GAZANTEP ZRVE UNIVERSITY

Entrepreneurship Education MODULE 3 Business Decisions Business Economics

What is a Financial Plan?

The amount of financing that the business needs to survive, Timing of positive and negative cash flows, How to find lowest cost financing and how to use it. This part of the business plan shows the possilibility to fulfill the liabilities.

To prepare a good Financial Plan

How much I should pay to produce? Costs How much my fixed assets depriciate? Depriciation How much loan I have? Debts Who owes me money and How much? Receivables How should I report my financial activities? Accounting How much financial surplus I have ? Profit What is the level of income ? Sales At what price should I sell my product? Selling Price What do we have in the firm? Assets How much money I have? Cash How much money do I need to continiue to produce? Working capital How can I settle my future financing? Proforma Financial Statements

Financial Plan
Goals
Financial Needs

Internal Financing

External Financing

Use where?

How to use? (Conditions)

Where to find?

How? (on what conditions)

 A good financial plan involves financial control. Financial control enables to compare the ex-ante (estimated) and ex-post (realized) values.

Ex-Post

Ex-Ante

Finansal Kontrol nedir? My Estimates

Reasons of deviations and correcting activities.

What is your end point?

Is there any deviation? How big? Is it high and crucial?

How much is the initial investment capital of your business plan ?

Initial investment capital for your business plan

Initial investment capital requirement Table (TL)
Investment Expenditures Research and Project preperation Expenditures Building Construction Costs Machinery and Equipment Expenditures (Domestic) Office Equipments Electricity-Water,Gas- Venting installation Rent- Deposits Carriage/transportatin and Insurance Costs Installation Costs Pruchasing Costs General Costs Start up Expenses and Public fees Maintanance and Repair Expenditures Transportation Costs Electricity-Water,Gas Subsciription Expenses Promotion costs Unexpected costs (% 10) Total Fixed Costs Total Description Arcihtect, Engineer, Advisor etc. Specialist services,Expenditures Main Building, Auxiliary units, Deppo, Administrative and social building

The price of machineries and equipments (KDV Included) Computers, Handsets, Fax machines, Internet, Furntiture etc.

Transportation of machineries and insurance expenditures. Start up costs of Machineries Trial production costs Notary, Insurance, Transportation, Communication, Personnel, advertisement etc. Start up costs of the firm Modification,Restoration etc.

Initial investment capital requirement Table (TL)

Investment Expenditures
Research and Project preperation Expenditures Building Construction Costs
Machinery and Equipment Expenditures (Domestic)

Total
125.000 15.000 1.000 2.000 500 2.000 2.500 3.000 1.000 1.000 153.000

Description
Arcihtect, Engineer, Advisor etc. Specialist services,Expenditures Main Building, Auxiliary unit, Deppo, Administrative and social building The price of machineries and equipments (KDV Included) Computers, Handsets, Fax machines, Internet, Furniture etc.

Office Equipments Electricity-Water,Gas- Venting installation Rent- Deposits Carriage and Insurance Costs Installation Costs Pruchasing Costs General Costs Start up Expenses and Public fees Maintanance and Repair Expenditures Transportation Costs Electricity-Water,Gas Subsciription Expenses

Transportation of machineries and insurance expenditures.

Start up costs of Machineries Trial production costs Notary, Insurance, Transportation, Communication, Employees, advertisement etc. Start up costs of the firm Modification,Restoration etc.

Total Unexpected costs (5% of the Total amount) Total Fixed Costs

7.650
160.650

Unexpected Expenditures

Machinery and Equipment Expenditures Machinery Quantity Unit Cost Total Amount

Total VAT %18 Grand Total

Utility Services Machinery and Equipment Expenditures Costs Quantity Unit Cost Total Amount

Total VAT %18 Grand Total

WORKING CAPITAL TABLE (TL)

Working Capital:
It is the amount of capital that the firm has to finance until the products and services in that opererating cycle are sold.

