What you really need to understand when starting a business is that it takes time to build a successful business. Which is ok because if you start with a solid base and build off that, you can have a business that will look after you for the rest of your life
, giving you and your family security which is all we really want. Of course the money is important but living with security gives you great piece of mind.
How to start.
It doesn’t matter weather you are selling sweets, cutting hair or fitting windows the principles are exactly the same.
First you must do a forecast for your first year of predicted trading; this must include all the costs of the materials you will need to buy for resale.
Below that you will need to entre all the overheads that the business will have to pay out across the year – like heating bills, petrol, wages, stationery, vehicles etc. Make sure you include absolutely everything, and don’t try to keep these costs down, if you do, it will catch you out, in fact go on the top side. Make sure you take into account 5 week months as they can be costly with wages. You will also need to add the start up costs for machinery, computers desks, decorating – absolutely everything you will need to start up your business.
Next you will need to estimate your sales over the next 12 months, be very careful here, and take into account Christmas holidays and months you may suffer due to circumstances like weather for instance, also take into account the rate at which you expect to get your money in from customers, especially if you are giving them credit, also build this into forecast. You will need to underestimate your first year’s sales as you probably will not achieve what you expect.
The sum is now easy:- Example January sales incoming, then take away from that amount, the cost of materials you will need to buy, then from that total, take away the cost of the overheads, this will give you a total, probably a loss in your first month of trading. Don’t worry as long as you know before hand you are prepared. At some point across the year you should get a break even figure where your incomings are the same as your outgoings. You can then work out how much money you will need to start your business and keep it supplied with money until you reach your break even point. This is the point where you will start to make a profit.
To be continued – next starting the business.