It is a fantasy of millions of workers to set up their own business and say goodbye to their boss once and for all. You can see just how widespread this idea is, by looking at the number of ‘business opportunities’ there are on line with titles like ‘Fire Your Boss’. They sell well, so I am led to think, but I would not touch them with a barge pole.
Of these millions of would-be business people, many people do all the difficult work of researching the business and doing their arithmetic, but fall at the last fence, for many it is the highest fence of all, the finance of their business. Some individuals cannot set up adequate credit and others are frightened of losing their own money.
The first thing to point out here is that no-one, no matter how rich and no institution, no matter how generous they are towards start-ups, will offer finance to any business, the directors or proprietors of which are not willing to risk their own money. So, if you do not have any capital and do not have any collateral, do not give up the day job until you do.
However, if you have some capital (and depending on the business, it does not have to be a great deal) and you are prepared to gamble it, then you have a decent chance of persuading others to take a danger with you.
The first thing to do is produce a business plan. There are many books and computer programs to help you do this. You can learn to make one yourself with a library book and a finance exercise book from a stationer’s or you can use a spreadsheet on a computer to make the maths simpler. A spreadsheet will also compute predictions more effortlessly.
Be truthful in the formation of your business plan. The managers who will be looking at it are experts and if you think that you are going to kid them, you are only kidding yourself. Make a detailed business plan for twelve months ahead and another far less detailed section projecting the trend on for two or four more years.
It is a wise idea to find out exactly what your bank or local enterprise board actually wants to see in the plan, before you show it. Make sure you have a thorough knowledge of your business and the plan, because there will be questions to be answered and you do not want to be seen to be floundering for the answers.
Let’s say that the bank (or whoever) is willing to forward you some credit, open a business bank account and apply for a business credit card. They are more impressive to business people than private credit cards, because it proves that a financial institution has checked you out and approves of you.
Next take this information to traders that you are likely to use for supplies and request credit. If you have got this far, you are likely to get it from the merchant and negotiate a large discount so that your money goes even further.
By now, you have leveraged your small amount of money to get money from the bank and credit from a merchant (or two, so that you can play them off against each other in a price war).
You have come a long way, but do not try to run before you can walk. Now is the time to increase your credit status in order to qualify for a higher credit limit. You do this by never missing a payment – ever. In order to ensure that you can pay your bills in full each month, you might have to curtail your business activities at first.
This certainly goes against the grain, but may have to be done. If it occurs two months in a row approach your bank manager and merchants for better credit conditions to cope with the increased volume of business.