5....The Money
So how much money will I need? How much will I make? How much will I lose? These are all questions that need to be asked and answered long before we actually start our business.
If you are lucky enough to have piles of spare cash lying around and you don't need to raise finance then you may be tempted to think you can skip this step. If that's the case, then you may as well hand all that folding stuff to me and I will flush it for you.
The harsh reality is that most business's that fail, fail because they do not have adequate cash resources. There might be many different reasons for needing more money, but at the end of the day, there is no bottomless pit in any business. Just ask the folks at General Motors.
So to start with you will need to prepare accurate cashflow projections and profit and loss forecasts, these go hand in hand with you business plan on the previous page. Feel free to us the free business planning tools in the tools section of the site. You will need to get togethor a lot of information to do this. You will need to know how much you will spend on rent, on staff, how many sales you will make and lots, lots more. If the research has been done right you should have all that at your fingertips.
If you are going to be seeking lending from a bank you will need to know exactly how much money to ask for. Ask for more than you need! It's not the best of looks to keep appearing in front of your bank manager with your hand held out asking for more. Of course, make sure that your request ties in with your forecasts and your plan.
You are going to need money not just for starting the business, but for those times when the money coming in isn't enough to cover the money going out, hence the importance of being realistic and cautious with your sales forecasting, get that wrong and you may not be in business for very long.
Think outside the square when it comes to raising money. Avoid the banks if possible, although in the current economic climate it's likely that they will be avoiding you. No matter who it is you borrow money from, banks, family or the guy over the street, keep your presentation proffessional.
Here's a few tips to summarise.
1. Negotiating for money should be treated the same as if you were making a sale.
2.Ask for the right amount, it's much harder to go back and ask for more.
3.Look at the different options carefully. Short term overdrafts and credit cards are great for managing cashflow, but the interest is higher than long term loans and you want to avoid using those short term solutions for long periods.
4.Consider how much you are investing in your idea before asking other people to invest. Personally, we believe that your investment should be at least 40% to 50% of the total required capital.
5.Do you like owning your own home? I did. Mortgaging your house or giving personal gaurantees for business loans is a big step. Discuss it with your family.
6.Are you a qualified accountant? If the answer is no, then go and employ the services of one now. They can do a myriad of things for you, but at the very least they will look over your forecasts and your plan, give you tax advice. A good accountant will be there with you every step of the way at the start, keeping an eye on your business's financial performance and advising you of problems long before they surface.
7. Read number 6 again!
