You as the?business manager?need to be able to determine larger sources of funding by creating a financial plan to help reduce duplication of resources, identify requirements and ri
You as the business manager need to be able to determine larger sources of funding by creating a financial plan to help reduce duplication of resources, identify requirements and risks, and determine various financing options. Completing this planning is an important step for all businesses to take if they want to succeed. Larger companies may delegate this process to financial managers, financial analysts, or operations managers.
You decide to create a financial plan for your company to help distinguish between sources, requirements, and risks associated with various types of long- and short-term financing capital structure that your company can potentially use in the future.
Assessment Deliverable
Draft a 3- to 4-page financial plan for your company. This plan should include sections for a business case and profit-and-loss statements. Include the following items:
- A business case that includes a description, type of business, and sources of funding
- Note: Use your Wk 5 Assessment Prep: Business Case Research assignment and feedback.
- A profit-and-loss statement for a 3-year period
- Project revenue. State realistic assumptions, such as growth per year, in your projections.
- Estimate direct costs, including capital, marketing, labor, and supply costs.
- A conclusion that includes an explanation of what working through a financial plan can do for a larger company
Cite references to support your assessment according to APA guidelines.
Submit your assessment.
Assessment Support
- Rubric for guidance on deliverable expectations
Note Please:
Writing Standards – Please follow all APA formatting requirements, in-text referencing requirements, and referencing for all work – induing discussion questions, participation, presentations, etc. Support all assertions. The UOPX APA Sample Writing Paper is an excellent resource.
Originality – if you submit work with more than a 10% turnitin match ( properly referenced or not) the work will be reviewed for originality. Work with originality issues will be scored a zero.
5
Organizational Financial Plan
Gbenga Adeogun
University of Phoenix
FIN/571
Carol Sommers
April 11, 2023
Organizational Financial Plan
Gelian Restaurant is a concept for a business that will result in the opening of a restaurant in the neighborhood that serves classic cuisine as well as organic and healthy food. The Gelian Restaurant will be a collaboration of two families. The company plans to serve between 150 and 200 customers daily, serving breakfast, lunch, and an early dinner. The average startup cost is predicted to be between $649 000 and $665 000, with 30% of that amount going toward one-time expenses like the security deposit required for a lease, business licenses and other permits, signage and advertising, legal fees, furniture, kitchen, and cooking equipment, tables, renovation and customization, and tableware, ordering and payment hardware and software, and accessibility for people with disabilities. Conversely, recurrent, and ongoing expenses like employee pay and benefits, utilities, insurance and permit costs, food and beverage charges, marketing, and many more will also be worked out throughout the initial year of operation.
Funding as a Business Necessity
Several factors necessitate finance for businesses. For example, an existing business may require additional funding for marketing and expansion, whereas a new business will require funding for all necessary tasks, including variable and fixed costs. Similar to the case of Gelian Restaurant, money is required to lease a space, acquire business permits and other licenses, renovate and improve the property, hire staff, and purchase raw materials. On the contrary, without finance, a business plan cannot commence. Less funding makes cost-cutting imperative and might occasionally conflict with the initial business concept.
Funding Sources and Requirements to Access Them
The type of financial sources that may be accessible to finance the idea depends on the type of business. Although the Gelian Restaurant is a partnership, the two partners' savings are the primary funding source. As long as a partner is a legitimate organization member, there is no set criterion to access their contribution. The company can also get finance from stock, venture capital, angel investors, and commercial lines of credit. Banks favor backing established businesses over new ventures. The two partners must provide collateral that the lender will utilize to guarantee the partnership's eligibility for a commercial bank loan. The bank will compare the value of the collateral to the amount that the two partners will be requesting. The soundness of the business idea is a key prerequisite for angel investors. Angel investors will not hesitate to contribute their funds to the realization of the project if it has enormous promise in exchange for equity or convertible debt (Crick & Crick, 2018). In terms of venture capital, the partnership's readiness to adopt management advice from the venture capitalists is also a need, as is the concept's viability.
The Associated Risks of Each Funding Source
Each of the aforementioned funding options has benefits and drawbacks. Business loans can be a great resource for funding a company and fostering its expansion after the original startup stage. However, the facility has high-interest rates. It can be dangerous, particularly if it is utilized to finance activities that have no direct connection to generating profits ("Small business cost of capital," n.d.). For instance, expenses related to leasing real estate, purchasing depreciable assets, or remodeling have no direct impact on sales. If a bank loan finances them, there is a higher chance of default. Bank loans and venture funding can occasionally be overbearing.
The Selected Funding Sources
Other financing options, including self-funding and angel investors, are low-risk and may be acceptable for Gelian Restaurant. Angels are low-risk investors because they will invest without hesitation if they are convinced of a concept. Companies frequently rely on specialists for objective assessments of an idea's viability. On the contrary, they frequently separate themselves from management-level decision-making, allowing for autonomy. Self-funding also affords such independence. The sole objective of the firm is to generate profits for its shareholders.
Cost of Capital for Funding Sources
Cost of capital refers to the cost of obtaining the financing for a business idea. The business has settled on two main funding sources for its short-term financing. These include self-funding and angel investors accredited by the Securities Exchange Commission (SEC) (Corporate Finance Institute 2020). The business will still rely on angel investors for its long-term funding. There is no cost attached to self-funding. However, the cost associated with angel investors is discussed in three main ways: providing a loan that is later converted into an equity position, allocating stock, then deferring dividend payment, and lastly, getting an equity position directly (Sage US. n.d).
|
Year |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
Capital Provided |
$250, 000 |
$250, 000 |
$250, 000 |
$150, 000 |
$150, 000 |
|
APRs |
10% |
10% |
15% |
15% |
15% |
|
Cost of capital |
$40, 000 |
$40, 000 |
$40, 000 |
$40, 000 |
$40, 000 |
References
Crick, J. M., & Crick, D. (2018). Angel investors’ predictive and control funding criteria. Journal of Research in Marketing and Entrepreneurship.
Corporate Finance Institute. (2020, April 28). Angel investor – Learn about sources of angel investments. https://corporatefinanceinstitute.com/resources/knowledge/finance/what-is-angel-investor/
How much does it cost to open a restaurant checklist | Sage US (n.d). restaurant. https://www.sage.com/en-us/accounting-software/startup-costs/restaurant/
The small business cost of capital. (n.d). The Balance Small Business. https://www.thebalancesmb.com/cost-of-capital-for-a-business-393132
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