If you are thinking about starting your own business, you have certainly already thought about trading products on the Internet. E-Commerce is one of the few sectors in Germany with extremely positive inventory figures and forecasts. Even in economically rather weak times, it can convince with stable sales and attractive profits. The entrepreneur is subject to special regulations with regard to his qualification and must demonstrate his knowledge and skills for exercising the self-employed activity or, if necessary, participate in an aptitude test.
The effort involved in setting up the company itself is comparatively manageable. Online trading requires neither high-quality and expensive machines nor particularly qualified personnel. In addition, many online retailers take up their activities in the start-up phase from home or apartment and thus save the high rental costs for commercial premises.
Optimal starting conditions for beginners in online trading
If a prospective online retailer also decides to set up a drop shipping company, the effort is significantly reduced once again. Products do not have to be procured and stored in advance and the goods risk is eliminated, as is the high cost of shipping logistics. Thus the foundation succeeds comparatively smoothly, while the success in the form of the first sales takes place within the shortest time.
However, beginners and founders should be aware of the fact that the strongly reduced effort of a DropShipping foundation must also be financed. This is not so much a matter of purchases as of the cost of living of the entrepreneur during the first few months of his independence. At this point, the first sales have already started. However, the fact that these are sufficient from the outset to maintain the previous standard of living of the founder and his family must be seen as a particular stroke of luck. Who dares the step into the independence, that must have a conclusive concept over the necessary financing, in order not to fail within the first weeks.
The creation of enterprises and the entrepreneurial offensive of citizens is to a large extent in the interest of the state. Growth can only be achieved if new companies continue to push their products and services onto the market. Against this background, the state maintains numerous support programmes that are specially tailored to the needs and wishes of prospective entrepreneurs. The start-up grant plays a special role among all available programmes. This is especially available to people who want to plan and realize an independent existence out of unemployment.
The state offers sufficient possibilities for support
In the following, we would like to introduce our readers to the state’s start-up subsidy in detail and show them in particular how the subsidy programme can be optimally combined with setting up a drop-shipping company. We will explain the start-up subsidy in detail and explain to which groups of people the subsidy is available. You will find out what financial resources are available to you over what period and how they can be used to put your start-up project on a solid and sustainable footing.
In addition, you will receive detailed instructions explaining how to apply for a start-up grant in just a few steps. This guideline is intended to support those willing to set up their own business and give them valuable help in the planning and start-up phase of their own company.
Planning reliability included: The start-up subsidy from the federal government
Every newly founded company, regardless of how good the respective business idea is, needs a certain amount of time to generate predictable sales and profits. Even if a new entrepreneur has succeeded in correctly assessing and financing the costs of running the business, the question remains how he can secure his own livelihood and the costs of providing for his family during the start-up phase. If an intact employment relationship existed until shortly before the foundation, the founder may have had the opportunity to provide for personal reserves, which he can fall back on during the start-up phase. It is also conceivable and in many cases practicable for this group of people to take up part-time self-employment as a first step.
But what if self-employment is a way out of unemployment? More and more people in this situation have the commitment, courage and diligence to take their professional destiny into their own hands. Even if an Unemployment Benefit I (ALG-I) recipient succeeds in representing the pure start-up costs of his business, the problem still remains as to what income should be used to finance his livelihood if the newly established business is not yet able to pay for it.
The start of a company is particularly promoted
With the state start-up subsidy programme, the federal government offers the affected group of people active assistance in financing the start-up phase of a company. The promotion serves the founder of the company as support in matters of livelihood and should thus facilitate the conditions for founding a company in Germany. However, a look at practice shows that only a small proportion of those eligible actually make use of the helpful offer.
The reasons for the low number of applications are complex. Many young entrepreneurs simply do not know that the start-up subsidy is available to them. Others, on the other hand, shy away from going to the employment agency and the formalities and bureaucratic hurdles associated with it. Also out of shame the state support is waived in many cases.
