How shall I handle this scenario in a business plan?

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Icarus

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I had a deal with a client on a large project through a company I was previously with. The company then defaulted on a large payment to this client with whom I had a good relationship. I offered to repay this myself in return for maintaining our relationship.
How shall I handle this in the context of my business plan? As a bad debt write off?
 
Hi Icarus,
If I understand correctly, this payment is the acquisition cost of a significant first client. Treat it that way and I don't think you will have too many problems.
In many new businesses, significant money is spent up-front in trying to attract the first few customers/clients, and you have already done this. For a fledgling company, I think having a key reference client is critical and any investors will understand this. In addition, the acquisition cost is known, which removes a huge amount of risk.
I think you'll be fine.
Best of luck with the venture - where are you going for source of funding? The usual 3F's??
 
I for one would not be discussing your particular subject on a public forum, you give enough info for parties involved or the "client" to work out who you are or at least have a hunch. Asking for info on a public forum on how to prepare a business plan, to me, in this scenario, would not instill confdence...

You never know who is on AAM??
 
monkeyboy said:
I for one would not be discussing your particular subject on a public forum, you give enough info for parties involved or the "client" to work out who you are or at least have a hunch. Asking for info on a public forum on how to prepare a business plan, to me, in this scenario, would not instill confdence...

You never know who is on AAM??
Click to expand...

I can't decide whether or not I agree. Better save than sorry I guess.
 
Hey It does not give me any clue, but if the client read it, I thinlk they would know.

Sorry, its just the 1st thing that sprang to my mind reading it.
 
monkeyboy said:
Hey It does not give me any clue, but if the client read it, I thinlk they would know.

Sorry, its just the 1st thing that sprang to my mind reading it.
Click to expand...

Well I appreciate you mentioning it at least. I think it's okay though.
 
amgd28 said:
Hi Icarus,
If I understand correctly, this payment is the acquisition cost of a significant first client. Treat it that way and I don't think you will have too many problems.
In many new businesses, significant money is spent up-front in trying to attract the first few customers/clients, and you have already done this. For a fledgling company, I think having a key reference client is critical and any investors will understand this. In addition, the acquisition cost is known, which removes a huge amount of risk.
I think you'll be fine.
Best of luck with the venture - where are you going for source of funding? The usual 3F's??
Click to expand...

What you be a good term for it within a budget, "Client acquisition cost"?

Funding from the 3 F's? No, not at all.
 
You can call it whatever you like. It can be a line item under 'cost of sales', but most likely it is better to highlight it as a separate line item, as 'Reference client acquisition cost', so that investors realise that it is a once-off cost and that you will not be incurring such costs for subsequent clients.
Its an exciting time - I started my business about 5 months ago and haven't looked back...Let us know how you get on
 
amgd28 said:
You can call it whatever you like. It can be a line item under 'cost of sales', but most likely it is better to highlight it as a separate line item, as 'Reference client acquisition cost', so that investors realise that it is a once-off cost and that you will not be incurring such costs for subsequent clients.
Its an exciting time - I started my business about 5 months ago and haven't looked back...Let us know how you get on
Click to expand...

Thanks for that. As for it being exciting? At this stage I will confess that my urge to be excited has come to be tempered by the realities of a couple of difficult years in very tough business arena. I think I'll be excited when it's a huge success, and even then I'm not sure anymore! Okay, cynical rant over!
 
Hopefully the client isn't just stringing you along to recover the original debt.
 
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