BUS 1 – INTRODUCTION TO BUSINESS
Assignment Title: Business Plan Building Blocks Assignment 5
Related Chapters: 17, 18
Assignment Description: This assignment is a building block for your business plan.
Assignment Objectives: Learn about the elements and considerations required to start a business. Incorporate the concepts learned in class to a real business. Provide a framework for writing the end-of-term business plan
Deliverable(s):
Word document. Your Word document should include three sections: Cover Page (See sample under References in Blackboard) Building Blocks (include headings for each of the sections) References. See APA Standards under References in Blackboard Building Blocks – Financial Plan and Capital Required
Starting a business costs money. Oftentimes, owners have to draw on personal assets to
finance the business and also obtain additional funding from banks and/or investors. The
building blocks below will help you determine the amount of funding you will need. In
addition, you will be creating the financial statements required by banks and investors.
1) Estimate Start-Up Costs – When you are starting a business, it is important to estimate
your budgetary needs. You will have expenses even before you begin operating. To
determine what you need to get started, you must estimate the costs of doing business for
the first months (up to a year). Some of these expenses will be one-time costs such as
the fee for incorporating your business or the price of a sign for your building. Some will
be ongoing costs, such as the cost of utilities, inventory, insurance, etc.
Costs can be divided into two categories: fixed and variable. Fixed expenses include rent,
utilities, administrative costs and insurance costs. Don’t forget your own salary.
Variable expenses include inventory, shipping and packaging costs, sales commissions,
and other costs associated with the direct sale of a product or service. The most effective
way to calculate your startup costs is to use a worksheet that lists both one-time and
ongoing costs. There are many startup cost worksheet templates available on-line.
2) If you are seeking funding for your business, use this section to outline your
requirements. Your funding request should include the following information: Your current funding requirement Any future funding requirements over the next five years The time period that each request will cover, the type of funding you would like
to have (e.g., equity, debt), and the terms that you would like to have applied. How you intend to use the funds you receive. Is the funding request for capital
expenditures, working capital, debt retirement, and/or acquisitions? Whatever it
is, be sure to list it in this section. 1 BUS 1 – INTRODUCTION TO BUSINESS Any strategic financial plans for the future; for example, buyout, acquisitions,
debt repayment, or business sale. These are extremely important to a future
creditor since they will directly impact your ability to repay your loan(s).
You may need to revisit your funding requirements and break-even analysis after
you create your financial statements (Income & Expense, Cash Flow, and Balance
Sheet). 3) Create a projected 12-Month Income Statement also called Profit & Loss (Chapter 17).
This statement will give you a good idea of what it will take to make a profit. Your sales
projections will come from a sales forecast in which you forecast sales, cost of goods
sold, expenses, and profit, month-by-month, for one year. Profit projections should be
accompanied by a narrative explaining the major assumptions used to estimate income
and expenses. There are a number of free Projected Profit & Loss templates available
online.
4) Create a projected 12-Month Statement of Cash Flows (Ch. 17). The Statement of
Cash Flows reports cash receipts and cash disbursements over a period of time using
cash-basis accounting. Remember, this means income and expenses are recognized on
this report when cash actually comes in or goes out. You can follow the samples in the
text book or use a template from the internet.
5) Create a projected Balance Sheet (Ch. 17). This is your net worth (i.e., A = L + OE).
You can follow the samples in the textbook or use a template from the internet.
Assessment of Work: This assignment is meant to be a building block from which you build
your business plan. As such, I realize that it may be fine-tuned and modified as you move
forward with the project. 2
