using these in the marketing store.
In marketing, a business strives to of your enterprise.
influence the behaviour of consum- Promotion: All means of communi-
ers. The aim of marketing is to create, Product: The goods or services and cation via which the marketer, i.e. the
maintain and develop customer rela- their features, the product name, guar- enterprise, can promote its product.
tionships. Maintaining customer loyalty antees/warranties, novelty value and This includes, amongst other things,
is important, because acquiring new how the goods/services stand out advertising, communication at the
customers is often much more expen- from competing products. point of sale or on the internet, sales
sive than keeping old ones. Loyal key campaigns, public relations and the in-
customers also usually create the ma- formation passed between customers
jority of sales volume. via word-of-mouth.
With advertising, the business strives Product
to directly influence the purchasing de- • features
cisions of the consumer and to make • product name
• innovation
• warranty/guarantee
services
Promotion Price
• advertising FOUR P’s • identity
• sales campaigns • competitive
• sales personnel
for planning environment
marketing • production costs
• customer’s perception
of product value
Source: Kotler Philip (1980) Princi-
ples of Marketing. Prentice Hall. Place
• sales area
• distribution channels
16Becoming an
Entrepreneur in Finland
Segmentation of customer The various media include A really important
groups and selection of a • newspapers, local and free papers,
target group and magazines marketing channel is
It is good for a business to investigate • the Internet communication among
which product group it wishes to sell • television
people, i.e. so-called
”
a product to. Even though acquiring a • outdoor advertising and business
large group of customers is tempting,
it is worth focusing on the most impor-
advertising media
• radio
word-of-mouth.
tant customer group that generates • films (including product placement).
the greatest sales for the enterprise
with the least effort. Marketing to a Direct marketing is one common way
certain segment (i.e. group) will reduce to reach customers. For example, a consider the following questions: have
the number of customers, but at the pizzeria entrepreneur may distribute you achieved what you wanted with
same time it will increase the effective- adverts him/herself to letterboxes of the measures implemented? Or should
ness of marketing. There are various residents in the neighbourhood. All you make changes or adapt your style
ways of specifying a certain segment. brochures, business cards, etc. to be of marketing or advertising? Has the
For example, age, place of residence distributed directly to people either in key customer group changed its pur-
or purchasing power, i.e. how much person or electronically are forms of di- chasing behaviour (changed require-
money customers have available, can rect-marketing media. However, in di- ments)? Who are your customers now,
be used. When advertising children’s rect marketing, you must take account and who do you want as customers in
toys for instance, it is worth focusing of authorisation issues, i.e. whether the future? And what are your compet-
on areas where there are lots of fami- you need customer authorisation for itors doing?
lies with children or on a baby maga- marketing or, in the case of minors, Nowadays, people search for
zine that is read by new parents. parent/guardian authorisation, if you products and businesses using the In-
use e-mail for example. ternet. Web visibility can take the form
It is worth segmenting a mar- A really important marketing chan- of ready media space on chargeable
ket if: nel is communication among people, internet search services, a business’s
• the market has enough potential i.e. so-called word-of-mouth. Custom- own website or an online store. If you
customers ers often tell each other about their introduce your own website, it is im-
• a group’s customers have common good and bad experiences, so infor- portant to remember to update and
features and requirements mation about a product spreads on maintain it. An online store, like other
• the customer groups differ from Facebook, for example. In marketing, internet pages, is a good way to col-
each other it is also worth paying special atten- lect information and build a customer
• marketing will reach the tion to how you treat a customer in register. You must always tell custom-
chosen segments economically a service situation. For example, are ers what you are using data for and
and effectively. you able in a sales situation to provide how they can prevent its use for pur-
added value for a product, which cre- poses other than that desired by them.
Selection of ates a positive image (amongst other
advertising media things, appearance of packaging, dis- Trademark
It is worth looking for those media for counts, home delivery, items thrown in A trademark is the characteristic fea-
your business, via which you can get for free)? Or how, for example, will you ture that distinguishes the goods and
a message, i.e. your advertisement, to deal with complaints? services produced or provided by a
the desired recipient as economically The marketing plan for the busi- business from the products of other
and effectively as possible. Familiar- ness will help make the marketing co- businesses.
