Post on 21-Dec-2015
www.stridingout.co.uk
Business Finance
Simon Ireland-Davies ACC, CPCCStriding Out
www.stridingout.co.uk
Simon Ireland-DaviesCPCC, ACC
• Professional Business Coach and Managing Director of Striding Out CIC
• Striding Out CIC is a not for profit Community Interest Company with a £1.2M turnover in 2010
• 15 years working in Blue Chip corporate environments leading large teams
• Last corporate role was Head of Coaching for O2 leading a team of 250 coaches looking after professional development for 6,000 people running a multi million pound cost centre
• Ran my own successful business prior to joining the Striding Out team
• Support entrepreneurs to start and run their own businesses• Still work within the corporate world focussing on leadership
development
www.stridingout.co.uk
Agreements
• Right to a point of view and to have that point of view listened to• Confidentiality• Stay open to new ideas and concepts• Be honest with yourself and others• Push beyond your comfort zone• Stay committed to learning rather than the ‘problems’• Say “I don’t know / don’t understand”• “Back on Track”• Have fun / humour
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Aims of our session
• Understanding the jargon• Understanding your income streams• Understanding your expenses• Profit & Loss• Apply these principles to your own business ideas
www.stridingout.co.uk
Some Jargon• Fixed costs – costs you incur just for being in business• Variable costs – costs you incur based on the volume you sell• Margin – the difference between the cost of providing something and
what you can sell it for• VAT – Value Added Tax (Currently 20%)
– Registration is compulsory is turnover is £70k plus in a rolling 12 month period
• Wholesale price – what you can sell your item for to a supplier – (also the price you will want to pay for your materials)
• Retail price – what the general public will pay for it• P&L – Profit & Loss• Tooling – Creating the templates to manufacture your product• IP – Intellectual Property
www.stridingout.co.uk
Income Streams
• Sales• Commission• Grants• Loans• Franchising• Look for passive income streams &
and repeat business
www.stridingout.co.uk
Costs• Fixed Costs
– Insurance– Rent– Utilities– Loans– Salaries– Professional fees– Dues & Subscriptions
• Variable Costs– Stock– Shipping– Commission– Banking fees– Marketing & Advertising– Sundries– Replacing items through wear and tear
www.stridingout.co.uk
Understanding your margins
• What does it cost to deliver your product/service?– Fixed costs as a unit price– Variable costs as a unit price
• What margin is acceptable to you?• What are the costs of returns/complaints?• What costs have you missed?• Remember:
– Turnover is Vanity– Profit is Sanity– Cash is Reality
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Scalability
• Higher volumes• Higher margins
www.stridingout.co.uk
Types of Funding
• The 3 Fs– Friends– Family– Fools
• Banks– Business loans– Personal loans
• Grants• Own savings• Business Angels• Dragon’s Den!• Credit Cards
www.stridingout.co.uk
Funding Bodies
• Local Government• Regional Agencies• Enterprise Zones• Specialists
– Unltd
www.stridingout.co.uk
Applying for Funding
• Can be lots of red tape• How does the funding reflect what your business plan says you
need?• Think about how much you need – not how much is available• Be professional• Take care during the application process• Be clear how you will spend the money you are given/loaned• Be clear how you can pay it back if it’s a loan• Get it in writing!
www.stridingout.co.uk
Profit & Loss
• Is what you’re earning, less or more than what you’re spending?• Use a P&L sheet to project the ‘health’ of your business through the
year(s)• Go into as much detail as you can• Allow for ‘contingency’ – with the best planning in the world you’ll still
have expenditure you didn’t forecast• Review P&L monthly (or weekly in the early days) and see how what
actually happened compares to your projections – then consider if you need to amend your projections
• Act on what you learn – be a giraffe not an ostrich!
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Cash Flow
• What you sell isn’t necessarily what you’ll earn!– Payment terms– Credit control
• Invoice early• Pay late
www.stridingout.co.uk
Name:
Adviser:
Date: Cashflow Forecast Year 1
Start up costs Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 total
Cash in £
Product 1 0
Product 2 0
Product 3 0
Product 4 0
Other 0
Total Sales 0 0 0 0 0 0 0 0 0 0 0 0 0
Grants 0
Loans 0
0
Total Income 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Cash out
Start Up Costs 0
Drawings 0
Stock 0
Direct Wages 0
Rent 0
Rates 0
Utilities 0
Insurance 0
Advertising 0
Stationery 0
Loan Capital 0
Loan Interest 0
Telephone 0
Postage and Shipping 0
Hire of Equipment 0
Professional fees 0
Motor/Travel 0
Total Expenditure 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Net Cashflow 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Bal b/f 0 0 0 0 0 0 0 0 0 0 0 0
Bal c/f 0 0 0 0 0 0 0 0 0 0 0 0 0
www.stridingout.co.uk
Projected Profit & Loss Account Projected Balance Sheet
Year 1 As at end year 1
£ £ £ £ £
Sales 0 Fixed Assets 0
Opening stock
Purchases 0 Current Assets
Direct wages 0 Stock
Less:Closing stock 0 Debtors
0 Cash at bank 0
Gross Profit 0 0
Expenditure Creditors
Rent/Rates 0 Trade creditors
Rates 0 Loans 0
Utilites 0
Insurance 0 ( 0 )
Advertising 0 0
Stationery 0 £ 0
Loan Interest 0
Telephone 0
Postage 0 Funded by: £
Hire of Equipment 0 Capital introduced 0
Professional fees 0 Retained Profit 0
Motor & Travel 0 Less Drawings 0
Depreciation 0 £ 0
Grants Receivable
0 Total Equip't
Net Profit £ 0 £ £
Cost 0 0
0 Depreciation 0 0
0 0
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Over to you!
• What are your income streams for your idea?• What are the costs for your idea to be viable?• What are your margins?• What are your options for scalability?• Have a go at your first cash flow forecast!
www.stridingout.co.uk
What are your potential Income Streams?
• Sales– Who would buy?– How much would they pay?– Wholesaling?– Retailing?
• Commission– Could it be sold under licence?
• Grants– Does it meet any typical grant funding criteria?
• Creating jobs• Environmental
• Loans– Who could loan you start up capital?
• Franchising– Is this a business that other people could run?
www.stridingout.co.uk
What are the costs to deliver your idea?
• Fixed Costs– Insurance/Rent/Utilities– Loans/Salaries– Professional fees/Dues & Subscriptions
• Variable Costs– Stock
• Manufacturing costs• Tooling
– Shipping– Commission
• Are you using anyone else’s IP
– Banking fees• Cash deposits• Credit Card transactions
– Marketing & Advertising• What do you need to spend to promote your idea
– Sundries• What are the day to day costs?• Travel
– Replacing items through wear and tear
www.stridingout.co.uk
What are your margins?
• What is your unit price?– If you make 1?– If you make 1,000?– If you make 1,000,000?– Formula :
• Fixed costs divided by # of units= unit price fixed cost• Add unit price fixed cost to the variable cost per unit = total unit price
– What discounts can you expect by buying resources in bulk?– What discounts can you expect by manufacturing in bulk?
• What price can you sell at?• What’s the difference?
– What discounts will you have to give?
• What options for scalability are there?