Start up business HELP!!! Capital, overdraft, banks, defaults

Savvy_Sue

rafiduck wrote: »

Online estate agency.

And what is your USP over all the existing online estate agencies? Precisely HOW are you going to get enough properties listed on your site to compete with them?

Obviously you don't have to answer that question here, but you MUST have an answer ... before you commit financial suicide, IMO.

Pennywise

rafiduck wrote: »

Online estate agency.

£20-£30k is nowhere near enough - add a naught and you're still light.

You're competing against existing firms with huge budgets.

I was involved with someone who wanted to set up a site similar to "rated tradesmen" but several years ago - they'd have been the first.

They went through £50k in a matter of a few months and ended up running out of cash, and losing their life savings.

Online estate agency needs critical mass very quickly - otherwise people will lose interest. To get that, you need big pockets.

Sorry, but forget it and move on. Banks won't lend for that kind of business. They'll know that your budget is far too low and that you'll be knocking on their door for more money in a few months.

bris

Unless you have a house to put on the line as security you won't get 30p of an overdraught never mind 30k. Even with security you will still struggle, big time, to get a bank to give a new company any kind of overdraft in these hard times. Whatever you do make sure you speak to the bank before you spend any money setting up a website, it will only end in tears if you dont.

motorguy

Pennywise wrote: »

£20-£30k is nowhere near enough - add a naught and you're still light.

You're competing against existing firms with huge budgets.

I was involved with someone who wanted to set up a site similar to "rated tradesmen" but several years ago - they'd have been the first.

They went through £50k in a matter of a few months and ended up running out of cash, and losing their life savings.

Online estate agency needs critical mass very quickly - otherwise people will lose interest. To get that, you need big pockets.

Sorry, but forget it and move on. Banks won't lend for that kind of business. They'll know that your budget is far too low and that you'll be knocking on their door for more money in a few months.

Have to agree totally.

Saturated market, up against big players who are struggling to make it fly, and a market a fraction of what it was 6 years ago.

Bad, bad idea.

motorguy

rafiduck wrote: »

Thank you to everyone for their amazing advice and taking the time out to answer all of the questions. Its very much appreciated.

Despite my natural optimism towards everything in life we are also realists and hard workers, so the advice given will be taken on board.

My personal defaults are due off in April and are marked as settled for figures of £50 and £250. When will this follow through to the banks does it take a few months after they have cleared?

We have a business plan and both worst-case and best case cash forecasts. The monthly outgoings are £2700 which are mostly made up of advertising costs, these advertising costs need to be covered for at least 6 months until payments start coming in worst case. The remaining monies will be start up costs so have been quoted £3600 for logo design, advertising templates and lots of other bits and pieces we've managed to get this reduced to £2400 and this is from a reputable graphic design company. The branding, website and marketing are so important to win business. £5000 for a professional website (which I think we'll have to re evaluate). and then software installation costs. We could potentially pay for some of the branding and the website costs by May at a figure of £5000 we had spoken to somebody at Lloyds TSB yesterday afternoon albeit briefly who mentioned that we would need at least 10%. We would only need a £20,000 overdraft as £30k was making sure we had more than enough.
My fianc! gets a bonus in June of £2000 and could then save a further £2000 between May to July and then apply for an overdraft this all depends on the lending criteria of Lloyds TSB.

Just to add.....The reason for deciding upon an overdraft is due to the nature of the business and by month 12 it should have almost have been paid back bar £1000

Does this sound more promising and doable.

Are you and your fiance taking a wage during this first twelve months and if not, how are you going to live until you can?

bni

rafiduck wrote: »

IWe will be looking at a £30,000 overdraft but have no security or capital this will come from my fianc! who will take out a £10,000-£15,000 personal loan. Is that ok? will the bank look at the source? The business overdraft will be in my name initially but the £10,000-£15,000 will come from that source.

You can't take a personal loan to fund a business - not that it hasn't been done plenty of times. There is probably a 1000 people going bankrupt for every person that sets up a successful business maxing out all their credit cards. Anyway your fianc! will be asked the question and would have to lie (commit fraud) to obtain the loan.

The kind of financing you need you will not get from a bank, they are in the business of low risk lending at relatively low interest rates to established businesses with assets. What you are looking for is an extremely high risk investment in a business without a track record - you need something like an angel investor to provide seed financing, normal in exchange for a big chunk of equity - think Dragons Den rather than Lloyds TSB.

ajdj

What experience have you got of the industry?

I worked in property for 10 years for 2 reputable names and can tell you now that the profit margins are not worth the effort (~10% gross). I consider myself to be entrepreneurial and wouldn't touch estate agency with a barge pole.

It's a numbers game, you need to list hundreds to improve your chance of a sales conversion. Even then you don't get paid until completion. You are relying on chains, acceptable mortgage offers, people not pulling out etc etc. Factor in an average completion time of 12 weeks (that's completely realistic). How many are you planning on selling in 12 months to pay £30k back??

And of course the catch 22 for estate agents, the more you have on your books, the customer service levels decrease. Unless of course you are employing staff (which cost a lot of money).

These are the cold, hard facts. Scrap the idea of an overdraft (which you have zero chance of getting btw).

If you are still keen-

1. Work from a spare bedroom (like my first boss did for 18 months, 10 years later he employed 60 people and had 3 branches).
2. Spend £50 tops on a logo
3. Buy a domain and redirect to your rightmove page
4. Buy Rightmove advertising
5. Pound the streets, talk to people etc. get your name out there.
6. Spend a small amount on basic flyers (you'll get a response rate of 1/100. Keep the message simple.

The above is still very risky but will get you the same result in profit terms. Estate agency is definitely not an industry where you speculate to accumulate- its all hard graft.

Good luck!

rafiduck

Thank you for all of your comments. I have been working within the industry for over 10 years now and you're right in what you are saying ajdj most of it works on a 50% conversion in order to sell 1 i need 2 on the market in order to get 2 on the market i need to see 4. It is not just an online estate agency there will be a little more to it than that, I am completley aware of the 100s of online agencies and how they work. It is most definetley a viable business and has every chance of succeeding mainly due to minimal overheads and the fee structure in place along with lots of hard work to make up the numbers.

I appreciate what your boss did but feel the industry is in different times now and technology is really pushing things forward.

The inital post was more advice on finances really, its tough not having family to give you a lump sum, like lots of people do, so we were trying to work out a way to get something up and running sooner rather than later but it looks like it's going to be another push at saving some extra cash. Thank you again everyone.

paulwf

rafiduck wrote: »

I appreciate what your boss did but feel the industry is in different times now and technology is really pushing things forward.

The only possible way I could see this working is if your business partner was a technical guru and could handle all the website coding whilst you used your 10 years in the industry to handle the business side of things. If you could then both devote 12 months full time to the project without drawing a wage you might be onto something.

Even then I think you would end up with a loss as once you have chucked big money at advertising you can't get that money back, you don't have any assets to show for it. However if you can build the business without advertising and also build an advanced website perhaps you would be able to sell it on to a larger player.

ajdj

I also think that you need to really consider whether this service is what your clients want.

(And of course by client read 'seller', as they pay your fee not buyers).

I truly believe that a small, local agent acting with experience and integrity would win the business of a motivated seller rather than an 'online based agent' any day of the week.

Yes, buyers particularly may rely on the internet. Mr and Mrs Smith with a £300k house to sell want a personal touch. They are the sort of people that have a 'family solicitor', 'family doctor' etc etc...

Just because the big boy agents are piling money into websites it doesn't mean you have to try and copy/compete with that. Infact, do the complete opposite and I challenge you not to have a very successful business in 12 months time.