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Figuring Out the Financials

JCF Associates Dr Christine Fiddler, PhD John Fiddler MBA 2014. Figuring Out the Financials. Running a business. Start up or existing Elements of running a business. Marketing and Sales. Operations. Finance. Growth and development. Personal Survival Budget.

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Figuring Out the Financials

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  1. JCF Associates Dr Christine Fiddler, PhD John Fiddler MBA 2014 Figuring Out the Financials

  2. Running a business • Start up or existing • Elements of running a business Marketing and Sales Operations Finance Growth and development JCF Associates 2014

  3. Personal Survival Budget • What do YOU need to live on? • Will your business make money straight away? • Do you have financial reserves? • Options Work out your personal survival budget... JCF Associates 2014

  4. Profit and Loss • Forecast Income • Sales revenue • Variable costs • Fixed costs JCF Associates 2014

  5. Breaking Even • Break even (product) = Total fixed costs Sales revenue (per unit) – variable costs (per unit) • Break even (annual) = Overheads Sales x 100 • Annual GP % = Overheads GP % x 100 JCF Associates 2014

  6. Pricing - Two basic methods • Cost plus pricing • Cost of producing product or service plus amount you need to make as profit • Ignores your image or marketing positioning • Hidden costs easily missed so true profit per sale often lower than you realise JCF Associates 2014

  7. Pricing - Two basic methods • Value – based pricing • Price you believe customers are willing to pay, based on benefits you prove you can provide • Perceived value to your customers • Very profitable, but can alienate customers driven by price JCF Associates 2014

  8. Cost Pricing - Product Cost plus pricing: product Jewellery maker thinks she can sell 1500 units over 12 months... Her research shows: Direct cost per unit £1.76 2640 Overheads 1500 Personal survival budget 20000 Breakeven revenue = 25140 25140/1500 = £16.76 per unit as a minimum Breakeven is a starting point – further research may lead to charging a higher price JCF Associates 2014

  9. Cost Pricing - Service Cost plus pricing: Service A handyman will work 30 hours per week but 5 hours will be spent doing admin etc. He will take 6 weeks holiday per year ... 46 weeks x 25 chargeable hours = 1150 hours per year (no significant direct costs) Overheads 2800 Personal survival budget 20000 Breakeven revenue = 22800 22800/1500 = £19.82 minimum charge per hour Breakeven is a starting point – further research may lead to charging a higher price – for example his competitors charge £25 per hour JCF Associates 2014

  10. Customer’s Perceived Value • Base your price on what a customer is willing to pay... • Keep in mind what you need to live on • Keep in mind the cost to produce • If your price does not make you money or at least cover your breakeven – ask yourself is it worth it? JCF Associates 2014

  11. Cash Flow • Most common cause of business failure is running out of cash • Even profitable businesses can’t get by when cash dries up • Proper planning • Profitability v day to day cash JCF Associates 2014

  12. Bringing it all together • Business plan • Blue print for success • Referral document – focus, goals • Update it regularly • Helpful and needed if looking for finance • Business plan formats What are the key things that should go into a business plan? JCF Associates 2014

  13. Where to get more help... • Everyone needs help now and again • Setting up and running your business • Growing your business • Research has shown that a business that gets the right advice is more likely to make a go of it and more likely to be more successful (Profiting from support update, Barclays Bank, Dec 2005) JCF Associates 2014

  14. Contact details • JCF Associates • Johnfiddler@jcfassociates.co.uk • christinefiddler@jcfassociates.co.uk • www.jcfassociates.co.uk • Twitter: @FinanceCoach1 • Facebook: TheFinanceCoach JCF Associates 2014

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