How can I start my own business? - MoneySmart · X Analyse relevant information to make informed choices when purchasing goods and services and/or resolve consumer choices X Evaluate

How can I start my own

business?Teaching notes and resource booklet

3www.teaching.moneysmart.gov.au© ASIC 2012 all rights reserved

Contents

Introduction 5

Section 1: Experience and ask 8

Section 2: Search (60 mins) 11

Section 3: Examine and analyse (60 mins) 17

Section 4: Trading as a business (up to 4 weeks) 23

Section 5: Share and reflect 52

4 www.teaching.moneysmart.gov.au © ASIC 2012 all rights reserved


IntroductionDoes business benefit my community?

Students investigate local economic systems and use their findings to develop a persuasive argument.

Students explore the local economic system through identification of local producers and consumers and how new economic opportunities can bring in extra revenue to a community. They plan and operate a local business. Students investigate how to set up a business and predict if their idea is viable. They run their business and keep financial records while the business is run. They are then required to reflect on their business venture and report back to the class.

Within this unit of consumer and financial literacy, students communicate, justify, predict, explore concepts, develop strategies, and analyse the viability of running a business. This is done by making short and long term financial goals, investigating the amount of profit generated, budgeting for profit and loss, and maintaining balance sheets and cash flow statements.

Links to National Consumer and Financial Literacy Framework

Year 10

Knowledge and understanding:

X Identify and explain strategies to manage personal finances

X Identify types of consumer and financial risks to individuals, families and community and ways of managing them.

Competence:

X Use a range of methods and tools to keep financial records in real-life contexts

X Create simple budgets and financial records to achieve specific financial goals, now and in the future

X Analyse relevant information to make informed choices when purchasing goods and services and/or resolve consumer choices

X Evaluate marketing claims, for example in advertising and social media, to influence consumers to purchase a range of goods and services

Responsibility and enterprise:

X Explore the economic cost of individual and collective consumer decisions on the broader community and environment

X Apply informed and assertive consumer decision making in a range of ‘real-life’ contexts


X Research and discuss the legal and ethical rights and responsibilities of business in providing goods and services to consumers

X Apply consumer and financial knowledge and skills in relevant class and/or school activities such as student investigations, charity fundraising, product design and development, business ventures and special events

X Exercise a range of enterprising behaviours through participation in relevant class and/or school activities

X Demonstrate awareness that family, community and socio-cultural values and customs can influence consumer behaviour and financial decision making.

Preparing

Consider these points before implementing student learning.

X Identify the local business community. What are the sources of economic benefit to the community? Consider the Federal/State Government as part of the local econonic system.

X Contact any local business owners who may wish to assist with surveys and/or be a guest speaker.

X Organise access to a range of relevant information sources to support students’ planning their business, running their business and writing arguments.

X Consider students’ prior knowledge and experience

X Hold discussion around how different community members make a living.

Implementation

Consider these points when implementing the teaching and learning.

X Organise with the school administration a suitable budget to allow students to create or offer goods or services to the school community.

X Find a suitable schedule of when the students will be trading as an active business. How long will they trade for? When are they allowed to trade? (e.g. Before/After School, during breaks)

X Organise a suitable area for students to operate their businesses.

X Decide on the mode(s) for presentation of students’ final argument – this may be written, oral, or some form of media, e.g. slide show or web page. Decide also whether students will all use the same mode or select from a range of options.


X Decide how to use the Student worksheets and adapt to suit local needs if necessary. You may decide to use notebooks or scrap paper for some activities instead of printing all the pages.

X Organise students to develop a business in small groups or as individuals. Decide on the timeline to plan and develop their business and determine the period in which they will be actively running their business.

X Provide opportunities for students to write their business financial plan and to perform related calculations.

X Provide opportunities for students to pose questions to small business owners

X Provide opportunities for students to making recommendations, justifications and strategies

X Allow students to report on their findings on how viable their business venture will be.

Giving feedback to students

Involve students in the feedback process. Give students opportunities to ask follow-up questions and share their learning observations or experiences.

X Focus feedback on the student’s personal progress. Emphasise continuous progress relative to their previous achievement and to the learning expectations — avoid comparing a student with their classmates.

X Highlight the students’ inquiry process and their work throughout the tasks, not just the final argument.


Section 1: Experience and ask X Online activity: Matching

X Online activity: Ranking

X Student worksheet 1: Employment agency

Teaching and learning Evidence of achievementYear 9

Explore and discuss how and why people work.

X Discuss employment agencies:

X What service do they provide?

X Who can access these services?

X Who runs employment agencies?

X Do some agencies make a profit? If so, how do they make a profit?

Students engage with the Smart Money Website Section 1 and complete Student worksheet 1: Employment agency.

Read the following scenario to the class.

Ellie would like to be carpenter. She has just read an advertisement offering an apprenticeship and would like to apply. Ellie is concerned that it may be difficult for her to find work as a carpenter because most carpenters are male.

Students could work in groups, discussing the following questions, then report their answers back to the class.

X Are some jobs gender-stereotyped?

X Should gender be a reason to pursue or not pursue a job or career?

X What are some valid reasons for pursuing or not pursuing a job or career?

X In a class discussion, consider appropriate reasons that a person might be considered suitable or unsuitable for a job.

Identify Humanities and Social Science curriculum references specific to state or territory as applicable.

Language: Language for interaction

Understand that roles and relationships are developed and challenged through language and interpersonal skills (ACELA1551)


Student worksheet 1: Employment Agency

You are working in an employment agency and you have been asked to investigate the employment situation in your suburb or town and write a report for your manager.

X Search the Positions Vacant in the local newspaper, community noticeboards and the internet for 1 week.

X Also think what other jobs may be available in your community

X Complete this table, providing detail about 10 available jobs.

