Evolution of Businesses Leslie Lum Bellevue College

The Business Universe

Businesses and Employment

Where are the jobs?

New Businesses

Growth in New Business Starts

Business Closings

Change in Business Closings

12

13

Case Study – Chesterfield Health

16

17 Making real business plans

18 Sample Upfront and Variable Costs Year Upfront Costs Marketing5000 Site Development10000 Revenues Cost of Goods (50%) Gross Margin ExpensesCosts by year Hosting Advertising Ongoing maintenance Personnel Profit

19 Payback Period Year Marketing5000 Site Development10000 Revenues Cost of Goods (50%) Gross Margin Expenses Hosting Advertising Ongoing maintenance Personnel Profit Calculation of Present Value8500/(1+0.08)^ /(1+0.08)^217660/(1+0.08)^3 Present Value $ (15,000.00)$7,870.37$13,574.53$15, Payback occurs in 2005

20 Breakeven Analysis

21 Monthly Breakeven for Restaurant

22 Do Breakeven Analysis for Your Business

The Steps What is your business? Product or service? Industry? What form of business ownership will you have? Developing a business plan –Market size – what will your sales $$$ be? –Marketing strategy – what makes you stand out? –How will you make your product or deliver your service? –How long will it take you to break even? –What are the risk? –How much money do you need to start?

Obtain Financing Debt (borrow money)? Bank Loans –Personal guarantees and collateral –2 - 3 points above prime rate –Factoring companies –SBA backed loans –Suppliers Equity (have investors)? –Private Investors –Venture Capitalists –Corporate Sources –State and Local Government Programs

Small Group Exercise Come up with a business Group presents it to class with capital requirements Class will vote yes or no