ise yourself thoroughly with the main herent and clear. Using the plan, you It is worth the enterprise protecting
features and prices of the various ad- can monitor fulfilment of the objectives its trademark by registering it with the
vertising media. The prices may vary and develop marketing in the future. National Board of Patents and Regis-
strongly depending on the media. It is worth reviewing both the market- tration of Finland. After registering it,
ing mix and the customer groups at the business has the exclusive right
regular intervals. For example, you can to use the trademark to represent its
17goods or services. The trademark may Internet network ID (domain) an actual person, and it must not con-
be, for instance, a word or a figure or A domain name is a worldwide-web tain offensive terms or expressions that
a combination of these. It may also be address that is written in the address incite people to commit crimes. The
a slogan, a combination of letters or a field of a web browser. The domain domain name can be ordered directly
sound or some other emblem that can name does not need to be the same from a service provider or with the help
be represented graphically. A trade- as the name of the enterprise. It might of a so-called web hosting service,
mark granted in Finland gives protec- be, for instance, just part of the name in which case you get everything you
tion only in Finland. If the entrepreneur or an abbreviation, preferably some- need all at once. The Finnish Commu-
wishes to protect his/her products thing short and memorable. nications Regulatory Authority www.
abroad too, (s)he must arrange this The domain name must not be viestintavirasto.fi grants use of the
separately. based on the protected name or trade- Finnish country code .FI.
mark of another party or the name of
Pricing In pricing, you can also use devic-
es such as introductory offers, contract
prices, “fast purchase” offers and spe-
Example: You sell a product that
costs EUR 28 to produce. Your com-
petitor sells the same product to cus-
cial-offer periods (for example during a tomers at a price of EUR 55 (incl.VAT).
Before you price your products, con- quiet period). With these devices, you Look what effect it has on the profit
sider whether your service is better or can set your basic tariff at the level you margin if you sell the product at a price
of higher quality than the competitors’. desire. Examples of pricing models are that is 20% lower than your competi-
Thus, will you sell your products at a restaurant lunch prices or early book- tor’s.
higher or lower price than your com- ing rewards at travel agents. There are
petitors? What added value are cus- also customers who want to pay the
tomers prepared to pay for? Will they price specified by the tariff without any
pay, for instance, for the image, prod- negotiations or bargaining.
uct quality, good customer service, a Pricing is an important competitive
Always keep your prices on view
warranty/guarantee or location? factor but not the only one. Often peo-
to your customers. A good price
Think carefully about the price ple only think about price competition,
list tells the customer both the
level, and set it so that it is in line with i.e. they sell at a cheaper price than
the product image. A quality, i.e. high- their competitors. Think carefully about product price and what the
priced, product requires a high-quality what is the right price for your prod- price includes. The consumer
setting. When you have started to offer uct. Part of the product’s sales price will only be interested in the
a product, negotiate on its price and must represent a profit for your busi- final price, including VAT. The
then sell it at a certain price, it is very ness. If you sell at a higher price (i.e. corporate customer will be
difficult in the future to raise the price. with a greater profit margin), you don’t interested in the price net of
Also remember that many customers need to sell so many to make a profit. VAT, because VAT on purchases
will expect there to be “room for nego- Whereas if the margin is lower, you can be deducted from VAT on
tiation” on the price. must sell a higher volume to achieve sales.
The pricing of expert services can the same profit level.
be based on time required. However,
the hourly rate does not tell the cus- EXAMPLE ON PRISING Competitor’s Price that is
price 20 % lower
tomer the total price, because they EUR EUR
will not know how much time will be
Sales price 55.00 44.00
required for the work. Use a pricing
- VAT 24% - 10.65 - 8.52
model as an aid in which you give de-
Price net of VAT 44.35 35.48
tails of the work contents and the time
Purchase price (VAT 0%) -28.00 -28.00
used for the work.
Profit margin 16.35 7.48
18Becoming an
Entrepreneur in Finland
Sales margin Example of the calculation of sales price EUR
Price your products correctly. How
Total costs of the product 150.00
much sales margin is generated for
+ Target sales margin (35 %) 80.77
each product or service sold? Is the
margin sufficient given the quantity = Sales price net of tax 230.77
sold? Also, remember the fixed costs + VAT 24 % 55.38
and total time usage. With the help of = Sales price including tax 286.15
the profitability calculation, you can get
a good idea of the lower limits for your
pricing.
Example of the schedule according to which the business gets money from its sales:
Business Business Money
Customer
sends the sends an Customer arrives in the
orders the
product to invoice to pays business’s
product
the customer the customer account
When a customer orders a product, it
may take 1 - 5 days, depending on the
company, before the product is deliv-
ered to the customer. Often the invoice
for the product is sent 1 - 5 days from
the delivery. The longest payment pe-
riod in transactions between a com-
pany and a public procurement unit is
30 days, in special cases 60 days. In
business-to-business sales, the pay-
ment period may be agreed on. Usually
payment periods from 14 to 30 days
are applied. If not separately agreed on,
the payment period is at most 60 days
in business-to-business sales. The pay-
ment should be available to the payee
on the due date in order for the payer
not to incur consequences for default.
