Entrepreneurship 110

1. Entrepreneurship 110 Business Plan – Financial Section “It’s All About Making Money”

2. Financial Section – Components • Financial Goal • Cash Flow Forecast/Cash Flow Notes • Start-Up Costs/ Sources of Funding • Balance Sheet • Income Statement

3. Cash Flow Forecast and Notes • This is the most difficult part of a Business Plan to complete. • This is a projection of ALL money coming into and going out of a business. • For a year round business, show all 12 months of operation. • YOU ALWAYS START THE CASHFLOW A MONTH BEFORE THE BUSINESS OPENS.

4. Components of a Cashflow Forecast Cash Receipts • This is the money being received by the business monthly. • This may include: loans, investments, sales, etc.

5. Cash Disbursements: • This is the money going out of the business on a monthly basis. • This may include: rent, utilities, insurance, wages (what you pay employees), owners drawings (what you pay yourself), business registration ($112/$224), materials, advertising, loan repayment, etc.

6. Net Cash • This section is where you calculate monthly totals. • Your monthly totals will either show a surplus (profit) or deficit (debt).

7. Totals • You should always calculate totals for both each category AND each month; you should always add down and across. • There are totals columns on the right hand side of the Cashflow and at the bottom of the Cash Receipts and Cash Disbursements sections.

9. Assignment • Read the business profile you have been given titled “Surreal Sweaters.” • Using the financial information found in the handout, create a Cashflow Forecast for the company.

10. Cashflow Notes • Cashflow Notes accompany the Cashflow forecast in your Business Plan. • Cashflow Notes offer an explanation of how numbers/amounts found in the Cash Receipts and Cash Disbursements sections of the Cashflow Forecast were arrived at. • For example, if in the Cash Disbursements section you had Wages being $1200 for the month of September, in your Cashflow Notes section you would explain or show how this number was arrived at.

11. Start Up Costs/Sources of Funding Start Up Costs • Here, you: • List all of the purchases that you will need to make in order to start the business and their associated costs. • Remember, most of these costs will be incurred during the month BEFORE the business opens. • This list includes, but is not limited to: • Equipment • Inventory • Office Supplies • Furniture • Promotion • Wages/Owner’s Drawings • Rent • Business Registration

12. Sample Start-Up Costs

13. Sources of Funding • Here, you explain where the money will come from to cover your start-up costs. • Ideally, some of this money should come from the Entrepreneur (savings, bank account, investors, etc.) • Sources of Funding also typically include government or other loans. For this course, you may reference one of the following loans: • ACOA Loan - $20,000 (full year and other business) • TED Seed Loan - $3,000 (summer business only)

14. Sample – Sources of Funding

15. Income Statement • An income statement, otherwise known as a profit and loss statement, is a summary of a company’s profit or loss during any one given period of time, typically a year or season. • The income statement records totals for all revenues (Cash Receipts) and expenses (Cash Disbursements) categories for the business for its duration (year or season). • Income statements are one of the most basic elements required by potential lenders, such as banks, investors, and vendors.

16. Income Statement Revenue ____________ $ ______________ ____________ $ ______________ ____________ $ ______________ ____________ $ ______________ ____________ $ ______________ Total: $ ______________ Expenses ____________ $ ______________ ____________ $ ______________ ____________ $ ______________ ____________ $ ______________ ____________ $ ______________ ____________ $ ______________ ____________ $ ______________ ____________ $ ______________ ____________ $ ______________ ____________ $ ______________ ____________ $ ______________ ____________ $ ______________ ____________ $ ______________ ____________ $ ______________ Total: $ ______________ Total Income: $ ______________

17. The Balance Sheet • A Balance Sheet calculates the worth of the Entrepreneur. • A Balance Statement is a very simple document with two categories: assets and liabilities.

18. Assets • Assets are sources of personal income and may include: • Savings accounts • Checking accounts • Stocks • Property (Homes, estates, etc.) • Land • Art • Jewelry

19. Liabilities • Liabilities are debts owed by the Entrepreneur and may include: • Credit Cards • Mortgages • Student Loans • Car Loans • Personal Loans

20. Why Complete a Personal Balance Sheet? • Entrepreneurs complete a Personal Balance Sheet to prove to a lending institution that they have worth should the business experience financial trouble. • It is the items listed in the Personal Balance Sheet that may be seized in bankruptcy.

21. Sample Balance Sheet

22. Setting a Financial Goal • Typically, a Financial Goal for a business centers upon the Market Share that a company plans to capture. • In the Market Research section, you calculated the size of your market, here you determine how much of that market your company will “capture.” • Formula: • Market Share = Total Sales/Market Size x 100

23. Sample Financial Goal It is the goal of this organization that, by month’s end August 2009, the business has captured __% of the market.