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Duncan Bannatyne - Coggle Diagram
Duncan Bannatyne
The start-up costs of Duncan's business ventures varied in size. There are several options available for financing new business start-ups and for expanding established businesses. Duncan believes entrepreneurs must demonstrate commitment to the business. When assessing whether to invest in new enterprises such as those in Dragons' Den, Duncan wants to know how much of their own money new entrepreneurs are willing to put in. If they are not willing to risk their own money, Duncan almost always declares himself out.
Banks are a major source of finance for all businesses, providing finance for starting up, running the business and for expansion:
• loans can be short-term, medium-term or long-term, depending on need.
• mortgages are long-term loans for the purpose of buying fixed assets such as buildings and equipment.
• overdraftsare short-term loans with limited duration which can help the day-to-day running of the business.
All financing has specific terms and conditions, for example, times for repayment and interest charges. Interest is the fee the bank takes for providing the loan. The rate of interest varies between each type of loan and according to how much risk the bank feels there is.
He grew up in Clydebank, Scotland in poor circumstances, the second of seven children. At an early age he experienced his first taste of entrepreneurship.
In his early thirties he bought an ice cream van for £450. He built this into Duncan's Super Ices, with a fleet of vans and a business turnover of £300,000 per year.
During the 1980s, he spotted that the government was helping unemployed people by paying their rents. He used surplus profits from the ice cream business to buy and convert houses into bedsits for rent
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To earn money for a much-wanted bike, he applied for a newspaper round. Being told there were no rounds available, he went door-to-door to ask if people in the neighbourhood wanted papers delivered. This research established that there was demand and enabled him to get the job.
This guaranteed revenue from the government. To finance setting up a chain of care homes, he sold his ice cream business and almost every other asset he owned. The homes eventually sold for £46 million.
Duncan's business empire now includes the Bannatyne Health Club chain, Bannatyne Hotels, Bar Bannatyne and more recently a chain of spas.
Starting a business-
- Identify a gap in the market do research. What do people need, what is missing from the market? Proving there was demand for a paper round enabled Duncan to get a job. Many of Duncan's business enterprise ideas have come from reading local and national press and watching news programmes.
- Know where finance will come from and when. A business needs good cash flow to keep running
- Do something better than or different to competitors. Duncan improved ice cream sales by using a new scoop that speeded up serving and made a shape like a smile in the ice cream. This meant he could charge a little more for these special ices.
- Have a business plan. This is a key tool when starting a business. It shows what start-up and running costs will be, what resources are needed, the estimated value of sales and whether the business will give the right return on investment.
- Ensure the people in the business have the necessary skills. For example, Duncan had the experience to start up Duncan's Super Ices from his time selling ice cream in Jersey.
- Be prepared to delegate work and responsibility but be clear about standards. Duncan's ethos is to provide quality products and services for customers.
- Commit to the business. When building costs for the first residential home almost bankrupted the company before the project was finished, Duncan, his partner, friends and family completed the work. This saved money as well as demonstrating commitment to the venture.
- Pay attention to detail and understand what affects the business. Duncan increased sales for his ice cream business by buying an exclusive position in a local park for £2,000. This gave him profits of £18,000 in one summer - a huge return on his investment.
- Be prepared to take risks. To set up the new care home business Duncan had to sell his ice cream business, as well as his house, his car and colour television.
- Sole traders: Duncan's first ice cream van was an example of this type of business - owned and run by just one person who takes all responsibility and all the profit. The small investment for the van was covered by personal funds. This is typical of many start-up businesses.
- Partnership: This is usually owned by between 2 and 20 people. The joint owners share responsibility and the profits. Duncan went into partnership for the first care home. The investment was much bigger and needed borrowing from a bank.
- Limited companies may be private, for example, a family business, or public, where anyone can buy shares in the company. To build more care homes, Duncan used a mix of profits, borrowings and offering shares in the company. This was achieved by 'going public' and floating the company on the stock exchange.
There is no single best source of finance and not all sources are available to all businesses. It is important to assess the advantages and disadvantages of each in the context of the business' size, needs and intended return on investment and choose the most appropriate option. Every investment is a risk and successful investors balance the degree of risk against potential rewards.