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Day 13. Financing your plan.

How did you get on setting your budget yesterday? Did it show you what level of investment will be needed to get your idea off the ground? For example are you going to have to invest in raw materials or marketing before you sell anything? Are you able to finance that amount yourself preferably without getting in to interest payments on your credit card? If not then today’s challenge is designed to get you thinking of different ways in which you could raise the investment needed?

Sadly money doesn't grow on trees so you may need to read this page to find other options!

Sadly money doesn’t grow on trees so you may need to read this page to find other options!

Financing equipment

I’m starting with equipment because it is a capital expense and, as such, tends to be viewed differently by lenders and the tax authorities. By now you should know what equipment you need and how much it will cost but do you need to buy it? Have you checked out recycling sites for example www.freecycle.org.uk or http://www.londonreuse.org/for-business/ there are probably similar sites in your locality? How about posting what you are looking for on Twitter, Facebook or Gumtree? You may not be lucky but if someone is wanting to get rid of what you want it would be a win-win. Look out for charities in your area that take other people’s cast offs, restore them and sell them to others who need them and in doing so provide employment opportunities for those in need.

Do you need to buy the equipment or could you lease it? Would leasing save you money? The sums may well depend upon how long you need the equipment for and what length of agreement you can negotiate but it is worth exploring.

If you do decide you have to buy do you really need new? It’s often possible to make considerable savings on items which have hardly been used. Ebay would be a good place to start looking.

If you are buying it can be worth talking to your bank to see if you can arrange a loan. A loan is usually a lot cheaper than an overdraft. However if you are buying for a business you may need to produce a business plan before the bank will consider you. Lenders are often more comfortable lending to finance equipment purchases because there is something to secure a loan against. For more ideas see the section on ‘Raising Finance’.

Using other people’s money

This is not as underhand as it sounds! Could you set up an account with your supplier which would enable you to pay in 30 days or more? This would allow you to convert your raw materials into product which you could hopefully sell before you have to pay the invoice. If you can settle the account with a credit card you may get up to 30 more days before you have to start paying interest on the money. Just make sure that you remember that this bill will need paying before you spend the money on other things and be aware that a supplier is unlikely to deliver further items if you haven’t settled their last bill.

Should you be taking payments, or at least deposits, from your customers before you buy in raw materials? If you are providing a bespoke service then this is almost certainly the case. Make sure that you have a clear contract or terms of business to protect both you and your customer.

Could sponsorship be an option? Your sponsor will probably want to know that what you are doing is consistent with their values and typically that it will reach their target audience. They should want to use their sponsorship to generate positive PR, such as media coverage, for their organisation and will probably want their name and logo to be highly visible in whatever you do. Typically sponsorship is an option for charities, events and not for profits but it could be an option worth exploring.

Raising finance

If you can finance your money making venture yourself then this is the quickest and easiest way to get going. If not, do you have friends and family who would be willing to back you? You really shouldn’t expect them to do this for nothing! Offer them a share in your profits, a decent rate of interest or a free service in return for their support.

Could you bring partners into your venture? Of course if you do they will expect a say and a return on their investment, are you prepared to share your decision making and your profits?

If you are planning to start a business in order to make your money making target then there are other options for raising finance but they have both advantages and disadvantages. You will need to produce a business plan which shows that your business is viable and you will probably need to prove that you have made a decent investment in your business yourself. Why should they risk their money if you won’t risk yours?

Here are some of your options for raising finance for a business:

  • a bank loan: in the UK there is some government backing to help banks take risks, if the bank turn you down ask if they would consider you under this scheme
  • crowd source funding: a relatively new way of raising finance usually from smaller investors in return for shares in the business. You set your goal and don’t get any of the money until you get the backing for all of it. One example is http://www.crowdcube.com/
  • venture capital: this is where a person or organisation with money backs businesses that need it in order to make more money. Venture capitalists will be looking for scalable businesses from which they can make a decent profit. They typically want to own a significant proportion of the business and to sell their share in around 5 years.
  • business angels: rather like venture capitalists but perhaps a bit less aggressive! Whilst a business angel will want to make money out of your venture they will typically share their skills and experience with you and may take a longer term view about making a profit.

ACTION: If you need to raise finance decide which three methods you are going to go for in order of preference and prepare your case. Set a deadline by which you will ask for the backing, add it to your project management plan unless it is already there.

Next steps, should you choose to take them…

  1. Share any insights or recommendations in the comments section here.
  2. Join the conversation on Facebook to gain support from the 21 Day Challenge community (we’ll be looking at some of the benefits of social media later in the challenge but for now being active on this page and on Facebook can help boost the way people can find you on the Internet.)
  3. Tweet this ‘I’m working out how to finance my money making venture #21DMMC
  4. Join us tomorrow to when we’ll be putting together our cashflow forecasts.
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Day 12. Budgeting.

Welcome to Day 12, the first of three days on Managing Finance. Don’t groan! (I’m talking to the right brained amongst you now, who probably would like to get on with being creative and building relationships!) You wouldn’t expect a Making Money Challenge not to address managing finance would you?  I know from most of the courses I run that financial planning is something that doesn’t come easily to everyone so I’ve broken it into three steps that build on the work you’ve already done on Days 6 and 8. Today we’re looking at budgets, tomorrow at raising finance and on day 14 planning cashflow.

Those of you who looked at my Prism profile will realise that I’m in with those who would rather do most things that manage finances and I am not an accountant so I’m going to keep this as simple as possible. If finance is something you find difficult to get your head around I recommend Cash Flows and Budgeting Made Easy by Peter Taylor published by How to Books and available on Amazon, it is written in an easily understandable style with plenty of examples. (I am not getting a cut from sales of this book!)

Why budget?

