For most entrepreneurs starting a new business, their bank is the first place they turn to for funding. But not all succeed in getting hold of the money they want. Mike Harding, from Lloyds TSB, advises what banks are looking for from new business owners.
First impressions count so make it a good one
If entrepreneurs walk into the bank manager's office for that all important meeting without being prepared, they will be doomed to failure, Mike Harding says. "Don't go in without having thought through all the issues in advance," he advises. "Be completely prepared. Know your business sideways, backwards and forwards."
Listen to advice
Listen to what the business banking manager has to say. They are experts. Be prepared to back down on your original ideas, Harding advises. "Yes, it's your business so you have to make your own decisions but in terms of finance listen to what they have to say as they have a lot of experience. Often the way you structure the finance is absolutely critical."
Be realistic
"Banks are not the Dragons' Den so be realistic about the level of risk you expect the bank to take", Harding says. Banks will not give you 100% of what need to set up in business, typically you'll get 60-70%.
Do a business plan
"Above anything else, a business plan is crucial," Harding says. According to research, 95% of companies that survive for more than five years have formulated a business plan. But even among those entrepreneurs that do write a plan, many fail to get it right. Business plans should not look like:
The best business plans are between 10 and 12 pages long. The fact you've got an O-level in sociology is not important.
The Wayne Rooney story
Your business plan is your business. It shouldn't be authored by someone else. If the bank manager asks you where a specific figure comes from and you don't know, you're unlikely to succeed in getting hold of the money you want.
The horoscope
No-one starting in business can realistically plan more than one year ahead.
The guide to speaking Mandarin in a week
Like learning a complicated language, huge business success in a short pace of time is very hard to achieve. In your business plan, don't be over-optimistic or pessimistic but be realistic. Most businesses start gradually and grow. Reflect that in your plan.
The audio book
"It's in my head" – that's not good enough. It should all be written down.
What to include in your plan
Harding advises that a business plan should cover the following details:
Customer research
Competitors (strengths and weaknesses)
Your unique selling point
Target customers (identify your typical customer)
Marketing plan (advertising, promotions etc)
Pricing policy
Practicalities/operations
You and your people
Your strengths and weaknesses (and what you're doing about them)
And relevant equipment, premises, suppliers
Finance
How much do you want?
Where's the money coming from?
Cashflow forecast (maximum 12 months)
Profit and loss forecast to end of first year
Breaking even point (understand what level of sales needed each day to make a profit)
Mike Harding was speaking at Business Startup held in London.
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