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Commercial Development Programme
Commercial Essentials
Workshop 2 – Planning For and Funding Your Idea
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Stephen SlaterPartner
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Agenda for today•Building a business plan – the key components
•Understanding the financials
•Evidencing market potential
•Funding – what, who, how?
•Networking
•Professional advisors
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Commercialisation Project Management Cycle
IP Exploitation
Concept Research Business
Plan
IP Protection
Funding Package
Product Dvpt
Commercial-isation
Working Capital
Strategy Dvpt
Market Research
Company Set Up
Idea Dvpt
Risk Management
Revenue Generation
Strategy
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Product Life Cycle
Business Plan
Do you need one ?
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Purpose of a Business Plan
• A potential investor• A potential funder – bank• You and your team
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Potential Investor
• Provide an overview of the investment opportunity
• Demonstrate how the value of the potential investment will grow
• Provide an indication of the financial return• Demonstrate the costs involved• Demonstrate why the investment is needed• Demonstrate how the investor can exit
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Potential Funder• Provide an overview of the funding opportunity• Provide an indication of the financial return• Demonstrate the costs involved• Demonstrate why the funding is needed• Demonstrate that the preferred type of funding can
be facilitated• Give the potential funder confidence in the
management team
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Management
• Provides focus and direction• Determines available and required resources• Provides a benchmark for future performance• Identifies parameters within which the business
should operate
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
The Key Areas• Executive Summary• Introduction & Background• Content – Management• Content – Market• Content – Product• Content – Business Operations• Financial Projections• Appendices
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Financial Projections
• A minimum of two years (usually three, sometimes five)
• Profit & Loss, Cashflow and Balance Sheet• Monthly with year end totals• Assumptions – Sales Forecasts• Amount and use of finance• Possible exit strategy for an investor
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Cashflow Projection• “Cash is king”• Profit does not equal cash• Peaks & troughs• Timing of cashflows – weekly• Plan – bank facility or investment• Costs…don’t forget• Flexing – sensitivity analysis
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Cashflow Timeline
Days
0 4020 8060 100
Sell Goods
Receive
Goods
Order & Pay
forGoods
Get Paid
Pay Wages Pay
Rent
80 day cycle
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Sales Forecasts
• What are the variables?• Break down into basic details• Take a prudent approach
EXAMPLE – FITNESS TRAINER
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
The Do’s• Research the market thoroughly• Ensure you cover all areas of the business• Use a spreadsheet or forecasting software• Use realistic and conservative assumptions• Flex the key assumptions• Produce appropriate projections
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
The Do’s• Make it punchy and concise• Attractive and easy to read• Put sections in the appropriate places• State sources of information – adds credibility• Make it easy to update – it is a working
document
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
The Don'ts• Rush into it• Forget the possibility of economic changes –
inflation, tax, interest rates etc.• Do it all yourself• Get somebody else to write it for you• Overestimate demand or underestimate costs• Ignore advice
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Common Faults - NEL• No or poorly constructed executive summary• Weak management and controls• Bottom up financial projections• Poorly thought through strategy• Inconsistencies and spelling mistakes• Lack of market knowledge• Lack of financial detail• Too little emphasis on the main issues
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Evidencing Market Potential – where to find the data?
•Library (Business section)
•Trade Associations – www.taforum.org
•UK Office for National Statistics – www.statistics.gov.uk
•Business Magazines and Business Sections of national newspapers – www.ft.com
•Local authority/Chamber of Commerce
•UK Trade & Investment (Countries and Sectors) – www.uktradeinvest.org.uk
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Evidencing Market Potential – where to find the data?
•Commercial publishers – www.marketresearch.com
•Internet searching – but ensure credible
•Market research agency – www.rbg.org.uk (but check them out!)
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Early Stage Funding
Grants
VC
Banks
Loans
Private Investors Incentives
Tax Credits
Other
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Grants
•Research Grants
•Business Link – www.businesslink.gov.uk
•Other enterprise agencies
•Innovation Vouchers (see Business Link)
•Local council
•Research & Development Grants – www.onenortheast.co.uk
•Technology Strategy Board – www.innovateuk.org
•Knowledge Transfer Partnership – www.ktponline.org.uk
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Venture Capital
•Proof of concept – www.northstarei.com
•Early stage seed funding – www.northstarei.com
•Technology – www.ipgroupplc.com
•Angel match fund – www.riverscap.com
•Business Angels – www.bbaa.org.uk
•Private Sector Venture Capital – www.bvca.co.uk
•NESTA – www.nesta.org.uk
•Local VC – www.big-angels.co.uk
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Banks
• Overdrafts
• Credit cards
• Loans
• EFG
• Invoice discounting/factoring
• Overseas trading
• Market information
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Loans
•ENTRUST – www.entrustrelf.co.uk
•Trade Partner
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Private Investors – Enterprise Incentive Scheme
• Income tax reliefReduction in tax bill of 20% of investment (up to £500k inv’mt per tax year)
• Capital gains tax deferral relief On disposals one year before investment to three years after
• Capital gains tax exemption If shares qualify for income tax relief
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
R & D Tax Credits
Activities/projects which seek to:
“extend overall knowledge/capability in the field of science or technology”
• Eligible expenditure: Wages and salaries, consumable materials, power, water, fuel, computer software
• Tax ReliefsEnhanced deduction of 130% to 175% against profits chargeable to corporation tax, orRepayable tax credit (up to 25p per £1) if loss making
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Other
•Registering for VAT – www.hmrc.gov.uk
•www.eurekanetwork.org
•www.carbontrust.org
•www.j4bgrants.co.uk
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Approach to funding
•Research each potential funding provider
•Establish early contact
•Ensure you meet the criteria for investment
•Review your business plan before submission
•Engage with professional advisors (if necessary)
•Do you know any of their previous investments?
•Make the best first impression
•Expect complications
•Never assume anything!
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Networking
•First Friday – www.newcastlesciencecity.com
•Connect North East – www.connectnortheast.com
•Health – www.bewellconnected.co.uk
•EF – www.entrepreneursforum.net
Check out events guides on Business Link, Bdaily and Journal websites
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Building your professional advisor team – how can they help?
•Specific technical expertise – eg financial, legal, IP, commercialisation
•Previous experience and success
•Geared up to working with early stage businesses
•Contact sphere
•Making the process smoother and quicker
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
Contact Details
0191 256 9500
Thanks for listening!
Any Questions?
NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS