So you now have that killer idea. All you want to do is to go out and sell, organise, telephone, network etc.
All these things are vital when it comes down to setting up a successful business. However, unless you have a significant amount of resources at your disposal, you will eventually need to obtain external finance. This is where your business plan will come into its own. One which is badly prepared will only hinder an otherwise profitable venture. Some of the pitfallls to look out for are;
1)Is there a market for your products?
It goes without saying that you must be able to demonstrate people are willing to pay for the goods or services you provide. It is not enough that your services are convenient or useful to your potential customers. This does not in itself guarantee success. You also need to have done sufficient research on the idea so your business plan is based as much as possible on fact and not simply wishful thinking. You should avoid using friends and family to give critical appraisal of the project but instead use honest and independent advisers who will give unbiased and detached views.
2) Identify how much money you need
Another area is to know how much money you will actually need from the start.This will include everything from equipment, furniture advertising to wages, salary etc. Will you need a premises, if so where? From this you should then be able to work out how much you will reasonable need to get the business up and running.
Usually the people you are pitching to will have a good idea of the value of money and will know if you are being realistic when it comes to the level of funds required. So take some time to be accurate on your estimates.
3) What do you know about this business?
What do you know about this line of business in particular. What is your track records when it comes to business in general. Have you been involved in any other business ventures and were they successful? Are there any accounts from previous years available?
5) SWOT Analysis
No business plan will be complete without a thorough Strengths, Weakness, Opportunity, Threat analysis. In this you also have to ensure that you try to give not just a balanced view, but also how you propose to deal with any issues that your analysis predicts.
6) How much you are willing to invest yourself.
The is another critical area. A financial institution will seldom wish to be the only investor in your business and will almost always insist that you are “on the hook” for some element of the risk. How much is generally dependent on the type and scale of the business. However as a rule of thumb your business plan is unlikely to be successful if you are contributing less then a third towards the required funding personally.
It should also be emphasised that the banks will never consider a re-mortaged property as adequate collateral.
6) Cashflow projections
Above all the numbers need to stack up. If you are not an expert in this field then you may need to consider obtaining the advice of your accountant. If there is seasonality involved in the sales then this needs to be factored in and any cashflow problems anticipated. Simple ratios such as you break even point, profit margin, level of turnover, selling price and cost per unit need to be well thought out and established. You must be comfortable with how this information is obtained and that it ties in and makes sense. Banks are most nervous about how they are to be paid back and your cashflow should be the first indicator of this ability.
If you need any further advice and information about any of the above do get in touch with us at info@irishaccounts.ie
The information contained in this blog is for general guidance on matters of interest only and should not be construed as professional advice or service.As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers.