Neil Bromage has run his own small business and is a freelance business writer working on a range of newspapers including The Times, Sunday Times, Telegraph and Financial Mail on Sunday. This book is based on a wide range of columns and Q&As written and answered by Neil for Business Link over a number of years. He is based near Preston, Lancs.
If you want your new business to be a success you need to know how you’re going to fund yourself in the first few months before the money starts to roll in. Preparing a business plan is absolutely necessary for your business but what about your personal expenditure?
Each occupation will be very different and income is likely to come from a number of different sources. In any event it’s likely to be some time before your reputation gets around and work really starts to flow in.
So you need to plan how you are going to survive in the lean period before your bank balance starts to fill up. That’s where a personal survival plan comes in. It tells you how much money you need every month to survive.
Firstly, list your monthly expenditure including the likes of mortgage, rent or insurance payments, council tax and utility bills, life or pensions policies, vehicle and travel costs, hire purchase and credit card payments, food and childcare provision. This will give you the minimum you need to survive but doesn’t allow for trips to the cinema, eating out at restaurants or visits to friends and family.
Now list any regular sources of income such as your partner’s wages, child or other benefits, and interest on any savings. A simple subtraction will now give you the amount of your available monthly income and probably result in a deficit.
If you want to ensure your career is a success you must plan how to bridge this gap for at least six months. Possible sources of cash could be a redundancy payment, savings, the sale of shares, borrowing from your family or from the bank.
Finally, don’t forget to take account of any initial start-up costs such as equipment, stationery and installing an extra telephone line. They have to be paid for just at the time when you have the least free cash. On the positive side, however, you may be able to claim some of these costs back from the taxman at the end of the year.