Griffin | Entrepreneurship
 
Resume Table of Contents  

Entrepreneurship

Business Plan
Planned Financing

 
State Standards
 
  • E 5.1 Content Standard: Understand the role of finance as it applies to the
    entrepreneur.
  • E 5.1.1 Explain the nature of capital investments (FI:078) (ON)
  • E 5.1.2 Identify speculative business risks (FI:080)(ON)
  • E 5.1.3 Establish investment goals and objectives
  • E 5.1.4 Explain the purposes and importance of obtaining business credit (FI:023)
  • E 5.1.5 Determine financing needed for business operations (FI:043) (ON)
  • E 5.1.6 Identify risks associated with obtaining business credit (FI:023) (ON)
  • E 5.1.7 Explain sources of financial assistance (FI:031)(ON)
  • E 5.1.8 Forecast sales (FI:096) (MN)
  • E 5.1.9 Calculate financial ratios (FI:097)(MN)
  • E 5.1.10 Develop company’s/department’s budget (FI:099) (MN)
  • E 5.1.11 Implement procedures for managing debt (FI:103) (ON)
  • E 5.1.12 Obtain insurance coverage (FI:083) (ON)

  • E 5.2 Content Standard: Students understand tools, strategies, and systems used to maintain, monitor, control, and plan the use of financial resources.
  • E 5.2.1 Explain the need for accounting standards (CS)
  • E 5.2.2 Determine financing needed to start a business (FI:036) (M/E)
  • E 5.2.3 Prepare cash flow statements (BA:017) (MN)
  • E 5.2.4 Conduct break-even analysis (FI:101) (MN)
  • E 5.2.5 Explain the nature of balance sheets (BA:018) (SP)
  • E 5.2.6 Describe the nature of profit-and-loss statements (BA:020) (SP)
  • E 5.2.7 Interpret financial statements (MN:162) (MN)
  • E 5.2.8 Project cash needed to open business
Chapter Objectives
 
  • Put Together a Financial Plan
    • Start up costs
    • Income statement
    • Cash flow statement
    • Balance sheet
    • Personal financial statement
  • Obtain Financing for Your Business
1. Financial Documents: Startup Costs / Income Statement / Cash Flow / Balance Sheet
 

Start Up Costs Power Point

  • Pro Forma Financial Statements
  • Start Up Costs
  • Start Up Cost Chart
  • Start Up Definitions
2.

Start Up Costs - Business Plan - HOMEWORK

(Begun in Step 8) Start Up Costs

  1. Read article Estimating Realistic Startup Costs (use for tax purposes)
  2. Read article Estimating Startup Costs for a New Business
  3. Read article Industry Survey: How Much Does it Cost to Open a Restaurant?
  4. smLocate similar businesses at www.entrepreneur.com/franchise and find costs of similar businesses.
  5. Review the:
    1. Start Up Cost Template (other examples are available online)
    2. Language Links Example
  6. Calculate and record build-out/construction costs. (Be specific and pull out in doc.)
  7. Use the template and research from the internet to create your own Start-Up Cost Statement.
  8. Compose the narrative explaining the start up costs of your business

Notes:

This is one of the most important documents you can create for your business. The more accurate the list is, the greater your odds for success!

  • Reserve for Contingencies = extra cash if construction is more than budgeted
  • Working Capital = cash at opening
3.

Financial Documents: Startup Costs / Income Statement / Cash Flow / Balance Sheet

Income Statement Power Point

  • Income Statement Definition
  • Difference between a Cash Flow Statement
  • Create your Income Statement
4.

Income Statement - Business Plan - HOMEWORK

Income Statement

  1. income smReview the Language Links Example
  2. Review the Other Sample Plan Example
  3. Review online examples
    1. Wikipedia
    2. eSmallOffice
  4. Save the linked income statement.
  5. Use the template to create your own Income Statement. (Don’t forget to read the comments.)
  6. Hand in with the Income Statement Documentation.

