It’s the first or second question we frequently are asked: “how much money does this cost or how do I finance this project?”
One of the largest hurdles of launching a business can be getting bank financing.
The team at Acara likes to boil this process down into four simple “C’s”
1. Concept
2. Credibility
3. Credit
4. Collateral
Concept
It’s important to put your thoughts onto paper, not just for the sake of outlining an action plan, but more importantly for the bank to understand your vision & mission.
You need to clearly communicate exactly what your aesthetic practice will be offering (your service menu) and who you will be offering it to.
The “what” is much easier than the “who.” You need to identify target demographics in a defined marketplace while also looking at the competition. There are many consultants (including Acara) that can pull this data for you. The relationship between the competitiveness of your market and number of target individuals in your marketplace will directly impact how you forecast your sales.
Once you have defined what services you’ll be offering, who you’ll be offering them to, and how many individuals/competitors there are…it’s time to translate this information into a financial plan. The bank will see your financial model as plausible if it is based on historical or benchmarked information. It needs to clearly pinpoint the total capital investment along with a minimum of 3 years of top and bottom-line projections. Along with projections, your model should clearly identify 4 key areas of investment: leasehold improvement, furniture & equipment, start-up costs (soft costs), and working capital.
Quick-tip: never underestimate the amount of working capital needed to bring your business to profitability.
In our next blog, we will finish outlining the other 3 C’s: Credibility, Credit, and Collateral.
If you need help with financial modeling, do not fear, call Acara Partners for a free 1-hour consultation and learn how we can help: 203-678-9887
