This week you’ll have to take the pricing of your product as compared to competitors and begin to build some financials, using the tables in the mini-Business Plan. This week complete Section 4 Financial Plan. You may view the grading rubric by clicking on Grades and Progress in the navigation menu, locating the assignment, and selecting View Rubric. Find more information helpful to this exercise via your Gitman text; Chapters 5, 14 & 16; especially Chapter 5. You will also need to update and finalize your Executive summary.*The four financial pieces of information that you will need to include with your mini-Business Plan are the following:
- Sunk costs – a cost that you will incur in starting this business that you will not be able to recover. This sheet is NOT part of your plan template.
- Balance sheet day one – any assets, liabilities, and owners’ equity you will have on the day you start your business. What will be in that office the day you start, and how will it get there? There is a template for this
- Projected income statement 3 years out. A realistic ramp-up of revenue with an understanding of the costs related to selling this product or service, and your overhead expenses. These are your fixed and variable costs. You will need to know then for the final item. There is a template for this in your plan. Do not worry about the cash flow document for now.
- Break-even estimate – some calculation or table which shows that you know realistically how long it will take (and how much money you will need) until your sales volume matches your fixed and variable costs. This is NOT included in your plan template. A fairly simple explanation can be found HERE. Read down through the page and see examples of how to calculate your Break Even.
*Along with all of the above, you will need to have some Financial assumptions. You will need to determine your threshold of sales, and how quickly you will ramp up. As you ramp up sales, your customer acquisition costs or marketing costs will increase. In your assumptions, you can give some guidance as to what your percentages on the cost of goods sold may be. You can make assumptions about how and from whom you will borrow money. You’re still going to need to have enough cash on hand to be able to make it until you have enough money coming in that you can cover not only the variable cost for each additional product but also your fixed costs, which will be your lights and heat and other monthly expenses. This is why there is a cash-flow document in your plan template. This is not required since it is a bit complicated. But you may try to complete it.*This final week you will also need to update and finalize the Executive summary section, drawing content from the other parts of your mini-Business Plan. Then download and submit the completed mini-Business Plan to the link above. Your instructor is available to help you answer any questions that you may have.