In 2009, for example, only 18 percent of start-ups in Germany made use of state support programmes. If one considers that around 25 percent of newly founded companies do not survive the first three years on the market and if one also considers that in most cases the reason for the early cessation of operations is insufficient financial resources, one should neither shy away from the expense of applying for a start-up subsidy nor, out of shame, forego this important support. In the following, we will explain to you in detail which conditions apply to the application for a start-up grant.
State support: Requirements for application
The federal start-up subsidy was introduced to make it significantly easier for unemployed people to start their own business. Monthly payments to the beneficiaries should help to cover the cost of living and social security contributions. Since many people interested in setting up a business do not realise their career plans because they are afraid of not being able to provide for themselves and their family sufficiently during the start-up phase, the start-up subsidy is an important and extremely effective instrument for promoting self-employment in Germany.
In accordance with its purpose, the grant of the start-up subsidy is limited to persons who were entitled to unemployment benefit I (ALG-I) at the time of application. A further requirement is that the remaining period of entitlement to ALG-I must be at least 150 days at the time of application. In order to find out when the entitlement period ends, it is sufficient to take a look at the permit notice issued by the employment agency. The date on which entitlement to the corresponding payments ends is specified here.
Any ALG-I recipient considering setting up his own business should first check whether he meets the requirements for applying for a start-up subsidy. If the remaining time of the claim against the Employment Agency is less than 150 days, the so-called entry allowance can still be applied for instead of the start-up subsidy. In 2009, almost 140,000 start-ups applied for and received the start-up subsidy. This is 14.9 percent more than in 2008.
Active workers can also receive start-up grants
In addition to persons who are already unemployed and receive ALG-I, prospective start-ups with an existing employment relationship can also benefit from the state subsidy. This always applies if the current job is currently threatened with loss. It is important that the person concerned contacts his or her employment agency immediately after termination or signing a termination agreement and applies for unemployment benefit I there. In order to apply for ALG-I, the employee must have paid unemployment insurance contributions for at least 12 months during the last two years.
In any case, it should be taken into account that the unemployment registration deadline at the Employment Agency is only three days. If the time limit is exceeded, the authority may be able to impose a blocking period. If an existing employment relationship has been terminated by the employee and he subsequently registers as unemployed, the Employment Agency imposes a blocking period before payments from ALG-I are made.
In this case, however, it is also possible to apply for the start-up subsidy. However, two things have to be taken into account here: On the one hand, the blocking period shortens the overall entitlement to unemployment benefit I. An intended formation may therefore have to take place earlier for affected parties than for someone who has the full term of ALG-I at his disposal.
In addition, founders must take into account that the payments from the formation grant are also subject to a blocking period if such a period has been imposed for the ALG-I. Those who plan carefully and do not allow existing deadlines to elapse unused can also successfully apply for a start-up grant under the circumstances described above. In the next section, we describe the period over which and the amount of the start-up subsidy is available to the beneficiaries.
Founding grant: Funding periods and level of support
In order to plan the step into self-employment solidly and realistically, prospective entrepreneurs must be informed exactly about the amount and for what period of time payments from the employment agency are available to them. Within the framework of the start-up subsidy, a distinction is made between two different phases. The first phase of funding will cover a total period of six months. The second phase can start immediately after the first phase and will last another nine months. In this way, a total funding period of 15 months is achieved.
During the first phase, the entitled person receives a continuation payment of his previous remuneration from the ALG-I, without having to continue to make his labour available to the Employment Agency. The receipt of these payments is independent of one’s own income in the start-up phase of self-employment. Even if income is already generated here, it is not counted towards the unemployment benefit I. In addition, the payments from the start-up subsidy do not have to be paid back to the federal government.
In addition to the actual funding amount in the amount of the applicant’s previous ALG-I, an additional contribution of a further 300 euros is available. This amount is intended to enable the founder of a new business to pay for his own social expenses. The receipt of this social lump sum amounting to 300 euros can also be applied for from the respective case manager or clerk for the second phase of the start-up subsidy. In total, the applicant is therefore entitled to a continuation payment of his previous ALG-I for the first six months and a social lump sum of 300 euros per month for the first 15 months.
