Develop a high-level funding schedule for a new venture business concept that can be used to discuss cash requirements for the first year of operations with prospective investors. The schedule should be prepared on a monthly basis and should include the following specific details:
(1.) Headcount plan - including all personnel needed to carry out the critical operations of the business for the upcoming year.
(2.) Forecast general & administrative expenses, including office rent and related costs, utilities, communication expenses, insurance, filing fees, etc.
(3.) Estimate the cost of how you plan to market the company/product.
(4.) Develop your revenue model, including key assumptions and variables such as unit sales, sales growth, number of customers by the end of the year, product pricing, etc., Make the model flexible enough to enable you to change key variables and run âwhat ifâ analyses.
(5.) If the cost of delivering your product of service is significant, forecast the cost of goods sold based upon estimate costs and the product assumptions used in item 4 above.
(6.) After preparing the initial financial plan, critically review the plan and assumptions (including having advisors and other management team members review the plan for reasonableness). Adjust the month-to-month results to ânormalizeâ the cash balance (and ensure it never runs below $0), adjusting discretionary expenses if necessary.
(It can be any business venture as in a resturant or a store)
Upon completion of the financial model, answer the following questions:
Question 1
How much cash do you need to raise to operate during the first 12 months of operations? Please include your numeric answer and an explanation of several sentences. (about 150 words)
Question 2
Does the amount of cash needed in item 1 above fall within the âreasonableness rangeâ for an early stage company (i.e., up to $5 million)? Please include your numeric answer and an explanation of several sentences. (about 150 words)
Question 3
What is your monthly cash burn rate - both gross and net burn (gross burn is the average of total expenses each month; net burn is gross burn offset by the average monthly cash generated from revenues). Please include your numeric answer and an explanation of several sentences. (about 150 words)
Question 4
How long will you be able to operate at the end of the 12 months forecast before you need to raise additional funding? Please include your numeric answer and an explanation of several sentences. (about 150 words)
Question 5
Please attach a copy of the Financial Model that you created for this assignment.
EXAMPLE
How much cash do you need to raise to operate during the first 12 months of operations? Please include your numeric answer and an explanation of several sentences.
As I plan to operate a restaurant with a nice ambiance I would require premises, renovation and internal decor, furniture, electric setup, a couple of computers, staff, their uniforms, chefs, food supply, tables, chairs and couches, brochures and menu cards, marketing and advertising. Premises and land= $196.3K Renovation and internal decor= $49K Furniture, tables and chair= $20K Staff(2 waiters 1 on the counter 2 cooks)= $16K Uniforms, brochures, menu cards= $500 Food supply= Everyday return, so not included. Marketing and advertising= $20K
Does the amount of cash needed in item 1 above fall within the âreasonableness rangeâ for an early stage company (i.e., up to $5 million)? Please include your numeric answer and an explanation of several sentences.
Total required amount is $301.8K which falls under the reasonable range.
What is your monthly cash burn rate - both gross and net burn (gross burn is the average of total expenses each month; net burn is gross burn offset by the average monthly cash generated from revenues). Please include your numeric answer and an explanation of several sentences.
Three workers at $200 per month and two workers of $300 per month (That's what the salaries are where I live). $1,200 salary, $300 for the electric, maintenance, gas and marketing etc every month. If in the starting months 20 people visits the restaurant and spends at least 7$ per person on food on average, they would bring $140 revenue everyday and in 30 days, $4,200, which is the revenue generated including 60% profit that the food items would generate. $2625 on the food that is being sold. A total of $4,125 is expected to be spent in the first few months, which is the gross burn. The $2,625 food that is sold will at least give 60% profit, that's calculated to be $1575. So the revenue earned each month for a first few months would be $4,200. This estimates that the net burn would be something around (4,125-4200) viz "-$75" every month for a first few months. The negative sign shows it's a profit, and that even at the estimated value their would be some room (of $75) for the accounts to balance and the venture to not fall off into loss. This is the minimum sale calculation which shows no loss. 20 people to visit in one day is a very small figure. Such a business offers an everyday recovery.
How long will you be able to operate at the end of the 12 months forecast before you need to raise additional funding? Please include your numeric answer and an explanation of several sentences.
As we will start gaining more costumers due to marketing and best quality provided, we will start making wholesome profits. At the rate of 50 costumers per day shopping at the average of $8 per costumer, we would make a revenue of $400 per day and $12,000 per month, which after deduction of food cost and other bills would give a profit of $3,000 every month, and hopefully at the end of the 12th month we will be making $6000 per month. Such a profit will help recovering the amount invested and in a few more months the business will be able to recover all the investment except the cost of the land and premises, which will of course be there as an asset.
