1. Create Your Business Plan A SCORE Seminar Sponsored by Southwest Florida SCORE Chapter 219 In cooperation with Edison College Session 3

2. Review and Agenda In prior two sessions, we have covered the majority of the Narratives within a Business Plan. Today, we will focus on the Financials and also cover the Executive Summary, which is the first section of a Business Plan but is the final completion. To aid this effort, we will create a hypothetical business called “Liz J’s Picture Frames”.

3. Financials Balance Sheet/Net Worth Statement Sources and Application of Funds Capital Equipment List Year 1 Income Projection (month by month) Year 2 Income Projection (quarterly acceptable) Year 3 Income Projection (quarterly acceptable) Cash Flow Projection Break Even Analysis

4. Financials – Balance Sheet Some Definitions: Balance Sheet -An itemized statement, which lists the total assets and liabilities, your business at a given moment in time, also called a statement of condition. Equity -An interest in property or in a business, subject to prior creditors. An owner’s equity in his business is the difference between the value of the company's assets and the debt owed by the company. For example, if you borrow $30,000 to purchase assets for which you pay $50,000, your equity is $20,000. Net Worth -Same as Equity.

5. Financials – Balance Sheet

7. Financials - Sources and Application of Funds

8. It may be necessary to complete financials prior to finalizing this sheet!

9. Financials – Capital Equipment List Depreciation - Lost usefulness; expired utility; the diminution of service yield from fixed asset or fixed-asset group that cannot or will not be restored by repairs or replacement of parts.

12. Financials – Income Statements

14. 10 Minute Break

15. Financials – Cash Flow Projection Cash Flow -The schedule of your cash receipts and disbursements.

16. Financials – Cash Flow Projection

18. Financials - Breakeven Analysis Breakeven Sales = Fixed Cost/Gross Profit Percent Where Gross Profit expressed in percentage terms = Gross Profit/Sales Or, for clarity sake Gross Profit % = (Sales – Cost of Sales)/Sales

19. Financials - Breakeven Analysis Breakeven Sales = Fixed Cost/Gross Profit Percent Example of Liz J’s Picture Frames (year one) Fixed Cost =$52,500 Gross Profit % = $37,300/$55,500 =.672 Breakeven Sales = $52500/.672 = $78,125 (year) or Monthly Sales Volume = $78,125/12 = $6,510 per month

20. Financials - Summary When completed (may have to make a few iterations), you will have: A reasonable forecast of the viability of the business, A reasonable view of the capital, both equipment and operational, required to sustain the business until successful, and A good estimate of what sales volume is necessary to reach break-even annually.

21. Business Plan – Executive Summary The Executive Summary, which is the first section of any Business Plan, is a one page synopsis of the entire Plan. It briefly describes: The Market, Business and Competition, The Operational Plan, and The Financial viability of the venture.

22. Example – Liz J’s Executive Summary Framed artwork in the Estero area is a $500,000 market that is growing and projected to grow at five percent per year. By locating a retail outlet in the area, a first, and supplying high quality products in this high end market, Liz J’s will achieve ten percent market penetration within its first year, attaining 25% by the end of the third year. The business will be located in a high traffic corridor along U.S. route 41, a major north-south highway. Hours of operation will be consistent with the patterns applicable in safe, well-lighted strip malls in the area. Liz J’s will be managed conservatively, using well-trained retail selling staff and the technical picture framing expertise of the owner and her family. The business will be insured properly and, while daily cash accounting and accounts payable (including sales tax and payroll tax payments) will be accomplished by the owner, payroll and quarterly and full year tax returns will be subcontracted to professionals. The business will be insured in accordance with the norms of the region. Utilizing initial funding consisting of a gift from a family member and a second mortgage against the equity presently available on the owner’s residence, Liz J’s will consistently exceed its monthly break-even point early in its second year of operation and will be profitable on a full year basis by the end of that year.

23. Homework Assignment – Session 3 Prepare Business Plan Financials and final Narrative Balance Sheet/Net Worth Statement Sources and Application of Funds Capital Equipment List Year 1 Income Projection Year 2 Income Projection Year 3 Income Projection Cash Flow Projection Break Even Analysis Executive Summary When completed and consolidated with previous work, you will have your Business Plan. Turn in a copy at the next session (excluding Net Worth). Be prepared to make a 5 minute presentation on your entire Plan. Supplemental Material A three page Accounting Dictionary for the Business Person Sources and Applications of Funding Worksheet Capital Equipment List Worksheet Sales Forecast Worksheet A CD-ROM with financial worksheet masters. (Courtesy of SCORE)

24. Session 3 Lab – Time Permitting Begin preparation of Financial Worksheets. Instructors will circulate throughout class in attempt to answer questions.