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Ensure that
the quoted costs include all the likely expenses of setting up the
business (remember: if premises are involved, there could be a
substantial lease premium) and the working capital estimate is
realistic. Involve your accountant in this process of
investigation if you are not experienced in business; to do
otherwise is asking for trouble.
Even franchises with a state or national back-up require time in
which to establish themselves. You may require funds to cover
both your own needs and the business needs during this time.
This is called "negative cashflow".
Take advice from your accountant about cashflow, working capital
requirements and profit forecasts. Profits should provide a
return on investment in two to three years. Take into account the
impact of any borrowing necessary, seasonality of the product, and
any other factors which will influence profit.
A good business is not created overnight - it can take up to 3 or
even 5 years before its true goodwill value is optimised.
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