A new way to do business for Auto Entrepreneurs?

Having spoken with Andrew about his project, I suggested he post the details of it here for everyone to discuss, please have a read through and let's get a discussion going about the pros and cons. Thanks, James (Editor SFN)

There is universal agreement that doing business in France is difficult, cumbersome and sometimes impossible. As one forum participant posted: “The administration in France is notoriously difficult to get a handle on, even if you are a French national, so starting a business can be very difficult. As with anything there can be barriers, but there are also opportunities - it often amounts to a state of mind.” (ed.CC)

Well he’s right: it does all depend on your state of mind but also, it depends on who you ask for help and what help you then receive. If you ask almost any accountant, solicitor or conseiller from the Chambre de Commerce or Chambre de Métiers in France, you’ll get the usual comparison of SARL vs. MICRO vs. AE and so on and so forth. Yes, that’s a start but it’s not really strategic advice and it will not necessarily help make your business successful. These categorisations just determine how much you pay to the state and when you pay it.

Naturally, there is no ‘one size that fits all’, but it is possible under some circumstances to operate a French Enterprise using a familiar, efficient, modern solution. The Teknos Achat Buying Service is just such a solution: relieving Artisans of the pressure: of time-wasting searches; endless phone calls to different suppliers; responsibility for manufacturer's guarantees; and the feeling that you are struggling alone against the system.

Businesses using Teknos Achat have achieved increasingly positive results through this networking, cooperation, participation and sharing approach. Acting as a group – a concept well recognised by the French - Teknos Achat intelligently uses the power and influence of numbers to the individual's best advantage – a concept less familiar in France, until now!

How does it work?

Let’s consider the case of a typical Artisan, who buys materials, adds a mark-up and resells them to a private customer as part of a complete project.

Should he seek it, the most common advice given to this Artisan will be to become a Limited Company (SARL or EURL) and register for TVA. Within this Company, he will offset the cost of all his materials, recover TVA against his income and draw a salary. While this arrangement may work for an Artisan with a substantial order book and a number of business customers, it is a very different story for someone just finding their way as a self-employed worker in France.

Once registered as a SARL, the Artisan will be expected to pay a steady stream of cotisations sociales, TVA and other charges, most of which are calculated at the beginning of the year on the basis of forfaits and ‘notional’ instead of actual income. Even if business is slow, the Artisan will find himself with a bill each trimester for many thousands of euros and an invoice for his Accountant's fees at the end of the year – and that's without setting aside the time required to prepare TVA returns and other paperwork, or paying someone to do it for him.

In recent years, the Artisan has instead had the option of the Auto Entrepreneur regime which allows him to concentrate on work he gets paid for and which reduces administrative duties and declarations to a minimum – but it’s not a free ride. For an Artisan in this regime, expenses, purchases and TVA cannot be deducted, and cotisations are charged on turnover rather than his actual salary. Whilst the rules allow the Artisan to declare separately prestations de service and activités commerciales, there is little room these days for a generous mark-up on materials as many private customers have the capacity to search the internet for the best possible prices. This puts the Artisan in a difficult position: does he allow the customer to source and supply materials, possibly choosing substandard imitations for the Artisan to install; or does he insist on purchasing materials himself to resell at a modest profit and at the risk of raising his turnover beyond the AE threshold and forfeiting his entire margin to TVA and cotisation costs? Why do that for no benefit?

The Teknos Achat Buying Service combines the advantages of these two systems and eliminates their disadvantages. Registered as an AE, the Artisan works under the simplified financial regime and charges his Customer for his labour only. Through Teknos Achat, the materials for each job are invoiced directly to the Customer and the Artisan receives a commission on the sale. Being a stakeholder in Teknos Achat, the Artisan is sure of the quality of the materials while the group's buying power means that the customer gets the best price and the best terms. In addition, once the Artisan and the customer have agreed on the shopping list, a Teknos Achat manager takes over responsibility for dealing with the suppliers as well as any problems such as delivery delays or exchanges under guarantee saving the artisan a tremendous amount of time, allowing him to get on with more paid work. At all times, the artisan keeps his relationship with the customer – Teknos Achat acts only on the instructions of its artisan members.

Teknos Achat is a network, helping artisans enjoy more freedom and more profit from their work. Joining is easy. Make contact and get started.

www.teknos-achat.com

What our members say

“The survival of my business depends on maximising every benefit I can find. Using TEKNOS-ACHAT.com delivers good savings and more profit out of my work.”

“I did this job with the help of the TEKNOS-ACHAT.com buying service as a partner. Not only was all the purchasing taken care of eliminating a lot of time normally wasted, but also I finished the job with a better result in my pocket. So why would I go through the hassle of buying the goods myself – it makes too much sense to use TEKNOS ACHAT to do it for me.”

“If I have to get the client to buy the goods separately, then I don’t get any commission and sometimes it ends up badly if the wrong product arrives or if there is damage. To get the same result without TEKNOS-ACHAT.com takes a lot of time and a lot of luck. I don’t see why I should take the chance- so I always use TEKNOS-ACHAT.COM”.

