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SESSION 7: FINANCE. TOPICS COVERED Participants will produce a formal business plan that will include a component of each of the following: Week 1: Introduction Week 2: Entrepreneurship Week 3: Idea development Week 4: Marketing Week 5: Competitors and Organisational and legal structure
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TOPICS COVERED Participants will produce a formal business plan that will include a component of each of the following: Week 1: Introduction Week 2: Entrepreneurship Week 3: Idea development Week 4: Marketing Week 5: Competitors and Organisational and legal structure Week 6: Technical developments and Risk assessment Week 7: Finance Week 8: Integrating and control Week 9: Guest speakers Week 10: Summary
CONTACT DETAILS SURGERY HOURS On Request
Mind stretcher • I need to borrow 100k to make my business viable. Which options will I have and what will it costs me?
Money! • Need money, but how much and for what reason – will determine source Reasons: • Fixed Capital • Buy fixed capital • Working Capital • Buying stock, manufacturing product/service – running of business • Growth Capital • When expanding or changes direction
Sources My money! Not my money!
Fixed and Variable Costs • Fixed cost • Variable costs
Profit vs. Cash • Formula Sales Less Cost of sales = Gross profit Less Fixed cost = Net Profit
Break-even Sales Income Total Variable Fixed Time
Break-even • Break-even: Sales Turnover Formula: • Fixed Cost/GP% • Break-even: Units Formula: • Fixed Cost/GP per Unit • Break-even with profit motive: • Fixed cost + Profit/GP%
Break-even • Break-even: • Fixed Cost/GP% • Break-even: Units Formula: • Fixed Cost/GP per Unit • Break-even with profit motive: • Fixed cost + Profit/GP% • You sell CD’s at £8 each. Cost price per CD is £3. Operating costs is £5000 per month. You would like to make £500 profit per month
Websites • http://www.business.hsbc.co.uk/1/2/start-up-business;jsessionid=0000Mma9gKKqbyE_V5dVdB5lgUZ:12fhlq7db • http://www.businesslink.gov.uk/bdotg/action/home?domain=www.businesslink.gov.uk&target=http://www.businesslink.gov.uk/ • http://www.advantagewm.co.uk/what-we-do/helping-business/finance-for-business.aspx • http://www.princes-trust.org.uk/
Exercise • Calculate the break-even point for your own business using the templates provided.