As Swindon establishes itself as an increasingly attractive location to start up a business, I would like to give some advice to start-ups, with a focus on agencies in the recruitment sector who are typical users of invoice discounting to fund growth and expansion.
Before you start any business, you need to have a business plan which covers the key areas affecting your business - premises, marketing, staffing, funding, competition, etc.
There are many places you can go to to get help on drawing up your plan, including accountants, Business Link, the internet and, of course, your bank.
The plan will provide the blueprint for the early stages of your business's development. It is not cast in stone, but if you fail to plan then there is every chance your business will falter at an early stage.
An important step to ensuring the successful growth of your business is gaining financial support, where necessary. Getting buy-in' from your bank, presenting a strong case and illustrating the research and knowledge behind your ideas is of utmost importance. You need to work closely with your bank manager. View him or her as a key business partner, and provide the necessary information.
The nature of the way recruitment agencies operate means they are often left with a funding gap. Agencies are often required to pay staff on a short-term and often weekly basis, while most of their customers will require standard 30-day credit terms from the date of invoice.
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Businesses invariably fail because they run out of cash or they can see that they are going to run out of cash.
Many businesses are lured by the need to achieve turnover growth - that is, sales - without focusing on the cash required to fund that growth.
For example, a business might be attracted to a large contract where the margins are finer than would otherwise be the case. Having the cash available to pay the staff required to meet the contract is a major issue, especially for fledgling businesses and with a lower profit margin they may have been better taking on smaller contracts.
Planning and being prepared to get buy-in from your bank manager is an important stage. At The Royal Bank of Scotland Group (including NatWest), we work closely with customers and prospects to ensure we fully understand their key business needs and challenges.
Contact Chris Elias at RBS on 07831 342094 or email chris.elias@rbs.co.uk
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