Business Awareness ProgrammeFinance- ‘How can I fund my Idea’

Research and Enterprise

Starting in BusinessBusiness Awareness

Workshop“How can I fund my Idea”

Research and Enterprise

Bernard Curren MCMIResearch and EnterpriseKnowledge & Innovation Manager

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Today’s topic Finance and Accounts General introductions

Domestics Outline of the starting in Business

Awareness programme Outline of today’s Finance and Accounts

session

Starting in Business Programme

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Finance and Accounts

Start-up Costs Personal Survival Budget

Cashflow Forecast Profit and Loss Forecast

Break Even Analysis Financial Management

Sources of Finance

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Start-up Costs

Business purchase Franchise

Lease Purchase raw materials

Stock Purchase Fixed Assets

Re-vamp/redevelop Business Premises Assist with Cash flow (Working Capital)

Insurances

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Further costs to consider

Rent in Advance, ingoing premium Shop fitting, sign writing, Power & telephone

connection Vehicles, Road Fund licence, vehicle insurance

Advertising & Promotion Legal and other fees

Probably some more!!!!!

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Start-up Costs

Be realistic when estimating these costs

Don’t turn a blind eye to them, these are genuine costs

You have to find the money, its often pre-start-up, (before trading commences)

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Start-up Costs

How this can be fundedPersonal Finances

Loans

Re-mortgage

Overdraft

Family/Friends

Grants

Redundancy

• Equity

• Trade Credit

• Leasing and Hiring

• Small Firm Loan Guarantee• Prime• Royal British Legion• Princes Youth Trust

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Personal Survival Budget

This is the minimum take you have from the business The Business Plan will need to sustain this overhead

The PSB links with the following documents Business pricing structure

Cashflow Forecast Marketing Plan

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Cashflow

Always remember…

Cash is King More Businesses fail through lack of

cashflow --- than lack of no customers

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The Cashflow Forecast

This important document helps to: Establish the amount of money required and

when it is needed Ensure that capital expenditure is controlled

Encourage efficient use of resources Identify any shortfalls

Provides facts to help with decision-making

Month 1 2 3 4 5 6 7 8

Income

Capital 2000

Loan 2000

Sales paid 0 500 1500 3000 4500 4000 4000 4000

Total Income 4000 500 1500 3000 4500 4000 4000 4000

Expenditure

Materials/purchases 1500 1500 1500 1500 1000 1250 1000 3000

Survival Budget 500 500 500 500 500 500 500 500

Salaries/ Drawings 0 0 0 0 0 0 0 500

Rent/ratesInsurances

900600

900

600900

Motor 2000 250 200 200 200 200 250 250

Total Expenditure 5500 2250 2200 3450 1700 2550 3050 4250

Net Cashflow -1500 -1750 -700 -450 2800 1450 950 -250

Opening Balance 0 -1500 -3250 -3950 -4400 -1600 -150 800

Closing Balance -1500 -3250 -3950 -4400 -1600 -150 800 550

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The Profit & Loss ForecastPurpose

To assess the profitability of a Business over a given period of time.Format

Sales - Cost of Sales = Gross ProfitGross Profit - Overheads = Net Profit / (Loss)

MethodMatch sales income with the “Cost” of producing

that income

Profit & Loss Forecasts cont Spread the costs across the time to which they relate.

Months 1 2 3 4 5Sales 1,000 1,000 1,100 1,500 2,000Purchases 500 500 550 750 1,000Gross Profit 500 500 550 750 1,000Insurance 100 100 100 100 100Rent 200 200 200 200 200Motor Expenses 50 60 40 50 50Light & Heat 50 50 50 50 50Telephone 100 100 100 100 100Wages 150 150 150 150 150Profit / (Loss) (150) (160) (90) 100 350Cumulative P/(L) (150) (310) (400) (300) 50

…. No, it has made an overall profit of £50 for the 5 months

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Preparing the P&L Forecast

Sales ForecastProduced fromMarket researchMarketing planPricing policyAssumptions

Sales - Cost of Sales = Gross Profit

Cost of SalesProduced fromSuppliers’ pricesUnit costsAssumptions

Overhead BudgetProduced fromKnown costsAnticipated additional costsAssumptions

Gross Profit - Overheads = Net Profit / (Loss)

Breakeven ChartPounds

Sales Volume

Total Revenue

Total Cost

Losses

Fixed Cost

Total Variable Cost

Breakeven Point

Profits

20

60

100

140

150

10 2030

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Breakeven ExamplesLevel of sales

Fixed Cost = stall rent + wages £12 + £12 = £24

Divided by Product price minus direct cost£5 - £3 = £2

Sales to breakeven 24/2 = 12 Units

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Book-KeepingAsset RegisterSales Record

Purchase Record- Analysis book

- All in one accounts book- Computer based system

Record every transaction and asset acquisition with receipts.

Keep personal finances separate.Business Bank accounts

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Professional SupportAccountant

Familiar with small businesses Recommend a book-keeping system Clear about what they will charge you.

What’s the alternative!!Solicitor

Strong commercial experience Member of ‘Lawyers for Business’ scheme

Business AdviserBusiness Link 0845 6009966