Firstly you will need a bank account. If you already have a private account then go and see your bank manager and talk over the opening of a business account at the same branch. You should have prepared a business plan and have sent him or her a copy in advance.
What is a business plan? Important, that's what it is! A business plan is a professionally presented, (typed) document prepared by yourself, which outlines the business you are proposing to undertake. It need not be more than ten pages long, but should explain clearly, in plain English, the following points:
1) The type of business in which you are proposing to engage: (E.g. window cleaning services).
2) The market for your goods and services: (E.g. 10,000 windows within a short walk of your home).
3) The competition: (There are only two other window cleaners in the whole area, and one of them is ninety-five years old.)
4) The market penetration: You expect to be able to get ten percent of the windows onto your books within six months, that's one thousand windows. Back this up with facts, for example actually go and ASK one hundred people if you can clean their windows for them, and make sure that at least ten percent say "yes".
5) Servicing the market: Give figures and times to prove that you can actually clean one thousand windows a week using your available resources.
6) Business overheads: Note down the cost of buckets, a bicycle, ladders, leathers, soap, squeegee, insurance, leaflets, telephone, etc. Make sure that you've thought of everything.
7) Cash flow forecast: This is the most important page, and probably the only one which your bank manager will read.
The Cash Flow Forecast shows, month by month, how the business will progress, cash-wise. It is only your best guess at this stage, but your bank manager will judge your seriousness and fitness for business by the amount of insight which you show in preparing this forecast.
If you can't find someone to help you in preparing a cash flow forecast, then most books on running a small business will have a section on preparing these forecasts.
In simple terms, you divide a sheet of paper into twelve columns, each column is labeled with a month, starting with the first month of the forecast. In the first row, you put the number of sales which you expect to achieve in each month. You are not likely to get all of your customers in the first week of trading, but rather as your reputation increases, the number of customers will increase. The bank manager will be looking for a gradually rising level of sales, as this shows a realistic approach.
If your eventual target is four thousand windows a month, then your first month's sales might be one thousand, (two hundred and fifty a week) building to four thousand over a six month period.
In the next row, put the value of those sales in pounds. If you are planning to charge one pound per window, then this row will have the same figures as the row above.
The next few rows are used to show your overheads and materials. For example, each window might use ten pence worth of soap and other materials, this row will then show ten pence for every window 'sold' in the sales row. Your telephone bill will be shown as four quarterly payments going out in month one, four, eight and twelve. Put all your overheads and expenses down in this manner, using as many separate rows as you need.
Don't forget a row for your drawings (wages). How much are you going to take from the business every month?
After you have completed this exercise, the bottom row should be used to total the monthly columns. The totals are given by subtracting from the monthly sales, all the other amounts in that column.
Having completed this, anyone can see, at a glance, how the company will fare over the coming months. Just looking along the bottom row will tell you immediately the maximum amount of money which will need to be borrowed (if at all). Needless to say, the
bottom row should show a gradually rising monthly profit.
If you prepare your business plan carefully, then your bank manager will be inclined to take you very seriously. If you go to the bank with a half-baked, ill-conceived plan with nothing but enthusiasm behind it, then don't be surprised if you are shown the door, politely, of course.
Even the best business plan can meet with resistance. I well remember when I was about one year into my first company, I wanted to borrow ten thousand pounds for business expansion. I already had an established (but small) business. The first bank we went to looked over our (excellent) business plan and promptly said "good day". We were on the street before we new what had hit us!
We were greatly discouraged, but we decided to try the bank next door. We were welcomed with open arms and congratulated on the thoroughness of our business plan. We were given the loan without question. The company still banks at this branch and has since put millions of pounds through the account!
The moral is that if you don't get any joy with your present bank, then try another.
I used to be scared of bank managers until I realised that I was the customer and THEY were there to serve me! I was doing them a favour by banking with them, even when I had a large overdraft, because that's how they make a lot of their money!
Let us assume that you find an agreeable bank manager who wants your business, the next problem comes with working capital.