Occupation Fulltime

Part-time Casual employment

Employer requirements

Skill/ Qualification

X In the report for you manager cover points such as: what jobs are available, the number of full time versus part time or casual jobs and whether you think people in your community have the skills needed for the jobs advertised.


You have also been asked to prepare a poster for a display at the Employment Agency’s Open Day. Choose one of the following topics:

X School to Work Pathways – Identify and illustrate possible school to work pathways that students can follow.

X Range of Occupations - showing description of jobs available, personal requirements, changes over time, pay, working conditions, education and training requirements, skills required, career path

X Stereotyping of Occupations – Oppose stereotypes of employment patterns in your community

X Community Volunteer work - organisations seeking volunteers in your community e.g. Meals in Wheels, what they do, what they need, employment related skills that are developed.


Section 2: Search (60 mins)1. Student worksheet 2: How does money come into our community?

2. Student worksheet 3: Small business survey

3. Online activity: Expenses and revenue

4. Online activity: Profit and loss



Money is a limited resource in all communities. To increase the financial wellbeing of a community ways of increasing money that comes into the community can be explored.

The money that is available outside the wider community can be brought into the local community through strategic business strategies. This may initially be through increased individual income, which is then spent in other business in the local community, which increases the income of these local businesses.

Students engage with Smart Money Website Section 2

Identify producers and consumers in the community. Students complete worksheet 2: How does money come into our community?

Brainstorm and list the local businesses in the community. Students complete worksheet 3: Small business survey.

Discuss as a class the students’ findings in worksheet 3. What successful business practices did they learn about? Consider as a class the characteristics of a successful business.

Prompt students to think of products or services that are new to the community and that could benefit the community. Consider where the knowledge and culture of the local community can be utilised in a business venture such as harvesting and germinating bush seeds to supply tube stock for bush regeneration projects; developing skin care products based on the properties of indigenous plants.

Carry out the online Expenses and revenue as well as the Profit and loss activities. Explore further using examples relevant to the local community.


Language: Language variation and change

Understand that Standard Australian English is a living language within which the creation and loss of words and the evolution of usage is ongoing (ACELA1550)

Language: Language for interaction Understand that roles and relationships are developed and challenged through language and interpersonal skills (ACELA1551)

http://www.australiancurriculum.edu.au/Glossary?a=12d44a4d-a36c-41c1-b84c-9e4600a2a39b&t=Standard%20Australian%20English


http://www.australiancurriculum.edu.au/Curriculum/ContentDescription/ACELA1550


Student worksheet 2: How does money come into our community?

Draw a diagram with your community in a circle in the centre and all the places and people where money comes from in small circles around this centre being linked to it by arrows.


Enhancing the local community

Money in the community is a limited resource. To improve the ‘wealth’ of the community additional money needs to be sourced by providing goods and services that are paid for by people who live in other places. Business opportunities that bring extra money into the community should be considered. Increasing the money coming into the community through greater diversity goods and services; and using good business practice enhances the local economy and increases the financial means of the whole community. This means that the money being paid for goods and services required by people in the community needs to be less than the money that comes in.


Student worksheet 3: Small Business Survey

Choose a small business in your community to explore the issues that small businesses face:

X What is the name of the business and what products or services do they offer?

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X What resources do they use?

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X What are their practices?

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X Who are their targeted audience?

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X Have they ever made a loss? For how long did they make a loss?

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X What can you learn from them? What advice can they give you for running a business?

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X How long have they been in business for?

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X Survey your local business to find how they target their audience.

How do you target your audience? Yes No Unsure

Pamphlets

DVD

Advertisement

Local paper

Flyers

Television

Internet

X List other ways that they reach their audience.

Draw a map of your community and plot all the businesses on it.


Section 3: Examine and analyse (60 mins) X Student worksheet 4: What we hope to do

X Student worksheet 5: Fish tank business game


Lead a discussion on what the roles of different business are in the community and the role of each student within the local economic system.

Students work through Section 3 of the Smart Money Website

How to come up with a product?

Begin the lesson by working together as a class to list the existing businesses in the local area. Students can refer to their local business survey. Are there opportunities to provide goods and services to the local and wider community?

Ask students to consider the needs that are not currently being met by existing businesses.

If students will be working in groups to develop and run their business, organise them into groups of no more than 4.

Instruct each student or group to identify needs in their local area, find business ideas that will address each of these needs and create a profile of the consumers for each of these business ideas. Student worksheet 4: What we hope to do, provides a starting point for discussing these questions.


English


Mathematics

Number and Algebra: Real numbers

Solve problems involving direct proportion. Explore the relationship between graphs and equations corresponding to simple rate problems (ACMNA208)



Although students may be tempted to pursue the first idea that they think of, it is a worthwhile to general several ideas and then compare and contrast these ideas. Emphasise the importance to students of generating several ideas at this stage. It’s quite acceptable that at this stage some of their ideas will be rough and underdeveloped. Students could consider both businesses that provide services and businesses that provide products.

Invite local small business owners to address your students about the considerations needed when developing a business idea.

Mathematics

Resource:

X Fish tank business game at http://www.scootle.edu.au/ec/pin/DGPMQV?userid=38967

X Use Student worksheet 5: Fish tank business game, to record results of the business game.

http://www.scootle.edu.au/ec/pin/DGPMQV?userid=38967





Student worksheet 4: What we hope to do – Think Pair Share

Before starting a business you will need to come up with a business idea. Your teacher will tell you whether you are going to be working on your own or in a small group of no more than 4 students. Then investigate the business idea and document the main ideas and decisions

1. Do the activities - think, pair, and share.

2. After ‘pair’ present your ideas to the whole class and decide on the best responses


Think

What is needed in your area?

Think by yourself for three minutes and come up with at least three responses

1. ............................................................................

