Workshop 2 Funding Your Idea

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Workshop 2 Funding Your Idea

  1. 1. Commercial Development Programme Commercial Essentials Workshop 2 – Planning For and Funding Your Idea
  2. 2. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Stephen Slater Partner
  3. 3. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS <ul><li>Agenda for today </li></ul><ul><li>Building a business plan – the key components </li></ul><ul><li>Understanding the financials </li></ul><ul><li>Evidencing market potential </li></ul><ul><li>Funding – what, who, how? </li></ul><ul><li>Networking </li></ul><ul><li>Professional advisors </li></ul>
  4. 4. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Commercialisation Project Management Cycle Risk Management Strategy 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 Revenue Generation
  5. 5. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Product Life Cycle
  6. 6. Business Plan Do you need one ? NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
  7. 7. Purpose of a Business Plan <ul><li>A potential investor </li></ul><ul><li>A potential funder – bank </li></ul><ul><li>You and your team </li></ul>NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
  8. 8. Potential Investor <ul><li>Provide an overview of the investment opportunity </li></ul><ul><li>Demonstrate how the value of the potential investment will grow </li></ul><ul><li>Provide an indication of the financial return </li></ul><ul><li>Demonstrate the costs involved </li></ul><ul><li>Demonstrate why the investment is needed </li></ul><ul><li>Demonstrate how the investor can exit </li></ul>NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
  9. 9. Potential Funder <ul><li>Provide an overview of the funding opportunity </li></ul><ul><li>Provide an indication of the financial return </li></ul><ul><li>Demonstrate the costs involved </li></ul><ul><li>Demonstrate why the funding is needed </li></ul><ul><li>Demonstrate that the preferred type of funding can be facilitated </li></ul><ul><li>Give the potential funder confidence in the management team </li></ul>NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
  10. 10. Management <ul><li>Provides focus and direction </li></ul><ul><li>Determines available and required resources </li></ul><ul><li>Provides a benchmark for future performance </li></ul><ul><li>Identifies parameters within which the business should operate </li></ul>NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
  11. 11. The Key Areas <ul><li>Executive Summary </li></ul><ul><li>Introduction & Background </li></ul><ul><li>Content – Management </li></ul><ul><li>Content – Market </li></ul><ul><li>Content – Product </li></ul><ul><li>Content – Business Operations </li></ul><ul><li>Financial Projections </li></ul><ul><li>Appendices </li></ul>NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
  12. 12. Financial Projections <ul><li>A minimum of two years (usually three, sometimes five) </li></ul><ul><li>Profit & Loss, Cashflow and Balance Sheet </li></ul><ul><li>Monthly with year end totals </li></ul><ul><li>Assumptions – Sales Forecasts </li></ul><ul><li>Amount and use of finance </li></ul><ul><li>Possible exit strategy for an investor </li></ul>NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
  13. 13. Cashflow Projection <ul><li>“ Cash is king” </li></ul><ul><li>Profit does not equal cash </li></ul><ul><li>Peaks & troughs </li></ul><ul><li>Timing of cashflows – weekly </li></ul><ul><li>Plan – bank facility or investment </li></ul><ul><li>Costs…don’t forget </li></ul><ul><li>Flexing – sensitivity analysis </li></ul>NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
  14. 14. Cashflow Timeline Days 0 40 20 80 60 100 Sell Goods Receive Goods Order & Pay for Goods Get Paid Pay Wages Pay Rent 80 day cycle NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
  15. 15. Sales Forecasts <ul><li>What are the variables? </li></ul><ul><li>Break down into basic details </li></ul><ul><li>Take a prudent approach </li></ul><ul><li>EXAMPLE – FITNESS TRAINER </li></ul>NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
  16. 16. The Do’s <ul><li>Research the market thoroughly </li></ul><ul><li>Ensure you cover all areas of the business </li></ul><ul><li>Use a spreadsheet or forecasting software </li></ul><ul><li>Use realistic and conservative assumptions </li></ul><ul><li>Flex the key assumptions </li></ul><ul><li>Produce appropriate projections </li></ul>NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
  17. 17. The Do’s <ul><li>Make it punchy and concise </li></ul><ul><li>Attractive and easy to read </li></ul><ul><li>Put sections in the appropriate places </li></ul><ul><li>State sources of information – adds credibility </li></ul><ul><li>Make it easy to update – it is a working document </li></ul>NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
  18. 18. The Don'ts <ul><li>Rush into it </li></ul><ul><li>Forget the possibility of economic changes – inflation, tax, interest rates etc. </li></ul><ul><li>Do it all yourself </li></ul><ul><li>Get somebody else to write it for you </li></ul><ul><li>Overestimate demand or underestimate costs </li></ul><ul><li>Ignore advice </li></ul>NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
  19. 19. Common Faults - NEL <ul><li>No or poorly constructed executive summary </li></ul><ul><li>Weak management and controls </li></ul><ul><li>Bottom up financial projections </li></ul><ul><li>Poorly thought through strategy </li></ul><ul><li>Inconsistencies and spelling mistakes </li></ul><ul><li>Lack of market knowledge </li></ul><ul><li>Lack of financial detail </li></ul><ul><li>Too little emphasis on the main issues </li></ul>NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
