When you are starting a new business, there will inevitably be expenses. You may need money for stock, but there are overheads to consider as well. You could be lucky enough to have a pot of money that will pay for all these things, but there are many people in the position where they need to finance their startup. The problem is that in the excitement of their idea they forget some of the costs that will arise, and then find they have not borrowed enough money to get things underway.
Make A Detailed List
Start by making a detailed list of everything you will need. Don’t just guess at the cost of them either, as that is certain to lead to failure. Even such small items as stationery can soon add up to a lot of money. To start with, only buy things that are vital to the business, and if you can buy reasonably second-hand, do so to save some cash. As the business progresses, you will be able to expand on the equipment and whatever else you need, but to start with, they could be expenses that are just unnecessary.
Another item people often forget is insurance. If you are a carpenter, for example, it is vital that you have insurance cover, in case you cause an accident or get injured yourself. Getting an insurance quote is easy. You will find online insurance for carpenters without a problem, just as you will for any other type of business you are starting.
Another thing easily forgotten is bank charges. Also include items such as phone and internet bills and computer supplies.
A cashflow forecast may be requested by whoever you are approaching finance, but it can be a very useful exercise for you to complete anyway. The secret is not to overestimate how well your business will do. Be realist with the amount you show for sales, or you could find the finance you arrange needs to be paid much quicker than you will be able to afford.
Remember, this is a forecast of how the flow of cash into and out of your business will go. It is not a profit and loss projection, so you need to include payments of any taxes and any loan repayments.
Who Will You Be Selling To?
You need to do some research to find out who your target audience will be. Is your product meant for men or women? Is it for the younger or older generation? Do you think it will appeal to everyone, regardless of age or gender? These are questions you will be asked, and you need to know the answers. Your marketing strategy will be more successful if you have this information so that you know who you should be aiming for.
Social media is a great and free way to get your business known, but only if you manage it properly and dedicate the time to it that is needed. You might also consider email marketing, but whatever you do it is vital that you have some sort of online presence if you want your new startup to succeed.
So, now you have an idea, you know what your costs will be and you have a cashflow forecast. These are all part of your business plan, but now it needs finishing. Be under no illusion, raising finance is not easy. There are a lot of people after the same money, and statics show that most new startups fail, so why should they lend to you over someone else?
The rest of your business plan is your sales pitch. You have to convince the would-be financier that you and your idea have the ability to succeed, or why should they give you the cash you need? Any doubts in your own mind will show through, and when at some point you get to meet them, you need to sell your idea with conviction and confidence.
Tell them why your product is better than others. Let them know your marketing strategies, and why you will be a success where others have failed.
A very simple example is the man that wanted to open a men’s clothes shop, and when asked by the bank what security he could offer he answered “Me, what more could you want”. He got his finance and went on to run a very successful business for many years.
Go For It!
Now is the time to start looking for the finance you need, but where do you start? The obvious place for most people is whoever they bank with. This has the attraction that they already know you, which can help to make things a little easier. However, banks are not always the best at lending money for something that is unproven. The old saying that banks will only let you borrow when you don’t need it is often true, which is why you may need to look elsewhere.
There are many options to raise finance through and if you look, you will come across them all. Just watch out for things like interest rates and charges, or the finance you raise could end costing you a lot more than you thought.
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