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” Research and Enterprise Bernard Curren MCMI Research and Enterprise Knowledge & Innovation Manager

Research and Enterprise 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

Research and Enterprise Finance and Accounts Start-up Costs Personal Survival Budget Cashflow Forecast Profit and Loss Forecast Break Even Analysis Financial Management Sources of Finance

Research and Enterprise 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

Research and Enterprise 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!!!!!

Research and Enterprise 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)

Research and Enterprise Start-up Costs How this can be funded Personal 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

Research and Enterprise 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

Research and Enterprise Cashflow Always remember… Cash is King More Businesses fail through lack of cashflow --- than lack of no customers

Research and Enterprise 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 Income Capital2000 Loan2000 Sales paid Total Income Expenditure Materials/purchases Survival Budget500 Salaries/ Drawings Rent/rates Insurances Motor Total Expenditure Net Cashflow Opening Balance Closing Balance

Research and Enterprise 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 Forecast Important - Match sales income with the costs involved in achieving that income. Has this business really lost £550 by the end of 5 months? …...

Profit & Loss Forecasts cont Spread the costs across the time to which they relate. …. No, it has made an overall profit of £50 for the 5 months

Research and Enterprise Preparing the P&L Forecast Sales Forecast Produced from Market research Marketing plan Pricing policy Assumptions Sales - Cost of Sales = Gross Profit Cost of Sales Produced from Suppliers’ prices Unit costs Assumptions Overhead Budget Produced from Known costs Anticipated additional costs Assumptions Gross Profit - Overheads = Net Profit / (Loss)

Breakeven Chart Pounds Sales Volume Total Revenue Total Cost Losses Fixed Cost Total Variable Cost Breakeven Point Profits

Research and Enterprise Breakeven Calculations Gross profit margin is Selling price minus purchase price Divided by selling price x 100 = % Profit margin Breakeven level of sales per ( ) Fixed Cost divided by (product price minus direct cost)

Research and Enterprise 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

Research and Enterprise 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

Research and Enterprise 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