This document provides an overview of financial management topics for social enterprises, including the importance of financial planning, forecasting, and projections. It discusses start-up costs, pricing strategies, break-even analysis, revenue and expense projections, and financial systems. Financial information is crucial for understanding viability, managing costs and cash flow, and making sound business decisions. Forecasting sales, costs, and profits allows owners to anticipate risks and set realistic goals and timelines.
The document discusses strategic airline management and strategies. It covers:
1. Definitions of strategic management and what constitutes a strategy according to various experts. Strategic management provides overall direction and involves specifying objectives, policies, plans, and allocating resources.
2. Examples of strategies for airlines such as focusing on low costs or customer service. It also discusses the difference between a strategy and something being strategic, which must impact scope, value, advantage, or operations.
3. Factors influencing airline business models are changing due to market liberalization, technology advances, and the internet transforming distribution methods. This has led to blurring lines between legacy carriers and low-cost carriers.
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EUROMA 2016 conferance paper:
The objective of this paper is to identify and describe the maintenance service pricing models used by firms servicing industrial equipment. Today, price pressure in this market has been seen to be increasing with changes in customer buying behaviors. This pricing pressure confirms the need to focus on customer value when pricing (Anderson et al., 2006). Value pricing has been seen to be selectively successful in the B2B environment. Through analysis of different buying behaviors in different industrial segments this paper highlights difficulties and provides guidance on how to overcome them.
The focus on pricing is in no sector more important then the challenging Life Sciences industry. Not only are you facing increasing development- and manufacturing costs, there is also the ethical aspect to take in account. Both government and private stakeholders cause pressure on your business results.
This Forum is your opportunity to gain new insights in your pricing and profit
optimisation management. Get to know the new trends and innovation within
pharma, medical devices, biotech, and generics. Receive updates on the existing market-access and risk sharing schemes, and work out real-life cases on successful
business improvement projects. But most importantly, this is your Forum: that’s why we focus on interactivity and the input of our participants and provide plenty of networking opportunities. Let us know what you would like to discuss and go home with a load of new and inspiring ideas.
This document provides information about the objectives, budget, funding amounts, evaluation process, and key elements of proposals for the SME Instrument, which is part of the European Innovation Council.
The SME Instrument supports high-risk, high-potential small and medium enterprises to develop and commercialize innovations like new products, services and business models. Proposals are evaluated based on excellence, impact, and quality of implementation. Key elements that should be addressed in proposals include convincing specifications of demand, description of the innovation and competitors, realistic growth plans, protection of intellectual property, and experience of the management team.
The document discusses various topics related to money and banking including inflation, deflation, types of inflation, effects of inflation, demand-pull inflation, cost-push inflation, methods of controlling inflation, anti-inflationary measures, banks, and central banks. It defines key terms and provides examples and explanations of inflation, deflation, different types of inflation based on speed and inducement, effects of inflation on various economic activities, and methods used by governments to control inflation through monetary and fiscal policies.
This document provides an overview of engineering economics and management concepts across 4 sections:
1. It introduces microeconomics, macroeconomics, economic and technical decisions, demand and supply concepts, and break-even analysis.
2. It defines microeconomics as the study of particular markets and segments of the economy like consumer behavior and firm theory. It also outlines characteristics, scope, and importance of microeconomics.
3. It states that macroeconomics deals with aggregates like national income rather than individual quantities. It discusses key issues in macroeconomics like economic growth, business cycles, and unemployment.
4. It describes the process of managerial decision making and sources of uncertainty. It also distingu
On successful completion of this module the student will be able to:
1. Evaluate the performance of a company using various financial analytical tools.
2. Analyze different patterns of cost behaviour and apply cost-volume-profit analysis to
business decisions..
3. Evaluate divisional performance using both financial and non-financial measures
The document discusses strategic airline management and strategies. It covers:
1. Definitions of strategic management and what constitutes a strategy according to various experts. Strategic management provides overall direction and involves specifying objectives, policies, plans, and allocating resources.
2. Examples of strategies for airlines such as focusing on low costs or customer service. It also discusses the difference between a strategy and something being strategic, which must impact scope, value, advantage, or operations.