2. ............................................................................

3. ............................................................................

What ideas can you come up with?

1. ............................................................................

2. ............................................................................

3. ............................................................................

Who are your customers and what would they want?

1. ............................................................................

2. ............................................................................

3. ............................................................................

Pair

What is needed in your area?

Think with a partner and come up with the best three responses

1. ............................................................................

2. ............................................................................

3. ............................................................................

What ideas can you come up with?

1. ............................................................................

2. ............................................................................

3. ............................................................................

Who are your customers and what would they want?

1. ............................................................................

2. ............................................................................

3. ............................................................................


Student worksheet 5: Fish tank business game

1. First play the game for just a few minutes. Notice how to buy and sell fish. Explain the goal of the game.

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2. Click on “Start again” and click on “Yes”. Quickly look over the summary that appears.

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3. Before you start the game again, and play all the way through, think of some strategies you could use to help you do well in the game? What information could you record during the game that could help you win?

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4. Play the game but take note of three trades where you made a profit or loss. Record the type of fish, the amount of money that you paid for it, and what you sold it for,

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5. For each of the three trades you recorded in question 4, calculate the profit or loss and also calculate the profit or loss as a percentage of the cost price.

For example:

Suppose Jill bought a scarper fish for $30 and sold it for $40.

40 – 30 = 10

Jill’s profit is $10

1040

14

1001

100

= 25

x

x=

Jill’s profit is 25% of the cost price.

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6. Tom bought a scarper fish for $30 and sold it for $25 find his loss as percentage of the cost price.

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7. Mindi made a 12% profit when she sold one of her fish for $66. How much did Mindi pay for the fish?

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Section 4: Trading as a business (up to 4 weeks)Students will

X analyse the short and long-term benefits of financial decisions using mathematical knowledge and understanding.

X predict long term profit using data analysis and calculations

X Reflect on the accuracy of their business projections using mathematical knowledge and understanding.

1. Student worksheet 6: Market analysis

2. Student worksheet 7a: Production / operations plan

3. Student worksheet 7b: Services operations plan

4. Student worksheet 8: Setting goals for a business

5. Student worksheet 9: Calculating a break-even point

6. Student worksheet 10: Using a spreadsheet to calculate a break-even point

7. Student worksheet 11 : A business financial plan

8. Student worksheet 12 : A Business management plan

9. Student worksheet 13: Completing a simple balance sheet

10. Student worksheet 14 : Daily record keeping

11. Student worksheet 15 Weekly record keeping

12. Student worksheet 16: Reflection



In this section, it is important to emphasise to students the need for careful planning. This includes financial planning and pre-empting issues related to the management and practicalities of running a business.

Students work through Section 4 of the Smart Money Website

Market Analysis

Support students to complete Student worksheet 6: Market Analysis

Students could also use survey sheets to ask other students or community members what they would pay for if it was available in the community.

Planning operations

Teacher to lead discussion on:

X What else would you need to consider before starting a business?

X What other financial documents do you need to use to run a business?

Student’s complete Student worksheet 7a: Productions / operations plan or Student worksheet 7b: Services operations plan depending if their business is providing goods or services.

Assist student to identify any government regulations relating to the proposed economic activity.


English

Language: Language variation and change

Understand that Standard Australian English is a living language within which the creation and loss of words and the evolution of usage is ongoing (ACELA1550)


Literacy: Interpreting, analysing, evaluating

Apply an expanding vocabulary to read increasingly complex texts with fluency and comprehension (ACELY1743)

Mathematics

Statistics and probability: Data representation and interpretation

Identify everyday questions and issues involving at least one numerical and at least one categorical variable, and collect data directly from secondary sources (ACMSP228)

Number and Algebra: Real numbers

Solve problems involving direct proportion. Explore the relationship between graphs and equations corresponding to simple rate problems (ACMNA208)



http://www.australiancurriculum.edu.au/Curriculum/ContentDescription/ACELA1550

http://www.australiancurriculum.edu.au/Glossary?a=12d44a4d-a36c-41c1-b84c-9e4600a2a39b&t=read

http://www.australiancurriculum.edu.au/Glossary?a=12d44a4d-a36c-41c1-b84c-9e4600a2a39b&t=text

http://www.australiancurriculum.edu.au/Curriculum/ContentDescription/ACELY1743



Mathematics

Business Calculations

Revise the following terminology with students:

X Cost

X Profit

X Loss

X Revenue

X Asset

X Liability

Ensure that students develop a clear understanding of financial terms and the context in which they are used as they arise during the business task.

Setting initial business goals:

Lead a discussion on why a business would need short and long term goals.

Pose questions:

X Why would a business worry about the future?

X What are short and long term goals?

X How realistic do the goals need to be?

Explain to students that at this stage they are going to set some initial goals for their business. Later on they will do some more complex calculations and more detailed considerations that will enable them to refine these goals.

Ensure that students understand terms and the way they are used in context, such as revenue, cost, profit, earnings.

X Support students to complete worksheet 8: Setting goals for your business.



Break-even point

Remind students that so far they have not taken the start-ups costs of their businesses into account.

Student’s complete worksheet 9: Calculating a break-even point and worksheet 10: Using a spreadsheet to find a break-even point.

Prompt students to consider how they would change their goals based on their break-even point analysis.

Examine the principles of ‘economy of scale’ where a business can achieve economies of scale by lowering the average cost per unit through increased production since fixed costs are shared over an increased number of goods or services.

Planning

Lead an initial discussion on the organising and writing of a business financial plan.

Pose questions

X Do they think all businesses have financial plans?

X What goes into a financial plan?

X Why is it important to have a plan?

Build upon prior knowledge:

Get the students to reflect on their findings and discussions on what they have done.

