Financial strategy

Financial strategy

Cash in-cash out= ?

·         Cash flow

·         Profit and loss

·         Balance sheet

Cash flow

·         Real time- NOW

·         Money in hand

Profit and loss

·         Outgoings accounting

Balance sheet

·         Assets and liabilities

Income/ cash in

·         Competitors- research for the best price/ interests

·         Cost plus- manufacture costs plus a little bit for profit

·         Differentiation- designs that let you charge more

For an accurate business plan:

·         Cash in

o   Units sold (probably none in first month)

o   Sales price per unit

·         Sales/ services

o   Assume seasonality i.e. purchases at Christmas

o   Loans and grants

·         Total Cash in

·         Cash out

·         Direct/ variable costs (relate directly to the product being delivered)

o   Materials

o   Labour

o   Delivery

o   Postage

o   Marketing etc

·         Overhead/ fixed costs

o   Wages (£0 if to myself)

o   Withdrawals

o   Rent/ rates (any from home?)

o   Heat/ lights (consider you using a room in the house i.e. 1/8 of overall house rate)

o   PR/ advertising- free online, search engine optimisation

o   Telephone/ broadband

o   Postage and stationary- product postage, letters etc

o   Insurance

o   Transport and travel

o   Repair and maintenance

o   Professional fees i.e. lawyers and solicitors

·         Finance costs

o   Loan interest i.e. 10%

o   Loan repayments/ 24 months

o   Capital expenditure – one off; lasting purchase? i.e. tables

o   Anticipate coasts of buying and renting

·         Total cash out

Net cash flow is the

Toal cash in- total cash out

Be sensitive to your stock and demand rates!

Negotiate payments and shipments with suppliers

Diversify on everything from suppliers to retailers

Costs / out

What are your costs?

Direct, indirect, capital expenditure

Look at potential disruptions

Cost based pricing

Break even point

·         Variable costs- relating to product

·         Fixed- all basic business costs

·         FC + VC + profit =

·         In unit Break Even = FC / (SP − VC)

·         where FC is Fixed Cost, SP is Selling Price and VC is Variable Cost

o   Calculate your break-even point by using the following formula: (Fixed Costs) / (Unit Selling Price - Cost Per Unit)So if you own a deli and sell sandwiches, you would have something that looks like this:Monthly Fixed Cost, such as rent, insurance, etc = $4,500.00Variable Cost Per unit = $1.25Selling price per unit = $3.00Your formula would be: (4500) / (3.00-1.25), so 4500 / 1.75 = 2571.43. This means you would have to sell 2,572 sandwiches to reach the breakeven point. Everything above that is profit.

Read more: How to Calculate BEP | eHow.com http://www.ehow.com/how_4422677_calculate-bep.html#ixzz1bvp9rhIQ

If you increase the price you don’t have to make as many

·         Funding

o   Friends/ family

o   Bank overdraft/ loan (if you can provide a stability scheme)

o   Cash management- delay bill paying through negotiating

·         Risk management

o   Scenarios and projections

o   What could potentially go wrong?

Other issues

·         New products

·         New customers

·         Market

·         Pricing strategy

·         Price/ benefit sensitivity

·         Continual review