“It took me about 20 minutes to join and become a User, it cost nothing more than my time at TEKNOS-ACHAT.com. After that, I’m ahead almost immediately- it’s so easy. Best thing I’ve done for a long time. “

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Comment by Andrew Henderson on February 21, 2013 at 17:59: Simon

I appreciate your insight but what you wrote:

mainly because I've made sure that I've been a minority gérant (by using family members as the other shareholders). Then one pays charges sociales only when the company is making enough money to pay the gérant a wage. And that's usually after one has taken a lot of expenses out of the business (transport, office costs, rent etc), again without any cost to the gérant.

Firstly, I would hasten to suggest that there are so many risks associated with improper declaration that the possibility of being controlled should dissuade anyone from such a practice. In addition it is not really practice for hard working families who need to draw a reasonable salary every month to keep the bills paid and food on the table. We are discussing; ‘what is the best and most efficient way to do that’ and not trying to ‘dress up wages as charges’.

The approach I am suggesting does not rely on any such concealment or re-routeing of income. Everything is to be declared as it is and to be complete and fair so that there can be no repercussions later on or if there is a Control. With that done those who are using this approach using a Buying Partner are proving a better results than an Entrepreneurs acting alone.

From your post though, it’s clear that business operation is France is possible, however I would only hope that it was so without any additional risk from what you’re are describing. Your note about pensions is well taken, in that what are we really paying for with our huge cotesations? But that is another argument and given that we HAVE to pay them, doesn't much matter what we think of it as I don't see that Holland Government changing anything on that anytime soon except maybe more of the same.

Andrew

Comment by Simon Oliver on February 19, 2013 at 17:34: Looks like an advertorial to me.I have run a number of SARL over my 32 years in France and can't say I've found it very difficult. Never paid any of those "...steady stream of cotisations sociales, TVA and other charges, most of which are calculated at the beginning of the year on the basis of forfaits and ‘notional’ instead of actual income.'" mainly because I've made sure that I've been a minority gérant (by using family members as the other shareholders). Then one pays charges sociales only when the company is making enough money to pay the gérant a wage. And that's usually after one has taken a lot of expenses out of the business (transport, office costs, rent etc), again without any cost to the gérant.

Of course, this doesn't do much for one's pension ... but then, who gets a decent pension anyway apart from the fonctionnaires and the retired executives from multinationals.

Comment by Andrew Henderson on February 18, 2013 at 12:17: Tracy.. thanks for adding the clarification, as it is certainly part of the point I was trying to make but the difficulty goes on, in that a period of prosperity and significant drawings followed by a down turn and reduced drawings, then the cotestations will stay at the previous level for nearly 2 years before they come into line with the new levels. The theory here is that the business pays and is reimbursed later for excessive contributions, but this quite effectively robs the business of working capital during hard times when every penny is desperately needed. It’s an impossible system for small business.

Chris .. Yours is a 'service ' business and so there less opportunities for benefits from the use of a Buying Service.

Jayne.. as we have discussed before, there are significant advantages for your type of business in this approach. I would point out that although there are certainly a lot of REEL simplife working as artisans, I suggest that increasingly business owners are choosing either limited Companies (SARL) or AE as the REEL provides none of the advantages of either Regime, and certainly contains many of the disadvantages.

You wrote… The artisan usually pays cotisations monthly and the accountant's fees quarterly, which one knows in advance and the accountant does the TVA returns. All the artisan does is scan the paperwork at the end of each week which takes 10 mins. Admittedly the accountant is expensive but then you have to weigh that up against the loss of TVA refunds which you would not get with AE.

As most people who are AE use small quantities and don't necessarily work on different sites for more than a day or so, how can a delivery service work unless you are investing in large quantities and end up with more stock sitting around than you need?

This is not really entirely true, as Cotesations can be declared quarterly or monthy by AE, REEL and SARL, it was certainly the case for my SARL and when it came due it was a killer. The benefit of the AE is that you don't need to pay the nearly €3k in fees for an accountant to undertake the book keeping, annual return and the TVA declaration- that is a significant saving in of itself. Not to mention that '10 min' times the number of times it needs to be done in a busy business can add up – in my case it was nearly another full time job to keep up. You may be surprise that there are plenty of AE who are doing impressive turnovers, up to the limit in some cases, certainly I am working with quite a few who regularly require shopping lists in the €10'000's. The fact that the average turnover amongst AE is something like €7k is more a reflection that there are plenty who do little or nothing with their registration, the average gets written down as a consequence. As you now know, using a Buying Service, the AE no longer suffers any penalty from the inability to collect TVA which is dealt with by the Buying Service.