In other words, even in the best-case
scenario, it will take several weeks,
even over a month from the order, be-
fore the money reaches the bank ac-
count of the company.
19Funding for a new business start-up
In the initial stages of a business, mon- Capital investments
ey is almost always needed to start up A capital investor (business angel or
operations. The amount of money ini- capital-investment company) invests
tially required depends on the business
Loan financing is money in a target business in return
idea, and it fluctuates greatly depend- mainly granted by the for a share of ownership (typically less
ing on the industry. If operations are than 50 % of the shares). Capital in-
based on selling the entrepreneur’s ex-
commercial banks and vestors take a significant risk when
pertise as a service and the use of his/ the special financing they make an investment, and there-
her time (for example, in interpreting fore they expect a significant return
and translation work), the initial invest- company, Finnvera. from the investment as compensa-
ment required is much less than if a tion. The terms of the investment will
restaurant or a company manufactur- be specified in detail in the shareholder
ing goods is being established. The ini- agreement.
tial investment enables establishment
of the enterprise and the start up of Business subsidies
operations. When the business is prof- www.finnvera.fi. Interest is paid on The Centres for Economic Develop-
itable, future investment requirements a loan, which may be linked to the ment, Transport and the Environment
can be covered by the income gener- Euribor reference rate, for instance. (ELY centres) can grant subsidies for
ated by the business’s operations. In addition, the finance provider must business ventures and the planning of
obtain a return for itself, i.e. an inter- them, depending on the line of busi-
With the help of the funding calcula- est margin, and a handling fee for the ness and the location of the enterprise.
tion, the investment requirements and loan. The loan repayment terms vary Business subsidies or aid are generally
the sources of funding in the early depending on the finance provider. Of- discretionary and require that the busi-
stages will be determined. The sources ten the banks require a real security for ness’s operations are profitable. There
of funding are now considered. the loan capital, such as the pledging is no need to pay back the subsidy or
of a home or other assets. You should aid. Business aid must be applied for
Equity capital always ask many different banks for and a decision received before any in-
Entrepreneurs may invest in the busi- quotes on loans. vestment is made. Aid for purchases
ness their own money or other assets made is generally only paid in arrears
that they own and possess (property Also, funds from other external inves- www.ely-keskus.fi.
given as a capital contribution). The tors, such as acquaintances or family
entrepreneur’s own savings, work tools members, may be capital in the form Support for innovative business ventures
or machines are referred to as self-fi- of a loan that must be paid back with can be obtained from the Finnish Fund-
nancing. Generally, lenders (i.e. banks) interest. It is always worth agreeing in ing Agency for Innovation www.tekes.fi.
require that around 20 % of the finance writing on loans and their associated
provided comes from the entrepreneur interest and repayment terms. The ELY Centre for Uusimaa may grant
before they consider granting a loan. micro enterprises support for the
It is worth the entrepreneur remember- development of inventions
Equity capital can also be invested ing that short-term financial aid can also www.ely-keskus.fi.
in the business by the entrepreneur’s be obtained by paying for supplies later
friends, family members and acquaint- (supplier credit), leasing, bank accounts If the business is geared towards de-
ances. As a result, they can gain a with overdraft facilities, and credit cards. veloping countries, it is possible to
share of ownership in the business. Leasing finance is long-term rental obtain a subsidy with the help of the
where the item for which finance is pro- Finnpartnership business-partnership
Loans vided acts as security. However, in the programme www.finnpartnership.fi.
Normally, an entrepreneur needs, in cases mentioned above, the entrepre-
addition to equity, external capital, i.e. neur must pay attention to the annual When planning the business, it is good
loans. Loan financing is mainly grant- interest rate, which may be substantially to remember that its operations must
ed by the commercial banks and the higher than a normal bank’s interest not be reliant on subsidies. The busi-
special financing company, Finnvera rate, i.e. the loan will be more expensive. ness must be profitable without any aid.
20Becoming an
Entrepreneur in Finland
Start-up grants
Business start-up grants are a form of On conditions for granting
discretionary support that can be paid start-up grants
to someone starting up as an entrepre- The conditions for granting a start-up
neur, and they are available in the initial grant are that
stages of a business operating on a 1) the applicant has or he will obtain
full-time basis. Start-up grants help adequate readiness for the intend-
with the entrepreneur’s subsistence at ed business and that
a time when the business is only just 2) the intended business is of full-time
starting its operations and establish- nature and it is estimated to meet
ing itself. the requirements of continuous
profitable operations.