3. Factors influencing airline business models are changing due to market liberalization, technology advances, and the internet transforming distribution methods. This has led to blurring lines between legacy carriers and low-cost carriers.
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EUROMA 2016 conferance paper:
The objective of this paper is to identify and describe the maintenance service pricing models used by firms servicing industrial equipment. Today, price pressure in this market has been seen to be increasing with changes in customer buying behaviors. This pricing pressure confirms the need to focus on customer value when pricing (Anderson et al., 2006). Value pricing has been seen to be selectively successful in the B2B environment. Through analysis of different buying behaviors in different industrial segments this paper highlights difficulties and provides guidance on how to overcome them.
The focus on pricing is in no sector more important then the challenging Life Sciences industry. Not only are you facing increasing development- and manufacturing costs, there is also the ethical aspect to take in account. Both government and private stakeholders cause pressure on your business results.
This Forum is your opportunity to gain new insights in your pricing and profit
optimisation management. Get to know the new trends and innovation within
pharma, medical devices, biotech, and generics. Receive updates on the existing market-access and risk sharing schemes, and work out real-life cases on successful
business improvement projects. But most importantly, this is your Forum: that’s why we focus on interactivity and the input of our participants and provide plenty of networking opportunities. Let us know what you would like to discuss and go home with a load of new and inspiring ideas.
This document provides information about the objectives, budget, funding amounts, evaluation process, and key elements of proposals for the SME Instrument, which is part of the European Innovation Council.
The SME Instrument supports high-risk, high-potential small and medium enterprises to develop and commercialize innovations like new products, services and business models. Proposals are evaluated based on excellence, impact, and quality of implementation. Key elements that should be addressed in proposals include convincing specifications of demand, description of the innovation and competitors, realistic growth plans, protection of intellectual property, and experience of the management team.
The document discusses various topics related to money and banking including inflation, deflation, types of inflation, effects of inflation, demand-pull inflation, cost-push inflation, methods of controlling inflation, anti-inflationary measures, banks, and central banks. It defines key terms and provides examples and explanations of inflation, deflation, different types of inflation based on speed and inducement, effects of inflation on various economic activities, and methods used by governments to control inflation through monetary and fiscal policies.
This document provides an overview of engineering economics and management concepts across 4 sections:
1. It introduces microeconomics, macroeconomics, economic and technical decisions, demand and supply concepts, and break-even analysis.
2. It defines microeconomics as the study of particular markets and segments of the economy like consumer behavior and firm theory. It also outlines characteristics, scope, and importance of microeconomics.
3. It states that macroeconomics deals with aggregates like national income rather than individual quantities. It discusses key issues in macroeconomics like economic growth, business cycles, and unemployment.
4. It describes the process of managerial decision making and sources of uncertainty. It also distingu
On successful completion of this module the student will be able to:
1. Evaluate the performance of a company using various financial analytical tools.
2. Analyze different patterns of cost behaviour and apply cost-volume-profit analysis to
business decisions..
3. Evaluate divisional performance using both financial and non-financial measures
This document is a course project for a student at Vilnius Gediminas Technical University. The project analyzes the pricing of high quality running shoes produced by a French company. It will involve a cost analysis and use of the break-even method to calculate price. The project will first review relevant pricing theory concepts. It will then describe the company and product, the industry, and goals of pricing. It will calculate BtoB, BtoC, and break-even prices. It will conclude by discussing the company's existing pricing and discounts.
Technical Training and Coaching Material on How to develop a feasibility studies within transitional economies, and how to assess project feasibility and investment climate in the West Bank and Gaza Strip
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The document provides information about Health Business Services (HBS) in Ireland, including its organizational structure, procurement structure, sourcing process, logistics, and tips for public sector tendering. The key points are:
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- It has a national director and departments including procurement, finance, customer relationship management, and estates.
- Procurement is organized into categories like medical devices, pharmaceuticals, and professional services. Sourcing is conducted nationally and locally.
- Logistics operations include a national distribution center and regional hubs to consolidate supply chain activities.
