Business Start-up Advice

[Smitho3]

HI Guys,

We are currently at the business plan and research stage of setting up our business. We are going to be opening a garage around this time next year. I have been to business eye but to be honest they wernt much help.

Can anyone who has started up their own business give me some advice on where to get information about things such as leasing/rental bond costs(So many estate agents but so little information), expected income for the genre of business and legal fee's (If any as we are starting from scratch).

Also with regards to the business plan, what exactly are the bank looking for? Are there any things we need to include to ensure they part with the cash we need? What things should we avoid putting into the business plan?

Thanks in advance for any help you can give.

 

[neil3k]

Although I can't help I can wish you the best of luck with your new venture.

So Good Luck.

 

[mattpc]

cant help with premises

bank are surely going to want to know projected yr1, yr2, yr3 turnover and profit forecasts. Some background about yourselves, what you are going to spend their cash on. Guess they will be tightening their purse strings at the moment so you had better have some good answers. What I did was actually just take a personal loan, pump the money in to the business and the business pays back the repayments. This worked better for me as the APR on the loan was much lower and the whole thing was less hassle. Perhaps this is not suitable for you but if 3-4 of you are directors and can each borrow a chunk it is a good backup plan. On the otherhand it will be really good experience and stand the business in good sted if you have a clear business plan and know how you are going to execute it.

btw wouldn't advise tieing yourselves in to a long lease on your premsises- you don't know whats going to happen.

 

[darreny]

the bank may have a business starter pack which might help you answer some questions, ie simple business plan form and DVD.

i would imagine the costs of starting a garage would be a fair sum of money so personal loan might not be viable.
i only started my joinery company back in August so not much help although i can say i actually look forward to working now instead of the dread of monday coming and then waiting for friday to come around. i definatly would,nt like to go back to being employed again.

good luck with it.

 

[EffBee]

Not sure what business eye is.

There are loads of sources of information around. No one will hold you by the hand and tell you what to do - you are on your own, sink or swim, its up to you find and use the right info.

In my area there is a thing called Business Link run by the local council, I think, to help people get off the ground.

Banks have business advisers and starter packs to help you. You will come to hate banks and there grossly inflated business charges.

Get a GOOD accountant (recommendation from people you trust who run businesses).The accountant can give lots of good advice too. Start talking to your accountant very early on and certainly before you start trading.

Accountants are expensive - you might want to get a good bookeeper (part time probably) to look after the finances day to day, and use the accountant perhaps quarterly to check things out, and once a year for final accounts.

The government has web sites describing health and safety issues, legal issues of running a business, tax issues and so on. The government are complete ******** towards people running a business.

Customes and Excise have web sites and hand-outs describing VAT etc. These people are very helpful if you are straight with them, but utter utter ******** if you try to screw them over and get caught. They are worse than the tax man.

Most medium sized and above towns have "small business" clubs which meet in hotels or similar once per month or so.

Finally - go to a book store and peruse the business section.

 

[233]

what kind of garage are you opening sales/repairs/servicing etc have you worked out costs for stock/tools/staff etc

 

[Jonny69]

Banks want to know what you are going to be spending the money on, how you expect to get business in, how many customers you are going to need to cover your costs and how you will plan to grow the business.

 

[Smitho3]

what kind of garage are you opening sales/repairs/servicing etc have you worked out costs for stock/tools/staff etc

Thanks everyone so far for the advice, we are aware that this is a dog eat dog world and nothing is spoon fed. We have done a great deal of research and as one of the partners has worked in the industry for more than 8 years we can lean on him for an informed view of what we need to run a succesful garage. To answer the above quote, we will be starting off with a small garage that specialises in MOT, Service and general repair, with a few unique selling points which would give us the upper hand on other local businesses trading in the same industry. We have worked out the entire startup costs based on factual and estimated values (Stock/tool/machinery are all factual). There are 3 of us initially but once we start to turn away business due to lack of staffing we will be employing more staff members.

Another question that we have been pondering is company status, which is best? As we suspect, looking at initial forecasting, we will be turning over in excess of 150k. Would a Limited liability company be best for us? If we were to set up as a partnership we would only be paying ourselves a bare wage to start off so that we can increase the company profit 'pot' if you will. We would not be paying ouselves a wage above the higher tax bracket so would only be liable for an income tax of 22%. This is where my knowledge in the business world becomes a bit hazy, only having worked as a manager in a very large company i have not had to deal with the complexities that we are trying to currently cover.

Once again, thanks for any advice you can give.

