You are by now confident of the ins and outs of living the dream with regard to the property and the area. What about the financial side of things? Not so exciting, but it’s essential to get this right. If you need finance you’ll have to draw up a business plan. You should also be working to a budget, both for setting up and for the everyday running of the business. And what about cash flow? Money will be scarce at the start-up of the business and probably for some time after that. You need money to live in the meantime and also to carry out any building development necessary. Lots of aspects to view, and this is the time to face up to them.
Business Plans
These are not as intimidating as they sound – a good business plan will focus your mind as well as helping you get some financial support.
What Sort Of Information Do You Include?
- Your business and your product or service.
The background
- What is your idea or plan?
- Have you been working towards this idea for some time? How long?
- How much do you know about this type of business?
- Have you had any direct experience?
- Have you carried out any work on the new business so far?
- Who, exactly, are to be the owners of the business? You, you and your partner or is it a family venture? Are friends involved?
Your service or product
- What exactly is your service or product?
- How will it differ from those already on the market? If you want to start up a B & B business, for example, why do you think yours will be better than those already established? Why will guests choose to come to yours in preference to others in the area?
- How do you intend to develop the business in the future? If your idea is to set up a gift shop for tourists, for example, how do you see the business expanding? Will you build an extension to hold extra stock? Do you intend to set up a tearoom in conjunction with the shop one day? Will you do mail order? How will you exist when the tourists are not around?
- Your market and competitors.
Who is your market?
- What sort of customer, client, guest are you aiming for? For a shop, these could be locals, tourists, bus parties or specialist buyers, for example. For holiday cottages, your ‘guests’ might be foreign visitors, walkers, climbers, families etc. It makes a difference to the facilities or services you’ll want to provide.
- How big is this market? Can you expand it? Is there a trend? For instance, if you intend to grow organic produce, you will want to show that more people are buying organic these days. If you are intending to provide adventure holidays then you should be able to demonstrate the increasing interest in this type of holiday.
- If you’ve already started your business by this time or if you’ve perhaps done it in a small way before, what sort of return have you had? Do you already have customers lined up and waiting?
Who are your competitors?
- What are the advantages and disadvantages of your services or products over those of your competitors?
- Why will people choose to come to you? You must show that you have done your market research properly.
- Marketing your business.
- How will your prices, quality, service and experience compare? If you are making and selling goods, what are the design features or qualities that will compare well with your competitors? What about after-sales service? If you are going to run a holiday business, how will the value for money you give your guests compare with others in the market?
- How will you actually sell to customers? By phone, through your website, by post or perhaps through an agent?
- Do you anticipate repeat business or repeat orders? What percentage are you aiming for?
- Are there any interested customers/clients already?
- How will you find potential customers?
- How and where will you advertise? In magazines, on the web, direct mail or with organizations such as the tourist board?
- When is your projected start-up date?
- Management.
- Who are to be the managers of the business?
- What are their strengths and how are they to overcome any shortfalls?
- What are their backgrounds and what experience do they have?
- Are there any business supporters – mentors etc. – to provide informal assistance?
- Just how enthusiastic and committed are you?
- How much time and money will you both (all) contribute?
- How many staff will be needed? Will they be full-time, part-time or seasonal?
- Is training required?
- If recruiting staff, are you aware of all the legal responsibilities involved?
- Financial forecasts.
- Work out a realistic sales/income and expenditure forecast for the next three years, breaking the figures down into components – these might be months if it’s a holiday business or different types of products or sales if you are selling goods.
- Produce a cash flow forecast showing how much money you expect to be flowing into and out of your account and when. You must show that you have considered the key factors affecting cash flow – timing of sales/amounts of income and outgoings. At what time will the business be cash positive, i.e. more cash coming in than going out?
- For each forecast list all your key assumptions: prices, sales, income, timing etc. Business Link and Enterprise Agencies will help you put together your forecasts free of charge.
- Financial requirements.
- How much finance will you want, when will you want it and in what form? You might ask for an overdraft facility from a bank and a loan, for example.
- What will the money be used for? Will it be building work, refurbishment, purchase of machinery, materials etc.?
- Prove that you can afford it. For instance, does your cash flow allow you to make the payments on the loan?
- Are there costs involved in the recruitment and training of staff or possibly training the management?
- What sort of support do you already have? Give details of your bank, accountant, architect, solicitor etc.
- Appendices. The information here is used to support the main text of the document. It includes:
- any cash flow tables, monthly sales/income figures etc.;
- market research data you’ve referred to in the document;
- any technical specifications or sources of outside information you’ve mentioned, e.g. tourist numbers in the area, tenders for building work, costings of plant, equipment or furnishings.
- The summary. Although this summarizes your whole plan, it goes at the beginning. Avoid technical jargon and use it to sum up six main areas:
- your product or service and its advantages;
- the opportunity in the marketplace;
- management;
- your record to date;
- financial projections;
- financial requirements.
- Presenting your document.
- Keep it short. Include relevant material only.
- Make it professional. Give it a title page, put on a cover if possible and include a list of contents.
- Re-read it yourself. Ask a friend to read it. Does it give a good picture of your business?