- T
Entrepreneurship Summit IIT Kgp How To Write A Business Plan 03 11 2007Prof Parameshwar P Iyer
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Module 2.1 - Marketing mix 1
The SENSES project co-funded by the European Union funds (ERDF and IPA)
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A profound pricing strategy in your company is necessary, but only using the classic methods can
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The document discusses the art of costing and provides definitions and explanations of different types of costs that make up the total cost of a product. It defines direct material costs, direct labor costs, processing costs, investment costs, organization costs, and profit. It explains that direct material costs refer to the identifiable materials used in production. Direct labor costs refer to payroll that can be assigned to manufacturing a product. Processing costs are incurred from the technology and processes used in production. Investment costs refer to the portion of initial investment allocated to a product. Organization costs are indirect costs like R&D, sales, marketing, and administration. Profit is the incentive for stakeholders and should be earned in good years to cover bad years. The document aims
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The document discusses marketing and selling concepts. Marketing involves creating awareness of needs and persuading customers that a company's products can satisfy those needs. It focuses on customer needs and creating satisfaction. Selling involves closing sales to generate revenue.
It also discusses marketing mix strategies including segmentation, targeting, and positioning (STP). STP involves dividing a market, selecting target segments, and differentiating a product. The document outlines the 4Ps and 7Ps of marketing - the traditional product, price, place, and promotion framework as well as an extended framework adding people, physical evidence, and process.
Cost and management accounting provides managers with detailed cost information to control operations and plan for the future. Cost accounting information is used for financial accounting and by managers for decision making. Management accounting provides economic and financial information for internal users. Cost concepts like cost objects, cost pools, and cost drivers are introduced. Costs are classified by elements, functions, traceability, behavior, and controllability. Product costs include direct materials, direct labor, and manufacturing overhead and become inventory until goods are sold. Period costs are expenses of the current period. Job order costing and process costing are introduced as costing systems. Just-in-time processing, activity-based costing, cost-volume-profit analysis, contribution margin,
The document discusses various types of costs including direct costs, indirect costs, fixed costs, variable costs, and mixed costs. It defines costs and provides examples of each cost classification. It also covers topics like contribution margin, break-even point, and how they are calculated using equations and graphical methods. The document is intended to educate people on finance and accounting concepts related to costs.
The document discusses several key factors to consider when developing a business case for a digitization project:
1) Clearly define the needs and benefits of digitization, ensuring the needs come from external stakeholders rather than just internal drivers.
2) Calculate the total costs of ownership in producing and sustaining digital assets over the long term.
3) Set tangible and measurable targets for user engagement and return on investment based on known patterns of demand.
4) Strategically prioritize digitization initiatives to maximize public and economic benefits.
The document discusses life cycle costing and target costing. Life cycle costing considers all costs from inception to abandonment of a product, including R&D, marketing, customer service, etc. Target costing determines the target price customers will pay, target profit, and derives the target cost of production. It reinforces management commitment to innovation and customer satisfaction while helping maintain a competitive advantage. Potential downsides include increased costs to meet all customer needs, delays from alternative designs, and internal conflicts over cost cutting.
Digitale verlage by Günther Haslbeck / Ovenga MediaGünther Haslbeck
Digital publishers can implement individualized product strategies like customization, versioning, and modularization for digital goods. They must also consider pricing models like freemium, tiered, and consumption-based approaches. Key metrics for subscription businesses include monthly recurring revenue, churn, customer lifetime value, and customer acquisition cost. Publishers should analyze customer value, awareness, segmentation, demand variability, and important value metrics to determine the optimal pricing strategy.
The document discusses pricing as the fourth P of the marketing mix. It covers various topics related to pricing such as introduction to pricing, case studies, questions to consider in pricing, functions of price, setting the price, estimating demand, and estimating costs. The key steps in setting price include selecting the pricing objective, determining demand, estimating costs, analyzing competitors, selecting a pricing method, and selecting the final price.