In order to be able to better assess the concrete amount of support within the framework of the start-up subsidy, a calculation example is given here: If the person in question is a married entrepreneur with a child whose income before the onset of unemployment was above the income threshold for contribution assessment, he or she can receive a total of 18,200 euros in funding during the entire funding period, i.e. within 15 months.
As already mentioned, they are paid out independently of their own income under the new self-employment scheme and do not have to be paid back to the federal government. For the applicant, this funding means that he can experience the start-up phase of his own company free of personal financial problems. For many interested persons, it is the start-up grant that is the prerequisite for building an independent existence, which would not be possible without state support.
The social security contributions of subsidised founders
As soon as you become self-employed, you are obliged to take care of the maintenance of social security protection yourself. It is particularly hard for start-ups to have to pay both the employee and the employer’s share of their social costs from now on. Health insurance and long-term care insurance play a particularly important role for start-ups. Both are required by law and must be completed. It should be noted that, even without such an obligation, it would be more than reckless to waive such cover.
The situation is different in the area of pension insurance. Many self-employed people find it relieving that in their new professional position they are no longer obliged to pay into the statutory pension insurance. Even without such an obligation, however, employment with adequate provision for old age should not be postponed. Those who do not make timely efforts to build up a private alternative to the statutory old-age provision will find themselves facing major financial problems in retirement and may quickly find themselves in a position to rely on the support of social institutions.
The amount of the concrete contributions to health and long-term care insurance depends on the income of the business founder. Here it should be taken into account that the social cost lump sum of 300 euros is also counted as income. On average, start-ups using the start-up subsidy can expect monthly costs of around 200 euros.
Step by step to the start-up subsidy
Many founders of new businesses shy away from the bureaucratic work involved in applying for state subsidies. The application procedure for the start-up grant is comparatively simple. In addition to a few purely formal steps, the focus here is mainly on measures required which are also in the interest of the business founder independently of the application itself. This includes, in particular, an intensive examination of the potential of one’s own business idea, the assessment of the overall concept by a competent body and participation in seminars for start-ups.
Those who do not regard these steps as an annoying obligation, but rather as an opportunity to review and optimise their independent project, can benefit greatly from this. Anyone who is ashamed to make use of the services of the Employment Agency should bear in mind that the state and society urgently need to promote a start-up-friendly atmosphere. Only the initiative of citizens who are willing to start a business will ensure growth and new jobs. Those who do not resign themselves to unemployment but instead take their professional future into their own hands deserve comprehensive support from the state and should not be ashamed to make use of it.
In the following we will explain step by step which tasks have to be completed within the framework of applying for a start-up grant and how these can be successfully mastered.
Mandatory requirement: The application for unemployment benefit
The start-up grant is only available to persons who are entitled to Unemployment Benefit I with a remaining period of at least 150 days. If unemployment already exists, the Federal Employment Agency should check on the basis of the permit decision whether the required remaining term still exists. If the applicant is still in an employment relationship that will end at short notice, it is important to submit the application for unemployment benefit I in good time to the relevant employment agency.
If a period of three days is exceeded, the responsible case manager can impose a blocking period, which must be avoided. Since the amount of the start-up subsidy depends on the amount of the previous ALG-I benefit, applicants should ensure that the benefits paid by the Employment Agency at the time of application are not reduced by additional income. Otherwise, there is a risk that the reduced amount will form the basis for receiving the start-up grant.
The start into a funded future: The application form for a start-up grant
Where there is clarity as to the actual intention to set up a business, the application form for the start-up grant should be collected from the relevant employment agency. Although this step does not force the applicant to actually set up a business, it signals to the case manager that there is an intention to do so. The latter is informed that the applicant now has to complete a number of tasks that are time-consuming.
