1. © 2017 Junior Achievement USA® All rights reserved.
JA Academy
Building a Small Business Financial Plan
© 2017 Junior Achievement USA® All rights reserved.

2. Warm-Up
It’s a Plan

3. You are starting your own small business
You are starting your own small business. In what order would you do these things?
____ Locate a store front and sign the lease.
____ Order the inventory you need to stock your store.
____ Hire the right help so you can open quickly.
____ Create a financial plan and review it with experts.
____ Purchase the furniture and shelving for your store.

4. I will
explain three reasons why a small business prepares a financial plan.
identify four common components of a small business financial plan.
complete a break-even analysis for a sample business.

5. Business Financial Plans
discuss
Business Financial Plans

6. Any Plan Answers 3 Questions
Where are we now?
Where do we want to go?
How are we going to get there?

7. Five Reasons for Financial Plans
Loan applications require a financial plan.
Success is increased when there is a plan
Spending can be easily prioritized.
Marketing efforts can be measured against profits.
Trends (good and bad) can be identified easily.

8. Components of a Financial Plan
Break-Even Analysis
Cash Flow Statement
Income Statement
Balance Sheet

9. Pro-Forma
Means that the document has been prepared using projected numbers rather than actual numbers.

10. What does it mean to break-even?
It is the point when you get your money back – you haven’t made any yet, but you haven’t lost any either.
A break-even analysis is exactly the same . It is the point when money made and money spent is the same amount.

11. Fixed Costs – These are things that will not change based on the number of products made.
Examples: rent, insurance, utilities remain steady and are not affected by the number of products made.
Variable Costs – costs that changes based on the number of products made.
Examples: materials, ingredients, and labor may change or fluctuate.

12. 4 3 2 1 Basic Steps | Break-Even Analysis Analyze the results
Determine your Break-even point
Decide on the selling price
Figure out the costs: fixed & variable
Figure out the costs: fixed & variable

13. Graphing: Break-Even Analysis
Costs
Units Sold
50,000
40,000
30,000
20,000
10,000
2,500
5,000
7,500
Step 1 Fixed Costs
Step 1
Step 2
Step 3
Step 4
Step 5

14. Graphing: Break-Even Analysis
Costs
Units Sold
50,000
40,000
30,000
20,000
10,000
2,500
5,000
7,500
Total Costs
Step 2 Variable Costs
Step 1 Fixed Costs
Step 1
Step 2
Step 3
Step 4
Step 5

15. Graphing: Break-Even Analysis
Costs and Sales
Units Sold
50,000
40,000
30,000
20,000
10,000
2,500
5,000
7,500
Total Costs
Sales
Step 2 Variable Costs
Step 1 Fixed Costs
Step 1
Step 2
Step 3
Step 4
Step 5

16. Graphing: Break-Even Analysis
Costs and Sales
Units Sold
50,000
40,000
30,000
20,000
10,000
2,500
5,000
7,500
Total Costs
Sales
Step 2 Variable Costs
Step 1 Fixed Costs
Break Even
Point
Step 1
Step 2
Step 3
Step 4
Step 5

17. Graphing: Break-Even Analysis
Costs and Sales
Units Sold
50,000
40,000
30,000
20,000
10,000
2,500
5,000
7,500
Total Costs
Sales
Step 2 Variable Costs
Step 1 Fixed Costs
Break Even
Point
LOSS
PROFIT
Step 1
Step 2
Step 3
Step 4
Step 5

18. 4 3 2 1 Remember | Break-Even Analysis Analyze the results
Determine your Break-even point
Decide on the selling price
Figure out the costs: fixed & variable
Figure out the costs: fixed & variable

19. Using It! Break-Even Analysis
Fixed Cost to run this business
Example:
The fixed cost to run our widget business is $24,000.
The variable cost per widget (revenue per unit) is $5.50. It costs you $5.50 to make one.
You want to sell each widget for $15.
How many widgets would we need to sell to break even?
$ 24,000
2526
Break-Even Point = -
Widgets Sold 15
9.5
5.5
Revenue
Per Widget
Variable Cost Per Widget
At this price, we need to sell 2526 to break even.
If we sell 20 per day, it would take 126 days.
If we sell 100 per day, it would take 25 days.
Reveal
Reveal
Reveal

20. Get together
Make a Statement

21. Review the scenario with the class.
Complete the calculations.
Be prepared to share your calculations, pricing, and break- even points.
Answer the questions in your student pages.
Jacy Baxter is making plans to open Jacy’s Coffee and Sweets, a small drive-through business that sells a variety of coffees and a few homemade cookies and donuts. As she gets ready to work on her financial plan, she knows that she first needs to make some decisions about her prices.
Use the information about Jacy’s fixed and variable costs below to test some prices and give Jacy your recommendation.
What price should Jacy set for her standard cup of coffee? Why?
How long do you estimate it to take for Jacy to break even? How many cups of coffee would she need to sell per day to hit that target? How do you think she could determine if that number is reasonable?
Mortgage $10,000
Equipment/machines $8,000
Advertising $500
Utilities .01
Cups .03
Coffee beans .04
Milk .01
Add-ins .03
Wages .32
Extension activity: Ask students to graph their values., so they can see how it changes. *Lisa put one in the file folder for session 1. Maybe we can simplify it and use it?
If not, they can just use the math equation and figure out numbers.

22. Wrap up
Paths to Success

23. Paths to Success Why do businesses need good financial plans?
Secure loans, increase success, prioritize spending, see trends
Answer
What are the four components of a financial plan?
Break-even analysis, balance sheet, income statement, cash flow statement
Answer
What do you need to do a break-even point calculation?
Fixed costs, revenue, and the variable costs
Answer