Blueprint for Success : Aboriginal Women Entrepreneurs

1

Introduce Yourself* Ask others to introduce themselves.. Including their name, business and what is the main thing you want to take away from this seminar

2

What is scary budgeting?* A lot of terms, numbers and know where everything should go

#3 - BUDGETINGStarting CostsOperating CostsCash FlowBreak Even AnalysisGross MarginsMarkupsLost LeadersGetting ProfitableStaying Power3

This module of the Aboriginal Women Entrepreneur course is about Budgeting arguably one of the least enervating sessions, yet absolutely critical to a sound Business Plan and to success as an entrepreneur.

BUDGETINGBudgeting is the creation of an action plan to outline financial and operational goals, in this case to help a business allocate resources to evaluate and forecast performance.4

How many people have created a budget before?Do you use a budget in everyday life?Budgets are meant to be changed and are flexible to the extend.> The main important of budget is so that you in your mind have and idea of what you are going to doing with your business and how your resources will be allocate.

5

What do you think would be on a budget?Categories?

a) Better understanding of anticipated revenue

B) Increase accuracy predicting cash flow

C) Better understanding in cost involved in operating your business

D) ALL of the AboveA benefit of having a budget is?6

D All of the aboveCorrect Answer is 7

HAVE A CLEAR VISION!If you dont know where you are going, you will wind up somewhere else. Yogi Berra

???8

Again budget is going to help understand what you will be doing with your business

A basic family budget9

Starting off small here we are going to prepare a basis family budget. These are often having to be provided from financing purposes

10

Risk is another factor to consider what going into businessMany business dont make money for a very long time, perhaps multiple years. Also with many high profit business, there is a great level of risk associated with and potential for failureEI a machinery operation company, that has only one main client, in a resource sectors which is subject to high and lowsHow do you minimize risk?Diverisfy client base? Buy used equipment? Search for lower intrest rates? Explore oppurtunties in other sectors?

START-UP CAPITALThe total amount of money needed to open a business

Capital Cost is the setup cost of a business or entity, after which there will be ongoing operational costs.

Capital is net worth in money, property & goods.

Build in a Safety Factor. Do not underestimate! Dont begin behind the !

11

How many people have opening their businesses already?Examples are computers, cost of initial signage, initial cost to get your business to a point were you can earn your first dollars.There needs to be a safety factor built in when you are considering these. Things always end up costing more, add in an extra 10-20% to account for this.

12

For example.. If you are buying a dump truck for a exactvating company:* Is this project worth it. Do you make more money hauling your own gravel or could you just pay someone else to do it. How much do you save by doing it yourself vs paying someone.How much money do have to front to buy this truck, what is the interest rate, have you factored those items into the equation.* Should you be hauling rocks, or even in the excavation business at all. What other thing could you be doing with your time and money? Is it all worth it?

START-UP CAPITAL COSTSExample: Home Daycare Start-up WorksheetExpenseItemRenovations$10,000 Toys$2,000 Food$500 Equipment$3,000Furnishings$5,000 Office Supplies$5,000 Utilities - Upgrades$500 Insurance$2,000 Legal Fees$3,000 Accounting Fees$2,000 Licensing$50 Advertising, Promotion & Website$3,000 Bank Charges$300 Operating expenses Fund$10,000 Start-up Capital required$46,350

13

Renovation costs > changes to home so they can have the daycare Explain each of themOperation expenses fund > IE the buffer

START-UP CAPITAL COSTS14Group Childcare Start-up CostsTeaching/Activity Supplies$3,000Equipment & Musical Instruments$47,000Telecomm$3,000Office supplies & Music$4,000Insurance$12,000Subscriptions$500Advertising and promotion$2,600Accounting fees$3,000Legal & Licensing fees$4,000Rent$12,500Leasehold Improvements$70,000Bank charges$300Association Dues$50Van purchase, maintenance & expenses$45,000Initial Investment$206,950

1) Home vs Group daycare > start up costs are much high.. But likely more reward

NEDC Workbook Startup15

Nedc workbook - startup16

OPERATING (WORKING) COSTSThe amount of money required to keep the business going after start-up

Many potentially solid businesses fail because they run out of money before they can become established.

17

Chances are you are not going to make good money right off the bat You need to be prepared to have the fund to get your thought the first couple difficult months or years/ Consider at least 6 months

18

OPERATING COSTSPlan to Have Enough Reserves!

The rule of thumb is to have enough money to fund at least 3 months (preferably 6) to pay expenses, especially fixed costs costs that are independent of production or sales, such as rent, property tax, insurance, utility and interest expenses.

