How do you know if your business can succeed?
For a business to succeed, the amount of money coming in must exceed the amount of money going out - in other words the 'cash flow' is crucial. Businesses with full order books and extensive capital assets have failed because there has not been sufficient cash in the business to pay the immediate costs.
The clearing banks produce packs of information for potential business people, sometimes with prepared disks allowing you to prepare an estimated cash flow for running your business over one year.
Produce a cash flow chart
This will take into account items of expenditure, showing the amount due and the month the bill must be paid. Don't forget to include everything - if you are baking scones, there may only be a teaspoon of salt in each batch of 12 scones, but the salt is still a cost and over time will accumulate to a considerable amount.
The cash flow chart will also include items such as rent for premises, insurance, heating, lighting, water, electricity etc, publicity costs - printing of business cards, letter heads, publicity leaflets and advertising, stationery, postage, raw materials, packaging, transport costs, equipment and projected income.
Minimise your costs
Develop a business plan
The more preparation that you put into thinking about the business, the more impressive you will be to potential customers and investors. Before approaching a bank or other organisation for funding, make sure that you have prepared a convincing and detailed business plan, including:
Remember that you must take professional advice before setting up
your own business.