The British Chamber of Commerce claims that the UK Budget for 2007/08 will cost small business £1.2 billion ($2.35bn) over the next two years.

A poll showed that 71 percent of British businesses would be worse off after tax rises announced by Chancellor Gordon Brown in Parliament yesterday.

The UK’s 4 million small businesses currently pay corporation tax of 19 percent on profits up to £300,000 ($588,000). But Brown announced he will raise this by one percent each year to 22 percent by 2009.

Simultaneously, corporation tax on big companies will be cut from 30 percent to 28 percent, leaving smaller businesses gasping at the unfairness of it all.

Some attempt has been made to offset this move by allowances and credits on research and development and major business investment.

Nick Goulding of the Forum of Private Business said : “The vast majority of small businesses are not going to carry out R&D or buy new machinery every year. This is the type of one-off investment that they make at the start or every ten years”.

The move seems aimed at retaining larger companies in Britain by adjusting British tax levels to those in competitor countries, and making smaller businesses, which can’t leave these islands, pay for it.

The story that follows is a perfect case-study of how to bootstrap a business from scratch without a bean to your name.

Bootstrapping, as in “lifting yourself up by your bootstraps” is a method of starting a business with virtually no money. If it sounds more hair-raising than business-raising, do not fear, for many a giant has walked this path before you. Microsoft for one … and countless two-man garage startups that went on to dominate their niche.

Our case study is an interesting one because the business was created under conditions of some hardship :

In just a few years, John Fanuzzi built a national business in the U.S. employing dozens of workers. He did it with no capital and used basic cash-flow techniques to accomplish his dream.

John moved from Philadelphia to Montana in 1980 with everything he owned in the back of a pickup, including his two children of five and two years of age. He was a single father and had a lot on his plate.

He’d done a bit of project managing in the past and was a skilled carpenter. His business idea was to build a company in the unlikely field of massage tables.

Fanuzzi was in this situation because he had injured his back and a doctor said it couldn’t be treated. He was cured, however, by a single visit to a massage therapist. Who says alternative treatments don’t work?

The therapist had told him that it was impossible for him to source a portable massage table for the patients who couldn’t come to him. John was so grateful for his cure, he replied without thinking, “No problem, I’ll make you one.”

He began building it in his driveway, having spent $100 on materials and costs. It was so successful, the news got out and soon orders came flooding in. The problem was, John didn’t have enough to fork out $100 for each table while it was being made. He bridged the gap by asking for a deposit of $100 for each table, then charged $185 for the completed item. Classic bootstrapping methodology. Fanuzzi was in an ideal situation. He had no overheads and lots of customers.

After the move to Montana, he persuaded local teenagers to assemble his products for piece-rate wages and even shipped them on Greyhound buses.

Later, in the 1990s, Golden Ratio Woodworks, based in Emigrant, Montana, became an established and going concern. He was doing $200,000 of business a year. His debts were almost zero and customers paid in cash.

Then it took off in more sophisticated areas of the U.S, like California and the East coast, where buyers thought it “kinda folksy” to order from Montana.

The key to his success, as it is with all bootstrappers, is the management of cash-flow.

Careful cash-flow techniques are what a bootstrapper must master to succeed. In other words, the lower the costs, the less you have to earn to get into the comfort zone.

Have you ever wondered if the internet has added to your productivity or reduced it?

Do email, IM and phone calls take precious hours from your working day? Are online distractions driving you to distraction? Sharon Sarmiento over at 901am may have the answer.

Sharon lists five ways to improve your productivity online. The headlines are hers, the comments beneath are mine :

1. Restrict your work hours to increase efficiency
The idea is to challenge your brain to avoid being sidetracked by irrelevant incoming chaff. I must say this always works for me, although if overdone — cutting it too fine — it can be counter-productive in that I’ll put it off until more time is available. Common sense is always important in these matters.

2. Create a map for your day
Write down what you need to do in the time available. Indispensable at all times if you don’t want to drift through your day.

3. Schedule times to check email
Another must. Email can run away with your time, especially if it’s still coming in while you’re culling the existing stuff. Time-limit the exercise.

4. Relax and don’t try to force yourself to work harder
If you’re stressed, you won’t breeze through your work. Chill out or you’ll feel the chill factor later.

5. Cut yourself some slack
Take a while to breathe without mental flak. But don’t do it if you are working well and efficiently. When you hit a rhythm keep it going, otherwise you will find it hard to switch it on when you get back from your break.

Good tips, worth keeping in mind for working online.