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Our Business Idea

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by

Jason Wright

on 29 November 2013

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Transcript of Our Business Idea

Sources of Finance Suitable
Family / Friends

Savings
Where
We feel the area of Longbridge will be suitable to set up your business. The area is currently undergoing regeneration and already has heavily populated sites in place which we feel will be a big impact on your business. These include:

Bournville College
MG Motor UK
Technology Park
Our business idea is to open a bar/restaurant in the Birmingham area. Operating as a sole trader initially, long hours and big responsibility will be involved. As the venture grows, the opportunity to expand into a partnership or even further will be available. We will assess all ideas of the sources of finance that are suitable and unsuitable for your new business.
Overdraft
Unsuitable sources of finance
Sources Suitable For Expansion
Bank Loan
Town Centre
Cofton Centre
Advantages

No interest
Pay back when suitable
They do not expect any profits to be split
No input into the business
Disadvantages

Can be a limited amount
Guilt
Advantages

Regular repayments
Fixed interest rate
Medium term
Reliable
Disadvantages

Small Businesses pay higher interest rate.
Finance plan needed
Stipulations on how the money can be spent.
Advantages

Simple to arrange
Flexible
Interest only on days overdrawn
Short term
Disadvantages

Can be recalled
Not a long term fix for the company.
Advantages

Increase capital
No need to borrow
No charges
Disadvantages

Lose everything if business fails.
Leasing
Advantages

Fixed cost
Can be ongoing
Regular repayments
Upgrades offered at time of renewal.
Disadvantages

Never own
Can be taken away if payments not met
Good credit needed
Paperwork
Mortgage
Investors
Reinvested Profits
Business Angels
Advantages
no need for collateral (personal asses)
BAs making investment decisions quickly
no repayments or interest
Disadvantages
Giving up a share of business
Less structural support available than from investing company
Takes longer to find
Suitable for investments from £10,000 - £250,000
The City
What You Need
To start your business you will need:

Premises
Food and drink supplies
Cooking equipment
Bar
Tables and chairs
Music (equipment + speakers)
Government loans

Venture Capital Funding

Larger investments
Do not need to pay back
Can bring valuable skills, contacts and experience to business
provide follow-up funding as the business grows
explore and execute growth ideas.
loans from £50,000 and some more than £250,000
Share a business

Investor’s control over company
provide regular information for the investor to monitor
generally expect equity stake of 20-40%










Debt Factoring
Advantages

provides a large and quick boost to cash flow

some customers may pay quickly to factors

Useful information about customers (credit standings)

credit check

helps to protect from bad debts
Disadvantages
discount charge (interest) and fees

Interested in handling bills from firms sales over £1m a year

reclaim money if the customer does not pay (resource factoring)

Some customers may prefer to deal directly with you

May effect customers' thinking of you
Government Grant
Advantages
Do not need to pay back

Won’t lose control over your business
Disadvantages
Long time to obtain grant
Certain conditions may apply(location)
Preparing government grant proposals
Reinvested Profits
Advantages
do not dilute the ownership of the company
increasing the value of shares

flexible - management have complete control over how they are reinvested and what proportion is kept rather than paid as dividends
Disadvantages
Sales of Shares
Advantages
No need to pay back

new ideas, skills and views to the business
Disadvantages
Risk
Mortgages

Advantages
Purpose Of Financial Statements
Trial Balance
Sources of Finance
Presented by:

Jason
Tatjana
Doncho
Who is
Interested?

Financial Statements
Disadvantages
more stable business planning environment

Repayment from 10-30years

Very short repayment as low as 2 years

lower interest rates
tax deductible interest payments

can sub-let some of your business premises.


Secured against property

Decent sized deposit

Hard to move your business

Interest rate increases

Loose a part of a business
no Shares for Sole trader
Share any profit
right to sell shares

Tax consequences

conflict between shareholders and other stakeholders
Sole Trader
Partnership
Public & Private Limited Companies
The purpose of financial statements is to enable a business to establish the result of its operations over a period of time.
Trial Balance is a list of closing balances of ledger accounts. It acts as the first step in the preparation of financial statements.Ledger balances are segregated into debit balances and credit balances.
Income Statement
The income statement reports a company's revenue, expenses, and net income over a period of time.
Helps identify whether the profit earned by the business is sustainable
Enables comparison with other similar businesses(competitors)
Allows providers of finance to see whether the business is able to generate sufficient profits to remain viable (in conjunction with the cash flow statement)
Balance Sheet
Cash flow statement
Balance sheet provides the financial position of the company at a given time.

This process is repeated monthly, quarterly and annually

The balance sheet shows the status of the company's asset, liability and equity accounts
Detailing balance of income and expenditure over the preceding period.
The purpose of the cash flow statement is to provide information about a company's gross receipts and gross payments for a specified period of time. Distributed along with a company's Income Statement and Balance Sheet.
Statement must disclose:

the amount of interest paid

the amount of income taxes paid

any significant investing and financing activities which did not require the use of cash.
Debit Balances
Credit Balances
Assets
Expenses
Liablities
Capital
Income
Advantages
Disadvantages
Owner is independent to run business
able to give personal service and supervise all areas of the business
easy to set up, e.g. use own name
unlimited liability
expansion is limited
long hours, difficult to take holidays, if ill business may have to either slow or stop
Advantages
Disadvantages
A person who is in the business on their own, final account produced is the trading, profit and loss account and balance sheet on annual basis normally.
possibility of increased capital
individuals may be able to specialise in particular areas
more people to illness and holidays
decisions may take longer, other partners may need to be consulted
disagreements may arise between partners
each partner is liable in law for dealings and business debts - unless is a limited liability partnership
retirement or death of one partner ma adversely affect the running of the business
Consists of 2 to 20 partners. Have to follow rules of Partnership Act 1890 or create own partnership agreement. Final account - trading, profit and loss account, balance sheet and an appropriation section at the end of profit and loss account.
Advanages
Disadantages
limited liability - shareholders can only lose amount of their investment
Advantages
Disadvantages
separate legal entity - company is separae from its owners, anyone taking legal action can only do so againstthe company not individuals
ability to raise finance - stock exchange ( plc), smaller companies from friends and family
voting rights
may gain a higher status in business community
can employ specialists
voting rights - a sole trader who has converted into a limited company may lose some control over the business.
more documentation e.g. preparation of formal annual accounts, cost of administering the company
A limited company is a separate legal entity, owned by shareholders and run by directors. Final accounts produced are trading, profit and loss account with an appropriation section and balance sheet.
Shareholders are the owners of a limited company. They buy shares which represent part ownership of a company.
Employees
Investors
Lenders
Public
Statistic agencies

Full transcript