  20. 20. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS <ul><li>Evidencing Market Potential – </li></ul><ul><li>where to find the data? </li></ul><ul><ul><li>Library (Business section) </li></ul></ul><ul><ul><li>Trade Associations – www.taforum.org </li></ul></ul><ul><ul><li>UK Office for National Statistics – www.statistics.gov.uk </li></ul></ul><ul><ul><li>Business Magazines and Business Sections of national newspapers – www.ft.com </li></ul></ul><ul><ul><li>Local authority/Chamber of Commerce </li></ul></ul><ul><ul><li>UK Trade & Investment (Countries and Sectors) – www.uktradeinvest.org.uk </li></ul></ul>
  21. 21. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS <ul><li>Evidencing Market Potential – where to find the data? </li></ul><ul><li>Commercial publishers – www.marketresearch.com </li></ul><ul><li>Internet searching – but ensure credible </li></ul><ul><li>Market research agency – www.rbg.org.uk (but check them out!) </li></ul>
  22. 22. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Early Stage Funding Grants VC Banks Loans Private Investors Incentives Tax Credits Other
  23. 23. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS <ul><li>Grants </li></ul><ul><li>Research Grants </li></ul><ul><li>Business Link – www.businesslink.gov.uk </li></ul><ul><li>Other enterprise agencies </li></ul><ul><li>Innovation Vouchers (see Business Link) </li></ul><ul><li>Local council </li></ul><ul><li>Research & Development Grants – www.onenortheast.co.uk </li></ul><ul><li>Technology Strategy Board – www.innovateuk.org </li></ul><ul><li>Knowledge Transfer Partnership – www.ktponline.org.uk </li></ul>
  24. 24. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS <ul><li>Venture Capital </li></ul><ul><li>Proof of concept – www.northstarei.com </li></ul><ul><li>Early stage seed funding – www.northstarei.com </li></ul><ul><li>Technology – www.ipgroupplc.com </li></ul><ul><li>Angel match fund – www.riverscap.com </li></ul><ul><li>Business Angels – www.bbaa.org.uk </li></ul><ul><li>Private Sector Venture Capital – www.bvca.co.uk </li></ul><ul><li>NESTA – www.nesta.org.uk </li></ul><ul><li>Local VC – www.big-angels.co.uk </li></ul>
  25. 25. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Banks <ul><li>Overdrafts </li></ul><ul><li>Credit cards </li></ul><ul><li>Loans </li></ul><ul><li>EFG </li></ul><ul><li>Invoice discounting/factoring </li></ul><ul><li>Overseas trading </li></ul><ul><li>Market information </li></ul>
  26. 26. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS <ul><li>Loans </li></ul><ul><li>ENTRUST – www.entrustrelf.co.uk </li></ul><ul><li>Trade Partner </li></ul>
  27. 27. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Private Investors – Enterprise Incentive Scheme <ul><li>Income tax relief </li></ul><ul><li>Reduction in tax bill of 20% of investment (up to £500k inv’mt per tax year) </li></ul><ul><li>Capital gains tax deferral relief </li></ul><ul><li>On disposals one year before investment to three years after </li></ul><ul><li>Capital gains tax exemption </li></ul><ul><li>If shares qualify for income tax relief </li></ul>
  28. 28. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS R & D Tax Credits <ul><li>Activities/projects which seek to: </li></ul><ul><li>“ extend overall knowledge/capability in the field of science or technology” </li></ul><ul><li>Eligible expenditure: </li></ul><ul><li>Wages and salaries, consumable materials, power, water, fuel, computer software </li></ul><ul><li>Tax Reliefs </li></ul><ul><li>Enhanced deduction of 130% to 175% against profits chargeable to corporation tax, or </li></ul><ul><li>Repayable tax credit (up to 25p per £1) if loss making </li></ul>
  29. 29. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS <ul><li>Other </li></ul><ul><li>Registering for VAT – www.hmrc.gov.uk </li></ul><ul><li>www.eurekanetwork.org </li></ul><ul><li>www.carbontrust.org </li></ul><ul><li>www.j4bgrants.co.uk </li></ul>
  30. 30. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS <ul><li>Approach to funding </li></ul><ul><li>Research each potential funding provider </li></ul><ul><li>Establish early contact </li></ul><ul><li>Ensure you meet the criteria for investment </li></ul><ul><li>Review your business plan before submission </li></ul><ul><li>Engage with professional advisors (if necessary) </li></ul><ul><li>Do you know any of their previous investments? </li></ul><ul><li>Make the best first impression </li></ul><ul><li>Expect complications </li></ul><ul><li>Never assume anything! </li></ul>
  31. 31. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS <ul><li>Networking </li></ul><ul><li>First Friday – www.newcastlesciencecity.com </li></ul><ul><li>Connect North East – www.connectnortheast.com </li></ul><ul><li>Health – www.bewellconnected.co.uk </li></ul><ul><li>EF – www.entrepreneursforum.net </li></ul><ul><li>Check out events guides on Business Link, Bdaily and Journal websites </li></ul>
  32. 32. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS <ul><li>Building your professional advisor team – how can they help? </li></ul><ul><li>Specific technical expertise – eg financial, legal, IP, commercialisation </li></ul><ul><li>Previous experience and success </li></ul><ul><li>Geared up to working with early stage businesses </li></ul><ul><li>Contact sphere </li></ul><ul><li>Making the process smoother and quicker </li></ul>
  33. 33. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Contact Details [email_address] 0191 256 9500
  34. 34. Thanks for listening! Any Questions? NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS

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