Griselda Togobo

Let’s Talk about Money – 6 Dos and Don’ts when Looking for Finance for your New Business.

Published on March 22, 2016April 19, 2016

Griselda Kumordzie Togobo Owner of Forward Ladies

Are you looking for cash to fund a new business, purchase an existing business or franchise?

Finding extra cash features very highly on every entrepreneur’s wish list. Although a lot of people find investors to support their business ventures, there are also lots of people struggling to get their businesses off the ground due to lack of funding.

In this article I will be sharing with you the main reasons why some entrepreneurs struggle to find funding and how you can go about your funding process to increase your chances of success.

The Dos when Looking for Finance

Get your business plan in shape

Your ability to produce a clear, succinct, well thought out and well-researched business plan places you a few steps ahead of the competition.

A lot of businesses don’t get funded because their plans are poorly written, over optimistic in their financial projections and poorly presented.

Don’t let this initial hurdle stop you. If you don’t have a business plan at this point, then go write one or get someone to help you put it together. If you already have a business plan, then refine it and have it reviewed by a professional.

What investors look out for:

Is the product or service commercially viable?
Does the company have potential for sustained growth?
Do you and your team have the ability to deliver this plan and grow the business?
Is it too risky to invest in?
Does the potential financial return on the investment meet their investment criteria?

Stand out from the crowd with a mind blowing pitch

The banks and investors receive scores of business proposals. Why should they spend their precious 5-10mins looking at yours? Make yours jump out from the rest any way you can.

If you are lucky enough to be given a platform to pitch your business, then this is your chance to grab their attention. Tell them who you are, what your business is, what’s unique about it, the amount you are looking for, what you will use it for and what they get in return. Cut out all the fluff and gimmicks and get to the point. Basically aim to blow their minds in under 3 minutes.

Stick to what you know

Investors are looking for competent and experienced partners to work with. You have a better chance of finding finance if your business venture is in an area you have knowledge and experience about. As much as possible try to stick to what you know and avoid industries that you have no knowledge about. A team with the relevant experience is a MUST if you have no personal experience in the industry.

The Don’ts when Looking for Finanance

Don’t forget the financial bit

The financial statements i.e. balance sheet, income statement and cash-flow statement shouldn’t be your weakest link. The quality of your projection will demonstrate to investors that you pay attention to detail and have properly thought out the financial implications of your plans. An accountant can help you with this area if you struggle with numbers.

Six degrees of separation – don’t underestimate your existing contacts

Every article on funding starts with asking your friends and family, but few people take the trouble to exploit this avenue properly.

Our friends and families are our greatest supporters and are quite willing to support us provided we present them with a viable business proposition.

Don’t cut corners when pitching to friends or family. Be professional and show them how you can make them money. At the end of the day that is what most people are interested in. I had a friend who did a full on presentation of his business idea to my family.

Although we didn’t invest in his business, we were so impressed with him that we opened up our contacts to him. If there is only six degrees of separation between everybody on earth, you never know where this seemingly small step may take you.

Don’t Limit your search

It may be that a cocktail of funding options is your only chance of securing adequate funding for your business. Do your research to identify the options available to you. Few businesses have only one source of funding.

There are age and gender specific grants and other funding options available to specific demographics of the population. Research the grants, banks and angel networks available, tailoring your approach to each source. Your geographic location doesn’t matter so much anymore, as investors are quite happy to invest anywhere provided it fits their investment criteria.

The quest for funding takes time. You’ll be better off starting now! Reach out to people, ask for help and let them share their experiences with you.

For those looking to buy existing businesses or franchises – why not ask for introductions to the seller or franchisor’s bankers? Their bankers already know their business, all you have to do is prove that you are capable of replicating their success.

Good luck and wishing you every success in your search.

Griselda Kumordzie Togobo is a business consultant, speaker and coach dedicated to helping business owners increase their profits and productivity. She is a chartered accountant and holds an MPhil in Industrial Systems, Manufacture and Management from Wolfson College, Cambridge University.

I’m also an Enterprise Ambassador at Leeds University and guest lecture on entrepreneurship.

