The urge to act on your business idea is often too great, you want to see your idea working and making money as quickly as possible, however, there are key things you really need to prepare before you start.
Once you are several months into your project and your available capital has run out, with only weeks before your intended start date, it can often be too late to get your idea to completion, and before you know it, your business has failed before it has even started.
Let me suggest a solution for you.
about your business
- Think clearly about what exactly your business will do.
- What is your "Mission Statement", e.g., "Western Widgets will create the best widgets in Scotland, and will deliver them to market with a price, quality and service that won't be beaten."
- What is its unique selling point (USP)? What makes it stand out, make your product desirable?
- What is it about you that will make it succeed, what is your background, your experience. Who will work with you (not staff; think partner or partner businesses) to help you succeed?
- Where is the best location for your business, have you identified premises?
- What makes this location so effective? Is it accessible to your customers if retail, or, if business to business (B2B), close to good distribution (road/rail/shipping) routes?
- Who are your competitors and where are they situated?
- What are your strengths, weaknesses, opportunities and threats (This is also known as a SWOT analysis)? Are there any legal hindrances to be overcome?
- What equipment and staff will you need, how much will it cost and how will you finance it?
- How will you sell your products and make your customers aware of your business?
what is your budget?
What are your pre-trading or set-up costs?
The first thing to consider is how much capital you have to invest in your business. This is the cash or equipment you own which you will use to set up your business. What business model will you follow; sole trader, partnership, Limited Liability Partnership (LLP), Limited Company. Forming a company has a cost, and you need to understand your legal and statutory obligations. Consider the timescale to set up your business, what has to be done at each point before you can start making money.
What costs, (e.g., mortgage or rent, equipment installation, building renovation or fitting) have to be paid during the set-up phase, what stocks will you need to have when you start trading. Will you need tradesmen and have you had quotes? Are there licence or other legal costs involved in your set-up?
List all your expected costs, and include a contingency amount for unexpected costs. Is there a shortfall? How will you make up any shortfall? You haven't finished yet, so hold that thought, you might need to ask for more.
To go to a bank, grant making or venture capital body you need to have a financial projection, preferably looking forward five years. The cash-flow projection generated by this will highlight any dips in your cash-flow, when you need to become VAT registered, and whether you can successfully live off your business profits, and pay any taxes that are due.
I (or your chosen professional) can then help you with your cash flow and financial projections which can be incorporated into your final Business Plan. Together we will have identified how much you need to find.
The first port of call will be local and national grants, usually sourced through the local council or enterprise company. This may fill some, if not all of your shortfall, and is money you will not need to pay back.
The remainder can be sourced through the bank or venture capital companies.
Your final consideration is simply this. Enjoy yourself! It's YOUR business, have fun, and good luck!