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Brooklyn Public Library Power UP! Business Plan Competition: 

Brooklyn Public Library Power UP! Business Plan Competition Creating Your Financial Plan May 23, 2007 BPL Business Library Presented by: Brooklyn Economic Development Corporation Boricua College Small Business Development Center

Financial Plan - What is it? : 

Financial Plan - What is it? The Future Story of Your Business – your marketing & your operations in $ terms An Answer to your financial questions “How much will I sell?” “How much will I spend?” “How much will I make?” An Answer to your financing questions “How much $ will I need?” “How am I going to pay for this?” A System for tracking the way you will tell the story and answer these questions

Financial Plan - Why is it needed? : 

Financial Plan - Why is it needed? Because: Great product does not mean a profitable business Cannot run a business without money Businesses grow, and need money for it Timing is everything - seasonality and cyclicality and ramp-up Business plan is incomplete without it – it proves the other parts make sense

Financial Plan - When is it needed? For stormy weather or a successful launch? : 

Financial Plan - When is it needed? For stormy weather or a successful launch? When you are: Starting a business Expanding a business Selling a business Seeking financing from outside - either a loan or an investment Turning around a business

Financial Plan - What’s in it? : 

Financial Plan - What’s in it? Cash flow projections “Know the Flow” Financing need “Trap the Gap” Financing strategy “Flash the Cash” How much money is going in and out just from the business? How much additional money is going to be needed to carry the business? Where is it coming from? In what form is it coming?

Financial Plan “Know the Flow” : 

Financial Plan “Know the Flow” Projecting operating cash inflows, month-by-month Projecting operating cash outflows, month-by-month Projecting operating cash balance, month-by-month

Financial Plan “Know the Flow” : 

Financial Plan “Know the Flow” Projecting cash inflows, month-by-month (Cash Sales = Operating cash inflows) This involves 4 steps: Develop the sales price Project unit sales per month or customer purchases per month (total #’s) Multiply units to be sold by price (# x $) Project dollar sales per month (total $)

Projecting operating cash inflows: 

Projecting operating cash inflows First, Develop the price list for your product or products – Include volume prices

Projecting operating cash inflows: 

Projecting operating cash inflows Second, Project the # of units you will sell (or # of customers you will sell to) in each month If products (or customers) are very different, prepare separate projections for each Add time that allows sufficient time for customers to respond to your marketing and for seasonality

Projecting operating cash inflows: 

Projecting operating cash inflows

Projecting operating cash inflows: 

Projecting operating cash inflows Third, multiply the # of units by the price per unit for each month

Projecting operating cash inflows: 

Projecting operating cash inflows Finally, Put the cash amount for each product in each month Get the total for all products for each month Those are your total cash inflows for each month That amount is what is available to pay all your expenses – your cash outflows…

Projecting operating cash outflows, month-by-month: 

Projecting operating cash outflows, month-by-month Involves 4 basic steps: Create categories Price each category Quantify each category for each month Total all categories

Projecting operating cash outflows: 

Projecting operating cash outflows Create categories for expenses or costs What kinds of things are needed to operate your business every day, week or month? Make a list of them Each one is part of an operating expense category – it has to be paid for regularly

Projecting operating cash outflows - categorize: 

Projecting operating cash outflows - categorize

Projecting operating cash outflows - price: 

Projecting operating cash outflows - price

Projecting operating cash outflows - quantify: 

Projecting operating cash outflows - quantify Project how much of each item will be used each month Some may be FIXED (pay the same regardless of sales (the rent must be paid no matter what the sales activity) Others may be VARIABLE (changes depending upon sales – more sales means more phone activity)

Projecting operating cash outflows – Jan 2006: 

Projecting operating cash outflows – Jan 2006

Projecting operating cash outflows – total: 

Projecting operating cash outflows – total

Projecting cash outflows – capital expenses: 

Projecting cash outflows – capital expenses Capital expenses = This is cash spent to buy fixed assets – things that the business owns that are of long-term value They are usually made to start up the business or expand the business They are also made every few years, depending on the need and available finances

Projecting cash outflows – capital expenses : 

Projecting cash outflows – capital expenses Categorize them: Equipment (to manufacture or inventory products or provide a service, like a sanding machine) Office Equipment (Including new or used computer, copier, fax machine) Furniture (including new or used tables, chairs, cabinets) Building (totally or partially occupied by business) Vehicle (new or used)

Projecting cash outflows – capital expenses: 

Projecting cash outflows – capital expenses Price them and recognize that they are fixed

Projecting cash outflows – capital expenses: 

Projecting cash outflows – capital expenses Quantify and Total $ – project how much is needed at start-up and later (if possible, in which year)

Projecting total cash balances & needs: 

Projecting total cash balances & needs Take all the cash inflows and outflows for the month, and add them up

Projecting cash balances & needs: 

Projecting cash balances & needs What is the final cash balance? If it is positive, then you have positive cash flow If it is negative, then you have negative cash flow In which situation do you need cash? In a month in which the business expects Negative cash balance or negative cash flow, because then you cannot count on the business to provide you the operating cash

Projecting cash balances & needs: 

Projecting cash balances & needs In which of the following months do you need outside or extra cash?

Summary – Connecting the dots : 

Summary – Connecting the dots Business plan components are connected. Let’s review: Market & Competition & Analysis Marketing Strategy Operations Finances

Creating the Financial Plan: 

Creating the Financial Plan Questions & Answers

CASH FLOW BUDGET WORKSHEETS: 

CASH FLOW BUDGET WORKSHEETS SMALL BUSINESS ADMINISTRATION (SBA) http://www.sba.gov/library/cfbudget.xls BROOKLYN PUBLIC LIBRARY (My Own Biz) http://myownbiz.brooklynpubliclibrary.org/s2/wtm_cash_now.htm BUSINESS KNOW HOW CALCULATOR http://www.businessknowhow.net/bkh/startup.htm COMMERCE CLEARING HOUSE (CCH) http://www.toolkit.cch.com/tools/cfbudg_m.asp

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