ENTR FPX 5412 Assessment 4 Financial Plan for New Venture

Student Name

Capella University

ENTR-FPX5412 New Ventures and Entrepreneurship

Prof. Name

Date

Introduction

This section addresses the financial planning necessary for the establishment of our woodwork business, emphasizing its online nature and the absence of a physical location. The financial plan serves as a comprehensive outline of goals, strategies, and timelines, fostering accountability and the implementation of action steps (Neiman, 2006).

All business plans, whether for startups or existing ventures, should encompass essential components such as profit and loss statements, cash flow statements, balance sheets, sales forecasts, personnel plans, and business ratios (Ward, 2019). Collaboration with a certified financial planner is recommended for effective goal-setting and guidance in the financial planning process.

Initial Investment

The initial investment, defined as the amount required to initiate the business, is a crucial consideration. According to the U.S. Small Business Administration, microbusinesses typically cost around $3,000, while home-based franchises range from $2,000 to $5,000 (Carmela, 2018). The computed initial investment for our woodwork business amounts to $12,445.00, factoring in our home as the workspace and accounting for existing equipment.

Monthly Operating Expenses

Operating expenses, representing the costs of sustaining the business, constitute a significant aspect of financial planning (Ward, 2019). Monthly operating expenses were calculated, excluding state payroll taxes due to our state’s tax absence. The difference between expenses with and without rent and utilities for online operations is highlighted.

Monthly Revenues

Monthly revenue projections reveal variations, emphasizing the impact of including rent and utilities in the expenses. Notably, some months yield a profit, while others result in a negative income, underscoring the need for comprehensive financial planning.

Cash Reserves

Maintaining cash reserves equivalent to three to six months of basic living expenses is recommended for financial security (Neiman, 2006). While the spreadsheet indicates a need for $463.98, a reserve of $1,500.00 is suggested to account for unexpected events.

ENTR FPX 5412 Assessment 4 Financial Plan for New Venture

Funding Source

The preference is to avoid external funding initially, given the absence of a physical location and existing equipment. Future considerations for a small business loan may arise when expanding to a physical location in approximately five years.

Conclusion

Upon completion of my master’s degree, I intend to secure the necessary registrations and licenses for our woodworking venture. The rationale behind this decision is to ensure a comprehensive understanding of the requirements involved. Currently pursued as a hobby, I plan to integrate the knowledge gained during my academic journey into the preparation of our business forms.

Developing a business plan is crucial for contemplating the long-term goals of any new venture. It serves as the foundation to explore the essential steps for establishing a Limited Liability Company (LLC). Understanding the financial investment required is paramount, as it enables a realistic assessment of costs and the feasibility of self-funding or attracting potential investors. In the case of our woodworking enterprise, consideration may be given to obtaining a small business loan if additional financial support is needed, given our size may not attract individual investors.

References

Carmela, S. (2018, April 12). Startup Costs: How Much Cash Will You Need? Retrieved from Business News Daily: https://www.businessnewsdaily.com/5-small-business-start-upcosts-options.html

Neiman, D. (2006, April 17). Financial Planning 101. Retrieved from entrepreneur: https://www.entrepreneur.com/article/159530

Ward, S. (2019, October 07). How to Write the Financial Section of a Business Plan. Retrieved from the balance small business: https://www.thebalancesmb.com/writing-the-businessplan-section-8-2947026