I’m sure that I don’t need to tell you how easy it is to spend money! Holding on to it is much more difficult. Budgeting for your income and expenditure introduces a bit of discipline and control. It helps with decision making too, when you know how much you have available it is much easier to decide whether or not to buy.

Typically in a business you would set an annual budget but for this challenge you might want to set a budget specifically for the activities and duration of the challenge. What you are doing is working out how much you will have to sell and how much you will have to spend to achieve the amount of money you have set as your goal.

Setting your budget

Setting your budget.

Setting your budget.

If you worked out your break even on Day 6 you probably have most of the figures you need already, we just need to map them into a budget and then check that they make sense. Here’s a template to allow you to do just that. This is an Excel template so if you have any difficulties downloading it please contact me via the comments section below or in the Facebook group.

The template is editable but if you add extra rows you may need to redo some of the formulae to ensure get the right totals. You will see that I have numbered certain items where you may have more than one expense e.g. raw materials. I suggest you change these so that they reflect what you need to spend money on. Enter these figures in the budget column. Once a week, or once a month if that is more practicable, add your actual income and expenditure into the actual column. The variance column should calculate the differences automatically, allowing you to see where you need to sell more or cut down expenditure.

If you worked out your break even point on day 6 it should be relatively easy to work out how much you need to sell to achieve your money making target. Of course we didn’t factor in overheads such as administration and marketing into these calculations so you may find you need to sell more to cover these costs in order to make your target. Remember that if you need to sell more your direct and variable costs are likely to increase too.

You can use the template for any period you choose. One budget to cover the period until your deadline for making the money may be enough because we’ll be working out a monthly cashflow forecast on day 14 but you could do a monthly budget if you feel it would help you.

When you have put in all the figures does your budget total equal the money making target you set yourself? If not what do you need to increase or decrease? Is this realistic? If not, what needs to change?

ACTION: Complete the budgeting template and check that you are on track to make your money making target.

I’ll ‘see’ you tomorrow when we work out your options for raising any finance you need. Happy number crunching!

Next steps, should you choose to take them…

  1. Share any insights or recommendations in the comments section here.
  2. Join the conversation on Facebook to gain support from the 21 Day Challenge community (we’ll be looking at some of the benefits of social media later in the challenge but for now being active on this page and on Facebook can help boost the way people can find you on the Internet.)
  3. Tweet this ‘I’m working out my Money Making budget on @Glenda_S’s 21 Day Challenge #21DMMC
  4. Join us tomorrow to when we’ll be looking at how to raise finance.

Day 1: Determine your goal.

Welcome to your first activity on the 21 Day Make Money Challenge. Your task today is to define your objective and your motivation.

We can all say we want to make more money but why? What would we do with any extra money we made?

What do you want to make money for?

Whether you are doing this challenge for your personal or business finances you need to determine a target. Think what you would do with the extra money you are planning to make. Here are some ideas to get you started:

  • buy a new computer or other equipment
  • refurbish your office or a room in your home
  • re-brand your business
  • develop a new website
  • pay the membership on a networking group or club you want to join
  • do a training course to gain a new skill or qualification
  • raise the finance to start a small business
  • host a party for your staff and customers
  • pay for Christmas or another celebration without maxing out the credit cards
  • book a special holiday
  • clear the credit cards

ACTION: Write down your answer to this question ‘What am I raising money for?’

How much money do I want to make?

Perhaps you already know how much money you’ll need to do what you want to do but if not you’ll need to do some research. We’ll do some proper budgeting later in the challenge for now what we’re looking for is a ‘ballpark’ figure. You might find your answer via a Google search or you may need to make a few phone calls to price work you want done.

Try to get a range of prices so that you can have a basic target, a mid point and a stretch goal. So your basic target would pay for a computer with no frills and your stretch target would get you the latest all singing, all dancing good looking model.

ACTION: Research how much it will cost you to reach your goal a) at the basic level b) with a few frills c) with 5 star luxury! Make a note of how you arrived at these figures, which websites did you use? Where dd you get the estimates from? How did you arrive at the numbers?

Why do you want to make that money?

Understanding our reasons for wanting something is a great motivator. What we’re looking for is something you really ,really want. The more you want something the more motivated you will be to stick with it when life gets in the way. How will you feel when you have achieved your goal? What will it allow you to do that you can’t do now?

Spice girls pose

Tell me what I want, what I really, really want sang the Spice Girls. Do you know what you really, really want?

Make sure that your reasons for wanting to make this money are your reasons not something that someone else is dictating. Just because your son wants a new computer to play the latest games on may not be reason enough for you, You might just want something that allows you to shop online without waiting a week for the order to upload and lets you send a decent looking letter when you need to, or maybe you really want something with high definition graphics that will really help you  to develop your photographic skills. This is your challenge so make sure that your goal matters to you.

What is your deadline?

When do you want to have made this money by? Be realistic. This is a 21 day challenge in which you’ll make your plan to achieve your financial goal. You’ll then have to implement your plan to make that money. If you want to make just a couple of hundred then you may only need a few weeks but if your goal is thousands be realistic about how long it will take to make so much.

ACTION: Choose a date by which you want to have made your target amount.

Next steps, should you choose to take them…

  1. When you have completed today’s task  share your goal in the comments section, below (no need to say why you want to make this amount if you don’t want to). A goal shared is much more likely to be achieved.
  2. Join the conversation on Facebook to gain support from the 21 Day Challenge community (we’ll be looking at some of the benefits of social media later in the challenge but for now being active on this page and on Facebook can help boost the way people can find you on the Internet.
  3. Tweet this I’ve just set my goals in @Glenda_S Training Pack’s 21 Day Make Money Challenge, have you? #21DMMC
  4. Join us tomorrow to build the vision