Module 3.1 - Sales and pipeline managementszpinter
Module 3.1 - Sales and pipeline management
The SENSES project co-funded by the European Union funds (ERDF and IPA)
For more information check the official website: http://www.interreg-danube.eu/senses
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The SENSES project co-funded by the European Union funds (ERDF and IPA)
For more information check the official website: http://www.interreg-danube.eu/senses
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This document is a course project for a student at Vilnius Gediminas Technical University. The project analyzes the pricing of high quality running shoes produced by a French company. It will involve a cost analysis and use of the break-even method to calculate price. The project will first review relevant pricing theory concepts. It will then describe the company and product, the industry, and goals of pricing. It will calculate BtoB, BtoC, and break-even prices. It will conclude by discussing the company's existing pricing and discounts.
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The document discusses service-dominant logic and key foundational premises related to it. It discusses how goods are distribution mechanisms for service provision and knowledge as the fundamental source of competitive advantage. The customer is always a co-creator of value. Organizations exist to combine specialized competences into complex services demanded by the marketplace. It also discusses implications of viewing businesses through a service-dominant logic lens and how it relates to concepts like customer value.
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restrain you from exploiting your profit margins to the fullest. A lot of research and discoveries have
been done on this subject, resulting in soundly based and ready-to-use theories. During Advanced
Pricing Toolbox, you convey insights that go beyond the classical assumptions and tools of price
research and strategy.
The document discusses the art of costing and provides definitions and explanations of different types of costs that make up the total cost of a product. It defines direct material costs, direct labor costs, processing costs, investment costs, organization costs, and profit. It explains that direct material costs refer to the identifiable materials used in production. Direct labor costs refer to payroll that can be assigned to manufacturing a product. Processing costs are incurred from the technology and processes used in production. Investment costs refer to the portion of initial investment allocated to a product. Organization costs are indirect costs like R&D, sales, marketing, and administration. Profit is the incentive for stakeholders and should be earned in good years to cover bad years. The document aims
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The document discusses marketing and selling concepts. Marketing involves creating awareness of needs and persuading customers that a company's products can satisfy those needs. It focuses on customer needs and creating satisfaction. Selling involves closing sales to generate revenue.
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Module 5.1 - Managing finances and increasing profitability
1. Module 5.1.
MANAGING FINANCES
AND INCREASING PROFITABILITY
MAROM Club Association, Hungary
NESsT
2018
Project co-funded by the European
Union funds (ERDF and IPA)
2. What topics will you cover?
• The importance of financial information
– Basic financial definitions, terminology
– Identifying start up and operational costs of the SE
• An introduction to key financial information
– How to define the prices of the products, services
– Break-even calculation
• Tools of the financial management
– Sales revenue forecast; profit and loss forecast; and cash flow forecast
– Financial results
– Key financial forecasts: determining the viability of a business opportunity
Project co-funded by the European
Union funds (ERDF and IPA)
3. Forecasting and planning
Forecasting and planning are key skills which any entrepreneur should develop.
To run a successful social-enterprise you need to understand, create and interpret
financial information.
Have your say:
• Why do you think financial information is important?
• What do you think financial information is used for?
• Which internal and external stakeholders of a business need to see its financial
information?
• Consider the questions above, and discuss your thoughts with other learners in the
comments.
Project co-funded by the European
Union funds (ERDF and IPA)
4. Financial Planning
What is included?
• Initial (start-up)costs;
• Pricing strategy;
• Break-even analysis;
• Financial forecasting.
Why it is important?
• We have, or are likely to be able to obtain the necessary seed capital?
• Considering the real price (according to the competition and to the available
information) and the potential segment, can we break through the break-
even point?
• The more accurate the market research is, the more information we can
obtain to the financial plan.
Project co-funded by the European
Union funds (ERDF and IPA)
5. 1. Start-up Costs
Definition: investment needed before starting (or expanding) a social
enterprise .
Estimate the length of the period, then it should be relatively simple to
calculate costs involved.
Gives more formality to the process and in some cases more weight
internally:
• How many hours are we investing on this?
• What would the market value be if we calculate the cost of the advise
our network is providing to us?
It is important to be as specific as possible, details add up! Research!