Is their financial plan viable?

How can they make changes to give their business a better start?



Students complete student worksheet 11: A business financial plan and Student worksheet 12: A business management plan.

Students undertake Student worksheet 13: Completing a simple balance sheet.

Support students’ business activity.

Provide opportunities for reflection. After each day/week of trade students should complete worksheets 14 and 15: Daily record keeping and Weekly record keeping. Are they meeting their goals and what changes will they make to further business activity?

X Allow students actively to begin to run their business. Class time may need to be allocated to create their product/service and set a time when they are allowed to trade at school.

X Introduce a learning journal: students can then detail experiences, concerns and hopes for the business. This will be a good resource to use for the persuasive argument.

X Students reflect on the usefulness of all the financial tools given to them as a means to keep records of their day to day business transactions.

X Students complete Worksheet 16. Students use the information recorded in worksheets 14 and 15, and the short and long term business trading goals they set to reflect upon the actual business results they achieved after the first day of trade. This provides students with the opportunity to consider the reasonableness of their long term goal.


Student worksheet 6: Market Analysis

Target market

X What age group? X What gender? X What price range? X What location? X What needs does it meet?

Competitive advantage

X Are other businesses doing it? X How is it different from other businesses in the market?

X Why would consumers choose your product or service?

Competitors

X Who else is trying to tap into the market share?

X Who else is providing the same or similar product?

Location and how we are going to sell the product

X Where are you located? X What does your business look like? X How does your business stand out? X How are you different? X Are you professional?

Pricing

X Are you competitive? X Are your prices reasonable for your target market?

X How are people going to pay? X Do you discount?

Promotion

X How are people going to know about you? X Where will you advertise? X How are you going to promote our business?

Strategy to achieve success in the marketing mix

X Conclusion – why is your business going to be a success?


Student worksheet 7a: Production/Operations Plan (for businesses that sell a product)

What resources do I need to make my product?

X What materials are needed to make my product?

X What quantity of each material will I need?

X How many can I reasonably expect to sell each week and overall?

Where do I get my resources?

X Where am I going to get the items I need to make my product?

How do I make my product?

X What steps do I need to follow to make my product?

How long does it take to make my product?

X How many hours & minutes does it take to make my product?

X How many can I make before I start my business?

X How many can I reasonably expect to make each week that my business operates?

How do I make sure that my product is always of the same quality?

X Are there any guidelines to what my product should look like, taste like?

X How will I know if I am delivering a quality product?

Training

X How do I make sure everyone in our group can make this product?

Strategy to achieve success in the production mix

X Conclusion – why is our business going to be a success?


Student worksheet 7b: Services Operations Plan (For businesses that will sell a service)

What resources do I need to design and offer my service?

X What items will I need to buy?

X What quantity of each item is needed?

X How many customers can I reasonably expect to deliver my service to in a week? Overall?

Where do I get my resources?

X Where am I going to get the items I need to design and deliver my service?

How do I design my service?

X What steps do I need to follow to design my service?

How long does it take to prepare and deliver my service?

X How many hours & minutes does it take to deliver my service, including preparation time?

X How many customers can I reasonably expect to deliver my service to in a week? Overall?

How do I make sure that my service is always of the same quality?

X Are there any standards that I will adhere to?

X How will I know if I am delivering a quality service?

Training

X How do I make sure everyone in our group can deliver this service?

Strategy to achieve success in the production mix

X Conclusion – why is our business going to be a success?


Student worksheet 8: Setting goals for your business

Start by answering the following questions: (you will be able to review you answers later.)

How much money do you hope to make on the first day of your business?

................................................... (We will call this your short-term goal)

How much money would you hope to make if your business operated for a year?

................................................... (We will call this your long-term goal)

In order to check if these goals are reasonable, we can produce a cost and revenue breakdown. The calculations that we perform on this worksheet will not be exact because there are other costs to take into account, but they will help check that your goals are on the right track.

An example of the cost and revenue breakdown of producing cup-cakes is shown to the left.

The cost is $5 for every 12 cup cakes. This is the price of the packet mix, milk and butter you need to make 12 cup-cakes.

What is the price of the cup-cakes? A judgement about how much you are going to sell the cup-cakes for, needs to be made. The total cost of making one cup- cake is 41 cents. If the selling price is $1.50, there will be a profit of $1.09 cents per cup cake. Is this reasonable price for a cup- cake?

We can write a formula showing the relationship between the Quantity sold (q) and the revenue generated (r).

r = q x 1.5

Let’s check this formula when 12 cupcakes are sold.

r = q x 1.5 = 12 x 1.5 = 18This agrees with our table which shows that when 12 cupcakes are sold, the revenue is $18.

Consider what other costs are involved in making and selling cup-cakes in addition to the ingredients.

As you can see, setting the costs and the revenue out in a table allows us to see the potential earnings overall.

Quantity Sold

Costs Revenue Profit

1 $0.41 $1.50 $1.09

12 $5 $18 $13

24 $10 $36 $26

It will cost $10.00 to make 24 cup cakes

The potential profit will be $26

The potential revenue is $36


1. Jules is starting a fish-tank cleaning business. He needs to complete a cost and revenue breakdown.There are special detergents needed to clean a fish tank. It costs about 50 cents for the detergent needed to clean a single fish tank.The detergents cost 50 cents, but Jules also need to take into account the time he will take to clean the tank. He decides on a selling price of $15.a. What will the profit be when he cleans 1 fish-tank? Write your answer in

the appropriate box in the table.b. Complete the table.c. Calculate the profit that Jules will make if he cleans:

i. 20 fish-tanks?ii. 13 fish-tanks?iii. 60 fish-tanks?

d. Write a formula showing the relationship between the number of fish-tanks Jules cleans (f) and the revenue generated (r)

e. If Jules cleans a large number of fish tanks then the cost of detergent decreases because he can buy the detergent in bulk. Suppose he cleans 150 fish-tanks and the cost of detergent is only 30 cents per fish-tank. What would his profit be?

f. Explain the risk involved if Jules chooses to buy a large quantity of detergent.

g. Can you think of some start-up costs that Jules will encounter when he starts his business?