It is worthwhile for someone consider-
ing setting up a business to contact Barriers for the granting and
their local Employment and Economic payment of a start-up grant
Development Office www.te-palve A start-up grant is not granted if
lut.fi in good time before starting their 1) the intended business is estimated
operations and to establish the pos- to secure a reasonable income for
sibilities for obtaining start-up grants. the applicant at the start-up and
Operations must not be commenced stabilizing stages of the business
before the Employment and Economic operations
Development Office has made a deci- 2) the start-up grant is estimated to
sion on the start-up grants. the applicant has outstanding taxes distort competition between the
to pay. A certificate may be ordered providers of same products or serv-
Start-up grants are taxable income, i.e. via the website of the Finnish Cen- ices to more than a minor extent
tax is payable on them. Start-up grants tral Tax Administration (www.vero.fi/ 3) the private customer applying for a
can be granted at the same time to verovelkatodistus), for example, or start-up grant has started the busi-
several entrepreneurs who are working one may be collected from a tax office. ness before a decision on the grant
in the same start-up business. has been made
Start-up grants can be paid for a peri- 4) the applicant for a start-up grant
Conditions for granting od of up to 18 months. However, usu- would leave an employment rela-
support ally start-up grants are granted for a tionship and start doing the same
Start-up grants can be granted if the period of six months. After this period, work as an entrepreneur and it is
entrepreneur is able to establish profit- start-up grants may be granted on a likely that his main principal/client
able business and (s)he has experi- case-specific basis so that the entre- would be his former employer
ence as an entrepreneur or has busi- preneur’s livelihood is secured. The 5) the applicant for a start-up grant has
ness training. The support must be continuation application for a start-up materially neglected his duties to
necessary for the entrepreneur’s sub- grant shall be delivered to the EED Of- pay taxes or statutory payments or
sistence. The entrepreneur must work fice during the ongoing start-up grant he has material private-law payment
in the business full-time. period at the latest, approximately one defaults unless the Employment
month before the termination of the and Economic Development Office
An application for start-up grants must start-up grant period. deems the granting of the support
be accompanied by the business plan expedient for a special reason.
and profitability and financing calcula- In 2014, the amount of start-up grants The start-up grant cannot be paid if the
tions. Help with preparing these can available is around EUR 700–1,120 income of the new entrepreneur has
be obtained from business advisory per month gross (i.e. tax is still pay- been secured in another manner, for
experts. able on this sum). Start-up grants are example, by wages, various support or
paid once a month retroactively and an benefits. The barriers for the granting of
A further requirement is a certificate of application must be made to the Em- a start-up grant are governed in more
the payment of taxes/tax debt cer- ployment and Economic Development detail in the Act on Public Employment
tificate, i.e., a statement on whether Office for this. and Enterprise Services.
21Permits and registrations of foreigners
and persons residing abroad
Permits and registrations of may be needed for establishing a busi- with the police department of his mu-
foreigners moving to Finland ness or for holding a managerial posi- nicipality of residence. A separate resi-
The nationality of a foreigner decides tion in a business. dence permit is not required.
which permits or registrations he
needs when moving to Finland. Moving from another In addition, a citizen of an EU/EEA
Nordic country Member State shall register at the Lo-
Foreigners moving from outside the EU/ A citizen of another Nordic country cal Register Office after the right to
EEA Member States need, as a main (Sweden, Norway, Denmark, and Ice- reside has been registered with the po-
rule, always a residence permit in order land) moving to Finland shall register at lice department. At the local register
to work or engage in trade in Finland. the local register office, if the intended office, the person to be registered shall
stay is to exceed six months. For this fill in and sign in person the registra-
An EU/EEA citizen shall always register purpose, the person must visit the Lo- tion form for foreigners as well as the
his stay in Finland with the local police in cal Register Office of his place of resi- notification of move for the Population
case of a stay exceeding three months. dence in person. A passport/identity Information System. The registration
card is needed to verify one’s identity. shall be made is the stay in Finland is
Anyone moving to Finland shall sub- In addition, a notification of move shall permanent. An identity card or pass-
mit a notification of move to the Local be made to the Population Information port is needed to verify one’s identity.
Register Office if the intended stay in System.
Finland is to exceed three months. The Moving to Finland from outside
notification shall be submitted within a Citizens of the EU/EEA the EEA Member States
week from the entry into the country. Member States A person moving to Finland from out-
A citizen of an EU Member State, side the EEA Member States needs a
If the permanent place of residence or Switzerland or Liechetenstein who in- residence permit for a self-employed
municipality of residence is outside the tends stay in Finland, due to work or person in order to engage in trade in
EEA, a permit of the National Board engagement in trade, for more than Finland. A person shall be deemed a
of Patents and Registration of Finland three months shall register his stay self-employed person if he is engaged
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