Notes:

  • Make sure to change:
    • Income: Make sure to adjust for seasons; cutting grass in the winter and selling more retail in December. ( = 30 days * 60 people * $12 average ticket )
    • Payroll: How many people at what wage? Add more people as you grow. If you have 20 employees reflect that here. ( = 1 person * ( $15,000 ) / 12 months )
    • Rent or Lease Expenses: (price + CAM) * size / 12. (This info should match the trading area analysis – If your business is 5,000 ft2 then it should be reflected here.)
    • Inventory: adjust if needed
    • Loan amount in non-operating expenses: Get from your start-up costs ( = -PMT (0.07 percent / 12 months , 84 months , 97353 loan amount ) )
    • Check to make sure you are at least approaching a positive income by the end of the year. By the end of the year income should be greater than expenses.
  • Non-Operating Expenses = Loan for start up expenses
  • Take the total from the Start Up Costs and enter the amount in the formula in Non-Operating Expenses.
  • Credit Card Info - SquareUp
5.

Financial Documents: Startup Costs / Income Statement / Cash Flow / Balance Sheet

Cash Flow Power Point

  • Cash Flow Statement Definition
  • Difference between an Income Statement
  • Create your Cash Flow Statement
6.

Cash Flow Statement - Business Plan - HOMEWORK

Cash Flow Statement

  1. cASHfLOWReview the Language Links Example
  2. Review the Other Sample Plan Example
  3. Review online examples
    1. Wikipedia
    2. eSmallOffice
  4. Save the linked cash flow statement.
  5. Use the template to create your own Cash Flow Statement. (Don’t forget to read the comments.)
    1. Enter 0 for the beginning cash balance.
    2. Transfer all the Income and Expense values from the Income Statement.
    3. Locate the highest negative number.
    4. Enter at least that amount for the beginning cash balance.
  6. Hand in with the Cash Flow Documentation.

Notes:

    • Expenses should be the same as the cash flow document.
7. Begining Financials: Step by Step - (Pdf version)
  1. Step’s in Order: These are sequential steps. Do not start one statement without finishing the previous one. Each of the documents are commented. financial steps
        
          comment-image

  2. Start-Up Costs: Check your building costs. If you have a building it should match the size you found in your Trading Area Analysis. (If your business is 5,000 ft2 then it should be reflected here.)

  3. Income statement: Make sure to check/change:
    1. Income: Make sure to adjust for seasons; cutting grass in the winter and selling more retail in December. ( = 30 days * 60 people * $12 average ticket )
    2. Payroll: How many people at what wage? Add more people as you grow.  If you have 20 employees reflect that here. ( = 1 person * ( $15,000 ) / 12 months )
    3. Rent or Lease Expenses: (price + CAM) * size / 12. (This info should match the trading area analysis – If your business is 5,000 ft2 then it should be reflected here.)
    4. Inventory: adjust if needed
    5. Loan amount in non-operating expenses: Get from your start-up costs
      ( = -PMT (0.07 percent  / 12 months , 84 months , 97353 loan amount ) )

  4. Cash Flow Statement: Enter the same amounts from the income statement to the cash flow statement
    1. Adjust the first month to ensure a positive cash position.

  5. Make Adjustments

  6. Complete the Balance Sheet using the Balance Sheet Directions from the web site.

  7. Import each financial document into your business plan using the instructions to insert spreadsheets into Word from the web site.

  8. Write narratives explaining key components. You are explaining the financial documents. (See web site for additional information.)
 

Financial Documents: Startup Costs / Income Statement / Cash Flow / Balance Sheet

Balance Sheet Power Point

  • Balance Sheet Definition
  • Create your own Balance Sheet
8.

