1. Entrepreneurship Week 13 Financing your business

2. Assignment Dates
December 7 – Business Plan – part 2 rewrite due – NO late rewrites December 9 – Business Plan -- part 3 December 14 & 16 – Group Presentations December 21, 23, 28, 30 – Business Plan presentations

3. Cost categories
Start up – An initial purchase for your business – usually equipment, or marketing materials
Continual – payments you are usually committed to making every month (“fixed costs”)
By sale – costs that only occur if you sell a product -
food for your restaurant, clothing for your store (“marginal costs’)

4. Start up costs
A new business does not just have fixed costs (rent and salaries), it also has start up costs (equipment, decorations, initial advertising). Start up costs need to be paid – usually over several months or a year.

5. Cash Flow – dress shop cash flow goes positive in 6 months1
2 – store opens 3 4 5 6
Labor costs
500
Store costs
315
Equipment purchase
400
Inventory purchase
1000
C.O.G.S.
 1000
1500
Total costs
1715
1815
2315
Revenue
 2000
2000
3000
Profit/(loss)
(1715)
185
685
Yearly profit/(loss)
(1530)
(1345)
(1160)
(475)
210

6. Flower shop cash flow goes positive after 8 months1 2
3 – store opens 4 5 6 7 8
Labor costs
200
Store costs
300
Equipment purchase
600
Decorating
100
C.O.G.S.
400
Total costs
1000
500
700
800
900
Revenue
1200
1600
Profit/(loss)
(1000)
(500)
Yearly profit/(loss)
(1500)
(1400)
(1300)
(1200)
(800)
(400)

7. Initial Finance
How much money do you need to cover startup costs – and – the period where you are cash flow negative?

8. Initial financing – dress shop start up costs – 1400 store costs - 315
Month 1
2 – store opens 3 4 5 6
Labor costs
500
Store costs
315
Equipment purchase
400
Inventory purchase
1000
C.O.G.S.
 1000
1500
Total costs
1715
1815
2315
Revenue
 2000
2000
3000
Profit/(loss)
(1715)
185
685
Yearly profit/(loss)
(1530)
(1345)
(1160)
(475)
210

9. Initial financing – dress shop Projected sales are 100 dresses per month What if sales are lower?
2 – store opens 3 4 5 6
Labor costs
500
Store costs
315
Equipment purchase
400
Inventory purchase
1000
C.O.G.S.
 1000
1500
Total costs
1715
1815
2315
Revenue
 2000
2000
3000
Profit/(loss)
(1715)
185
685
Yearly profit/(loss)
(1530)
(1345)
(1160)
(475)
210

10. Initial financing – dress shop If sales are just 10 dresses per month, what financing do you need?
2 – store opens 3 4 5 6
Labor costs
500
Store costs
315
Equipment purchase
400
Inventory purchase
1000
C.O.G.S.
 100
100
Total costs
1715
915
Revenue
 200
200
Profit/(loss)
(1715)
(715)
Yearly profit/(loss)
(2430)
(3145)
(3860)
(4575)
(5290)

11. Initial financing – dress shop Hope for the best – prepare for the worst Assume sales may be very bad at first. So, find at least 5000 OMR to start
Month 1
2 – store opens 3 4 5 6
Labor costs
500
Store costs
315
Equipment purchase
400
Inventory purchase
1000
C.O.G.S.
 100
100
Total costs
1715
915
Revenue
 200
200
Profit/(loss)
(1715)
(715)
Yearly profit/(loss)
(2430)
(3145)
(3860)
(4575)
(5290)

12. Ice cream shop - financing example IF you meet sales projects, you go cash flow positive after 3 months, so you need 1000 OMR
Month 1
2 – store opens
3 – 4 5 6 7 8 9
Labor costs
150
Store costs
200
Equipment purchase
600
Decorating
100
C.O.G.S.
Total costs
900
450
500
550
Revenue
 400
400
800
Profit/(loss)
(900)
(50)
250
Yearly profit/(loss)
(950)
(1000)
(800)
(550)
(300)

13. Ice cream shop - financing example what if you sell just 100 cups per month? Buy 100 cups (250 bz) – sell 100 cups (500 bz)
Month 1
2 – store opens
3 – 4 5 6 7 8 9
Labor costs
150
Store costs
200
Equipment purchase
600
Decorating
100
C.O.G.S. 25
Total costs
900
375
Revenue
 50 50
Profit/(loss)
(900)
(325)
Yearly profit/(loss)
(1225)
(1550)
(1875)
(2200)
(2525)
(2850)
(3175)
(3500)

14. Business Plan Part 3 Finance section
Calculate how much money you would need if your business had no revenue for 6 months.
That is your need for financing.
State the amount and explain it.
Explain where you will get the money.

15. Business Plan Part 3 Finance section
Sources of money:
Your savings
Your family
A bank loan
A grant
Investors

16. Business Plan Part 3 Finance section
Sources of money:
Investors –
Partners (join you in running the business)
Angel investors (take a portion of the company)
Venture capitalists (take a portion of the company)
Bear’s Den or Shark Tank – you “pitch” your business