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Raising Finance

Financial planning

Good financial planning and management are essential elements of any business. While you don't need to be a whizz with figures, you will need to develop some good book keeping skills to run your franchise successfully.

To begin with, you'll need a profit & loss forecast . This is a forecast of the profit (or loss) based on the sales you anticipate, less any direct costs and overheads. You need to clearly state what assumptions you have made as this will form the credibility of your forecasted sales. Clearly list the direct costs and overheads and any calculations relating to these.

Next, you'll need to work out your cash flow forecast . Managing cash flow can be a bit of a juggling act. Cash will flow in and out of your business - often at different rates and times. You may have to pay for materials in advance, yet wait months for payment after you have sold your product or service. This can often lead to cash flow problems in what is an apparently profitable business. To avoid this, you'll need to turn your profit and loss forecast into a cash flow forecast listing assumption pertaining to: when you expect to get money from sales, when the suppliers will need paid, and when you'll have to spend on overheads.

Included in the cash flow forecast is how much capital equipment that you require for your business. Differentiate between existing equipment and expenditure still to be made - how much and when. Properly done, this will tell you when your business is likely to be short of cash and it will enable you to plan for this.

You will also need to generate balance sheets to show how your business is performing at a specific period. It compares the fixed and current assets of the business against what the business owes in long term / current liabilities.

Finally, you'll need to work out the return on investment (ROI). This is the sum of money gained or lost in relation to the investment put into the business. Your projected calculations should demonstrate a positive return on capital investment over a specific period.

A Business plan

A business plan is a great tool for illustrating and communicating your business ideas, intentions and how you'll achieve them. It covers everything from the product or service you are selling; number of people you plan to employ; the market you'll be operating in and its condition; how you'll market and promote the business; and crucially, financial projections.

Writing an in-dept business plan is not only useful as a way of reviewing the business and its potential, but if you intend to apply for a loan from the bank, then it will be essential to support your case.

For further information on the content for your Business Plan , please click here