Week 9 - Financial strategies, 4 main components of financial strategy PDF

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Financial strategies, 4 main components of financial strategy...

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Week 8 Business Finances Purpose of a Financial Strategy  Tool to help manage your money o Provides schedule for bill payments o Itemizes costs o Identifies how much money is needed for start up o Plan for cash shortage o Projects if your business will be profitable 4 Main Components  Start up costs o Refers to expenses that you have to pay upfront to launch your business o Deposits o Renovations o Equipment o Marketing/advertising o Uniforms o Technical development/services  Sources of Financing o Family and friends o Credit cards o Commercial banks o Government loans o Government grants o Finance companies o Private individuals o Personal investment  Expenses o Refers to all monies that must be paid out for the business to operate o Also known as “operating costs”  Examples of Expenses o Rent o Utilities o Equipment/supplies o Inventory o Deb repayment (start up financing) o Marketing o Payroll o Corporate expenses

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o Cost of goods sold (product businesses) Can be organized into 2 categories o Direct Costs: costs which can be directly traced to the production of product or provision of a service (ex. Rental fees, staffing costs, supplies, cost of goods sold) o Indirect Costs: costs which cannot be assigned to one specific product or service but which are spread across multiple sources of revenue (ex. Insurance, administrative costs, utilities, salaries, marketing expenses) Revenue o Is income that a company receives from the sale of goods and services to customers o Projecting revenue is referred o as a “sales forecast” 2 key items that need to be addressed in order to calculate revenue o How much are you going to charge? (1) o 3 steps: o Establish a price range (low, high, same) o Review costs (how much do I need to make) o Determine profit margin (how much money do I want to make)...