Fish tanks cleaned

Costs of detergents

Revenue Profit

1 $0.50 $15.00

2 $1.00 $30.00

3 $1.50 $45.00

4

5

6

7

8

9

10


2. Now consider your own business:

Complete the following table.

Quantity

(The number of products or services

you sell)

Cost

(The costs involved in creating or

providing these products or services)

Price

(What price will you sell at?)

Revenue

(How much money will you make if you

sell everything?)

Earnings

(How much are you going to make after

paying costs?)

1

5

3. Are any of the costs that you indicated in the table variable? In other words, will the costs sometimes change? If so, explain why the costs might vary and how this will affect your profit.

4. Explain the effect on your profit if you do sell all of the items you make (or if you do not provide the number services that you expect to).

5. Use the information from the first and last columns of the table to draw a graph of the Profit as a function of the Quantity Sold.

Earn

ings

$

Quantity sold


6. Use the graph to assess the goals you have made for your business.

a. How many will you need to sell to meet your short term financial goal?

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b. How many you would have to sell to meet you long term financial goal?

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c. Are your short-term and long-term goals reasonable? Explain your answer. If they are not reasonable, write down some revised short and long-term goals.

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7. Notice that the graph is a straight line through the origin. This tells us that the profit and the quantity sold are directly proportional. Search online for the definition of “directly proportional” then explain it in your own words.

8. Teri runs a large business. She finds that the following formula gives the approximate relationship between the number of items she sells and her profit. This relates to economy of scale.

p = 100q2 where p is the profit in dollars and q is the quantity she sells (in hundreds)

a. Complete this table, filling in the values of p.

p (profit in dollars)

q (quantity sold in hundreds)

1 2 3 4 5 6 7 8


b. Using the values in your table, sketch the profit as a function of the quantity sold on the number plane below.

7000

Profi

ts ($

)

6000

5000

4000

3000

2000

1000

0 1 2 3 4 5 6 7 8Quantity sold (hundreds)

c. Here is how we would calculate the approximate profit per item if Teri sold 800 items:

If she sells 800 items her approximate profit would be $6400.

Teri’s profit per item would be approximately $8

Use this method to calculate Teri’s profit per item if she sells

i. 600 items

ii. 400 items

iii. 200 items

d. Notice that Teri’s profit per item is greater when she sells more items. Search for the meaning of “economy of scale” on the internet. Think of some businesses that make large profits because of economies of scale.


Student worksheet 9: Calculating a break-even point

Example:

Jim has spent $250 on a new lawnmower. He would like to start a small lawn mowing business in his local area.

a. Suppose Jim charges $15 to mow a lawn. How many lawns will he need to mow to make at least $250?

Solution:250 ÷ 15 = 16.67 (to 2 decimal places) Jim will need to mow 17 lawns to make at least $250.

b. If Jim can mow 3 lawns each week, how many weeks will it take him to earn at least $250?

Solution:17 ÷ 3 = 5 r 2It will take 6 weeks for Jim to earn at least $250

We say that 6 weeks after starting his business Jim has reached his break-even point. This is the point where he has recovered his initial investment.

c. If Jim mows 3 lawns each week for 20 weeks, what would his profit be?

Solution:3 × 15 = 45Each week Jim will earn $4545 × 20 = 900Jim will have earnt $900 but he spent $250 on the lawnmower.900 - 250 = 650Jim’s profit will be $650.

d. Suppose Jim stops his business after 2 weeks. What would his loss be? Are there any ways that Jim could recover this loss?

Solution:45 × 2 = 90Jim will have earnt $90 but he spent $250 on the lawnmower.250 - 90 = 160Jim’s loss will be $160.Jim might be able to sell the lawnmower to recover all or part of this loss.


1. Yash is starting a web design business. It costs her $800 to purchase the software that she needs to design websites for her customers. She is pitching her business at families who would like to have their own website and will charge $150 to create a very simple family web site.

a. How many websites will Yash need to create in order to earn at least $800? (i.e. to reach her break-even point)

b. If Yash creates 3 websites and then closes her business, what would her loss be?

c. How many websites would she need to create for her business to make a profit of $400?

2. Natasha has an idea for a bike-repair business. She already has some tools but will need to purchase a few more, costing a total of $90. As she repairs bikes she will often need to buy some spare parts. On average, the spare parts needed to repair a bike cost $10. Suppose Natasha charges $50 on average to repair a bike.

a. Look for the words “on average” in the paragraph above. Explain what “on average” means.

b. How much money will Natasha make when she repairs a bike?

c. Calculate Natasha’s approximate break-even point. In other words, approximately how many bikes will she need to repair to recover the $90 that she has spent on tools?

d. Explain why it could take Natasha a bit longer or a bit less time to reach her break-even point.

e. Natasha has estimated the cost of spare parts and the average price she will charge her customers. List some ways that Natasha could check whether her estimates are appropriate?


3. Marty started a business where he makes and sells kites. The materials to make a kite cost him $25, but he can sell each kite for $35, so he makes a profit of $10 for each kite he sells. When he started his business he spent $200 on advertising, but it took some time for his business to grow. In the first week of his business Marty only sold 3 kites. But each week, for 8 weeks, Marty increased his sales by an average of 4 more kites.

a. Complete the following table:

Week Number of kites sold

Income for that week

Income so far

1 3 $30

2 7

3

4

5

6

7

8

b. Calculate Marty’s break-even point. In other words, in which week did he recover the $200 that he spent on advertising?

c. After 8 weeks Marty faced a problem. His business had grown and he didn’t have enough time to make all of the kites that his customers were asking for. How could Marty continue to grow his business?