 

[Raymond Lin]

There is a 5 letter word that they use, its short for 5 things...like the 5 P's by the SAS but not that obviously, i forgot, someone in banking should be able to tell me.

Anyway, they wanna see how much money a local garage in the area is making if possible,

How much you are going to make, and profit should exceed £15,000, they want you to live on something. Don't over do it.

Make a spreadsheet with everything in, all expenditure, from bills, rent, taxes, petrol, salary...etc and projected income.

They would also like to see a steady growth in the year after too, and they might want a property as a collateral just in case.

 

[Kemik]

Another question that we have been pondering is company status, which is best? As we suspect, looking at initial forecasting, we will be turning over in excess of 150k. Would a Limited liability company be best for us? If we were to set up as a partnership we would only be paying ourselves a bare wage to start off so that we can increase the company profit 'pot' if you will. We would not be paying ouselves a wage above the higher tax bracket so would only be liable for an income tax of 22%. This is where my knowledge in the business world becomes a bit hazy, only having worked as a manager in a very large company i have not had to deal with the complexities that we are trying to currently cover.

You could go with a Limited Liability Company (LTD) but you pay higher taxes than income tax and have a few more company fees to pay. This is probably the best route in the long run though.

Or there is Limited Liability Partnernship (LLP) but they're only usually for professional services such as accountants, lawyers, etc.

There is a 5 letter word that they use, its short for 5 things...like the 5 P's by the SAS but not that obviously, i forgot, someone in banking should be able to tell me.

Do you mean a SWOT analysis?

 

[[TW]Fox]

Your projected turnover seems very high. To get 150k a year turnover you'd need to have a labour rate of, say, £40 an hour, and have at least 2 cars in at any one time every working day of every week.

For a new business, this is a tall order. Where did your 150k come from?

 

[Smitho3]

Your projected turnover seems very high. To get 150k a year turnover you'd need to have a labour rate of, say, £40 an hour, and have at least 2 cars in at any one time every working day of every week.

For a new business, this is a tall order. Where did your 150k come from?

We took our rough monthly outgoings to be around 8k with an income of around 15k. The income figures are based on the average spend in the garage that one of the partners currently works in. We then halved it to reflect the staffing numbers in our garage. This is all very rough at the moment which is why we need more concrete evidence of what a garage on the scale we intend to operate actually brings in.

 

[[TW]Fox]

Surely the average spend per customer per day is capped at your hourly labour rate * the hours worked on the car that day? Will you use multiple members of staff on the same car? Usually if someone drops their car off and picks it up 2 hours later they'd expect a bill for 2 hours of labour.

Therefore if you've got 2 cars in all day every day and you work with 100% efficiency on those cars and you charge lets say £40 an hour (Any more than that whilst not being a specialist in a certain marque = no), your income will be approx £560 a day.

And IMHO, in your first few months of trading, this sort of efficiency is an unreasonable expectation.

Although I guess your turnover will include the cost of any parts you charge the customer for, even though most garages normally don't make much if any profit on the parts just the labour.

 

[Ant C]

Your projected turnover seems very high. To get 150k a year turnover you'd need to have a labour rate of, say, £40 an hour, and have at least 2 cars in at any one time every working day of every week.

For a new business, this is a tall order. Where did your 150k come from?

Remember he will also be charging for parts. 150k is not that high imo.

Speak to Business Link and ask if there are any grants you can apply for. There are all sorts available depending on you business and location.

Do a cash flow forecast taking into account some customers might be slow to pay. This is where a lot of businesses fall down, esp. when growing fast.

 

[Smitho3]

Surely the average spend per customer per day is capped at your hourly labour rate * the hours worked on the car that day? Will you use multiple members of staff on the same car? Usually if someone drops their car off and picks it up 2 hours later they'd expect a bill for 2 hours of labour.

Therefore if you've got 2 cars in all day every day and you work with 100% efficiency on those cars and you charge lets say £40 an hour (Any more than that whilst not being a specialist in a certain marque = no), your income will be approx £560 a day.

And IMHO, in your first few months of trading, this sort of efficiency is an unreasonable expectation.

Although I guess your turnover will include the cost of any parts you charge the customer for, even though most garages normally don't make much if any profit on the parts just the labour.

You hit the nail on the head. The amount of turnover not including parts just labour is roughly 13-15k per month (Dont forget MOT's at a rate of approx 3 per day that take 20-30 minutes). This is based on an hourly rate of £40 with both staff members working on 1 car each all day. We understand that the first year is going to be difficult as we will be building our customer base. We have done the math behind this one but is more than likely inaccurate due to us not having a solid basis for comparison.