My point is that, serious business owners in France who are working hard to obtain and perform serious work are being disadvantaged by a system which discourages entrepreneurial activity. With a simple and slight change in perspective it’s possible to improve that situation and approach what we all would consider a more 'normal' flown of 'effort for reward' relationship. There are also many other benefits to be had from cooperation and networking which are yet to be realised by this population who seem to feel somewhat disenfranchised from such alliance. As irrational as this appears, the reality that is the French 'going it alone' psyche has terrible consequences to individual business health and the prosperity of the economy in general. Resistance to change is the challenge here.

This debate will not change that fundamentally but I'm saying that there is hope as there are real and workable ways to improve the business health of small business in France. So little by little then change should become more acceptable not for its own sake, but for the more fundamental Survival in France.

Andrew

Comment by Tracy Thurling on February 16, 2013 at 19:08: " the Artisan will be expected to pay a steady stream of cotisations sociales, TVA and other charges, most of which are calculated at the beginning of the year on the basis of forfaits and ‘notional’ instead of actual income.'"

When you start your business, this is how it works, it is only when you have been running three years that you pay on actual figures achieved, it is why so many French business go bankrupt in the third year.

Admin Comment by James Higginson on February 16, 2013 at 14:19: Hi Emily,

This is not an advert, it does read like that though I know.

Thanks

James

Comment by Chris Freman on February 16, 2013 at 13:51: Hi Andrew, in fact I have been AE for a few months now working as a graphic/web designer, but as I have only recently arrived in the south I have a very small network here and depend mostly on Paris based friends and contacts.

However I am looking to launch a communication support for anglophones in Montpellier, a kind of where to go what do do for those new to the city and tourists, and a form of communication tool between those living here. Using a bimonthly paper flyer/magazine/map backed up by a website and some social media support. Speaking to some here there seems to be a space for this so I'm just trying to get a solid shape before rolling out at by summer..

Comment by Jayne Warner on February 16, 2013 at 11:35: " the Artisan will be expected to pay a steady stream of cotisations sociales, TVA and other charges, most of which are calculated at the beginning of the year on the basis of forfaits and ‘notional’ instead of actual income.'"

Surely this information is incorrect because the cotisations are based on the net turnover from the previous year, so apart from the inevitable surprise increases which no one can be aware of, then one knows what your cotisations will be.(Also you do not mention REEL Simplifiée which is what many artisans become.

" the Artisan will find himself with a bill each trimester for many thousands of euros and an invoice for his Accountant's fees at the end of the year – and that's without setting aside the time required to prepare TVA returns and other paperwork, or paying someone to do it for him"

The artisan usually pays cotisations monthly and the accountant's fees quarterly, which one knows in advance and the accountant does the TVA returns. All the artisan does is scan the paperwork at the end of each week which takes 10 mins. Admittedly the accountant is expensive but then you have to weigh that up against the loss of TVA refunds which you would not get with AE.

As most people who are AE use small quantities and don't necessarily work on different sites for more than a day or so, how can a delivery service work unless you are investing in large quantities and end up with more stock sitting around than you need?

Comment by Andrew Henderson on February 16, 2013 at 10:22: Thank you all for your comments.

Chris.. Good luck with your business start-up, perhaps you could be explicit on the nature of your business so that we might be of some help to you.

Emily... there is plenty in this idea which is not only useful but could mean the difference between survival and prosperity for a lot of hard working people. Plenty of whom have adopted the approach after listening to the whole story and are consequently enjoying the benefits.

Toni... In principle I suppose that you are a manufacturer and therefore will pay 14% cotesations on your sales of your product (this varies from a typical artisan who pay 24% on prestation service and 14% on sale of goods). It’s difficult for me to comment on what improvements might be possible without more very specific information which is probably not suitable for open form. If you are interested to explore this further then I'm happy to discuss some detailed application with you via email.

As must certainly be clear, the object of this Blog is to explore and discuss in a generic sense the application of an approach which could be beneficial to many but will most probably not be applicable to everyone. In the cartoons I've tried to indicate that what the essential concept is- vis Pic 1, Doing business alone, necessitates carrying all the load of the work and the cost alone. Pic 2 Sharing some of the work with an expert partner (purchasing for example) spreads the work, spreads the cost which can be handled more efficiently. Result – more profit in the pocket of the artisan, more time to undertake more projects, less hassles, less responsibility and more.

Andrew

Comment by Toni Ressaire on February 16, 2013 at 8:50: Forgive my ignorance, but after reading the post and visiting the site, I'm not sure how this works and what the advantages are for a buyer.

As an AE, I buy small amounts of supplies to create my products. For example, right now I'm searching for the electrical parts to create lamps. (I work in metal; create the designs and fabricate them in metal). I also by clock mechanisms and the hands for the clock, via a company on the internet. But I don't buy more than 100 pieces at a time, obviously because I'm a very small business, i.e. AE.

So how would I do this via TEKNOS-ACHET.com? And what would the advantages be?

Comment by Emily Montès on February 15, 2013 at 18:22: Can I just ask: is this an advertorial? It reads like one- though there's also some useful non- advertising material as it puts AE in context for an artisan.