GT
Specialized
Marin
Giant
Total start up stock cost: £12170.00
Components
Till
I will need a basic till that will be able to calculate simple calculations and store money during the day.
Desk
For my particular business, I will only need a reception desk
Equipment
I will need basic equipment to carry out bicycle services as well as assembly jobs.
Business Cards
Accounting System
I have a computer at home so I can do this there, because its not an immediate need in the business
Telephone System
Sign outside door
Shelving
Alarm System
I will now need to add up all the costs to work out the set up costs for my business, to see if it is actually financially possible to start my business.
- Decorating £45.69
- Stock to start up with
GT £2040.00
Giant £2930.00
Marin £3600.00
Specialized £3600.00
- Enough Components £580.00
- Till £255.50
- Desk £450.00
- Equipment £90.87
- Business Cards £70.00
- Telephone System £99.74
- Sign outside the door £400.00
- Shelving £100.00
- Alarm System £500.00
Subtotal £14761.80
Rent £19950.00
TOTAL £34711.00
How to get the Money I need
Looking at these prices, I feel that I can financially set up my business. I have savings of approximately 16000, but I feel that it would be un-wise to use up all my savings. I would like to keep at least £5000 spare, for in case the business is unsuccessful. Therefore, I will use £11000 of my savings.
That means that I will need to raise £24000. To get the money, I feel that a bank loan will be the best way to borrow money.
I have spoken to an Accountant, (Derek Turner) about the issue, and he has assured my that between The Halifax, NatWest, Royal Bank of Scotland, and Loyds TSB, that NatWest will provide me with the best loan at the best interest rates.
These are the interest rates that NatWest offer.
*I will be borrowing at these rates.
I sat down with one of the bank managers, and he gave me the following details about my loan.
This is a very large amount of money, and the bank manager I spoke to said that seeing as I own property worth £90 000, he doesn’t see too much trouble in me getting a loan.
Once he talked to one of his colleagues, he said that under these circumstances, they would grant me a loan, considering I can prove that my business will be successful. To do this, I will need to produce a cash-flow forecast, which can be found attached.
Running Costs
As I am running my business, I will need to pay for things to be able to run my business.
These include:
- New Stock
- Water
- Gas
- Electricity
- Rent
- Insurance
- Loan Repayments (only for a limited time)
- Advertising
- Wages
I can estimate these costs by taking guesses, considering all circumstances
New Stock
Bikes aren’t really sold according to seasons, so I will not need certain stock at certain times of the year, therefore, I will basically, just buy new stock when it becomes too little. I will buy stock of around £12,000 3 times a year. One may argue and say that I will not be able to sell many bikes if I only have about 3 bikes in the shop before I order. This will not be true, like I have said previously. I will order some bikes on demand, because if I order some expensive bikes, it may not sell, meaning that I will lose a lot of money
Water
Seeing as I am a bicycle shop, I will not be using a huge amount of water, certainly not more than at home.
Gas
I am a business, and will therefore have to have a good heating supply, running for most of the day.
Electricity
Being a business, I will use a lot of electricity, but not a huge amount, I estimate this being about 50% more than average home use.
Rent
The rent will be £19,950, paid annually
Insurance
Having asked around, I have found insurance to cost much less, than I initially expected. I will estimate it at being around £70 per month
Loan repayments
I will only have to repay my loan for a period of 120 months, at 380 per month
Advertising
As I decided previously, I will advertise 1/8 of a page in the Newbury weekly news, every 2 weeks, as well as place a 6x6 cm add in the yellow pages. This will work out at £110 per month and £639 in February.
Wages
I will not employ anybody except for myself initially. I will pay myself £8 per hour, working 8 hours a day. That would mean £64 a day. 6 days a week will be £384, and 4 weeks a month will be £1536. Seeing as there is not exactly 4 weeks in a month, I will increase this number to £1600
Can I earn enough?
To work out how many bicycles I will sell in a month, I will need to consider a number of factors.
- Bikes range in prices, from very cheap to very expensive. I only need to sell one or two very expensive bikes (up to £4000) to earn most of the months revenue.
- Around here, cyclists ride all year round, there are very good tracks for cross country and downhilling.
- Seasons. Even though I just said that people wont be bothered by seasons, They will definitely spend more around summer. That’s because people are out, jumping their bikes, breaking them and needing spares. Therefore they will be buying more. I will also have to have an after season sale, just like the Cycle Shop, to be competitive. Christmas will also be a good time for me, as children may like bikes for their Christmas.
- Bikes that most people buy, average out on about £600, so if I only sell 10 each month, I will definitely make enough each month.
- My first month will not be as good as the following ones, seeing as I will not be as well known in the area.
I have spoken to the manager of The Cycle Shop, and he said that I can expect to earn about £4500 on average each month as a new business
Therefore, I feel that I will earn roughly the following amounts each month.
I feel that, financially, I can start this business, but I must now take into consideration, the fact that Halfords have just expanded.
