Welcome to the
April 10 - May 15
Wednesday 5-6pm Class
Presented by
Ryan Murray MBA,CBA
Brief Notes
• Class is 5pm-6pm, goes for 6 weeks
• It is recommended you take the class twice
• Homework is due before the beginning of the next module
Submitted to ryan.murray@usu.edu
• We will cover the overview of the class and business plans in
general next week
• FYI Entrepreneur Leadership Series is right after if anyone
would like to attend
6 Modules
1. Company Profile –
2.
3.
4.
5.
6.
A brief overview or explanation
of your business
Product/Service –
An analysis of your potential
sources of revenue
Market Opportunity – Your portion of the revenue
the total market will pay
Marketing Strategy – A detailed plan explaining exactly
how you will sell, to whom, and
at what expense
Management Team – Getting the right people doing
the right things to make it
happen
Financials –
Measuring it and tying it all
together
3 Basic Financial Statements
• Profit and Loss
• aka P&L or income statement
• Statement of Cash Flows
• Balance Sheet
Profit & Loss
• Measures profitability
Sales
(less) Expenses
Profit
Cash Flow
• Measures cash available to cover expenses
• Hint: (too much cash is expensive, too little cash is dangerous)
(+ or –)
Beginning Cash Balance
any changes in cash
Ending Cash Balance
• What’s the importance of Cash vs. Profits and how do I
know the difference?
Balance Sheet
• Measures the health and competitiveness of your business
Assets = Liabilities + Equity
(Sales driver) = (Leverage) + (Owner’s portion)
3 Factors for New Venture Success
• Start-up Costs (initial costs)
• Break even
• Sales projections
Break Even Example
Rhett wants to sell lemonade on the corner. Aunt Bertha will
rent him her corner sidewalk for $75 a day. It cost Rhett $.50
each cup to produce the lemonade (cups, lemonade mix, water,
and napkin). He sells his lemonade for $1.00 per cup. How many
cups does Rhett need to sell to break even?
Break Even Example 2
Amber sells T-shirts for $13.00 each. It costs her $2.25 to order
in her shirts and she pays her employees $1.00 for every shirt
they sell. Rent is $400/month and the rest of her monthly
expenses come to $575 dollars. Where is her break even point?
Answers
1.
150 cups/day
•
•
2.
I get half of my sales as profit so I need to double $75 and at $1
per, I need 150 cups
Contribution margin of 50% and $75/.5 = $150/$1 = 150 cups
100 shirts/month
•
•
$13 – $3.25 = $9.75 then $975/$9.75 = 100
Contribution margin of 75%, $975/.75 = $1300, $1300/$13 =
100 shirts/month
Contribution Margin
Sales
$ 462,452
Less Variable Costs:
Cost of Goods Sold
Sales Commissions
Delivery Charges
$ 230,934
$ 58,852
$ 13,984
Total Variable Costs
$ 303,770
Contribution Margin (34%)
$ 158,682
Less Fixed Costs:
Advertising
Depreciation
Insurance
Payroll Taxes
Rent
Utilities
Wages
$ 1,850
$ 13,250
$ 5,400
$ 8,200
$ 9,600
$ 17,801
$ 40,000
Total Fixed Costs
$ 96,101
Net Operating Income
$ 62,581
http://en.wikipedia.org/wiki/Contribution_Margin
Contribution Margin
Sales
$ 462,452
Total Variable Costs
$ 303,770
Contribution Margin
(34%)
$ 158,682
Contribution Margin =
158,682/462,452 = 34%
Break Even =
96,101/.34 = $282,650
282,650 < 462,452 hence the
positive net income
Total Fixed Costs
$ 96,101
Net Operating
Income
$ 62,581
Sales Forecast
• Sales are a function of marketing – if sales increase I should be
able to track that increase via my marketing strategy
3 Factors for New Venture Success
• Start-up Costs (initial costs)
• Break even
• Sales projections
Feasibility Comparison
Samples
Option A
Start up costs = $10,000
Breakeven = 2 years
Sales at the end of year 3 = $50,000
Option B
Start up costs = $1,500
Breakeven = 3 months
Sales at the end of year 3 = $7,000
Option C
Start up costs = $100,000
Breakeven = 3 years
Sales at the end of year 3 = $5 million
Homework
• Create Start-Up expense sheet
• Create Cash Flow year 1 forecasted month to month
• Calculate Break Even