In layman’s terms, efficiency means getting stuff done in a
timely manner. This week we have to do a
lot of work in a short 5-day time frame.
We will complete at least one presentation per class period, but also
have to focus on completing all elements of the financial plan. This means that not every student will get to
present his/her idea to the class before we actually present our plans. The snow has really put us behind the pace,
so we need to pick it up this week. See
below for what we will do each day after our collaboration exercise.
Monday/Tuesday: Expenses
(Fixed/Variable) and Blog
The time has come to begin looking for real
numbers for our business. How much money does it actually cost to
run your business? Many of you have already done at least some
research about renting a facility, paying employees, advertising expenses,
etc. For Monday, the plan is to first list as many costs as you
can for your business. Consider these questions:
o Will
you have a facility?
o How
much is the rent for the amount of square footage you need?
o Will
you hire employees?
o Will
you advertise?
o Approximately
how much does the utility bill cost for a facility you plan to run?
o Do
you sell merchandise? What is the cost to make or procure the
merchandise?
o What
other consumable assets will you use on a monthly basis? (landscaping companies
use fuel on a regular basis)
The list can go on and on. My
suggestion is that you find as many fixed and variable expenses as possible for
your plan. A simple web search can greatly help you.
Once you’ve sufficiently completed these tasks
(or if we only have about 20 minutes left in class Tuesday), it’s time to blog
about your progress. Feel free to tell me:
What have you learned about being prepared for
anything?
How did you react to having to deal with the
possibility that your original assumptions may have been wrong?
What did you learn about our economy? Has your
opinion changed about anything?
How will the economy impact your business?
Were you aware of all the expenses your business
would have to pay? Which expenses stood out during your research?
Wednesday: Breakeven
Analysis
Below is a photo of what a typical breakeven
analysis might look like for a business plan.
Worry not. I don’t expect you to go
into such great detail for this project if you are not a member of the finance
department at Pick-it Sweets & Treats. What I would like you to
do today is simple.
· First, add up your total fixed and the average of each variable
expense you calculated last week.
· Next, take a look at how you generate revenue. Do you
sell merchandise? Services? Determine the average revenue
generated per unit.
For example, if you sell cupcakes, I’m sure they
vary in price (maybe from $1.50 up to $4.50). If you feel as if
you’ll sell more of the $1.50 cupcakes, instead of having an average revenue
per unit of $3.00, perhaps you will estimate it at $2.50 or $2.75. Ultimately,
what I’m looking for is proof that you understand approximate expenses and can
determine how much merchandise (or services) you’ll have to sell to at least
break even.
From the rubric:
Provide break-even amounts
in total dollars or number of sales. Provide details about assumptions you used
to perform analysis including the profit margin percentage. (Assume that all
costs are fixed except for cost of goods sold.)
Once you have determined a break-even for your
business, access the Excel Spreadsheet titled "Breakeven Analysis"
from my Public folder and create your own chart.
Thursday: Projected Sales
Nobody goes into business with the hope of just
breaking even. Though this may be the outcome at first, I’m certain
you wish to eventually turn a profit. Take today to project a
realistic number for your sales over the next 12 months. Be honest,
and understand that in your first few months in business, customers may not be
responsive to the new guy in town. Perhaps it may take a while
before you start gaining ground on your competitors. Determine a
fair estimate for how much you believe you will sell during your first year and
record the numbers in your notes. I will provide you with yet
another Excel spreadsheet that will make your projections stand out.
Friday: Financial Write-up
and Blog Entry
Now that you have some concrete numbers drawn up
for your business, it’s time to make those spreadsheets, graphs, and charts
make sense. Write a 250-word description of your break-even analysis
and sales projections.
A good way to frame this would be to write one
paragraph describing how you determined your expenses, and another one
detailing how you came up with sales projections. I know that many
of you have decided to purchase land and building, and have calculated monthly
mortgage payments with taxes and insurance, while others have looked up average
rent per square foot for commercial property. Tell me about that,
along with how you found other expenses. Then write about how you
determined how your sales will (hopefully) increase over time. Do
you believe it may take a few months for a certain advertising campaign to
start bringing in the money? Will word of mouth help bring in new
business after your first few months? Will you even turn a profit in
your first year (many businesses don’t) or will it take more time? Tell
me about your road to breakeven.
Copy and paste your write-up into a blog entry
and title it "(Insert Company Name)'s Financial Write-up" when
finished. Next week, we will create an Executive Summary, organize our
plan, and prepare for the Shark Tank.
