Necessary Startup Capital?

Going back to the original question you may find the following helpful:
First things first: What you need to think about initially can be put into 2 categories
1. The Business Model
• What will the business do?
Simple in practice but you have to know what/who you are marketing too, age group, spending power etc.
• What competition do I have to contend with?
Who are your competitors and what are their Unique Selling Points (USP) will you compete against them offering the same USP or will you do something different.
• Do I have the experience to manage this type of business?
What in the way of experience do you have list them down and deal with the areas of weakness before you acquire your business/premises.
• Where will I learn the skills I need to run this type of business?
There are plenty of courses you can purchase to fill in missing areas of competency, “By failing to prepare, you are preparing to fail.”
• Where can/will the business operate?
Are there any local restrictions re planning or usage of a building?
• What management controls will I need to put in situe?
Staff: Time keeping, Training, Holidays, employment tax etc.
Stock Control: Stock wastage, ordering, minimum levels
Income & Expenditure: Instant/ Daily/Weekly/Quarterly/annual reports on all forms of revenue streams.
Sink Funds: What are they and how do I manage unforeseen costs and wear and tear.
Book keeping: Records for the accountant to submit VAT, National Employment and end of year accounts to the tax authorities.
Till: To check accuracy of what is shown against stock and room bookings, along with all forms of income streams.
Cash flow projections: Without having a plan of what you expect to achieve how do you check your progress and look to specific areas in which you are failing or doing well.

• What additional income should I pursue and how?
Most if not all businesses will have a core income stream but there are always other avenues to maximise your earning potential. An example is ‘Ryan Air’ they work on a net profit margin of approx. £4.25 per travelling passenger, the biggest contributor to this figure is not the flight income but all the associated products/services.
Look to how you can maximise your earning potential
• What laws are applicable to working in the country of my choice?
Know the law, failing to know the Law of the land is not a legal defence, the penalties can be very harsh.
• What is the tax liability in working here?
As with the statement above “ignorance of the Law is no defence”
• Who can I call upon for help if things go wrong and how much will it cost?
Do spend time in getting to know the right people before you commit to a business venture i.e. those that are qualified in the areas of Tax and Employment Law (NOTE: some counties only allow their own nationals can trade as Solicitors or and accountants) and try not to be taken in by those that have no real knowledge of the facts or have ulterior motives in steering you in the wrong direction.
• What staffing levels do I require and what are the employment liabilities and Law?
Without this basic knowledge how do you know you are trading legally
What you can do when you may have to sack staff?
• What marketing Strategy will I employ?
Without a plan of who you are aiming at and how you intend to draw those people into your business then you are reliant on passing traffic and word of mouth, these two forms of customers are worth having but they will never keep you busy and in profit in the early days of a new venture.
Decide on the amount of money you can afford to invest in marketing or how much you are willing to pay away for each product you sell (this way there is no initial outlay) and use the money to drive people to your location, include these costs into your ‘Cash Flow Projections’ (I know I have heard it before “why do I need all these forecasts and plans my business is not big enough to warrant spending time on such nonsense” my response is “A Goal without a plan is just a wish and I personally have stopped believing in wishes”
• Have I got what it takes to make it work?
There is no right or wrong type of person to run a business. If you are determined to make it succeed, and are prepared to work long hours, then you have the ingredients for success.

2. The Expected Costs
• Can I fund the business myself, or do I need financial support?
If you are employing borrowed money have you built it into your cash flow models and can the business afford the cost?
Do bear in mind you may need additional funds in the early months to pay for your living costs while the company is in its infant state

• Do I buy an existing business and if so why?
If you change the décor do you lose your existing customers?

If you have no concern in losing the existing customers and are looking at a new type of clientele why buy the business to start with?

Is the asking price based on existing revenue and how can I check the accuracy

Is it easily identifiable why the venue is for sale e.g. location, condition, management, provable income etc.

• Why is the business I am looking to buy for sale?
An important question to ask but it does not mean you will get an honest answer
How genuine are the reasons for selling? The most common given reasons are looking to retire or move on; if it is such a good business surly they can rent it onto another person or install their own manager and still earn money and if it is not a good business why are you buying it? If it is because you are better than the seller then you may simply be buying the business on a hope and a prayer and you have not done your homework! If there are no customers to be had the likelihood is there is nothing you can bring to the table that will change that fact.
• What am I actually buying?
Are you buying the Freehold of the property or the lease, if a lease how long remains of the present term of the lease
Stock is the stock in date, is it what people want
Furniture and fixtures: What would the items be worth if you were to buy them new. What life expectancy can you put on their future use?
Goodwill the hardest of all things to value, consider Wetherspoon (the pub chain in the UK)they do not buy existing public houses but acquire green sites and build their own customer base, they can therefore spend more on the property and not on an unknown commodity.
• What are the alternatives to buying an existing business?

A)Start from scratch with a new or old empty building

B)Partnership with an existing business owner

c)Franchise

I hope this helps as a check list as to opening or buying a hostel, if you would like further info on either Investments or Franchising I would be happy to add more