1. Welcome to the April 10 - May 15 Wednesday 5-6pm Class Presented by Ryan Murray MBA,CBA

2. Brief Notes Class is 5pm-6pm, goes for 6 weeks It is recommended you take the class twice Homework is due before the beginning of the next module Submitted to ryan.murray@usu.eduryan.murray@usu.edu We will cover the overview of the class and business plans in general next week FYI Entrepreneur Leadership Series is right after if anyone would like to attend

3. 6 Modules 1.Company Profile – A brief overview or explanation of your business 2.Product/Service – An analysis of your potential sources of revenue 3.Market Opportunity – Your portion of the revenue the total market will pay 4.Marketing Strategy – A detailed plan explaining exactly how you will sell, to whom, and at what expense 5.Management Team – Getting the right people doing the right things to make it happen 6.Financials – Measuring it and tying it all together

4. 3 Basic Financial Statements Profit and Loss aka P&L or income statement Statement of Cash Flows Balance Sheet

5. Profit & Loss Measures profitability Sales (less)Expenses Profit

6. Cash Flow Measures cash available to cover expenses Hint: (too much cash is expensive, too little cash is dangerous) Beginning Cash Balance (+ or –) any changes in cash Ending Cash Balance What’s the importance of Cash vs. Profits and how do I know the difference?

7. Balance Sheet Measures the health and competitiveness of your business Assets = Liabilities + Equity (Sales driver) = (Leverage) + (Owner’s portion)

8. 3 Factors for New Venture Success Start-up Costs (initial costs) Break even Sales projections

9. Break Even Example Rhett wants to sell lemonade on the corner. Aunt Bertha will rent him her corner sidewalk for $75 a day. It cost Rhett $.50 each cup to produce the lemonade (cups, lemonade mix, water, and napkin). He sells his lemonade for $1.00 per cup. How many cups does Rhett need to sell to break even?

10. Break Even Example 2 Amber sells T-shirts for $13.00 each. It costs her $2.25 to order in her shirts and she pays her employees $1.00 for every shirt they sell. Rent is $400/month and the rest of her monthly expenses come to $575 dollars. Where is her break even point?

11. Answers 1.150 cups/day I get half of my sales as profit so I need to double $75 and at $1 per, I need 150 cups Contribution margin of 50% and $75/.5 = $150/$1 = 150 cups 2.100 shirts/month $13 – $3.25 = $9.75 then $975/$9.75 = 100 Contribution margin of 75%, $975/.75 = $1300, $1300/$13 = 100 shirts/month

12. Contribution Margin Sales$ 462,452 Less Variable Costs:Variable Costs Cost of Goods Sold Cost of Goods Sold Sales Commissions Delivery ChargesCommissions $ 230,934 $ 58,852 $ 13,984 Total Variable Costs$ 303,770 Contribution Margin (34%)$ 158,682 Less Fixed Costs:Fixed Costs Advertising Depreciation Insurance PayrollAdvertising Depreciation Insurance Payroll Taxes Rent Utilities Wages Utilities Wages $ 1,850 $ 13,250 $ 5,400 $ 8,200 $ 9,600 $ 17,801 $ 40,000 Total Fixed Costs$ 96,101 Net Operating Income$ 62,581 http://en.wikipedia.org/wiki/Contribution_Margin

13. Contribution Margin Sales$ 462,452 Total Variable Costs$ 303,770 Contribution Margin (34%) $ 158,682 Total Fixed Costs$ 96,101 Net Operating Income $ 62,581 Contribution Margin = 158,682/462,452 = 34% Break Even = 96,101/.34 = $282,650 282,650 < 462,452 hence the positive net income

14. Sales Forecast Sales are a function of marketing – if sales increase I should be able to track that increase via my marketing strategy

15. 3 Factors for New Venture Success Start-up Costs (initial costs) Break even Sales projections

16. Feasibility Comparison Samples Option A Start up costs = $10,000 Breakeven = 2 years Sales at the end of year 3 = $50,000 Option B Start up costs = $1,500 Breakeven = 3 months Sales at the end of year 3 = $7,000 Option C Start up costs = $100,000 Breakeven = 3 years Sales at the end of year 3 = $5 million

17. Homework Start-Up Create Start-Up expense sheet Cash Flow Create Cash Flow year 1 forecasted month to month Break Even Calculate Break Even