KANSAS HIGH SCHOOL BUSINESS PLAN COMPETITION
Worksheet Instructions
The instructions are given for each worksheet individually. However, some worksheets do require information from others be prepared first.
Economics of One Unit
1. Determine the selling price of one unit of your product. (This can be one unit of a physical product like a computer, or one unit of service like building a web page.)
2. Determine the cost of materials. (If the unit is a service, there probably won't be any materials.)
3. Determine the total number of hours it will take to complete the service or build the product. (If it takes two people 4 hours each to complete one unit, the number of hours is 8.)
4. Determine the wage that you will pay for one hour of labor.
That's it for the economics of one unit. The worksheet will do the rest of the calculations.
Fixed Costs Calculator
1. Determine the costs for monthly expenses: rent, utilities and telephone, insurance, advertising and salaries. Determine if there are any other expenses that may also apply. Temporary help and website hosting are examples of other types of fixed expenses.
2. Establish the cost over the next three years. A quarterly cost will be calculated for you. Use this as the starting point, and then decide if these costs will remain the same, or if you expect them to go up or down over time.
3. Determine your break even point. The total fixed cost line is added for you; just divide that number by the net profit per unit from the economics of one unit calculator.
4. Determine how many units you expect to sell for each quarter. Will this number rise or fall seasonally? How long will it take for your company to achieve break even?
5. Figure the Projected gross sales revenue and the cost of goods sold for each quarter. A projected gross profit will be calculated.
Start-Up Costs
1. Will you need any tools, equipment or machinery to start your business? How much will they cost.
2. How much money will your company need to cover operations until there is a steady flow of income coming to the business? This amount should be enough to cover any unexpected shortfalls in sales. You may need to assign a temporary value to your starting cash and then change it based on your cash flow worksheet.
3. Will you borrow any money to start the company or buy equipment? Will the loan be long or short term?
Balance Sheet (Part 1)
1. Begin with the Year 0 calculations. Assume that this day is the day that you begin operations and that you receive all capital (loans and investment) and buy all equipment on this day.
2. Determine all the company's assets. There will be no inventory or accounts receivable, so cash will be the only current asset. If you needed to buy production equipment count these as fixed assets unless you will need to replace them within 12 months.
3. If your company will be borrowing money to purchase start-up assets, include these as liabilities. If the loans are for 12 months or less, they are short term; they are long term if over 12 months. There will not be any accounts receivable at this stage.
4. Any money that has been invested in the company should be listed as owners equity. This amount may change in future years, but all investment will be owners equity in the Year 0 entry.
5. Make sure that the Year 0 amounts balance. Assets = Liabilities + Owners Equity
6. Estimate accounts receivable for years 1-3. You do not have to have accounts receivable, but not having them might limit sales opportunities, depending on your product. A good way to estimate an amount for accounts receivable is to determine a target amount as a percentage of sales. (10% of last quarter's sales, for example)
7. Estimate the inventory level. Determine how long it will take to build your product, and base your estimates on that. You should have enough inventory to cover anticipated sales for the time it takes new product to be built.
8. Determine the depreciation for assets. Most assets will be depreciated over 3 years and have a final value of $0. If your business plan calls for any type of building or land purchase (good luck with that) the depreciation period is 20 years and also has a final value of $0.
9. Estimate accounts payable. This can be determined by a percentage of inventory or some other basis.
10. Determine debt balances. Short term debt is paid off in 12 months. Long term debt is paid off over years 1-3 in even amounts.
Income Statement
1. Input projected net sales revenue, cost of goods sold, and total fixed costs from the estimated sales worksheet section of the fixed costs calculator.
2. Determine the amount of annual depreciation for each year. Divide that amount by four for the quarterly amount.
3. Compute interest for loans. Interest rates are calculated as simple interest, taking 10% of the initial loan balance. Divide this amount by 4 for the quarterly amount.
4. The worksheet will calculate the remaining amounts and yearly totals.
Cash Flow Worksheet
1. Input the Earnings Before Interest and Taxes from the Income Statement into the cash flow worksheet.
2. Input the Depreciation and Tax amounts from the Income Statement.
3. Input the changes from year to year in the Accounts Receivable, Accounts Payable, and Inventory from the Balance Sheet. Be sure to correctly record the increases and decreases. If the amount is to be subtracted (Has a minus sign before the entry) be sure to input the number with a minus sign so that it is computed as a negative amount.
4. The change in cash flow will be computed. make sure that this number matches your calculations. If it doesn't, check to make sure that all the entries that are supposed to be subtracted are entered correctly. (They will be in red and bracketed.)
5. Put in any amounts for purchase of assets (or sale of assets). Include any assets purchased as start-up items that are in the Year 0 column on the Balance Sheet.
6. Input information for loans taken and loans paid during each year. If any loans are taken out in Year 0 on the balance sheet, include them in year one on the cash flow. Payments of loan principal and interest should be added together and listed on the cash flow as a negative amount since they are being paid out.
7. Add any new investment in the company. Again, any initial amount from Year 0 should be added here. If any profits are paid back to the owners, they should be subtracted.
8. The total change in company cash flow will be totaled at the bottom of the worksheet.
Balance Sheet (Part Two)
11. Take the amount of total change in company cash flow for year one and enter this as the cash balance for year one on the balance sheet. Then take the total change in company cash flow amount from year two, and add it to year one to get the cash balance for Year 2. Do the same for Year 3.
12. You now have a total for the assets on the balance sheet. Since you already know the liabilities, now you can determine the owners equity. For this case, the Stockholder's equity will remain the same for all three years. (In the example, it stays at the $5,000 original investment.) Because of this, any changes in equity will affect the retained earnings. The retained earnings can grow with the company, or as in the example, all or part of the profits can be given back to the owners. |