19

Fixed cost things that you have to pay for and are not contigents of how much activity your business is partaking in. Insurance, Hydro, ect

OPERATING COSTSEstimate & Define Costs in Detail20

This example breaks down variables costs based on a per child basis. The more kids a daycare has, the hight each total cost would be

FIXED OPERATING COSTSExamples of Fixed CostsAdvertising and promotionEquipment rentalLease/mortgageFreight/postageInsurance/license/feesProfessional feesTaxesPersonal withdrawals!Salaries & benefitsUtilities and telecom; websiteVehicles21

22

Cashflow > Is the money coming in more than the money going outYour can be earning profit.. But still being a position were more money is going out than coming in

Cash Flow is the profit, over a given period of time, after expenses are subtracted from income.Estimate your Cash Flow as projected monthly income and operating costs for at least the 1st year & as a 3 year summary.

Cash Flow is an important component of the financial tables in your business plan.

Cash Flow is your best window into the future! OPERATING (WORKING) COSTS CASH FLOW23

OPERATING (WORKING) COSTSCash Flow Example Arts & Crafts BusinessYear 1Year 2Year 3Income Cash Sales $50,000$70,000$75,000 Other Income - Teaching $0 $500 $800Total Revenue $50,000 $70,500 $75,800Expenses Materials & Supplies$8,500$11,000$11,500 Wages & Benefits (Owner)$24,000$30,000$35,000 Rent and Storage$960$1,050$1,100 Equipment$3,200$2,000$3,000 Accounting, Legal, Insurance$2,700$2,500$2,700 Auto Exp, Travel & Shipping$4,000$5,000$5,500 Advertising & Promotion$1,200$1,000$1,000 Utilities $1,200 $1,300 $1,400Total Expenses $45,760 $53,850 $61,200 Gross Profit$4,240$16,650$14,600

24

Sales increasing over time2) Materials increasing consistent with expenses3) Less equipment outlays in year 2

OPERATING (WORKING) COSTSCash Flow Example Group Childcare25FY1FY2FY3IncomeBC Childcare Operating Fund$32,509$33,809$33,809BC Childcare Subsidy $110/day$137,500$143,000$149,500Parent fees$165,000$171,600$180,250Music Academy Lesson Fees$36,281$41,610$41,610 Total income$371,290$390,019$405,169ExpensesSalaries & benefits (FY1, 3 jobs)$117,000$124,080$129,360Teaching/Activity Supplies$7,000$6,000$6,000Food Supplies$20,000$20,000$20,000Equipment & Musical Instruments$5,000$3,600$3,600Telecomm$2,400$2,640$2,640Office supplies & Music$3,000$3,000$3,000Insurance$0$12,000$12,000Subscriptions$0$500$500Advertising and promotion$2,400$2,400$2,400Accounting fees$4,000$5,600$5,600Legal & Licensing fees$1,000$2,000$2,000Rent$68,750$75,000$75,000Leasehold Improvements$0$2,000$2,000Utilities$4,800$5,040$5,040Repairs and maintenance$1,500$3,000$6,000Bank charges$600$600$600Professional Development$3,000$3,000$3,000Association Dues$0$50$50Carrying Charges$1,200$1,200$1,200Janitorial$3,600$3,600$3,600Van purchase, maint. & expenses$9,600$16,800$18,000Total Expenses$254,850$292,110$301,590Gross Profit$116,440$97,909$103,579Owner Draw$72,000$75,000$78,000Income taxes$15,719$13,218$13,983Net Revenue (Equity)$44,440$22,909$25,579

Looks at a couple different income sourcesBreaks out # of people employing

Have participants prepare own cash flow statements 10 minutes

NEDC Workbook - cashflow26

BREAK EVEN ANALYSIS27

How much revenue you need to generate to make 0 dollarsConsider costs involved in operating business

BREAK EVEN ANALYSISFocus on the sales and/or service level at which your business will break even (costs = income), rather than just making pie-in-the-sky guesses about sale volumes.

You need to know the break-even point to determine if you are winning or losing.

Its a simple process, as we will see next. 28

29

BREAK EVEN ANALYSISLemonade Sales by 1,000s

30

This is a good illustrationWhen they are selling $2,000 units, income is less that expensesBut at $3,500 sales equal costAnything after $3,500, the company is profitableThis is something you need to determine for your company

31

There will be flucutations in cash flow for your business

GROSS MARGINGross margin is the sales revenue, minus thecost of goods sold, divided by the sales revenue - usually expressed as a percentage.

This number represents the percent of each revenue dollar retained as gross profit.

Gross Margin = (Revenue Cost of Goods / Revenue) x 100%

32

How much profit as a percentage is earned on each unit sold

GROSS MARGINSThe cost of goods includes only costs directly linked to the sale, (materials, labour, suppliers, shipping etc.). It does not include indirect fixed costs like office expenses, rent, administration, etc.OK Hold on. This next bit can be confusing!