WORKING CAPITAL TABLE (TL)

Costs Raw materials and Consumables Rent Electiricity Water Communication Gas (Heating-Fees) Employees Natural Gas Repair-Maintanance General Costs Accounting Costs Stationery Expenses Advertisement-Selling Costs Packing Supplies Expenses Transportation Costs Unexpected costs Total Annual Operetaing Costs Duration (Months) Working Capital Requirement (TL)

WORKING CAPITAL TABLE (TL)

Costs
Raw materials and Consumables Rent Electiricity Water Communication Gas (Heating-Fees) Employees Natural Gas Repair-Maintanance General Costs Accounting Costs Stationery Expenses Annual Operetaing Costs
216.165,00 3.000,00 3.000,00 600,00 1.800,00 1.800,00 52.632,00

Duration (Months)

Working Capital Requirement (TL)

18.013,75 250,00 250,00 50,00 150,00 150,00 4.386,00

0,00
500,00 600,00 1.200,00 1.000,00 1

0,00
41,67 50,00 100,00 83,33

Advertisement-Selling Costs
Packing Supplies Expenses Transportation Costs Unexpected costs Total

7.500,00
1.200,00 1.000,00 29.199,70 321.196,70

625,00
100,00 83,33 2.433,31 26.766,39

Annual Operating Costs Table (TL)

Operating costs includes all the expenditures in the process of producing goods/services, marketing and delivery of that goods and sercives to the customers.
There are 2 different types of operating costs Fixed Costs Variable Costs

ANNUAL OPERATING COSTS TABLE (TL)

Some operating costs can be both fixed and variable at the same time. At this point, that operating costs should be analyzed and the percentage of fixed and variable costs should be specified.

Annual Operating expenditures.

Costs Table shows the items of

Fixed Costs

These are the costs still exist in your business. even If you stop producing goods/services.

Fixed Costs
General Expenses Rent and Estate Taxs Lighting, Heating, Communication, Stationery Insurance, Repairment, Maintanance Employee Fees and Insurance Costs Interest and ve Brookerage Fees Other Expenses Marketing and Sales Expenditures Promotion Travelling, Honouring the guests

Fixed Costs
Administrative Costs Stationery Communication Salaries Others Depricitation Building Machinery Equipments Vehicles Others

Variable Costs

These are the costs that directly affect from the goods and services. These costs are incurred/realized at the point where goods or services are produced.

Variable Costs

Ask yourself whether the costs are varying regarding the amount of goods and services produced. If they vary, those are variable costs.

Variable Costs
Raw Materials Finished- Semi Finished Goods Production Costs Sales Brookerage Temporary Employment Delivery Others

ANNUAL OPERATING COSTS TABLE (TL)

Cost Items
Raw materials and Consumables Rent Electiricity Water Communication Gas (Heating-Fees) Employees Natural Gas Repair-Maintanance General Costs Accounting Costs

Total Expenditures

(%) Fixed/ Variable

Fixed Costs

Variable Costs

Stationery Expenses Advertisement-Selling Costs Packing Supplies Expenses Transportation Costs Unexpected costs TOTAL

ANNUAL OPERATING COSTS TABLE (TL)

Cost Items
Raw materials and Consumables
Rent Electiricity Water Communication Gas (Heating-Fees) Employees Natural Gas Repair-Maintanance General Costs Accounting Costs

Total Expenditures
216.165,00
3.000,00 3.000,00 600,00 1.800,00 1.800,00 52.632,00 0,00 500,00 600,00 1.200,00 1.000,00 7.500,00 1.200,00 1.000,00 29.199,70 321.196,70

(%) Fixed/ Variable

0/100
100/0 30/70 30/70 30/70 30/70 100/0 100/0 70/30 70/30 100/0 60/40 80/20 0/100 0/100 80/20

Fixed Costs
0,00
3.000,00 900,00 180,00 540,00 540,00 52.632,00 0,00 350,00 420,00 1.200,00 600,00 6.000,00 0,00 0,00 23.359,76 89.721,76

