Currently writing a business plan for a small business that I would like to start, but I don't really know too much about what I'm doing.
I assume I can present it to some banks, and I'm hoping for between 50,000-100,000$ in funding and will use the money to hire two full time positions as well as materials and equipment for the business to begin producing.
Anyone currently going through the same kind of thing?
>>1175235
I'm in somewhat of a similar situation.
I'm thinking about buying a small business, looking at getting a loan for about $250,000.
Just started reading about how to prepare a business plan as well. I won't be hiring any employees though (not for at least a year anyway), it will be a one man operation. And there won't be much for equipment either, just software licensing and shit. It's all intangibles that require financing.
Bank underwriter here. I can answer your questions.
>>1175299
Excellent! So I just found a guide that tells you what content needs to go into a Business Plan on that SBA website. What exactly are banks looking for in terms of this business plan? I have my target market specified and what types of products I want to produce, and my credit score is over 700. Never missed a car or house payment, and car is now paid off. I have a bachelors in Mechanical Engineering with a couple years of Design experience, and I'm graduating with an MBA in May.
For my Market Research, I pretty much cited shit from some articles from Forbes and included some charts relevant to my market research, and that's about it for that section. Does that sound like it would be good enough?
>>1175309
SBA is probably the best way to go for a start-up loan. A bank is usually hesitant to lend to a business that is not seasoned.
As far as market research, the articles and charts are a good start. I would also include info about your competitors and explain how you can differentiate yourself from them. You need to able to convince them that you can gain market share. How does your industry perform during downturns? How will your business be prepared to handle a downturn?
As for other info, make sure you have a pro forma prepared at least 2 years into the future. When you prepare your pro forma, make realistic assumptions. Don't be stupid and make assumptions like 50% annual revenue growth. Pro forma should also include cash flow projections to give banks an idea of what your burn rate is.
>>1175324
Any ideas what banks I should pitch this to? Do I just print out my 16page Business Plan, stick it in a report cover and bring just that? I have no clue how the presentation process should go
>>1175324
What are the chances of getting full financing from a bank to purchase a small business, without me having to put up any of my own money?
The business has a well established customer base and proven profits of about 60-80,000 a year. But it would have basically no assets to finance, and I have very few of my own assets to put up either (a car, that's about it).
>>1175335
Any bank who is a preferred SBA lender. A preferred SBA lender means that the bank can underwrite and approve SBA loans without further underwriting needed to be done by the SBA. Usually means it would be a faster process.
>>1175338
Very little. Banks like to see owners put equity in the transaction. Mezzanine financing might be an option, but I don't think they would look at deals for a business of that size.
Would the business owner be open to a seller's financing? Though you will probably have to pay the seller a lump sum in the beginning as well.
>>1175346
How much of my own equity would I have to put up to get the rest financed? I have like 10k in savings, could probably convince my dad to put in another 10k or so.
Would that help to get the remaining 230k?
>>1175353
20k cash and 230k loan means 8% equity. I think that's pushing it. 15%-20% equity is where banks would start feeling comfortable. Does your father have assets? Would he be comfortable with guaranteeing a loan with you?
What sort of business is this? When you say no assets, are you saying no fixed assets and more of the value is in intangibles (i.e. customer lists, etc)?
>>1175358
Yea it's a medical billing software company so no assets except maybe some small office furniture. Main expense is $20,000 to purchase software, the remaining value is for intangibles (brand, customers, idea)
Maybe I can get my dad to sign the loan or some kind of seller's financing. Thanks for the help.
>>1175342
Any tips on how to prepare a pro forma? This wasn't the kind of thing covered in my MBA program
>>1175235
I started a small businesses 10 years ago with about 10K of equipment (tools and machines) and safety net for housing expenses for 1 year ~15K.
Started in my garage and made $270K profit on 790K of revenue last year. I have 3 employees & have been in a warehouse for the past 8 years.
My advice is to start small and have plans to quickly expand. When the recession hit I saw many people go out of businesses. I simply fired an employee, renegotiated rent, and kept making money (I make very high end cabinets so a huge slowdown for 2-3 years I had to go through).
Make sure you have plans to respond to market conditions. I've seen many lose millions while they laughed at me for not borrowing money to expand a year earlier. I actually never took out a business loan ;-)
>>1175372
Start with your product. What is your price/unit? How many units will you be selling in your first year? That will get you your pro forma revenue.
For operating expenses, do some research. Do you have rent? Find out what rent is like in your area. Marketing expenses, what is your marketing strategy and try and price it out. Figure out exactly what all your expenses are and price them out.