To this extent, it will stop or at least reduce its efforts to actively place people in the labour market. It is of crucial importance for the applicant to collect the application form for the start-up grant from the Employment Agency before carrying out the actual start-up. If a company is formed before the form is accepted, the entitlement to the start-up grant shall lapse definitively.
Develop skills and acquire knowledge: The Business Start-Up Seminar
In your new professional environment, you will be confronted with many tasks that were not part of your everyday work. While the pure development of a business idea was possible even without special previous knowledge, the preparation of a business plan, the actual establishment of a company, the financing of your future company and the responsible management of your own company require a whole range of skills and knowledge. Business start-up seminars provide a deep insight into all matters concerning the foundation and development of an independent existence.
In addition to imparting and deepening important knowledge, you will also have the opportunity to get to know other founders and discuss your plans with them. Some employment agencies require applicants for start-up grants to attend a seminar. Even if this is not the case in your region, you should consider voluntary participation in an appropriate event.
Independent consulting and market-driven optimization: the expert body
Since the clerks and case managers of the individual employment agencies are not in a position to check the feasibility and prospects of success of business ideas from a wide range of areas and sectors themselves, it was decided to cooperate with so-called expert bodies. These are, for example, chambers of industry and commerce but also tax consultants or other licensed consultants in matters of business start-ups. To apply for a start-up grant, you need a positive statement from an expert body. In order to prepare this opinion, a counselling interview with the relevant body is required.
Here the basic features of the business idea are discussed in detail and jointly evaluated. The consultant will discuss whether there is a need for improvement and provide the founder with advice and tips for the further elaboration of the entrepreneurial concept. Do not regard this conversation as an annoying duty but as an opportunity to present your business model to a qualified expert at an early stage.
Arithmetic is better than guessing: The business plan
The application for a start-up grant requires the preparation of a binding business plan. This is a document that comprehensively describes the content and economic structure of a company to be founded. The business plan serves as proof of the soundness and marketability of your project to both the competent office and the employment agency. The business plan is divided into a content section and an economic section. In the first part you explain the actual business idea, present the market in which you want to become active, explain the products or services that are to be offered and explain why you yourself are convinced of the success of your project.
The economic part, on the other hand, reflects the financial situation of the company being created and takes into account both the start-up costs and the income and expenses in later day-to-day business. The economic part provides information on whether, to what extent and from what point in time profits can be made. Anyone who feels overwhelmed by the preparation of a business plan can fall back on the support of experienced experts. The employees of the Agentur für Arbeit are good first contacts when looking for a suitable consultant or seminar.
The business plan in critical review: the expert opinion
Once your work on the business plan has been completed, it must be submitted to the competent authority. Your local consultant will first take a close look at your document and then, in a personal meeting, suggest adjustments and improvements if necessary. If the expert body comes to a positive opinion on the business concept submitted, it will issue an expert opinion.
This document is a mandatory requirement for the application for a start-up grant. Do not regard this step as an annoying obligation, but see it as an excellent opportunity to finally get to grips with your business concept. Together with the consultant of the expert department, last weak points can be uncovered and repaired before you finally start with the implementation of your own company.
A last step before the start: the registration of self-employment
Before you can apply for a start-up subsidy from the relevant employment agency, you must register your future company with the authorities. The registration takes place with your responsible trade office and is to be settled within few minutes. Take this opportunity to check that you have completed all the necessary steps properly. You should be registered as unemployed at that time and be entitled to ALG-I for a remaining period of at least 150 days.
You should have picked up the application for a start-up subsidy from the Employment Agency in good time and you should have a business plan and a positive statement from the competent office. If your employment agency has required you to attend a seminar for business start-ups, you should have the relevant confirmation. Once all the steps have been completed and you have all the documents, you can register your future company with the trade licensing office.
