New retail business

KarrieF

Hi.
I am almost finished with my business plan, but I still have a few questions regarding costs, bills, cashflow etc, which hopefully someone can help with.

How do you estimate costs and cashflow, without actually knowing how much you will sell? Will a best guess case suffice for a business plan? I will need a loan, so this will be going to a bank..

Also, I have very little cash of my own to put into my venture, unfortunately. Will a bank even entertain someone not putting up any of their own money? I will still approach the banks, but just looking for any personal experience.

Also, with regard to bills, ongoing costs, are there any hidden costs any of you experienced once you opened your shop/business? So far I think that employee costs will be the highest, and then rates, tax etc. anything else I should be aware of?

Lastly, I am hoping to approach my local enterprise centre soon, for advice/mentoring, and hopefully to see if there are any grants or funding available. I have done a SYOB course but would definitely appreciate any advice and especially funding they could provide. are the enterprise centres generally helpful?

Thanks a lot, I know there are a lot of questions, and a bit of rambling!
Karrie

Peterdalkey

I would think you have very little chance of securing any bank loans without a track record and your own cash to bring to the table. Retail is a particularly challenging sector right now.

You need to start thinking about alternative methods of raising capital/loans/microfinance, think frieds and relations who might lend/invest/ some good info on here too http://www.citizensinformation.ie/en/employment/types_of_employment/self_employment/setting_up_a_business_in_ireland.html. As you are doing a SYOB course, have you not covered this topic in some depth?

KarrieF

Thanks Peter,
I have been told that about the banks, so Im not too optimistic there. However, I have a friend who just opened a gym and got a bank loan first attempt with a very basic business plan, which I was surprised at. Now, it is a very small loan, they have very little costs/outgoings, and its a totally different sector, but I was still surprised, so thats why I wondered did anyone have recent bank experience. People always say there is no chance with the banks, but the only one I know of recently got a loan no problem..

The SYOB course i did was a couple of years ago, so its not too fresh in my memory. I did attend a recent talk in my local enterprise centre and they said that grants etc are pretty difficult to obtain, so again, im not holding out too much hope. I think family might be my best bet, if at all possible...

MRTULES

Just a side note on working out the costs.to I do it like this Take the stuff you know like rent on a particular unit. Then add the rates. Try and figure out your weekly wage bill( don't forget employers prsi). When you figure out your total of outgoings, divide it down to a single day. You can then figure out how much you need to take in you till per day to break even.
Example:
Rent and rates per week = €1400
Wages = €1400
Heat & light = €70
Other expenses = €490

Total = €3360 out goings per week

If im open 9 to 5 for 7 days a week, i need to make €480 a day to break even.
You can break it down to the hour too.
In this example I need to make €60 per hour (on average). If im selling coffee for €3 a cup and making €2 profit on each cup, then I need to sell 120 an hour to break even.

Hope it's understandable. A little more long winded than I hoped.

jimmii

In that example you would need to be doing €590 I don't think that VAT man would like to be cut out of things!!

I opened my own retail place last year we'll need a lot more info to really give accurate answers. I opened around this time last year and it was really tough the first few months are absolute torture unless you have scored yourself a really good footfall spot. Keep a close eye on your costs and really keep them under control. Where are you planning on operating? Do you have any relevant experience in the field? Is it a new or existing unit? What is your USP and why should people buy from you instead of an existing retailer? Can you afford to live for 6 months without taking a single cent out of the business? It will really make a HUGE difference to your life if you have the "life" funds in place when you start as it will be one worry less. Start up costs almost always come to more than you expect its just one of those things.

As I say I opened up a place early last year so if you have any questions you want to send on PM feel free i'm happy to help.

theboo70

This is my experience when preparing a business plan & loan application last November for a seaside cafe.
I too have little or no funds but was not deterred.