I founded AWOVI Consulting after a career with an international professional services firm where I provided business advisory services to small and medium sized Enterprises, Charities, The NHS and blue-chip companies.

I also own and run Forward Ladies where I am on a mission to make a difference in the lives of entrepreneurs as well as career women. Check it out.

photo credit: Women In Tech – 73 via photopin (license)

Back to Work/Moving On

Back to Work – What is a Freelancer?

Published on March 18, 2016

Being self-employed is a decision that isn’t taken lightly by most people.

The legal structure you choose to operate your business with should be taken just as seriously as the initial decision to go self-employed. This is because the legal structure impacts the potential risks, compliance issues, financial and tax implications that you will face as a self employed business owner.

Lets assume that as a first step into self-employment, you decide to trade your skills as a professional freelancer.

Freelancing and contracting tend to be used interchangeably however the main difference is with the number of clients you work with at any given time.

Whilst freelancers tend to work with several clients at a given time, contractors tend to be contracted to work with just one client over a fixed period of time. Whether you call yourself a freelancer or contractor is irrelevant to Her Majesty Revenue and Customs (HMRC), you still need to make sure that you pay the right tax on time.

HMRC are very keen on investigating “employees” disguised as limited companies in order to pay a lower corporation tax rate. This is called the IR35 status which every freelancer or contractor needs to be aware of. This can potentially create fines and huge tax charges accumulated as a result of being taxed at a lower limited company rate.

Freelancers enjoy flexibility, independence and freedom as a result of being their own boss. As a freelancer, you have the option of operating your freelance business as a sole trader, limited company, partnerships or limited liability partnerships or through a PAYE umbrella company.

What is a freelancer? Each will be described briefly but it is always worth speaking to an accountant to decide the best structure for you.

Sole trader

A sole trader is simply someone who runs a business without registering it separately as a different entity.

This is the simplest and least cumbersome way of starting and running a business. All you need to do is inform the Inland Revenue within 3 months of starting to trade that you are now a sole trader.

The downside of being a sole trader is that you are personally liable and responsible for any debts run up by your business. This effectively means that your personal assets may be recovered to pay off any debts that your business racks up! A sole trader pays income tax and national insurance contributions on their earnings.

Limited company

When you operate your freelance business through a limited company, you become a director who is responsible for managing the affairs of the business (which is considered to be separate from you).

Having a limited company offers some protection when things go wrong.

Your personal assets are protected in case the company has to be liquidated or dissolved which usually happens when the company is unable to meet its financial commitments.

You are personally protected from bankruptcy arising from business losses. This makes it easier to recover from any business failures and to try again. There are also tax advantages in the form of lower tax rates and deductible expenses for limited companies. Directors of limited companies pay both Income Tax and NICs on their director’s earnings.

Partnerships (ordinary or limited)

Partnerships are business where two or more persons, the partners set up a business and share the risks, costs and responsibilities of being in business.

Partners can be individuals, businesses or other partnerships. Ordinary partnerships are unincorporated businesses (the business has no separate identity from the partners). An ordinary partnership is the simplest form of partnership much like a sole trader.

With limited partnerships or limited liability partnerships the business is registered as a separate entity therefore the personal assets of the partners are protected when things go wrong, similar to a private limited company.

Each partner in any partnership needs to pay tax on their share of the profits and gains, and make National Insurance contributions on their earnings.

The main issues with incorporation (for both partnerships and limited companies) are the burden and cost of compliance. If you are however serious about running a freelance business then you shouldn’t be discouraged by the extra administration. In most cases, the benefits of incorporation far outweigh the disadvantages.

PAYE Umbrella companies

Freelancing through an umbrella company is a hustle free way of freelancing because you effectively outsource the invoicing and administrative aspect of being in business to the umbrella company who act as your employers.

The umbrella company acts as an agency and contracts you to various organisations.

The umbrella company pays you a salary through PAYE so you don’t need to worry about tax and NIC contributions but you potentially earn less than the other structures because you directly or indirectly pay for the service.

As a final word, starting any business venture is exciting but you must be certain there is a market and demand for your expertise.

Without demand, it can be stressful and an uphill struggle getting clients, which defeats the whole purpose of freelancing in the first place.