Project co-funded by the European
Union funds (ERDF and IPA)
6. 1. Start-up Costs: Budget
Project co-funded by the European
Union funds (ERDF and IPA)
Type of
Cost
Specific Cost X
Cost (source of
information)
Facilities
First rent/purchase
Deposits (security, water, utility. Other
hookups)
Improvements or refurbishing/fixtures
Other
Equipment
Vehicles
Production machines/equipment
Computer/software
Furniture
Telecommunication
Other
Materials/
Supplies
Starting inventory (or raw materials/work in
progress)
Office and packing supplies
Promotional materials (brochures, displays,
etc.)
Training supplies
Other
7. 1. Start-up Costs: Budget
Project co-funded by the European
Union funds (ERDF and IPA)
Type of Cost Specific Cost X
Cost (source of
information)
Professional
services and
fees
Legal (tax, etc.)
Management /marketing / production
consultants
Accounting
Insurance
Design/graphic arts
Promotion and advertising
Licenses/permits/registration
Membership or association fees
Pre-
operations
training
Technical assistance or training
consultants
Tuition or fees (workshops, seminars,
classes, etc.)
Per diem and costs associated with
training (room rental)
Other
Others
For salaries (during start-up)
Reserves-unanticipated costs
Other
Total Start up costs
8. 1. Start-up Costs: Key Questions
How much money do you need to raise?
Where will you get the capital to cover start-up costs?
Does it seem likely that you will be able to raise the necessary capital?
Project co-funded by the European
Union funds (ERDF and IPA)
9. 2. Pricing
The price should allow the enterprise to function.
Normally customers focus more on product satisfaction then on the price.
Don't be afraid to charge a good price. This can always be negotiated down if
necessary.
Analyze ahead of time who is going to pay or who going to receive the product
or service (the target market) and how much they value it. You can always take
advantage of offering different prices for different customers.
Identify the unit price of your products and /or services!
Which aspects have you taken into consideration
Project co-funded by the European
Union funds (ERDF and IPA)
10. 2. Cost-plus versus value-based pricing
There are two basic methods of pricing your products and services: cost-plus and value-
based pricing. The best choice depends on your type of business, what influences your
customers to buy and the nature of your competition.
Cost-plus pricing: This takes the cost of producing your product or service and adds an
amount that you need to make a profit. This is usually expressed as a percentage of the
cost.
– It is generally more suited to businesses that deal with large volumes or which
operate in markets dominated by competition on price.
– But cost-plus pricing ignores your image and market positioning. And hidden
costs are easily forgotten, so your true profit per sale is often lower than you
realise.
Value-based pricing: This focuses on the price you believe customers are willing to pay,
based on the benefits your business offers them.
– Value-based pricing depends on the strength of the benefits you can prove you
offer to customers.
Project co-funded by the European
Union funds (ERDF and IPA)
11. 2. How to build a pricing strategy?
You need to decide whether to use cost-plus or value-based pricing.
• It's important to find out what your competitors offer and what they charge. If you
phone your rivals and ask them for a quote, you can use this information as a
framework.
• It's probably unwise to set your prices too much higher or lower without a good
reason. If you price too low, you will just be throwing away profit. If you price too high,
you will lose customers, unless you can offer them something they can't get
elsewhere.
• The perception of your product or service is also important. In many markets, a high
price contributes to the perception of your product as being of premium value. This
might encourage customers to buy from you - or it might deter price-conscious
customers.
• It can be useful to charge different prices to different customers, e.g. to customers
who purchase repeatedly, or buy add-on or related products, as a thank you for their
loyalty. Bear in mind that customers who are expensive to satisfy will be less
profitable, unless you charge them higher prices. One-off sales may cost you more
than repeat business.
Project co-funded by the European
Union funds (ERDF and IPA)
12. 3. Break-even Analysis
Objective: What is the necessary sales level (in terms of products or
services) to cover my expenses?
Most important factors:
• The time unit of the analysis;
• Define the sales unit;
• Define the price;
• Calculation of different types of expenses.
Project co-funded by the European
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13. 3. Break-even Analysis
Project co-funded by the European
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The UNIT should reflect the way you interpret
the social enterprise.
Period of analysis should be consistent with
the type of product or service being
evaluated.