Balance Sheet - Business Plan - HOMEWORK

Balance Sheet

  1. bALANCEsHEETReview the Language Links Example
  2. Review the Other Sample Plan Example
  3. Review online examples
    1. Wikipedia
    2. eSmallOffice
  4. Save the linked balance sheet.
  5. Follow the directions to complete the balance sheet.
  6. Use the template to create your own Balance Sheet. (Don’t forget to read the comments.)
    1. YEAR 1 > ASSETS
      1. Enter YR1 Cash from the beginning cash balance from Month 1 from Cash Flow Statement.
      2. Enter YR1 Inventory from either Beginning Inventory from the Start Up Cost Worksheet or Month 1 Beginning Inventory from the Income Statement.
      3. Enter YR1 Fixed Assets. (Items used in your business that will last over one year. Can obtain from the Start-Up Cost Worksheet.)
      4. Enter YR1 Vehicles for businesses that have purchased a vehicle.
    2. YEAR 1 > LIABILITIES
      1. Enter YR1 loan amount from the debt service of the Income statement. This is total amount, not a monthly payment including beginning cash.
    3. YEAR 2 > ASSETS
      1. Enter YR2 Cash from the ending cash balance Month 12 from the Cash Flow Statement. (bottom of the page, far right)
      2. Enter YR2 Inventory from ending inventory Month 12 from the Income Statement
      3. Enter YR2 Fixed Assets. This is the same amount as YR 1 unless a new asset was purchased during the year.
      4. Verify that YR2 depreciation is 20% of Fixed Assets.
      5. Enter YR2 Vehicle assets amount and depreciation if needed.
    4. YEAR 2 > LIABILITIES
      1. Go to www.bankrate.com. Choose calculators. In Calculators, choose Small Business.
      2. In Small Business choose Calculate your payment on any loan (includes amortization schedule). Enter amounts.
        1. Loan Amount: This is the total loan amount (This is the same amount used in the debt calculation. (Start up costs + beginning cash)
        2. Loan Term: 7 years
        3. Interest Rate: 7%
        4. Choose ‘Show/Recalculate Amortization Table’
      3. Enter YR2 loan amount from the Balance ($) of Month 12. this is from the 6th row, 13th column.
      4. VERIFY that Total Liabilities and Capital = Total Assets. ($$ in yellow should be the same)
      5. Enter business name, student name, and date.
      6. Change the yellow numbers to white so they will show when printing
      7. Print and hand in with the Balance Sheet Documentation.
9.

Personal Financial Statement

Personal FInancial Statement

  1. PFS SMA document or spreadsheet outlining an individual's financial position at a given point in time.
  2. A personal financial statement typically includes general information about the individual, such as name and address, along with a breakdown of their total assets and liabilities.
  3. A personal balance sheet
  4. Lots of examples and templates on the web. Search for "Personal FInancial Statement".
  5. Personal Financial Statement Template
  6. Bank Loan Application
10.

Financial's - Plan to Meet Capital Needs - Business Plan - HOMEWORK

PUT ALL FINANCIAL DOCUMENTATION TOGETHER

Create a document that outlines the following information for your business plan.  Match heading and sub-headings from the contest guidelines. Include:

Planned Financing

  1. Review the Language Links Example
  2. Review the Other Sample Plan Example (This is a good example for Narrative/Assumptions)
  3. Create your own plan to meet your capital needs. (Where are you going to get your start up money.
  • Possibilities
    • parents
    • bank loan
    • shares of stock
    • venture capitalist
    • personal savings
    • friends and family
    • credit cards
    • combinations from above

V. Planned Financing

A. Projected income and expenses

Each plan is required to have the following 3 financial statements:

  • Start Up Costs
  • Income statement by month for the first year of operation
  • Cash flow by month for the first year of operation (optional)
  • Balance sheet for the end of the first year

Provide a brief narrative description of the planned growth of the proposed business, including financial resources and needs.

B. Proposed plan to meet capital needs

The following items are recommended for inclusion. You may select appropriate items for your business.

  1. Personal and internal/external sources
  2. Plan to repay borrowed funds or provide a return on investment to equity funds.

Do not include a loan amortization table.

See instructions to insert spreadsheets into Word.

11.

Articles

12.

Finance TEST

Study Help - 40 Questions - 23 T/F, 17 MC, 1 Short Answer

Start Up Costs
  Important because…
3 Types of Costs
Pro-Forma
Reserve for Contingencies
Working Capital
     
Income Statement
  Also know as…
Period of Time
Important because…
  Parts of an Income Statement
Income
Expenses
    Operating
Non-Operating
 

Difference between Cash Flow Statement
How to increase profit
Accounts Receivable/Income (how is it calculated)
Inventory
Payroll  (how is it calculated)
Rent (how is it calculated)

  Loans
    Loan/Secured and Unsecured loans (how is it calculated)
     
Cash Flow Statement
  Period of Time
Parts – Revenues/receipts received, expenses/disbursements paid
Important because…
Difference between Income Statement
     
Balance Sheet
  As of a date
Parts – Assets, Liabilities, Ownership Equity
    Current and fixed assets
Current and long term liabilities
  Depreciation
Important because…
Net Worth

Additional Resources

A.



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