Student worksheet 10: Using a spreadsheet to calculate a break-even point.

A spreadsheet can be useful to calculate a break-even point for a business.

1. Open the spreadsheet: Break_even_point.xlsx found in Section 4 on the website.

2. Click on “sheet 1” at the bottom right of the screen, to make sure that first sheet is open.

3. Read the following situation:

Adam will need to pay $300 to buy the materials he needs to start his business, but he expects his business to make $40 each week.

4. Adam’s initial start-up cost is $300. Enter this value into the spreadsheet. (You will see some numbers appear – don’t worry!)

5. Each week Adam expects his business to make $40. Enter this value into the spreadsheet.

6. Why are some of the values in the spreadsheet negative?

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7. According to the spreadsheet what is Adam’s break-even point? In other words how many weeks will it take Adam to stop operating his business at a loss?

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8. Suppose Adam’s business doesn’t earn as much money as he thought. Suppose it only makes $35 each week. How will this affect Adam’s break-even point?

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9. Find the expected break-even point for Mary’s business if she spends $100 setting her business up and expects to make $30 per week

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10. Suppose Scott spends $900 starting his business and would like to reach a break-even point in 4 weeks. Use the spreadsheet to find out how much money his business would need to make each week.

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11. Click on “sheet 2” at the bottom of the screen.

12. Read the following situation:

Daniel’s business cost him $450 to start up. Daniel knows that it will take some time for his business to grow. He expects his business to make $30 in its first week but hopes that it will make an extra $5 per week from then on.

13. Enter Daniel’s start-up cost into the spreadsheet.

14. Daniel expects to make $30 in his first week. Enter this value into the spreadsheet.

15. Daniel expects his weekly profit to increase by $5 each week. Enter this value into the spreadsheet.

16. Notice that the money Daniel’s business makes increases each week.

17. If Daniel’s expectations are correct, what is his break-even point?

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18. What are some reasons that Daniel’s expectations might not be correct? For example, can you think of some reasons why the weekly profit of some businesses might sometimes decrease?

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Student worksheet 11: A business financial plan

Read the example then write your own business financial plan.

Worked example

Set-up costs

Calculate the start-up costs for your business.

Make sure you consider:

• The cost of any materials or equipment that you need to start your business

• Any other start-up costs such as connection costs for electricity or gas, initial advertising, the establishment fee for a business loan

Running costs for the start-up period of the business, that are required to be paid before revenue is stable and able to cover running costs.

Michelle starts a business where she will give a weekly guitar lesson to a small group of children.

The materials that she will need to start her business are:

• 4 second-hand guitars at an average cost of $40 each

• 2 guitar music books at a cost of $15 each

• 2 second-hand music stands at a cost of $8 each.

• Initial advertising in the local paper at a cost of $35

• A $10 loan establishment fee for a small business loan.

4 × 40 + 2 × 15 + 2 × 8 + 35 + 10= 160 + 30 + 16 + 35 + 10= 249

It will cost Michelle exactly $249 to start her business. She will put $49 of her own money into her business and will need a loan of $200.

Running costs

Calculate the total weekly running costs for your business.


• The cost of materials, or equipment needed to run your business from week to week

• Any weekly costs for electricity or gas

• The weekly cost of hiring a space to sell your product or service

• Any regular repayments that you need to make if you have borrowed money to start your business

Michelle has arranged to hire a small room at the back of her local community hall where she can conduct her classes. The room will cost her $8 per week.

Michelle has arranged with the bank to repay her loan over 4 months, with weekly repayments of $15.

Occasionally Michelle would like to photocopy some songs from guitar music books at the library so that her students can learn songs that are not in her guitar books. She estimates that this will cost an average of $1 per week.

8 + 15 + 1 = 24

Michelle’s weekly running costs (for the first 4 months) will be $24.


Prices

• How much will you charge for your product or service? Explain how you have decided this price.

Michelle has spoken to some music teachers and some parents in her local area. She has decided that she will charge each student $15 for each weekly lesson.

Break-even point

Calculate the break-even point for your business. Make sure that you explain the costs you are including. It is a good idea to calculate the break-even point for a range of scenarios. You may need to review your start-up costs, running costs and price of the goods or service if you are not satisfied with your break-even point.

Michelle would like to teach 4 students per week, but at this stage she only knows of 3 students who would like guitar lessons. She knows that even when she advertises and finds another, there will be some weeks when a student is sick or unable to come to the lesson. For this reason she calculates her break-even point based on having three students per week.

3 × 15 = 45

With three students, Michelle would earn $45 per week.

45 - 24 =2 1

After paying her weekly expenses, her weekly revenue would be $21.

To arrive at her break-even point she will need to recover her $249 start-up costs.

249 ÷ 21 = 11.86 to 2 dec pl.

It will take Michelle 12 weeks to reach her break-even point.

Starting point

How much money do you have right now to start your business? Do you have enough money to cover the start-up cost and the initial running costs? If not then consider:

• Ways to obtain more money in order to start your business

• Ways to reduce your start-up costs and running costs

• Delaying the start of your business so that you have sufficient capital saved

Michelle has some of the money she requires, but not all of it, which is why she has arranged her small business loan.

Michelle could consider delaying the start of her business until she has saved more money. She could look at her personal budget to see where she can save the initial start-up costs. She can also purchase the capital items gradually as she can afford them.


Assumptions

• What assumptions have you made in this business plan?

• Are your costs going to be the same every week?

• Are you going to sell everything you make each week?

• What is the risk if sales are lower than expected?

