Q: How does one go about establishing a feasible business case without much formal business experience? My partner and I would like to open a karaoke bar, but the costs involved are potentially huge, and how would one start to cost such an enterprise?
Jul 28 2008
Answered by: Clive Lewis Ask a question
You need to put together a business case setting out your vision. Why do you think there’s a market for a karaoke bar? What’s the competition? What’s the target market? What’s your experience of running karaoke bars?
All this needs financial forecasts to support it showing figures monthly for two years minimum - a forecast profit and loss account, cashflow and balance sheets.
You need to address the amount of finance required. How much money will the karaoke bar need? How much are you putting in? How much do you expect finance providers to put in? What rewards can they expect?
Your figures would need to build up the costs of a karaoke bar under a few clearly defined categories:
Premises
Would you be seeking to lease or buy premises? How much would the annual rent, rates and insurance be?
What location would you seek for the premises? The better the location the higher the costs.
Convertion costs – how much would it cost to convert the premises to a karaoke bar?
How much will the costs be for security and health & safety?
How much will it cost to decorate the premises and the exterior to attract customers?
Other start-up costs
What equipment will you need?
What about launch costs?
What marketing of the new venue will be involved such as advertising, leaflets, etc.?
Initial Trading
After you start there will be a period when you are probably operating at a loss until news that there’s a new venue gets around. Staff will need to be recruited and trained. Where will you be buying drinks, etc from? What margin do you hope to make? How long before the venture reaches breakeven (no loss/ no profit)? How much will the eventual annual profits be?
If you have no experience of running a karaoke bar you need to talk to someone who has. You must be confident that the costs included in your plan are adequate to get the operation going.
It is unlikely, once you have finance, that you will be able to get more. So getting the finance required right is important as underestimating the finance required to start a business and get it to profitability is one of the most frequent causes of business closing down.
When you feel you have got to the bottom of the costs you should talk to an accountant about putting a business plan together including the cashflow and other forecasts.
If you think you need to raise money a finance provider will expect to see a business plan and to talk to you about it. An accountant will cost approximately £1,500 to £2,500 to help put a business plan together, dependent upon the amount of work you ask them to do.
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