Welcome to the April 10 - May 15 Wednesday 5-6pm Class Presented by Ryan Murray MBA,CBA

Brief Notes Class is 5pm-6pm, goes for 6 weeks It is recommended you take the class twice Homework is due before the beginning of the next module Submitted to We will cover the overview of the class and business plans in general next week FYI Entrepreneur Leadership Series is right after if anyone would like to attend

6 Modules 1.Company Profile – A brief overview or explanation of your business 2.Product/Service – An analysis of your potential sources of revenue 3.Market Opportunity – Your portion of the revenue the total market will pay 4.Marketing Strategy – A detailed plan explaining exactly how you will sell, to whom, and at what expense 5.Management Team – Getting the right people doing the right things to make it happen 6.Financials – Measuring it and tying it all together

3 Basic Financial Statements Profit and Loss aka P&L or income statement Statement of Cash Flows Balance Sheet

Profit & Loss Measures profitability Sales (less)Expenses Profit

Cash Flow Measures cash available to cover expenses Hint: (too much cash is expensive, too little cash is dangerous) Beginning Cash Balance (+ or –) any changes in cash Ending Cash Balance What’s the importance of Cash vs. Profits and how do I know the difference?

Balance Sheet Measures the health and competitiveness of your business Assets = Liabilities + Equity (Sales driver) = (Leverage) + (Owner’s portion)

3 Factors for New Venture Success Start-up Costs (initial costs) Break even Sales projections

Break Even Example Rhett wants to sell lemonade on the corner. Aunt Bertha will rent him her corner sidewalk for $75 a day. It cost Rhett $.50 each cup to produce the lemonade (cups, lemonade mix, water, and napkin). He sells his lemonade for $1.00 per cup. How many cups does Rhett need to sell to break even?

Break Even Example 2 Amber sells T-shirts for $13.00 each. It costs her $2.25 to order in her shirts and she pays her employees $1.00 for every shirt they sell. Rent is $400/month and the rest of her monthly expenses come to $575 dollars. Where is her break even point?

Answers cups/day I get half of my sales as profit so I need to double $75 and at $1 per, I need 150 cups Contribution margin of 50% and $75/.5 = $150/$1 = 150 cups shirts/month $13 – $3.25 = $9.75 then $975/$9.75 = 100 Contribution margin of 75%, $975/.75 = $1300, $1300/$13 = 100 shirts/month

Contribution Margin Sales$ 462,452 Less Variable Costs:Variable Costs Cost of Goods Sold Cost of Goods Sold Sales Commissions Delivery ChargesCommissions $ 230,934 $ 58,852 $ 13,984 Total Variable Costs$ 303,770 Contribution Margin (34%)$ 158,682 Less Fixed Costs:Fixed Costs Advertising Depreciation Insurance PayrollAdvertising Depreciation Insurance Payroll Taxes Rent Utilities Wages Utilities Wages $ 1,850 $ 13,250 $ 5,400 $ 8,200 $ 9,600 $ 17,801 $ 40,000 Total Fixed Costs$ 96,101 Net Operating Income$ 62,581

Contribution Margin Sales$ 462,452 Total Variable Costs$ 303,770 Contribution Margin (34%) $ 158,682 Total Fixed Costs$ 96,101 Net Operating Income $ 62,581 Contribution Margin = 158,682/462,452 = 34% Break Even = 96,101/.34 = $282, ,650 < 462,452 hence the positive net income

Sales Forecast Sales are a function of marketing – if sales increase I should be able to track that increase via my marketing strategy

3 Factors for New Venture Success Start-up Costs (initial costs) Break even Sales projections

Feasibility Comparison Samples Option A Start up costs = $10,000 Breakeven = 2 years Sales at the end of year 3 = $50,000 Option B Start up costs = $1,500 Breakeven = 3 months Sales at the end of year 3 = $7,000 Option C Start up costs = $100,000 Breakeven = 3 years Sales at the end of year 3 = $5 million

Homework Start-Up Create Start-Up expense sheet Cash Flow Create Cash Flow year 1 forecasted month to month Break Even Calculate Break Even