Examples of units:
Number (product)
Hour (consulting service)
Portion (catering)
Subscriber (publication)
Participant (education)
Night (accommodation)Fix costs (given period)
Price per unit – Variable cost per unit
14. 3. Break-even Analysis: Defining the fix and the
variable costs
Project co-funded by the European
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Fixed costs:
These are all operating costs that will
exist once the enterprise is constituted,
which can’t be avoided and which are
independent of the amount of sales being
generated.
Example: wages, rent, utilities, telephone.
Variable costs:
Costs that are directly related
to the product or service
being provided. They only
exist once a product is
generated or a service is
provided.
Example: trainers contracted
for specific projects, direct
materials.
15. Break-even analysis: identify fix and variable
costs
Project co-funded by the European
Union funds (ERDF and IPA)
Contracted experts3
Personnel2
Total
Other11
Advertising10
Insurance9
Office supplies8
Printing7
Postage6
Telephone5
Rent/utilities4
Direct material1
VariableFixedExpense
16. Excercise: calculate the break-even of your
SE
Project co-funded by the European
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Costs Fixed (per period) Variable (per unit)
Personnel
Experts
Rent
Utilities
Telecommunication
Travelling
Advertising
Material
Others
Total
Price per unit:
Break-even:
17. 3. Break-even analysis: for multiple products
Project co-funded by the European
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Weighted Average
Weight Price Variable cost Gross profit
30% gloves 0.3 $2 $1 $1
50% pulover 0.5 $20 $8 $12
20% scarf 0.2 $8 $2 $6
Fix costs 10,000
Weighted average price 12.2
Weighted average VC 4.7
Break-even
Total 1,333
Gloves 400
Pullovers 667
Scarfs 267
Single product
Break-even
Gloves 10,000
Pullovers 833
Scarfs 1,667
Sales Price Expense Margin
1 day training 80% 100 40 150%
½ day training 18% 60 30 100%
1 hour seminar
consultancy
2% 10 8 25%
Sales Price Expense Margin
1 day training 80% 44 40 10%
½ day training 18% 90 30 200%
1 hour seminar
consultancy
2% 12 10 20%
18. 3. Interpreting the results from break-even analysis
Do they seem realistic?
Do they seem attainable for your organization? (sales potential as well as
production capacity)
Evaluate under different contexts – simulations under different prices and
cost reduction.
Key point in the analysis.
Project co-funded by the European
Union funds (ERDF and IPA)
19. 4. Financial Projections
Evaluation of sales, costs and prices
Objectives:
• Have an idea by when you will reach your goals (OR exercise!);
• Identify sources of risk (operational, financial, etc.).
Requires solid market research information:
• In order to determine starting point;
• In order to estimate the rate of growth.
Project co-funded by the European
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20. 4. Revenue Projections: How much money can
you make?
1. The level of revenue is determined based on sales.
2. Sales projections are produced based on market analysis.
3. NB: Don’t look at the break-even point!
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“I forget, which one is projected earning
and which is our actual earnings?”
21. Financial Projections
Based on the following:
1. Price - How much can you charge for one unit of your product or
service?
2. Sales - How many customers will purchase the product or service? How
much will you be able to sell when you first open?
3. Trends - How do you expect your sales to change (grow) over time?
Important to consider multiple scenarios – a best case, realistic case and
worst case. Be conservative!! Generally, the worst case is realistic.
Project co-funded by the European
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22. 4. Revenue and Expenses
1. Total Revenue: The total amount of a company's sales and other sources of
income.
2. Expenses: Business expenses are the costs the company incurs each
month in order to operate, including rent, utilities, legal costs, employee
salaries, contractor pay, and marketing and advertising costs. To remain
financially solid, businesses are often encouraged to keep expenses as low
as possible.
• Startup costs: Startup costs are the expenses incurred during the process of
creating a new business
• Operating costs: Operating costs are expenses associated with the
maintenance and administration of a business on a day-to-day basis.
– Operating Cost = Cost of Goods Sold + Operating Expenses
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23. 4. Making Revenue Projections Assumptions
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Business Scenario 1 Scenario 2 Scenario 3 Scenario 4
What is your
price per unit
(per product)?
How many
customers will
you have per
day/month
(per product)?