Variable Costs
216.165,00
0,00 2.100,00 420,00 1.260,00 1.260,00 0,00 0,00 150,00 180,00 0,00 400,00 1.500,00 1.200,00 1.000,00 5.839,94 231.474,94

Stationery Expenses Advertisement-Selling Costs Packing Supplies Expenses Transportation Costs Unexpected costs TOTAL

Income Statement

Day 4 / Session 4.8

Every Business prepares income statement to see their profits/losses at the end of fiscal year. Newly established businesses need to prepare this table frequently to see their profitability. This table shows the amount of revenues and costs in a fiscal year. Debts and credits do not give any information about the firms fixed assests. For this reason, income statement cannot indicate the value of the firm itself.

Income Statement
Sales Revenues (A) Variable Costs: Raw material Other Production Costs Brokerage Fees Promotion Fees Others Total (B) Gross Profit (C=A-B) Fixed Costs Fees Rent Insurance Administrative Expenses Adverstisement Interest Payment Depriciation Total (D) Net Profit /Loss ( E=C-D)

5.2.2

Income Statement
Sales Revenues (A) Variable Costs: Raw Materials Other Productions Costs Brokerage Fees Promotion Costs Electricity Total (B) Gross Profit (C=A-B) Fixed Costs Employee Fees Rent Insurance Administrative Costs Advertisement Electric-Water Heating Depriciation Total (D) Net profit /loss ( E=C-D) 55.000 20.000 3.000 500 500 200 24.200 30.800 5.000 1.000 300 200 300 100 150 200 7.250 23.550

5.2.2

Cash Flow Estimates (TL)

Cash Flow Statement table shows cash inflows and outflows for each time period starting from the investment period. It is not possible to see the profit of the firm from this table. Cash flow statement analysis enables to understand not only the inflows and outflows but also the effects of cash flows on the financial structure of the firm such as Investments, Loan Repayments, Tax Payments.

Cash Flow Estimates

For the Total Financing Needs all the otherPotential financing resources should be found such as Equity Capital, Credits, Loans, Mergers. After current financial sources are analyzed, the balance between investment sources and expenditures should be done on the Investment Period Financial Structure Table.

Cash Flow Estimation/Calculation Table (TL)

Cash, at the end of the reporting period in the cash flow table, should not be negative.
If it is negative, this indicates that financing needs for the investment and working capital needs are not satisfied/found.

CASH FLOWS
is estimation of Monthly or Weekly cash inflow and outflow.

Cash flow estimation shows; when we receive the cash, timing and amount of cash that we are going to receive, when to pay for debts and bills, how much we need to pay for the costs, the deatils of the incomes and expenditures, the best time to pay for additional expenditures (or high amount expenditures).

Items

At the Start up

Months 3 4

Total

Cash Inflows
Sales revenues KOSGEB Grant Equity Capital Debts

Bank Credits
Total Inflows A Cash Outflows Variable Costs

Fixed Costs

Total Cash outflows B A - B = Net Cas flow C Al kalan D Kapan kalan C+D

RETM/SATI HEDEFLER
Goods/ Services 1. M 2. M 3. M 4. M 5. M 6. M 7. M 8. M 9. M 9. M 10. M 11. M Total Unit Cost Sum

Production/Sales Goals

What is Breakeven Point?

This point shows the amount of sales that makes total revenues equals to the total costs.

BREAKEVEN POINT ANALYSIS

Sales Revenues Operating Costs Sales Revenues

Fixed + Variable costs

Variable Costs

Fixed Costs

B.E.P.

Units Sold

Calculating Breakeven Point

Sales Variable Costs Gross Profit Sales x 100

= =

Gross Profit
Gross Profit Margin

Fixed Costs + Depriciation) x 100 Gross Profit Margin

=0

B.E.P.

Calculating Breakeven Point Question 1 4,000 (sales) - 2,000 (VC) = 2,000 (GP)

2,000 (GP) x 100 4,000 (sales)

%50 (GPM)

(1,000 (FC) + 200 (Dep.) ) x 100 = 50 (GPM)

2,400

This firm starts making profit after selling 2.400 units.

