Research and Enterprise
Business Awareness Programme
Finance- ‘How can I fund my Idea’
Research and Enterprise
Starting in Business
Business Awareness
Workshop
“How can I fund my Idea”
Bernard Curren MCMI
Research and Enterprise
Knowledge & Innovation Manager
Research and Enterprise
Starting in Business Programme
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
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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-startup, (before trading commences)
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Start-up Costs
How this can be funded
Personal Finances
•
Equity
•
Trade Credit
•
Leasing and Hiring
•
•
•
•
Small Firm Loan Guarantee
Prime
Royal British Legion
Princes Youth Trust
Loans
Re-mortgage
Overdraft
Family/Friends
Grants
Redundancy
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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
0
500
1500
3000
4500
4000
4000
4000
4000
500
1500
3000
4500
4000
4000
4000
1500
1500
1500
1500
1000
1250
1000
3000
500
500
500
500
500
500
500
500
0
0
0
0
0
0
0
500
Income
Capital
2000
Loan
2000
Sales paid
Total Income
Expenditure
Materials/purchases
Survival Budget
Salaries/ Drawings
Rent/rates
900
Insurances
600
900
900
600
Motor
2000
250
200
200
200
200
250
250
Total Expenditure
5500
2250
2200
3450
1700
2550
3050
4250
-1500
-1750
-700
-450
2800
1450
950
-250
0
-1500
-3250
-3950
-4400
-1600
-150
800
-1500
-3250
-3950
-4400
-1600
-150
800
550
Net Cashflow
Opening Balance
Closing Balance
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The Profit & Loss Forecast
Purpose
To assess the profitability of a Business over a given period
of time.
Format
Sales - Cost of Sales = Gross Profit
Gross Profit - Overheads = Net Profit / (Loss)
Method
Match sales income with the “Cost” of producing that
income
Profit & Loss Forecasts cont
Spread the costs across the time to which they relate.
Months
Sales
Purchases
Gross Profit
Insurance
Rent
Motor Expenses
Light & Heat
Telephone
Wages
Profit / (Loss)
Cumulative P/(L)
1
1,000
500
500
100
200
50
50
100
150
(150)
(150)
2
1,000
500
500
100
200
60
50
100
150
(160)
(310)
3
1,100
550
550
100
200
40
50
100
150
(90)
(400)
4
1,500
750
750
100
200
50
50
100
150
100
(300)
5
2,000
1,000
1,000
100
200
50
50
100
150
350
50
…. No, it has made an overall profit of £50 for the 5 months
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Preparing the P&L Forecast
Sales Forecast
Produced from
Market research
Marketing plan
Pricing policy
Assumptions
Cost of Sales
Produced from
Suppliers’ prices
Unit costs
Assumptions
Overhead Budget
Produced from
Known costs
Anticipated
additional costs
Assumptions
Sales - Cost of Sales = Gross Profit
Gross Profit - Overheads = Net Profit / (Loss)
Breakeven Chart
Pounds
150
Total
Revenue
140
Profits
Breakeven
Point
100
Total Cost
Losses
60
Total Variable Cost
Fixed
Cost
20
30
10
20
Sales Volume
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Breakeven Examples
Level 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-Keeping
Asset Register
Sales 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 Support
Accountant
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 Adviser
Business Link 0845 6009966