workshop 2 funding your idea

Commercial Development Programme

Commercial Essentials

Workshop 2 – Planning For and Funding Your Idea

NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS

Stephen SlaterPartner


Agenda for today•Building a business plan – the key components

•Understanding the financials

•Evidencing market potential

•Funding – what, who, how?

•Networking

•Professional advisors


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


Product Life Cycle

Business Plan

Do you need one ?


Purpose of a Business Plan

• A potential investor• A potential funder – bank• You and your team


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


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


Management

• Provides focus and direction• Determines available and required resources• Provides a benchmark for future performance• Identifies parameters within which the business

should operate


The Key Areas• Executive Summary• Introduction & Background• Content – Management• Content – Market• Content – Product• Content – Business Operations• Financial Projections• Appendices


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


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


Cashflow Timeline

Days

0 4020 8060 100

Sell Goods

Receive

Goods

Order & Pay

forGoods

Get Paid

Pay Wages Pay

Rent

80 day cycle


Sales Forecasts

• What are the variables?• Break down into basic details• Take a prudent approach

EXAMPLE – FITNESS TRAINER


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


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


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


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



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

http://www.taforum.org/

http://www.statistics.gov.uk/

http://www.ft.com/

http://www.uktradeinvest.org.uk/


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!)

http://www.marketresearch.com/

http://www.rbg.org.uk/


Early Stage Funding

Grants

VC

Banks

Loans

Private Investors Incentives

Tax Credits

Other


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

http://www.businesslink.gov.uk/

http://www.onenortheast.co.uk/

http://www.innovateuk.org/

http://www.ktponline.org.uk/


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

http://www.northstarei.com/

http://www.northstarei.com/

http://www.ipgroupplc.com/

http://www.riverscap.com/

http://www.bbaa.org.uk/

http://www.bvca.co.uk/

http://www.nesta.org.uk/

http://www.big-angels.co.uk/


Banks

• Overdrafts

• Credit cards

• Loans

• EFG

• Invoice discounting/factoring

• Overseas trading

• Market information


Loans

•ENTRUST – www.entrustrelf.co.uk

•Trade Partner

http://www.entrustrelf.co.uk/


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


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


Other

•Registering for VAT – www.hmrc.gov.uk

•www.eurekanetwork.org

•www.carbontrust.org

•www.j4bgrants.co.uk


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!


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


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


Contact Details

[email protected]

0191 256 9500

Thanks for listening!

Any Questions?


workshop 2 funding your idea

Economy & Finance

commercial publishers

business plan

potential investment

potential investor

business magazines

potential funder bank

potential funder confidence

financial return