###### CHOOSE YOUR PLAYER

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## Emma

Emma is 27. She has a Masters in Engineering and has a passion for developing technology. Since attending a masterclass on new technologies for the environment, she has been developing her ideas for a new business venture.

## Sebastian

Sebastian is 29. After graduating, he worked as an engineer for a manufacturing company for 5 years. After discussing ideas with a colleague at work during a lunch break, he has a great idea for a new business venture.

## Your business idea

You will be developing a device to convert traditional diesel-powered engines to run on recycled vegetable oil. According to the last reports by experts, the device is expected to be especially useful in emerging countries where it could take relatively more time for alternative technologies (e.g. fully electric engines) to be adopted.

Along your journey you will be assigned a business advisor to give you feedback.

###### STEP 1

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You have been putting a lot of thought into your new business venture. You realise that, in order to move forward with your idea, you will need to build a prototype and test it.

You've costed this up and find that you will need £10,000. You don't have this money readily available, so will have to think about borrowing the money.

Choose one of the following options and see whether your project can get on to the next step.

###### You consider a bank loan, and start researching lenders

###### You decide to use reward-based crowdfunding

###### You decide to use equity crowdfunding

###### STEP 2

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You develop a project and the corresponding costing. Now you must find resources to make this happen. Choose one of the following options and see whether your project can get on to the next step.

###### You set up a new round of crowdfunding

###### You search for a business angel

You manage to get in contact with a business angel based in Düsseldorf Germany, who is interested in your idea. Here is her offer: ‘I'll provide 90% of the money you need, but will take 20% ownership in your business. Agreed?’ You consider her offer. What will you decide to do?

You decide to accept the offer and begin to collaborate with your business angel.
You make the decision to decline the offer.

###### You search for a venture capitalist

###### You try to find a lender

## Advice from business advisor

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###### STEP 3

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Congratulations. You have now established your business and have produced the first ten devices. You decide to bet on one of the greatest markets in emerging countries, India. This proves a good step as your device attracts the interest of a local public transportation company. They are interested in applying your device to a city bus fleet. After presenting the benefits to them, they agree on buying fifty devices.

You are expecting an increase in demand for your product. This means you will need to expand your production. You need a new plant and more advanced machinery, which increases your working capital requirements. Should you increase your borrowing or use alternative sources of funding? Your BA warns you to be careful as this could be huge watershed for the future of your business.

What do you decide to do?

###### Long-term debt with an interest rate at 4%

###### Short-term debt with an interest rate at 1.5%

###### Finance lease

###### Retained earnings

Your decision angers your collaborator. He asks you what retained earning you think you have.

You immediately realize that she is absolutely right. You still have to sell the devices in order to generate earnings to be retained.

You will have to find an alternative option before you can proceed to the next phase.

SCORE 1 CLICK HERE TO TRY AGAIN

###### STEP 4

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Well done. You have produced and sold fifty devices for an Indian local transportation company. You have made a profit of £105,000.

You are confident about the future prospects and performance of your business. You strongly believe that, at this point, you need to expand your business using external means of financing. Buying more advanced machineries and investing in R&D to improve the product will be the focus of this round of expansion. You estimate that you will need £600,000 this time.

How do you choose to proceed? If you opt for equity finance, you will need to be prepared to give up a degree of control in favour of equity. If you opt for debt financing, you will need to pay fixed repayments regardless of the performance of the business.

###### You opt for debt financing. You take out a loan with a bank for the full amount of £600,000. The interest rate is 10%.

Given the available profit figures, your interest expense is £60,000 (10% of 600,000). This leaves you with a profit of £540,000 (£600,000 - £60,000).

Your project can develop to the next phase.

SCORE 7 PROCEED TO STEP 5

###### You opt for equity financing. You offer to sell a 10% stake in your business to a group of interested investors.

Given the available profit figures, you will only keep 90% of your profits. This will be £540,000 (90% of £600,000).

Your project can develop to the next phase.

SCORE 7 PROCEED TO STEP 5

###### You opt for a mix of the two types of financing

You need additional and more structured information about the required return and taxation, in order to decide on the specific mix.

You will need to reconsider your options.

SCORE 5 CLICK HERE TO TRY AGAIN

###### STEP 5

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This part of your journey has now come to an end

You have been able to establish your business, by giving it a solid base and good potential for future growth. A few big players in the automotive industry are showing serious interest in your innovative product. The future of your organization looks bright.

Some of the choices you had to make to get to this point may have been quite difficult. As you continue to grow, you might want to consider taking on an assistant who would be able to help guide you through the financial decision-making process. This is a journey that will put you in touch a whole group of interesting and talented people. As you develop, keep an eye out for right person.

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