• What can you do to manage this risk?



• Identify any other risks to the finances of your business.

Michelle has assumed that she will have at least 3 students per week and that she will be able to teach for at least 12 weeks.

Michelle has identified the following risks:

• Students leaving her class

• Guitars requiring repair

• If Michelle becomes sick, she won’t be able to teach

Michelle’s friend Brenda has offered to teach her classes if Michelle is sick. Brenda is also able to repair guitars and will charge Michelle a reasonable price for doing so. If either of these events occurs, Michelle’s break-even point will take a bit longer to achieve. Michelle is comfortable with this because she is able to run her business for at least six months.

Michelle has surveyed the parents in her local area and is confident that if any of her students leave her class she will be able to find other students who are interested in joining.


Now create your own business financial plan:

Start-up costs:

Calculate the start-up costs for your business.


• The cost of any materials or equipment that you need to start your business

• Any other start-up costs such as connection costs for electricity or gas, initial advertising, the establishment fee for a business loan

• Running costs for the start-up period of the business, that are required to be paid before revenue is stable and able to cover running costs

• Consideration also needs to be given to the ongoing running costs of the business and the impact these have on the cash flow of the business.

Running costs:

Calculate the total weekly running costs for your business.


• The cost of materials, or equipment needed to run your business from week to week

• Any weekly costs for electricity or gas

• The weekly cost of hiring a space to sell your product or service

• Any regular repayments that you need to make if you have borrowed money to start your business

Prices

How much will you charge for your product or service? Explain how you have decided this price.


Break-even point

Calculate the break-even point for your business. Make sure that you explain the costs you are including. It is a good idea to calculate the break-even point for a range of scenarios. You may need to review your start-up costs, running costs and price of the goods or service if you are not satisfied with your break-even point.

Starting point:

How much money do you have right now to start your business? Do you have enough money to cover the start-up cost and the initial running costs? If not then consider:

• Ways to obtain more money in order to start your business

• Ways to reduce your start-up costs and running costs

• Delaying the start of your business so that you have sufficient capital saved

Assumptions:

• What assumptions have you made in this business plan?

• Are your costs going to be the same every week?

• Are you going to sell everything you make each week?





• Identify any other risks to the finances of your business.


Student worksheet 12: A Business management plan

Name of the business

Why did you come up with that name?

What does the name mean?

Who are the participants of the business

What agreements did you need to make?

As a business you will need to make several different agreements with different investment people

What are the features of the business

Why did you choose this business idea?

Products / service provided

Statement of purpose

What is a statement that uniquely identifies your business?

Objectives

These objectives support the statement of purpose.

How much to you think you’ll make?

What are the benefits for the consumers?

Do you intend to be in business for a long time?

If so do you intend to expand the business?


Student worksheet 13: Completing a simple balance sheet

Follow the steps below to complete this balance sheet for Jim’s lawn mowing business. A balance sheet should be completed regularly, at least once a month. As the number of transactions increase so too does the need to complete a balance sheet. Some businesses will complete a balance sheet daily.

Balance sheet Date:12/8/2012

Assets Liabilities

Cash: Current Loan:

Accounts receivable: Accounts payable:

Lawn mower:

Total liabilities:

Equity

Total assets: Total Liabilities and Equity:

1. When Jim started his business (18 months ago) he needed to buy a lawnmower costing $350. He borrowed this money from the bank. The loan was taken out over a period of 2 years with a simple interest rate of 6%.

a. Calculate the amount of interest that Jim was charged in the first year.(Hint: what is 6% of $350?)

b. Calculate the amount of interest that Jim was charged over the period of the loan. (Hint: in each year of loan, Jim will be charged 6% of $350 as interest)

c. Calculate the total amount that Jim must repay the bank. (Hint: he must repay the principal: $350 and also the interest that you calculated in part b)

d. Calculate Jim’s monthly repayments

e. Jim has now made 18 of these monthly repayments. Find how much money he still needs to pay the bank and write it on the balance sheet.

2. Jim recently had his lawnmower serviced. He was sent an invoice of $40 for this and this fee is due at the end of this month. This is his only account payable. Add this figure to the balance sheet.

3. When Jim had his lawnmower serviced, he found out that because his lawnmower is now second hand, and has some wear and tear, it is now worth about $150. Add this figure to the balance sheet.


4. Jim’s customers usually pay him on the day he mows the lawn, but one family is on holiday and will pay Jim when they return. They owe Jim $45. This is an account receivable. Add it to the balance sheet.

5. Jim’s business currently has $750 in its business bank account. Add this figure to the balance sheet.

6. Examine your balance sheet, and think about what each number means. What is the difference between an asset and a liability?

7. Calculate Jim’s total assets and Jim’s total liabilities.

8. Equity is what is left when we deduct all of the business’ liabilities from its assets. Calculate the equity of Jim’s business and add it to the balance sheet.

9. Calculate the total liabilities and equity and add it to the balance sheet. Explain why this number must always be the same as the total assets.

10. Now consider your own business. What assets and liabilities are you likely to have as you run your business? Create a balance sheet for your business that you will fill out every week. Make sure that you leave some space for unexpected assets and liabilities.


Student worksheet 14: Daily account keeping

Date Expenses

(list each expense and caluculate the total of the expenses for the day)

Number of sales

Revenues from sales

Notes


Student worksheet 15: Weekly account keeping

Week starting date

Profit or loss at the start of the week

Revenue raised during the week

Expenses incurred during the week

Profit or loss at the end of the week


Student worksheet 16: Reflection

Using the data from you graph and table, and your short and long term goals answer the following questions.

Compare the result from your first day of trading with your short-term goal:

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Was it a reasonable goal? (Reasonable: did the money you earn provide a reasonable hourly rate of pay for the time you spent on the business?) Justify your answer:

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Is your business viable to meet your long term goal? Why or Why not? Justify your answer.