I was informed that AIB can make loan decisions at branch level for loans up to 25 or 30,000 which means that your local commercial manager can advise approval as opposed to it just being forwarded to some faceless official in head office. I have been an AIB customer for a long while & thought that would be a good starting point.
I didn't get the loan from AIB but didn't give up at that & applied to the Microfinance Ireland(MFI) loan fund. Basically they take a different view on loan applications up to 25,000 to businesses which have been refused by a bank.

Before I applied to MFI, I contacted my local Enterprise board who allocated a mentor which was a fantastic help, the company appointed turned my humble 8 page business plan into a full blown, all singing & dancing 25 page report and they made the full application to MFI (it's quite a lengthy form with a shed load of info & technical stuff required!). I had read that these loans were very difficult to secure but within 2 weeks of the application being submitted I got a site visit by a MFI official & thereafter the loan was approved. I'm currently working on having the business open for Easter. So my message is don't give up hope, there is help out there.

The overheads I listed in my business plan are a bit scary but you must be realistic: Rent, Council Rates, Refuse, Insurance, Electric &/or Gas, Heating Oil, Any Equipment Lease, Loan repayments, Annual Repairs & Renewals, Consumables (paper, inks, cleaning stuff, etc), Adverts, Sponsorship, Telephone, IMRO, Accountant fees. I listed all this down on paper & then applied realistic annual costs for each.
Thereafter I broke the year into several different business seasons ie: low, high, mid, shoulder & totally dead periods and then looked at what level of turnover each period would achieve including breaking each day down to how many drinks, how many main courses, how many coffees which in turn is broken down to morning, afternoon & evening customer spend...take that info & add it all together for an annual turnover and finally work in the following costs (based on my food business) VAT@ 9%food & 23%drink, wages@30% of turnover, PRSI@8% of wages & Food Costs@30% of turnover and if you earn more than you spend then it looks good! Oh yeah, don't forget to pay yourself!
All of this of course is based on projections & food industry averages. It may seem like a lot but in my case it balanced out & the mentor I was appointed actually thought my turnover projections were a bit conservative. So I think definitely hit your enterprise board for advice before you push onto a bank, it will make the whole thing more appealing & you will have more ammo to answer any questions. The MFI loan repayments are actually slightly higher than current bank rates so bank would be cheaper in the long run but it was great to have it as an option in my case.

Best of Luck!

Graham

theboo70 wrote: »

I didn't get the loan from AIB but didn't give up at that & applied to the Microfinance Ireland(MFI) loan fund. Basically they take a different view on loan applications up to 25,000 to businesses which have been refused by a bank.

Before I applied to MFI, I contacted my local Enterprise board who allocated a mentor which was a fantastic help, the company appointed turned my humble 8 page business plan into a full blown, all singing & dancing 25 page report and they made the full application to MFI (it's quite a lengthy form with a shed load of info & technical stuff required!). I had read that these loans were very difficult to secure but within 2 weeks of the application being submitted I got a site visit by a MFI official & thereafter the loan was approved.

I think MFI has been suggested a couple of times over the last year or so as an alternative when bank finance isn't possible. It's fantastic to see a post from someone who's successfully raised startup finance from MFI.

Thanks for posting theboo70, you may have just nominated yourself as the MFI guru :pac:

KarrieF

Thanks everyone, that is exactly the kind of information I was looking for, with regard to costs, sources of finance etc. Good idea to try and break it down to targets per day or per hour. I have a lot to work on. I hope to be in contact with the Enterprise Centre soon, this month hopefully, so fingers crossed.

jimmii

You will probably need more than €25k unless its a really small shop or your stock is on the larger side especially if those numbers MRTURLES posted are anywhere near what you think you are going to need to do to break even as that is a massive amount of money to be turning over given the size of investment. To cover €480 a day you are going to need to be turning over €1200+ a day on average which is very unrealistic, Jan-Nov we would only be doing €1200+ on a Saturday.

My shop is about 1k sqft and at the start spent more than that to get things up and running (and I had a fit out cost of practically zero) and looking back now the shop seems like it was really empty stock wise!