Total Investment Requirement /Needs

The total amount of financing to execute the business plan consist of The amount of initial investment

And Working capital requirement.

Total Investment Requirement and Possibble Financing Sources Total Cash Needed
Investment Initial Investment Working Capital Total Investment Sum

Total Investment Requirement

Investment Initial Investment Working Capital Total Investment Sum
81.739,90

26.766,39

108.506,29

Financial Structure in Investment Period Table

Financial Requirement Initial Investment Working Capital
Total Financial Requirement Financial Sources Equity Debts Grants (KOSGEB etc.) Credits Total Financial Sources Sum

Financial Structure in Investment Period Table

Financial Requirement Initial Investment Equity Capital Total Financial Requirement Financial Sources Equity Debts Grands Credits Total Financial Sources 64.506,29 0,00 4.000,00 40.000,00 108.506,29 Sum 81.739,90 26.766,39 108.506,29

Goods/Services Sales Estimate (Monthly)

Monthly Sales Estimates Products Units 1 2 3 4 5 6 7 8 9 10 11 12

Initial Investment Requirement Table

Investment Expenditures 1. Land Costs 2. Research and project prep. Costs 3. Land Configurations 4. Building Costs 5. Machinery and Equipment Costs (Domestic) 6. Machinery and Equipment Costs (Imported) 7. Utility Services . Machinery and Equipment Costs Sum Explanation

8. Import and custom clearence Costs

9. Transportation and Insurance Costs 10. Installation Costs 11. Purchasing Costs 12. Licence Fees 13. General Costs 14. Unexpected Costs TOTAL FIXED INVESTMENT

Product Tree and Raw Material Costs

Product Types of raw material inputs Quantity Unit Price (TL) Sum (TL)

Total raw material Inputs :

Raw material Costs (yearly)

Raw Materials Tag Combed Cotton Order Form TimeTable Calender Flashing Sign Simple Sign Combed Cotton Print Brochures Invitation Letters Canvas Toplam 1
11.550,00 4.725,00 931,50 2.700,00 12.993,75

2
14.610,75 5.977,13 1.178,35 3.415,50 16.437,09

3
18.482,60 7.561,06 1.490,61 4.320,61 20.792,92

700,00
450,00 26,25 10.080,00 1.050,00 29.374,80
74.581,30

885,50
569,25 33,21 12.751,20 1.328,25 40.390,35
97.576,57

1.120,16
720,10 42,01 16.130,27 1.680,24 55.536,73
127.877,30

increase in costs due to inflation has been added.

Labor Expenditures
Labor Expenditures 1 2 3 4 5

TOTAL
XX

people works in this firm. Accouting service is outsourced. Values in the table are the annual labor costs to the firm.

General Costs
Other Costs Rent Electricity Water Fuel oil (Used by Machineries) Repairment and Maintanance Licence Fees TOTAL 1 2 3 4 5

GENERAL COSTS
General Costs 1 2 3 4 5

Communication
Internet Administrative Costs Honouring Guests Costs Tea/Coffee

Food for Employees

Transportation Expenses for the Employees

Fuel for the Vehicles

Fuel for Heating xxxxxxxxxxxxxxxxx TOTAL

Marketing and Sales Expenditures

Marketing and Sales Expenditures Business Cards Brochures Customer Visits Promotioanal Product Sales Advertisements Signs Posters 1 2 3 4 5

TOTAL

ANNUAL OPERATING COSTS TABLE

Cost Items 1. Raw materials 2. Rents 3. Electiricity Total FIXED FIXED % VARIABLE % Expenditures COSTS VARIABLE COSTS

4. Water
5. Fuel

6. Labor and Employee Costs

7. Repairment and Maintanance

8. Licence Fees
9. General Costs 10. Advertisement and Sales Costs TOTAL

** General Costs: Communication, administratrive costs, Honouring costs, fuels for vehicles, fuel costs forheating, tranport cost for employees ve food costs for the employees (General Costs are valid than for other items in the table. )