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Section 5: Share and reflect1. Student worksheet 17: Does business benefit my community?

2. Student worksheet 18: Business evaluation

3. Student worksheet 19: Present an argument

4. Student worksheet 20: Can you see how your business benefited the community?

5. Student worksheet 21: Reflection



Students complete Worksheet 17: Does business benefit my community? What are ‘my’ experiences? And Worksheet 18: Business evaluation.

Discuss the experiences of students between groups and individuals. Following the discussion students complete Worksheet 18: Business evaluation.

Use the Argument outline provided in Worksheet 19: Present and argument to develop a justified argument with multiple points of evidence.

X Explain the selected mode for presentation of students’ final argument – this may be written, oral, or some form of media, e.g. slide show or web page.

X Smart Money Website Section 5 Share & Reflect Assessment

X Explain the criteria for the argument included in Worksheet 19, included in the Peer Evaluation checklist

X Model the way students can use the templates in Worksheet 20: Can you see how your business benefited the community? to sort their evidence and sequence it into a structured argument.

X Examine the use emotive language in writing a persuasive argument.

Use Worksheet 21: Reflection, to develop a sense of whether students are more/less willing to undertake a business venture in the future.

Model how students reflect upon their learning experiences.


Literacy: Creating texts

Create imaginative, informative and persuasive texts that present a point of view and advance or illustrate arguments, including texts that integrate visual, print and/or audio features (ACELY1746)


Review and edit students’ own and others’ texts to improve clarity and control over content, organisation, paragraphing, sentence structure, vocabulary and audio/visual features(ACELY1747)


Use a range of software, including word processing programs, flexibly and imaginatively to publish texts(ACELY1748)

Literacy: Interacting with others

Use interaction skills to present and discuss an idea and to influence and engage an audience by selecting persuasive language, varying voice tone, pitch, and pace, and using elements such as music and sound effects (ACELY1811)

http://www.australiancurriculum.edu.au/Glossary?a=12d44a4d-a36c-41c1-b84c-9e4600a2a39b&t=create


http://www.australiancurriculum.edu.au/Glossary?a=12d44a4d-a36c-41c1-b84c-9e4600a2a39b&t=point%20of%20view

http://www.australiancurriculum.edu.au/Glossary?a=12d44a4d-a36c-41c1-b84c-9e4600a2a39b&t=point%20of%20view




http://www.australiancurriculum.edu.au/Glossary?a=12d44a4d-a36c-41c1-b84c-9e4600a2a39b&t=sentence

http://www.australiancurriculum.edu.au/Glossary?a=12d44a4d-a36c-41c1-b84c-9e4600a2a39b&t=visual%20features




http://www.australiancurriculum.edu.au/Glossary?a=12d44a4d-a36c-41c1-b84c-9e4600a2a39b&t=audience

http://www.australiancurriculum.edu.au/Glossary?a=12d44a4d-a36c-41c1-b84c-9e4600a2a39b&t=voice



Student worksheet 17: Does business benefit my community?

Reflect on your personal experiences of running a business and consider if your community would benefit from your business.

You will:

Reflect upon the task of running a business

Use your opinions backed up by facts to present an argument.

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Student worksheet 18: Business Evaluation

You will need to evaluate your experiences in the business in the following table.

Eval

uate

the

:Im

pac

t on

the

Com

mun

ity

(How

doe

s it

bene

fit th

e co

mm

unity

…?)

Imp

act

on M

e

(Am

I co

nfide

nt e

noug

h to

pa

rtici

pate

…?)

Imp

act

on M

y te

am

(Did

we

all w

ork

toge

ther

on

the…

)

Gro

up p

roce

sses

X

Gro

up d

ynam

ics

X

Parti

cipa

tion

X

Effic

ienc

y

Prod

uctio

n pr

oces

s

X

Envi

ronm

enta

l im

pact

?

X

Effic

ienc

y of

pro

duct

ion?

Prod

uct d

esig

n

X

Sui

tabi

lity

X

Targ

et a

udie

nce?


Student worksheet 19: Present an argument

Evidence from your investigation may agree or disagree with the statement – My community benefitted from my business. List some key points for each side.

Use evidence from your investigation to make a persuasive argument about that statement.

‘My community benefitted from my business – what’s the evidence?’

Agree Disagree

X

X

X

X

X

X

X

X

Your argument will:

X present your ‘thesis’ by saying why you agree or disagree with the statement

X have at least three key points

X give evidence for each point, and explain source of evidence

X sum up your argument in a conclusion

X Persuade others to agree with your thesis.


Argument outline: ‘My community benefitted from my business’

Thesis (why you agree or disagree with the statement):

First key point: ...............................................................................................................

Evidence:

Second key point: ..........................................................................................................

Evidence:

Third key point: ..............................................................................................................

Evidence:

(attach extra pages if you need more space)


Student worksheet 20: Can you see how your business benefited the community?

1. Did your business benefit the community?

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2. Describe how your business has benefited the community.

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3. List the ways your business benefited the community?

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4. What would you do differently with the business from a community perspective?

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5. How can the community help your business?

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Student worksheet 21: Reflection

Would you do it again? Managing a business is not a simple task and making that business successful takes a lot of work.

Answer the following questions based on your own personal reflection.

1. Why would you do this business again?

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2. What would you change about the business?

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3. Is there any part of the process / procedure that you would change?

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4. Was doing this unit of work easy or hard to participate in?

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5. Would you think about starting your own business after leaving school? If so what would it be?

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Help young people be MoneySmart

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Documents

How can I start my own business? - MoneySmart · X Analyse relevant information to make informed choices when purchasing goods and services and/or resolve consumer choices X Evaluate