MODULE 1 START-UP FINANCIAL CONSIDERATIONS

WEL Financial Intelligence

Objectives

To broaden your knowledge of the financial planning process through the following activities:

Establish your personal financial needs

Assess the costs involved to start a business

One time start-up expenses

Ongoing operating expenses

Prepare an Opening Balance Sheet (financial picture of the business on opening day)

Prepare a Proforma Income Statement

Concepts

Financial PlanningPersonal BudgetsStartup Costs

One time costsOperating costs

Opening Funds Requirement

Balance SheetsIncome Statement

Module 1 Module 2

PricingBreakeven PointCash Flow Forecasts

Module 3

Course Materials

PowerPoint Presentations

Excel File: “WEL Key Financial

Worksheets”

Student Reference Guide

Glossary of Terms

Module 1 - Overview

Introduction to financial planning

Financial Planning is the preparation of Proforma Financial Statements, including Income Statements, Cash Flow Forecasts, Balance Sheets and other analysis.

Module 1 - Overview

Why is Financial Planning necessary ?

Avoid surprises.

Determines investment required for start-up.

Improves ability to obtain financing.

Clarifies how investments are spent.

Identifies areas of concern up front.

Personal Financial Needs

If “yes”: How much money will you need to take from the venture ?

Avoids surprises later on...

Exercise guide you through analysis.

Will the venture need to support you?

Exercise 1: Personal Budget

Ex 1A. Instructions: On your own or with a study partner;

Review personal expenses on the next page

What can you add to this list?

10 Minutes….

Exercise 1 - List of personal expenses

Auto expenses

Auto payment

Beauty shop & barber

Satellite/ Cable TV

Internet services/Telephone

Groceries & outside meals

Health insurance

WHAT CAN YOU ADD?

Exercise 1 - List of personal expenses

Auto expenses

Auto payment

Beauty shop & barber

Satellite/ Cable TV/

Internet services/Telephone

Charity

Child care

Clothing

Credit card payments

Dues and subscriptions

Utilities

Entertainment

Gifts

Groceries & outside meals

Health insurance

Home repairs

Homeowner’s insurance

Laundry and dry cleaning

Life insurance

Medical and dental

Miscellaneous

Mortgage/Rent payments

Other debt payments

Vacations

Other

Assignment 1: Preparing a personal budget

Ex 1B Instructions: This is an individual exercise.

See WEL Key Financials Excel: Tab A

Create a Personal Budget (monthly)

Use this figure in future financial planning documents

Business Start up - Analysis of costs

First challenge: determine funds required to open the venture

Start up costs are all costs required to get a business off the ground and operating.

Start up Costs include Two Types of Expense

1 2One-Time Expenses

Operating Expenses

Exercise 2 - One Time Expenses

Ex. 2A Instructions: On your own or with a study partner

Consider expenses needed BEFORE the business opens

Examine the first list to get started

What can your group add to this list?

5 Minutes….

One Time Expenses

Down payment on property

Rent deposit

Down payment on fixtures and equipment

Vehicles

Decorating, remodelling

Installation of equipment/fixtures/

Leasehold improvements

Starting inventory

What is Missing?

Utility set-up fees

Promotion for opening

Licences and permits

Incorporation costs (where applicable)

Professional fees

Product development costs or franchise fees where applicable

Unexpected expenses

One Time Expenses

Do you think of these?

Assignment 2 – Operating Expenses

Operating expenses

2B Instructions: TYPE IN A SEPARATE DOCUMENT, PRINT AND BRING TO

NEXT CLASS

On your own or with a study partner

Review WEL Key Financial Worksheets Sheet B: One-time Startup Expenses.

Investigate

Develop a list of one-time expenses for your new venture.

Assignment 3: Total Opening Funds Requirement

Complete this table to determine your Opening Funds Requirements.

Opening Funds Requirement

A. Personal Expenses:

Reference: WEL Key Financials Excel Sheet-A

$________

B. One-Time Startup Expenses:

Reference: WEL Key Financials Excel Sheet-B

$________

C. Operating Funds: First 90 Days:

Reference: WEL Key Financials Excel Sheet-C1

$________

Total Opening Funds (A+B+C):Personal, One-time Start-up and Operations (90 days)

Reference: WEL Key Financials Excel Sheet-C2

$________

Module 1 Review

You now have the financial knowledge and tools to plan your venture:

A personal budget

One-time Startup expenses for the venture

Operating Expenses (3 month projected)

Opening Funds Requirement