Question

Project 1

• Create a financial plan for a business you intend to start up or for a hypothetical business and develop strategies to acquire finance.

  The financial plan should consist of four parts:

  Part 1

  A brief description of the business, its nature, intended operational size and goals.

  Outline of the business vision.

  Part 2

  An analysis of the financial requirements of the business including projected:

  • income and expenditure
  • costs of production or services
  • pricing strategies
  • contribution margins
  • profit projections

  Provide details of the basis for your projections.

  Part 3

  Details of:

  • profit targets which reflect desired returns
  • identification of your proposed asset requirements and asset management strategies
  • cash flow projections which will allow the business to operate according to the business plan and legal requirements
  • identification of capital investment requirements for each operational period
  • suitable budget targets to allow the monitoring of financial performance
  • break-even analysis
  • a projected balance sheet
  • working capital analysis
  • requirements for start-up finance or ongoing finance

  Part 4

  A finance acquisition strategy including:

  • identification of sources of potential finance
  • cost of securing finance
  • strategies to obtain finance

Give an example of one hypothetical business.

Answer 1

BUSINESS : "GET WELL SOON " - Online counselling 24/7

PART 1

Nature:

Our program is based on cognitive behavioral therapy (CBT). Since the therapy is web-based, you may access our program from throughout the world.

We are a dedicated online-based team of consultant therapists, cognitive behavioral therapists, practitioners and support staff that collaboratively works to help people in need of emotional support.

It is committed to improving the quality of life of the people it touches in its journey.

We believe that every human being is unique, with immense untapped potential.

Our mission is to open the doors for the flow of emotions, energy and release the potential.

Intended operational size and goals.

This is not just a quick-fix to make you smile right now. You'll get all the support and tools you need to feel better over the long-term.Connect with a listener by requesting the first available listener, or by selecting a specific listener from our community. Category a) counseling in person b) online counseling (by mail/ Chat/Phone) C) video Talks , D) Lectures/ Talks in following areas addictions, agoraphobia,anger,anxiety ,bipolar, BPD , depression , GAD, OCD, health anxiety , Insomnia,Relationship, Marital,loneliness

Business vision.

Better mental health and fitness for all , now and for future generations.

PART 2 Analysis of the financial requirements of the business

• income and expenditure

Set up a spreadsheet projecting sales over the course of three years. Set up different sections for different lines of services and columns for every month for the first year and either on a monthly or quarterly basis for the second and third years. Make spreadsheet blocks that include one block for unit services, one block for pricing, a third block that multiplies units times price to calculate sales, a fourth block that has unit costs, and a fifth that multiplies units times unit cost to calculate cost of services

• costs of production or services

Understand how much it's going to cost you to actually make the sales you have forecast. Differentiate between fixed costs (i.e., rent of website and payroll for counselor) and variable costs (i.e., most advertising and promotional expenses)

a)cost of services  

b)operating expenses

c)depreciation and interest on capital

• pricing strategies

Cost-plus pricing. This standard method of pricing in business seeks to first determine the cost of providing a service, and then add an additional amount to represent the desired profit. To determine cost, you need to figure out direct costs, indirect costs, and fixed costs. "With the cost-plus approach, the thing to remember is that if you're paying someone $11 an hour, you may think you should charge $11 an hour for the service they provide, but you have to factor in all your costs,"

• contribution margins

The contribution margin represents the amount of money a company has to cover its fixed costs after it pays all of its variable expenses. It also includes the amount, if any, left over after covering fixed costs that constitute the company's net operating profit or net operating loss.

You can calculate the contribution margin by using the following equation:

Contribution Margin = Sales Revenue - Variable Expenses

• profit projections.

fix according with market profitability margin

Part 3

Details of:

• profit targets which reflect desired returns

Determining a fair profit margin
Once you determine your costs, you need to mark up your services to ensure that you achieve a profit for your business. This is a delicate balance. You want to ensure that you achieve a desirable profit margin, but at the same time, particularly in a down economy, you want to make sure that your business doesn't get a reputation for overcharging for services.

• identification of your proposed asset requirements and asset management strategies

prepare a projected balance sheet. You have to deal with assets and liabilities that aren't in the profits and loss statement and project the net worth of your business at the end of the fiscal year. Some of those are obvious and affect you at only the beginning, like startup assets.

• cash flow projections which will allow the business to operate according to the business plan and legal requirements

This is the statement that shows physical dollars moving in and out of the business. . You base this partly on your sales forecasts, balance sheet items, and other assumptions. If you are operating an existing business, you should have historical documents, such as profit and loss statements and balance sheets from years past to base these forecasts on. If you are starting a new business and do not have these historical financial statements, you start by projecting a cash-flow statement broken down into 12 months.it's important to understand when compiling this cash-flow projection that you need to choose a realistic ratio for how many of your invoices will be paid in cash, 30 days, 60 days, 90 days and so on. You don't want to be surprised that you only collect 80 percent of your invoices in the first 30 days when you are counting on 100 percent to pay your expenses.

• break-even analysis

The breakeven point  is when your business's expenses match your sales or service volume. The three-year income projection will enable you to undertake this analysis. "If your business is viable, at a certain period of time your overall revenue will exceed your overall expenses, including interest." This is an important analysis for potential investors, who want to know that they are investing in a fast-growing business with an exit strategy.

• a projected balance sheet

• Begin	Year 1	Year 2	Year 3	Year 4	Year 5
  Cash	$33,150	$110,697	$210,697	$243,259	$293,834	$363,370
  Inventory	425,000	425,000	424,781	446,020	468,321	491,737
  Prepaid leases	28,000	28,000	28,000	28,000	28,000	28,000
  Total current assets	$486,150	$563,697	$663,478	$717,279	$790,155	$883,107
  Fixed assets	33,850	33,850	33,850	33,850	33,850	33,850
  Less: depreciation	0	4,916	9,832	14,747	19,664	24,579
  Net fixed assets	33,850	28,934	24,018	19,103	14,186	9,271
  Total assets	$520,000	$592,631	$687,496	$736,382	$804,341	$892,378
  Accounts payable	0	68,908	139,654	146,637	153,968	161,667
  Long-term debt	468,000	438,529	406,133	370,522	331,377	288,346
  Total liabilities	468,000	507,437	545,787	517,159	485,345	450,013
  Owner's equity
  Paid-in capital	52,000	52,000	52,000	52,000	52,000	52,000
  Retained earnings	0	33,194	89,709	167,223	266,996	390,365
  Total liabilities & equity	$520,000	$592,631	$687,496	$736,382	$804,341

• working capital analysis

Working capital measures a company’s operation efficiency and short-term financial health. For example, positive working capital shows that a company has enough funds to meet its short-term liabilities. In comparison, negative working capital shows that a company has trouble in meeting its short-term liabilities with its current assets

For example, a company has $10,000 in current assets and $8,000 in current liabilities. Look at the following formula to see the calculation.

Working capital = 10,000 – 8,000 = 2,000

• requirements for start-up finance or ongoing finance