Will you be taking any distributions from your business or will you reinvest your profits? Show that on the pro forma as well.
Calculate what your loan payment is going to look like. Calculate how much cash flow you have after your loan payment. If your net cash flow after debt service is negative, then you may need to adjust accordingly.
>>1175709
Material cost for one model is about 150$ with a retail of about 1000$, but that doesn't account for labor costs. Material cost for another model is around 700$ with a retail of around 4,000$, but again that doesn't account for labor costs. There is no rent or electricity or utilities of any kind, we're being given the space for free by the city to assist startups. Marketing I'm not so sure, I want to hire a Marketing Director to handle that aspect as well as maintaining the website and all company social media accounts
>>1176087
While you're going hiring crazy with the bank's money wtf are YOU doing? You're just the big idea man with the big office? Fuck off and get to work
>>1176098
Engineering Bachelors and Masters, as well as an MBA. I will be doing THE MOST work. I have tried doing this alone and it is just too much for one person to handle.
>>1176087
Some questions for you to consider
How many of each model are you expecting to sell? The answer will help you come up with your pro forma revenue.
Labor will be one of your largest expenses, so make sure you do your homework in researching labor prices.
You are getting free rent/utilities for now, but how long do you get to stay there? How will your net income look after you move into a regular space where you will have to pay fixed costs?
>>1175235
> $50k - $100k
huge mistake. It's a SMALL business. Key word being small.
There's 100 businesses you can start for under $5k.
I started my small biz with $3k. It earns me over $1k per week.
>>1176306
1K a week aint shit.
Also, this business isn't dealing with intangibles, it's a hardware manufacturer which has much higher cost of entry
>>1176306
Doing what?
>>1176370
At least.
Some weeks I make $2k.
And I never work more than 30 hours a week.
And I started the business 6 months ago.
And have zero debt to show for it.
Next year I'll likely shoot for $150k.
If you have specific experience in a given industry and a solid plan for a good/service, then that's one thing, but if you're just taking out a loan on something you know little about and hope that your dream takes flight, then good fucking luck.
>>1176371
home contracting muh fuckas.
>>1176382
You make $1k a week doing contracting? What kinds of jobs?
>>1176388
Today a lady needed me to fix part of her backsplash tile, and tile on her shower floor.
It took me 6 hours and I made $600. I spent like $20 in materials.
>>1176140
I suggest knowing you business model into depth.
Who is going to buy your product? (Likely several somewhat different segments). What do they look for in your product, that they cannot get anywhere else? (How you differentiate from other products, could be price, quality, location, special features and so on. How you're going to sell it, through stores, a webshop, personal sales etc, and also give some thought to which relationship your customer segments would expect to have with you, in terms of service et cetera.
There's plenty more, and this is a great start to go in depth with, if you haven't already :-)
>>1176382
It's different if you can buy an already established business, it's much easier that way.
But yeah, if you're starting a new business from scratch, you better have a fuck load of knowledge and experience in that field, or you're taking on a big risk.
>>1176382
But you had training or what to get started?
>>1175414
I always admire small start ups like these. My question is how did you first go about getting customers? Where you already in the industry and had connects?
My biggest barrier in starting my own small business is fear of having no customers. I know thats why you have money in the bank to rely on, but how do you make that jump into the industry?
>>1178215
Just started my own business in Jan. of 2016. I've got 3 commercial clients and 2 proposals sent that I should be working on within the next 2 weeks. I am also in the construction industry.
I basically crafted a generic but in depth introduction to myself and my company. I laid out my qualifications and history along with a few references. I then attached a brochure pdf and obviously my contact info/website etc. I then found all the contacts I needed by visiting prospective companies websites. They showed pictures, emails, and phone numbers for all their employees. So I would just copy/paste my generic email, write "hello (name)" and then at the bottom put "I'd love opportunity to meet in person and discuss how our services can benefit (name of company)". Sent out around 50 or so emails. Got many replies and 2 phone calls back. "Hey anon, your email came at the perfect time. I need blah blah blah"
I did my homework though. I was prepared before I sent my first email out with things like my insurance, LLC filings, W9 form, etc. Then I just let my work speak for itself. I've had repeat business and am slowly building my portfolio.
BTW, I knew which companies I needed to contact but had no prior relationship with anyone I contacted. I actually moved to a different state before starting my own business so it can be done with no contacts.
Knowing how to price products correctly is definitely one of the hardest things about businesses.
