BMGT: HVAC - An Entrepreneurial Business Plan: Financing

Costs

Startup costs are the expenses incurred during the process of creating a new business. All businesses are different, and can require different types of startup costs.

  • Research Expenses
  • Insurance
  • Licenses and Certifications
  • Permit Fees
  • Advertising and Promotion
  • Borrowing Costs
  • Employee Expenses
  • Technology Expenses
  • Location
  • Equipment
  • Transportation

Pricing Strategy

Competition Based

Competition-based pricing strategies focus solely on what the competition is charging, and strive to meet or beat those prices. 

Penetration Strategy

A penetration pricing strategy is used as a loyalty-building or market-entry tool. The penetration pricing strategy offers a high-quality product at a much lower than expected price. This combination helps the business enter a new market even when strong competitors exist, and it builds loyalty with new customers from the beginning. 

Loss Leader

Also known as a promotional pricing strategy, the goal of the loss leader pricing strategy is to get new customers even if you do not make a profit from the initial sale. By taking a loss on the first sale, businesses can offer related products or upsells at normal prices. 

High End

Premium pricing takes advantage of a segment of consumers who believe high quality comes at a premium price. Instead of trying to have the lowest price amongst competitors, businesses who use the premium pricing strategy attempt to price their products and services at the highest in their market. 

Capital

When applying for a business loan, the lender follows a protocol when evaluating the application. Banks often use the 5 C's of credit analysis to evaluate the application for the loan. The loan application addresses each of these points in detail, and include them in your feasibility study.

Capacity refers to the ability of the firm to repay the loan.

Collateral refers to forms of security you can provide to your bank or other lender.

Collateral may be buildings or equipment owned by your small business or by you personally, including your home.

Capital, in this context, represents the owner's investment in the business. The loan officer will look carefully at the amount and quality of capital the owner has to offer.

Conditions refer to the overall economic climate and external environment surrounding the bank and the business firm.

Character is often a subjective judgment made by the banker about the prospective client. 

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