How much will
you sell when
you start your
business?
How much will
you sell in one
year’s time?
24. 4. Excercise: Revenue Projections
Project co-funded by the European
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Month 1 2 3 4 5 6 7 8 9 10 11 12
Units sold
per month
Price
Total
Revenues
Total
Costs
Net
Income
25. 4. Cost Projections: How much will it cost?
Expenses usually can be very precisely predicted, if you had an accurate
market research.
For the financial analysis and for the financial forecasting we use three
different type of expenses:
• Initial costs;
• Fix costs;
• Variable costs.
• The fix costs are not related to sales volume. To design our fixed costs, note
the:
• price changing (inflation, raising of the overhead fees, etc.);
• Change in employment regulations and the increasing wage
expenditure.
• Fixed costs are based on realistic data based either on our experiences
or our research.
Variable costs vary proportionately depending on our sales.
• Use the specific direct cost (per sales unit);
• For the forecast multiply it by the monthly forecasted number of units
sold. Project co-funded by the European
Union funds (ERDF and IPA)
26. 4. Cost Projection Excercise
Project co-funded by the European
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Month 1 2 3 4 5 6 7 8 9 10 11 12
Units
sold per
month
Variable
Cost/Unit
Total
variable
cost/
month
Fixed
cost/
month
Total
Costs
27. 4. Net Income: NI
• Net income (NI) is a company's total earnings (or profit)
• Net income is calculated by taking revenues and subtracting the costs of doing
business such as depreciation, interest, taxes and other expenses.
• To calculate net income for a business, start with a company's total revenue. From
this figure, subtract the businesses expenses, operating costs and liabilites to
calculate the business's earnings before tax. Deduct tax from this amount to find the
business's net income.
– NI = TR – BE – OC – L - Tax
• This number appears on a company's income statement and is an important measure
of how profitable the company is over a period of time.
– Bottom Line: This is the total amount a business has earned or lost at the end of
the month. The bottom line is the last financial figure on a ledger. The term can
also be used in the context of a business’ earnings either increasing or
decreasing.
Project co-funded by the European
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28. 4. Excercise: Profit Projections
Project co-funded by the European
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Month 1 2 3 4 5 6 7 8 9 10 11 12
Units sold
per month
Price
Total
Revenues
Total
Costs
Net
Income
29. 4. Do not forget!
The biggest challenge is projecting sales – don’t fit sales to your break-
even!
Look at different scenarios, try using different units, different assumptions!
Compare these with other ways of projecting revenue like industry
standards - are you totally off base?
Small changes can have profound impacts.
NB: production capacity does not equal sales volume.
Project co-funded by the European
Union funds (ERDF and IPA)
30. 5. Financial Systems
• A well-functioning financial system provides us data on the following:
Sales planning and registering;
Income planning and registering;
Expenditure planning and registering;
Assets registering;
Liabilities registering;
Cash and deposit registering.
Project co-funded by the European
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31. 5. Financial Systems
Managing cash-flow, financial planning;
Financial planning ≠ accounting;
Software;
Internal controls;
Allows to check profitability, cost-cutting opportunities, approach
financial difficulties;
Payment schemes (keeping track of web payment, partial payment,
etc.);
Separation of different projects;
Risks (e.g. in lack of proper internal control and alarm system, thefts
may occur);
Discuss shortcomings of current system, short and long term plan to
overcome them.
Project co-funded by the European
Union funds (ERDF and IPA)
32. 5. Cash-flow Management
Main goal: avoiding lack of liquidity by controlling our payments and the
payments of our customers.
• What possibilities do we have?
Discounts to motivate our customers to pay earlier;
Advance;
Immediate reminder on overdue invoices to our customers;
In case of „bad payers” accepting only cash;
Utilize maximally the payment deadlines of our suppliers;
Preferring suppliers with flexible paying conditions;
Loan;
Factoring
Project co-funded by the European
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33. 5. Financial Systems
• Guidelines for setting up a financial system:
Trackable;
Searchable;
Double-checks;
Result-oriented;
Timesheets;
Clear;
In harmony with accounting system.
Project co-funded by the European
Union funds (ERDF and IPA)