Calculating Working Capital Requirement

Annual Operating Duration Costs (Months) Working Capital Requirement

Items for Working Capital Requirement

1. Raw material Stockpile

2. Finished goods Stock

3. Goods in Customers stock

4. Financing need for the general costs

TOTAL

CALCULATING WORKING CAPITAL REQUIREMENT

1. Raw Material StockPile

This is the amount of stocks that we need to have in hand when we stop buying raw materials for producing. It is also called as safety stock . (For instance, A firm producing plastic cannot purchase an amount of raw materials under a certain level from PETKIM. In this case, the remaining is kept for raw material and safety stock ) The amount of cost that the firm need to finance its stock is the amount of cash we should have in hand. For instance: To find this value of the 1 month raw material stock, we need to divide the raw material costs in to 12.

CALCULATING WORKING CAPITAL REQUIREMENT 2. Finished Goods Costs This is the amount of finished goods inventory in hand when we stop producing. In other words, it is the amount of finished goods inventory

to satisfy the received orders. This cost is calculated by multiplying unit

production cost with the number of required stocks. (For instance, The cost of producing one unit of nappy is $0,2 . Assume that we need 15 days of stocks to satisfy the received orders, which makes 2.000.000 units of nappies. In this case, the cost of this finished goods inventories to the firm is 0,2*2.000.000 = $ 400.000, which is also a working capital requirement.)

CALCULATING WORKING CAPITAL REQUIREMENT 3. Goods in Customers Stock In general, majority of the sales to the customers are credit sales. Hence, we need some capital to keep on producing (to puchase raw materials) until the time we receive the money. This is called as Goods in Customers Stock. The amount of annual raw material total costs corresponding the duration of the credit sales forms the Goods in Customer s Stock.

For instance, Assume that annual raw material total costs is $ 1.000.000. If
the sales of the firm are credited for 2 months, Goods in Customers Stock equals to 1.000.000 *2/12.

CALCULATING WORKING CAPITAL REQUIREMENT 4. Cash Requirement for General Expenditures Cash Requirement for General Expenditures is calculated by substracting total raw material costs from total operating costs . This value is divided by the duration that the firm needs stock (In months) to calculate the cash need
(Annual total operating costs Annual Total Raw Materials Costs General Expenses = Cash Needs 12 (We need that stock for 1 month )

(General Expenses+electricity + water+ Fuel+ Labor+ Rent+ Marketing Exp) General Expenses = Cash Needs 12 (We need that stock for 1 month )

How to find Financial Support?

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INSTITUTIONS OFFERING TAX EXEMPT FOR THE ENTREPRENEURS

KOSGEB Entrepreneur Support Programme Incubation, Tax Shield TOBB Council of Young Entrepreneurs Incubation, Tax Shield Technology Parks Incubation, Tax Shield (Boazii, ODT, T,KS )

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INSTITUTIONS GIVING SUPPORT FOR THE EQUIPMENT AND INFRASTRUCTURE NEEEDS OF THE ENTREPRENEURS Etohum Incubation, Seed Funding, Educational Entrepreneurship Unit Incubation, Seed Funding Center, AveaLabs Incubation

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INSTITUTIONS GIVING SUPPORT FOR THE FINANCING NEEDS OF THE ENTREPRENEURS 212 VC Yatrm Sermayesi (Erken Dnem)
Aksoy Internet Ventures Initial Investment (Start up Period) Endeavor Angel Finance Network Galata Business Angels Angel Finance Network Golden Horn Ventures Initial Investment (Start up Period) Ilab Initial Investment Inovent Incubation, Seed Funding Inventram Incubation, Seed Funding Inventures Seed Funding, Angel Finance Labx Angel Finance Network Tmar Ventures Investment Capital Turkven Investment Capital Verusa Investment Capital Young Turk Ventures Angel Finance

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