Finally, the application for a start-up subsidy to the Employment Agency
You submit the application for a start-up grant directly to your case manager of the responsible employment agency. Submit your business plan, the opinion of the competent authority, the proof of registration of your trade and, under certain circumstances, the confirmation of participation in a seminar for start-ups. Fill in the application form completely in advance and hand over all documents to the employee at the employment agency.
The decision on the approval of the start-up grant is a matter of discretion to which no legal claim exists and is generally taken at short notice. You will first receive the notice of cancellation of your claim to ALG-I and then the notice of approval of the receipt of the start-up grant. This provides information about the concrete amount and the exact duration of the funding.
DropShipping and start-up subsidy: an ideal combination
Who carries itself with the thought of starting the way into a vocational independence within the range of on-line trade, which should strive to exhaust all advantage potentials, which can help it to bring its future enterprise successfully to the market and hold there in a lastingly positive position. Prospective entrepreneurs are faced with two different problems: On the one hand, the foundation itself must be financed. In online trading, this includes in particular the acquisition of inventories and their adequate storage. On the other hand, the founder must be able to ensure that he is able to support himself and his family during the first few months as an independent entrepreneur.
Particularly in the start-up phase of young companies, the owner is faced with many tasks that are not associated with direct earnings. Structures must be established and contacts established. The online shop must be designed and created, work steps must be planned and advertising or marketing activities must be completed. All these work steps are not connected with income and therefore present the entrepreneur with the problem of having to pay for his regular costs.
In order to keep the concrete costs of the foundation as low as possible, the concept of trading by drop shipping is particularly suitable. Since the offered goods remain with the respective supplier until the final order by the consumer, the high costs for the product stocking as well as the expenditure, which is connected with a storage of the goods, are eliminated. Since the orders are also shipped directly by the vendor, it is not necessary to set up personnel for shipping logistics.
The start-up subsidy from the state is the optimal solution
The start-up costs are therefore limited to adequate computer equipment, the purchase or rental of suitable software and the basic equipment for the workplace and office supplies. Such a foundation can also take place if the available financial resources are comparatively small. In addition, many founders can use existing equipment, such as a private computer or a home office, to further reduce costs.
In order to secure the financing of the private cost of living during the start-up phase of a new company, the start-up subsidy from the state is an ideal solution. During the first months of his independence, the founder can concentrate entirely on building up his business without being distracted by everyday concerns about the financial situation. While many people cannot decide to realize their dream of starting their own business because of their responsibility to support their families, the start-up grant ensures that private financing is secured for a period of up to 15 months. Depending on previous income and marital status, up to 18,200 euros are available during this period. The subsidy does not have to be taxed or repaid. It remains in force even if initial income is generated within the framework of self-employment.
The combination of DropShipping and start-up subsidy enables people to start their own business for which this would otherwise not be possible for financial reasons.
Our practical tip: Well planned is half founded
Before you start your own business in the field of online trading, you should think about which facilities and funding opportunities you can take advantage of. Within these considerations, concepts that help to keep the start-up costs as low as possible should be the first priority. To do this, take a close look at the topic of drop shipping and check whether the planned retail concept can be represented by drop shipment. If this is the case, you will save considerable amounts during the formation process and reduce both the capital requirement and the entrepreneurial risk.
The next step is to check whether you are entitled to state support during the first few months of your self-employment. If this is the case, then you should make use of this under all circumstances. The bureaucratic effort is in balance with the high benefit. In addition, the obligatory measures within the framework of the application procedure help you to critically examine and improve your business idea. Even false shame in the use of state support is not appropriate here.
The foundation of new companies by committed citizens who develop from unemployment into self-employment by their own efforts deserves the full recognition of society. If possible, try to combine the DropShipping concept and the start-up grant and benefit from low start-up costs and reliable financing during the first few months of your self-employment.
Subsidies make it considerably easier for you to set up your own DropShipping company. Once this hurdle has been cleared out of the way, it can finally really get going. We will therefore show you how to in 5 easy steps quickly and safely to your own DropShipping company to get there.