Ideally your work will eventually generate enough income to finance its delivery and ongoing development, and sustain you and your aspirations. It may be easier to identify a direct income for some aspects of your work than others: you may be looking at a range of work and services so elements that are not income generating, (but are vital to the profile and development of your practice/business), can be subsidised by other activities. However, you are still likely to need finance to:
- develop your project
- sustain your venture until it is in a position to generate its own income, or
- to subsidise activity that won’t create revenue
Before you invest time and energy in planning your venture, consider how others will value your work and identify who will buy and/or fund your idea. Try to identify a range of clients and/or funders so that you are not reliant on one income stream.
To attract finance you will probably be expected to show some level of outlay yourself, complete an application process and support your application with a plan. It is much more difficult to get others to commit money to your idea if you don’t:
- demonstrate any investment from yourself or others
- articulate exactly how the money will be invested
- detail what the investor/funder will get in return for their contribution to your venture.
For your own sense of security and the confidence of your backers, you will have to prove that you can make a return on the investment you are asking for.
You will need to figure out how much income your venture can be expected to make and present this information in the form of a budget and a cashflow forecast.
The most common forms of investment are:
- Private Investment & Sponsorship
- Own Investment: private sources / friends & family cash, equipment, assets, security, cash, equipment, assets, security, partners, share holders,
- Others’ Investment: bank finance (overdraft, loan, small firms’ loan guarantee), business angels, sponsorship, in-kind support
- Public Funding: European, central and regional government, local authorities, Scottish Arts Council, Scottish Screen, Sector Skills Councils, Scottish Enterprise, Business Gateway, Chambers of Commerce, Lottery funds
- Grants & Awards: Charitable Trusts and Foundations
Before approaching any funders or investors it is important to:
- Ensure that you have protected your ideas as your Intellectual Property. This is particularly important in the social economy where innovative ideas often grow directly out of the support needs of the people who benefit from a social enterprise’s activity. For a good example of this, see www.glitterbeach.co.uk
- Ask yourself why you should invest time approaching each funder – assess the benefits and downfalls of each funding opportunity individually and ensure that the offer is suitable for you and your business.
Costing and Pricing Work, Budgets and Cashflow Factsheets, Cultural Enterprise Office (2004, 2005 and 2006)
Useful website links
Information on protecting your Intellectual Property.