1. Section 5: Financial Strategy

2. The Business Plan 1)Executive Summary 2)Market Analysis 3)Resource Analysis 4)Operating Strategy 5)Financial Strategy 6)Contingency Plan

3. Financial Strategy 1)Establishing Financial objectives 2)Calculating Start-up: Costs and Operating Expenses 3)Projecting Revenue and Expenses 4)Securing Financing

4. Financial Objectives This section gives you an opportunity to communicate what financial goals you have for your business – Break Even Point How many sales you need to make in order to not lose money per unit – Profit Margin The percent of the final selling price that will be profit – Return on Investment (ROI) The percent of profit that investors will earn back on their investment – Overall financial goals Earn x amount of salary Earn x amount of profit/revenue Earn enough to expand to other locations with x amount of years

5. Break Even Point How many sales you need to make in order to make your money back This will be different depending on the type of good or service you are selling Selling Price X Number of Sales = Variable Cost X Number of sales + Fixed Costs Example: You sell ice cream for $4/cone, the materials cost $2.50 your fixed costs (counters, freezers, etc.) cost you $30,0000

6. Break Even Point Revenues = Expenses 4x = 2.50x + 30,000 4x – 2.50x = 30,000 1.50x = 30,000 X = 30,000/ 1.50 X = 20,000 Therefore, you will need to sell 20,000 ice cream cones to make your money back

7. Profit Margin For each unit you sell – what percentage of $$ will be purely profit Tough to do for a service business..... – Therefore not required for business plan Profit Margin = selling price – cost price x 100 selling price

8. Profit Margin The cost of producing a plastic Maskoka chair is $15 and it is sold for $20 Profit Margin = selling price – cost price x 100 selling price PM = 20 – 15 x 100 20 25%

9. Return on Investment The amount of profit that investors earn in return for the capital they have invested in a venture ROI = amount returned – amount invested x 100 amount invested Ex ROI = 15 000 – 10 000 x 100 10 000 = 50%

10. Start Up Costs In the Resource Analysis section – You decided what material and technological resources you needed in order to operate your business In the financial Strategy section – You will allocate costs to those resources This can be difficult – finding the cost of all your resources – Level 4 – will find nearly all the costs, Level 3 – the costs of the major resources, Level 2 – very few costs given, Level 1 – no costs

11. Projections In this section you will estimate the revenue you will earn and the expenses that your business will incur (usually done on a monthly basis) Costs – Leasing a building $15/ sq. Ft (includes utilities, taxes & Insurance) – Salaries – Advertising – Paying back loans – Inventory

12. Projections Revenue – You must try to find a conservative figure of how many sales you will make within a given time frame – Example: 90,000 people in Brantford, 60% adults, 10% go to dinner on a nightly basis = 90 000 x 0.6 x 0.1 = 5400 people to try and attract – Conservative figure – you get 2 % of those people = 5400 x 0.02 = 108 people -The average plate is $20 -On a nightly basis your restaurant will make $2160 in revenue

13. Securing Financing In this section you will tell me how exactly you are going to get the financing If you have a total dollar figure (start up cost) – You can give dollar figures for each choice of financing – Example: $50 000 investors, $30 000 loans, $20 000 personal funds If you don’t have an exact dollar figure use percentages – Example: 50% investors, 30% loans, 20% personal funds

14. Financial Assignment Break- Even/ Profit Margin/ ROI Worksheet