Before you get to the stage of signing a lease, write a business plan. This needs to cover the following.
◆ Why you are going into business.
◆ What your personal goals are.
◆ What you want to achieve from the business.
◆ Why it is going to be a success.
◆ Why people are going to buy your products.
◆ Why your business will survive and thrive when so many others do not.
If you need to borrow money to set up the business you will have to write a very full and professionally presented business plan for the bank. This should include details of:
◆ the company structure – sole trader/partnership/limited company;
◆ what the business will do;
◆ the market size and potential;
◆ competitors;
◆ suppliers;
◆ cash flow forecasts;
◆ projections of takings and growth;
◆ a complete résumé of all the people involved;
◆ your qualifications, experience and the strengths you will bring to the proposed business;
◆ the proposed premises;
◆ any plant, machinery and vehicles;
◆ your assets and financial needs.
Be realistic
Calculate how much money you need to earn for the shop to break even and how much money you need to earn to live off. There is no point saying you can live for £50 a week when the mortgage on your house is £1,000 a month.
When writing the cash flow forecasts you will be able to enter accurate figures for the likes of rent and rates once you have found your proposed location, but will have to estimate how much you will be spending on telephone or stationery. Remember that the more your turnover goes up, the more you will spend on things like carrier bags and probably wages, but your heating and lighting costs for example will remain the same.
Turnover ratios are available for some types of business such as grocery and menswear shops. This means that if £x of stock is held in a shop floor area of y square feet, then turnover can be expected to be £z. For most types of business, however, you can only guess.
