Start-Up Finance Session

Money, Money, Money

Start-Up Session

Master Finance for your

BusinessThe course is designed to demystify the key financial concepts you’ll need to start, run and grow a successful new businessAbout the courseFrom cash flow forecasts to knowing when to raise capital for your company, the world of finance can be daunting. The course will explain basic financial concepts using real life examples.You will learn about:•Basic profit and loss accounts, balance sheets and cash flow statements•Ownership structures and how to divide equity (shares) in a startup fairly between founding team members•Pitching for investment, raising capital and finance for startups•Valuation methods for pre-cash flow new ventures•Using crowdfunding platforms

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Who is here?

• Who is already trading?

• Who is going to start a business?

• Who enjoys the financial aspects of business?

• Who is scared by the financial aspects of business?

• Who uses an accountant?

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Overview

• Raising Finance

• Understanding your finances

• Cashflow

• Record Keeping

• Help & Accountants

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• https://youtu.be/hJDRKy04I8s

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Start-Up Finance

We need confidence in the person and the proposition.

We need to know that your business will thrive, so that you can sustain yourself and make repayments.

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Pay yourself!

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It is important to understand how your business finances work … WHY?

Flexible / Adaptable

Take action, before it’s

too lateSet budgets

See what works (and

what doesn’t)

Review pricing

Contingency Save for tax

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What is a cash flow forecast?

A cash flow forecast is an

estimation of the money you

expect your business to

bring in and pay out over a

period time. It should reflect

all of your likely revenue

sources (like sales or other payments from customers) and compare

these against your likely

business expenses (like supplier payments, premises

rental and tax payments

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• How do I complete my cash flow forecast?

• A cash flow forecast is made up of three key sections:

• 1. Revenue – money coming inThis section is where you list any money that you have coming in to the business such as product or service sales, equity or other investments and your Start Up Loan. The number of items you include will depend on your business model, but a typical revenue section includes between three and six items.

• You add all of these sources together to figure out your total income (A).

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2. Expenses – money going out

This section is where you list any of the expenses your business incurs, like your premises rental, staff wages, council tax, supplier costs, marketing and promotional expenses etc. You’ll need to think about costs that do not occur on a regular monthly basis, like V.A.T. which is only payable every quarter.

Don’t forget to include things like your own salary, Start Up Loan repayments, or specialist expenses you are likely to incur. Again, the number of items you include will depend on your business model, but a typical expenditure section can be anywhere from 10 to 20 line items.

You add all of these sources together to figure out your total expenses (B)

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• 3. Net cash flow – the balance

• This final section is the difference between your total revenue (A) and your total expenses (B).e.g. “total income (A) – total expenses (B) = Net cash flow”

• If this figure is negative, it means that you are anticipating your expenses will be greater than your revenue in that period; conversely, if the figure is positive, it means you are anticipating your revenue to be greater than your expenses and to deliver a profit.

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• Make sure you understand the difference between revenue and expenditure.

• Revenue, or income, is any money your business generates. In a product-based business, this is likely to be made up of the sales of different products. You may like to include separate line items for your individual products or product categories, particularly if each product contributes a significant amount of revenue.

• Expenses, or costs, are the items you’ll need to pay for in order to produce and/or deliver your products or services, promote and manage your business.

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• Remember that some of your costs will be fixed and others will be variable.

• A fixed cost is one that doesn’t change over the course of the forecast. For example, your premises rent, insurance and Start Up Loan repayments etc.

• A variable cost is one that changes according to your needs. For example, supplier costs, material costs, venue hire, printing and travel expenses etc.

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Think about the promotional activities you’ve got planned and the sales you expect these to generate.

If you expect one of your promotional campaigns to deliver a high volume of new sales during a key month, you should try and reflect this in your numbers. Equally, if there are certain periods where you won’t have a large marketing budget in place, think about the impact this is likely to have on your sales.

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Plan for seasonality and base your figures on a range of typical scenarios (like quiet or busy periods)

Seasonality doesn’t affect everyone in the same way. For example, if you’re starting a business in an area that has a booming tourist economy in the summer months but is very quiet during winter, this should be reflected in your forecasted sales figures and costs. Even if seasonality doesn’t affect you in this way, every business goes through quiet periods (with less sales) and busy periods (with more sales). Depending on your fixed and variable costs, this may create more or less pressure on your cost base during this period.

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• Our top tips for creating your cash flow forecast:

• These tips have been prepared by our Business Advisors and loan assessment team to help you understand some of the key things that will strengthen your application:

• Be realistic in terms of how many sales you expect to makeWhile it is great to be ambitious for your business, it’s important to be realistic. Particularly in the early stages of trading, you may find that you aren’t able to make as many sales while you’re focusing on building up awareness about your product or service. It’s always better to make conservative estimates and over exceed your targets, than find yourself overcommitted or under prepared

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• Don’t forget to include the following items in your cost calculations:

• The salary you will require from the business !

• If you will not be earning any other forms of income while you start and grow your business you are likely going to need to draw on some of your business earnings to support yourself. The minimum salary you require needs to be included in your cash flow forecast as one of your expenses, along with any other staff salaries.

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Getting Paid (and on time)• Every business suffers from bad debt

• Don’t be afraid to ask for payment

• Make your payment terms very clear

• Take deposits or staged payments

• Incentivise prompt payment

• Invoice/Statement reminders

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Controlling Expenses• Set budgets

• Be lean (and mean when needed)

• Determine the best time to pay bills

• Review regularly• Services

• Suppliers

• Price tiers, discounts

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Record Keeping

• Sales invoices

• Purchase invoices / Receipts

• Business expenses

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Record Keeping

•Have a system• Shoebox• Ledger• Files/Folders• Spreadsheet• Software

•Update regularly

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What help is there?

•HMRC/ www.gov.uk

•Book keepers

•Accountants

•Banks (overdraft etc.)

•Other financial services• e.g. invoice factoring

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Should you use an accountant?

• Is time becoming an issue?

• How organised and diligent are you?

• Do you have any “complicated” financial issues?

• Do you know the best way to draw money from your business?

• Do you keep up to date with changes in legislation?

• What is the opportunity cost to your business?

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Choosing a good accountant

Ask PeopleLook for reviews

Talk / Free consultation

Are they interested in you &

your business

Experience in your sector

Networks / Connections

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Summary

Have a planSet budgets/targetsKeep recordsSeek adviceKnow YOUR BusinessYOU are accountable!

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Transmit Start Ups

• https://youtu.be/hJDRKy04I8s 30 second video of who we are and what we do!

Delivery Partner since late 2012-Team of 20 in Gateshead (HQ)-New offices in Glasgow & Edinburgh-Funded over 1400 entrepreneurs-£13m+ loan book

Any questions?

Mark GardnerMentoring & Partnership Manager0191 4909328Mark@transmitstartups.co.ukwww.transmitstartups.co.ukhttp://www.digitalbusinessacademyuk.com/rewards

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