Running your own business can be very rewarding however it is certainly challenging too. Youíll find yourself working long hard hours and making difficult decisions day in day out, so it is definitely not an easy option. A heavy dose of realism and plenty of research is a must before you take that first step and approach your bank manager for finance.
Writing your plan
The importance of a good business plan can not be overstated when you are starting up in business. Although the initial objective of the document is to help you raise finance for the business, it will also help you understand what you wish to achieve from the business and is an essential document to review the performance against your projections and can alert you to anything that is not going according to plan. The plan should demonstrate that you understand the business opportunity and unsurprisingly, a bank will only lend when it has a very good chance of being repaid. You may wish to seek professional advice in drafting the plan although it is too important to be left to someone else to write. Banks can supply a business plan template to give you guidance as to what to include in the document. Accountants and Business Link advisers can also provide valuable assistance in producing a business plan.
You must be able to confidently answer any questions raised by the bank manager about the business, your chosen market and the financial projections. The bank manager will want to see a robust plan summarising the business opportunity however they wonít be interested a lengthy document covering the operation of the business in minute detail. Itís always a good idea to practice presenting your proposal before you actually meet the bank manager.
What to include
The essential elements of a plan will include the past experience and skills of the business owner and key employees. A brief overview of the business and the market is also important. The business operational issues should also be covered including; premises, staffing, marketing, insurance, equipment, information technology, suppliers, customers, health and safety and stock control. Businesses that have a unique product or service or a competitive advantage are more likely to be successful in their market. A breakdown of the strengths, weaknesses, opportunities and threats to your business is also useful and is commonly called a SWOT Analysis.
You will also need to provide a list of personal assets and liabilities, as well as income and expenditure. The plan should detail your stake in the business and the source of the contribution for example savings, redundancy, re-mortgage, family loan or inheritance. The amount you are looking to raise from the lender, repayment term and available security should also been quoted. Cashflow and profit forecasts are also vital elements of the business plan. The ability to generate cash is critical to the success of any business. If the business cannot generate sufficient cash at the right time to meet payments due then there will be potential problems. The profit and loss projection will show the expected level of sales, the cost of these sales to the business and the operating expenditure.
Submit your plan for review
A copy of the business plan should be sent to the bank manager a few days in advance of the scheduled meeting to give them the opportunity to read the document before you meet. Banks will generally expect a personal financial commitment from you of between 30 and 50 per cent of the total set up costs including any working capital requirement. In most cases security will be required to cover any loan or overdraft finance agreed.
Treat it as a working document
No business plan is ever set in stone as objectives and forecasts can alter as you gain a better understanding of your marketplace and the business develops. The business plan is a working document and should be regularly referred to checking ongoing performance against the forecasts. It is likely that the bank manager will check the account activity and compare it to the original projections, especially in the early months of trading. If there are any major discrepancies expect to be questioned about them. It is better to adopt a proactive stance in your relationship with the bank manager and to highlight trading issues at an early stage to seek advice and support.
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