33

Remember we went over fixed and variable costs. COG inludes variable costs

MARK-UPMark-up is the difference between the selling price and the cost of goods or services again, often expressed as a percentage.Mark-up = Sale Price Cost of Goods

% Mark-up = (Mark-up / Cost of Goods) x 100%

34

Example if your sales price of $4Your cost of goods sold is $2Your mark up is $2Or as expressed as a percentage 100%

GROSS MARGIN VS. MARK-UPGross Margin is the percentage of the selling price that is profit.

Mark-up is the percentage of the cost of goods or services added to determine the sale price.35

So whats the difference:

Gross margin calculates what your profit is

Vs

Mark-up; What your selling price should be to make a profit

GROSS MARGIN VS. MARK-UPOK, OK if you really want to know!36

This illustration calculates the two

NEDC Workbook - pricing37

LOST LEADERA Lost Leader is a product or service sold at a substantial discount to generate sales of other, more profitable items.Why on earth would anyone do this?!

38

Why would anyone do this?To draw people into a businessTo gain potential customersTo use as a advertising too

LOST LEADER A business often uses a lost leader when they first open their doors, as a strategy to attract buyers and build a customer base tocreate future ongoing sales.

39

LOST LEADERSome companies use lost leaders routinely. Hewlett Packard sells its printers dirt cheap knowing that users will need to spend huge dollars on print cartridges.

Gillette practically gives its razors away in order to sell the real product costly blades!

40

Are they any other loss leader you can think of?

NEDC Workbook projections

41

Now that you know how much you are going to be selling your products for, you can calculate how much revenue you will be generating.

NEDc Workbook income stmt42

GETTING PROFITABLE Make your own decisions! Never stop learning Keep an eye on competitors Expenses pay attention to details & discounts Work to keep your receivables down Take care with price reductions a slippery slope Review under-performers and time-wasters Leverage social networking and technology Use free resources - local, Internet, BDC, Canada Business Service Centres, etc.

43

44

As the quote above.. The money in your bank is hard earned. Consider

STAYING POWER!Staying power is about sticking around when things dont work out well and the going gets tough. Being successful requires persistence, consistency and a never say die" attitude!

If you are serious about making your business competitive and sustainable, start by thinking about strategies and contingencies so you will be standing when the dust settles!

45

STAYING POWER! Awareness Foresight Creativity Persuasiveness Tenacity Flexibility Patience Humour Tact & Diplomacy Professionalism & Class

46Qualities for Success

Any Questions or concerns

Feel free to contact me if you have questions or would like to book a FREE mentoring session

EMBER.CATHERS@GMAIL.COM250-713-244447

CONTACT US, ANYTIME48

Income Generating Family Members: Monthly Annual Notes: (Source of Income)1. $ $2. $ $3. $ $4. $ $

TOTAL FAMILY INCOME: $ - $ -

Rent/Mortgage/Lease for Home $ $Hydro: gas/water/electricity $ $Cable/Internet/Landphone $ $Cell phone(s) $ $ Contract?Insurance: Car, home, life, disability, health $ $Car Loan Payments $ $Vehicle costs: fuel, maintenance $ $Child(ren) costs: daycare, clothing, babysitters, and toys. $ $Health Care: medical/dental care, prescriptions/vitamins,etc. $ $Furniture & Appliances Cost/ Maintenance $ $Entertainment: movies, concerts, vacations, videos, restaurants $ $Pet care: Medical, grooming, maintenance, food, etc. $ $Student Loan Payments $ $Credit Card Payments $ $Personal Loans/Lines of Credit/Overdraft Payments $ $Tax Payments $ $Other: $ $Other: $ $Other: $ $

TOTAL FAMILY EXPENSES: $ - $ -

Surplus/Deficit $ - $ -

Family Income

Family Expenses

FAMILY BUDGET

Certified true on this _______ day of _________________________, 20_______ Signature: ___________________________________

Family Budget

Building a Better Future for Business NEDC Business Plan Workbook 2012

15If you have not done your research yet, go back to Getting Started workbook!

Get help when you need it - contact NEDC: nedc@nedc.info 250.724.3131 1.866.444.6332

8.0 IMPLEMENTATION PLAN Outline the necessary steps that will be required to implement your business plan including start and end dates (or allocated time) and who will be responsible for ensuring completion:

Task/Objective Person Responsible Start date End date Ie; Purchase Equipment Owner A Jan. 1, 08 Jan 17, 08 Get biz name & license Owner A Jan. 1, 08 Feb. 1, 08 Who will be responsible for ensuring that these tasks/objectives are completed as outlined above? i.e. supervisor's or managers name __________________________________________________________

Building a Better Future for Business NEDC Business Plan Workbook 2012

To determine the project costs of your business, total the prices of everything you require for your project from your quotes and pricelists.

Use of Funds - Total Project Cost (Funds Required for):

Sources of Funds Equity:

Loans & Contributions: