With the financial information given, please (fill out the sheets for) open month expense report, break even analysis worksheet, break even analysis spreadsheet. Item Amount Monthly Payment Purpose Savings from partners (collectively you and your partners have pooled your personal savings $25,000 $1,000 used to purchase 4 months' worth of office supplies $5,000 used to purchase media presentation equipment (3-year useful life) $10,000 kept in saving CD that matures in 14 months. $9,000 kept in checking account for operating capital that you intend to spend over the next 3months Entire amount used to purchase equipment for the company (7-year useful life) Bank loan #1 taken out from your bank $27,000 $700 per month for 4 years You entered into a 5-year lease to rent an office from which to conduct your business $900 per month Monthly Office rental, 5- year lease Gift from rich relative $5000 Applied as down payment Purchased a storage garage for $17,000 $1350 per Bank loan #2 an additional bank loan to purchase a la $12,000 month for 10 small storage garage along with your relative's gift months Start up Expenses Assets Short Term Assets: Cash $ Bank Loan #1 $ No interest Loan $ Bank Loan #2 $ TOTAL Short Term Assets $ 25,000 Partners Contribution to business 27,000 Loan for medical equipment (7-year useful life) 5,000 Gift from Parents 12,000 Purchase Storage garage 69,000 Fixed (Long Term Assets: Equipment and Machinery $ Headquarter Necessities $ TOTAL Long Term Assets $ 100,000 Wheel chairs, Lifts, IV equipment 40,000 Computers, Tablets, Printer, tables, Chairs 140,000 Liabilities Short Term Liabilities Loans Due within 12mos. $ Tax payable $ Accounts Payable $ Notes Payable $ TOTAL Short Term Liabilities $ 20,325 Bank Loans, Rent 4,500 Payroll 19,500 Utilities, Supplies, Misc. 300 No interest Loan 44,625 Loan Term Liabilities Loans Payable > 12 mos. $ Total Long Term Liabilities $ 67,275 67,275 Owners Equity: 97,100 (Short + Long Term Assets) - (Short +Long Term Liabilities Opening month expense report: Your Name Company Name Fixed Expenses (monthly): Cash costs (Expenses) inuun name or brief explanation Name or brief explanation name or bred explanation name or brief explanation name or brief explanation Total monthly cash expenses: $ Non-Cash costs (Expenses) nnn name, or brief explanation name, or brief explanation name, or brief explanation name or brief explanation name, or brief explanation . Total monthly non-cash expenses: $ Total Monthly Fixed Expenses: $ Variable Expenses: list of major variable expenses: name, or brief explanation S not needed mame or brief explanation name or brief explanation name or brigt explanation Break Even Analysis great sheet Your Name: Your Company Name Estimated Average Monthly Income Per Client: Marginal Costs as a Percent: (%) explanation below Total Monthly Fixed CASH Expenses: From opening more Expense Report Number of Clients / Month for breakeven: #DIV/0! Basis for estimating average monthly income per client: Basis for estimating marginal expense ratio: NAME: INDIVIDUAL PROJECT: Break Even Analysis: worksheet For this part of the assignment, we are going to try to predict when your business will break even. Just as in the Startup Expenses and Opening Day Balance Sheet assignment, you will have to make financial estimates. That is not surprising. Most of time business people need to do this regularly. The difference between a "good" business person and a "not so good" business person often comes down to how accurate they are with their estimates. In this part of your assignment, you will have to estimate the average monthly income per customer and the Marginal Costs per sale (this was covered in class during session 9). STEP 1: What is my average monthly income per customer? What I want you to do is think about how much you income you would expect to make from one customer (an average customer) each month. Perhaps you will bill each customer monthly (like a nursing home does). Maybe you will bill each customer every time you see them (like a dentist office does). It doesn't matter. Let's fill in one of the two following options: Choose 1 of these 2 options - place a mark in the box for the option you choose: I bill my customers monthly. I expect to receive on average $ (enter the amount) from each of my customers in a month's time. The amount you entered is the average monthly income per customer. -or- I bill my customers every time I provide a service or sell them my goods. I expect to receive on average $ (enter the amount) every time I see a customer. I also expect to see this one customer this many times a month: (enter the number of times you expect to see a customer per month. If you bill this way, multiple the average that you entered by the number of times you expect to see that customer in a month. This then will give you your average monthly income per customer. Average $ monthly income per customer) number of times = $ (this is the average STEP What is my average monthly cost per customer? (What are my Marginal Costs and my Contribution Margin): Break even Analysis worksheet In session 9 we you learned about variable costs. Every time you perform a service for a customer or sell them goods, you will have costs. These variable costs are known as Marginal Costs. Marginal Costs can range from as little as 25% of your sale price to as much as 95% of your sales price. As an example, before you can sell something you will need to pay for supplies and the salaries of your salespeople. The more you sell the more supplies you will need and the more sales people you will also need as well. These are Marginal Costs Every time you sell something or provide a service, the 'average 'Marginal Cost is around 60% of your sales price. That is only an average, if your business is labor intensive or you have to buy a lot of supplies then you will have a larger percent. A smaller percent can also be used if you think your Marginal Costs are lower. Perhaps in your business, you do not need to buy a lot of supplies or you think that your labor costs are less that average. I expect my Marginal Costs (as a percent) to be _% of my sales price. OK, you are getting there. Let's figure out your average monthly cost per customer. All you have to do is multiply the average monthly income per customer (you calculated that in Step 1 on this worksheet) by the Marginal Cost Percent from above. This will give you the average monthly cost per customer: Average monthly income per customer (from STEP 1) is $_ Marginal Cost Percent you entered above_ cost per customer. . Multiply this by the %. This equals your average monthly My average monthly cost per customer is: $ STEP 3: Next we need to know what your Average Customer's Contribution Margin. This is easy. Subtract your average monthly cost per customer you just calculated this) from the average monthly income per customer (from step 1 of this worksheet). My Average Customer's Contribution Margin = The average monthly income per customer minus the average monthly cost per customer. $_ (The average monthly income per customer from Step 1) minus $_ _(The average monthly cost per customer from just above) _(Average Customer's Contribution Margin) What does this tell you? Every time you sell something you will have to spend money. Break even analysis worksheet Your average monthly cost per customer is the amount of money you will have to put aside from monthly sales to each customer cover your variable costs. The average customer's contribution margin is the amount of money you have left from monthly sales to each customer to pay your fixed costs. STEP How many customers per month do I need to break even? To answer this you need to know the total CASH fixed expenses per month. Good news, you already did that and all you have to do is look it up on your Opening Month Expenses Report Spreadsheet. Divide that figure by the average customer's contribution margin (you calculated that at the end of step 2 on this worksheet) and that is how many customers you need per month to break even. The total fixed CASH expenses per month (from your Expense Report Spreadsheet) -divided by The average customer's contribution margin (from the end of step 2) I will need enter the number from your division) customers per month to break even. Now that you know this is the number of customers per month that you need to break even sensible? Will you be able to get to that level within a year of starting your business? If not, the only options you have are either raising your prices or cutting your costs. What do you think?: (type your answer here)... With the financial information given, please (fill out the sheets for) open month expense report, break even analysis worksheet, break even analysis spreadsheet. Item Amount Monthly Payment Purpose Savings from partners (collectively you and your partners have pooled your personal savings $25,000 $1,000 used to purchase 4 months' worth of office supplies $5,000 used to purchase media presentation equipment (3-year useful life) $10,000 kept in saving CD that matures in 14 months. $9,000 kept in checking account for operating capital that you intend to spend over the next 3months Entire amount used to purchase equipment for the company (7-year useful life) Bank loan #1 taken out from your bank $27,000 $700 per month for 4 years You entered into a 5-year lease to rent an office from which to conduct your business $900 per month Monthly Office rental, 5- year lease Gift from rich relative $5000 Applied as down payment Purchased a storage garage for $17,000 $1350 per Bank loan #2 an additional bank loan to purchase a la $12,000 month for 10 small storage garage along with your relative's gift months Start up Expenses Assets Short Term Assets: Cash $ Bank Loan #1 $ No interest Loan $ Bank Loan #2 $ TOTAL Short Term Assets $ 25,000 Partners Contribution to business 27,000 Loan for medical equipment (7-year useful life) 5,000 Gift from Parents 12,000 Purchase Storage garage 69,000 Fixed (Long Term Assets: Equipment and Machinery $ Headquarter Necessities $ TOTAL Long Term Assets $ 100,000 Wheel chairs, Lifts, IV equipment 40,000 Computers, Tablets, Printer, tables, Chairs 140,000 Liabilities Short Term Liabilities Loans Due within 12mos. $ Tax payable $ Accounts Payable $ Notes Payable $ TOTAL Short Term Liabilities $ 20,325 Bank Loans, Rent 4,500 Payroll 19,500 Utilities, Supplies, Misc. 300 No interest Loan 44,625 Loan Term Liabilities Loans Payable > 12 mos. $ Total Long Term Liabilities $ 67,275 67,275 Owners Equity: 97,100 (Short + Long Term Assets) - (Short +Long Term Liabilities Opening month expense report: Your Name Company Name Fixed Expenses (monthly): Cash costs (Expenses) inuun name or brief explanation Name or brief explanation name or bred explanation name or brief explanation name or brief explanation Total monthly cash expenses: $ Non-Cash costs (Expenses) nnn name, or brief explanation name, or brief explanation name, or brief explanation name or brief explanation name, or brief explanation . Total monthly non-cash expenses: $ Total Monthly Fixed Expenses: $ Variable Expenses: list of major variable expenses: name, or brief explanation S not needed mame or brief explanation name or brief explanation name or brigt explanation Break Even Analysis great sheet Your Name: Your Company Name Estimated Average Monthly Income Per Client: Marginal Costs as a Percent: (%) explanation below Total Monthly Fixed CASH Expenses: From opening more Expense Report Number of Clients / Month for breakeven: #DIV/0! Basis for estimating average monthly income per client: Basis for estimating marginal expense ratio: NAME: INDIVIDUAL PROJECT: Break Even Analysis: worksheet For this part of the assignment, we are going to try to predict when your business will break even. Just as in the Startup Expenses and Opening Day Balance Sheet assignment, you will have to make financial estimates. That is not surprising. Most of time business people need to do this regularly. The difference between a "good" business person and a "not so good" business person often comes down to how accurate they are with their estimates. In this part of your assignment, you will have to estimate the average monthly income per customer and the Marginal Costs per sale (this was covered in class during session 9). STEP 1: What is my average monthly income per customer? What I want you to do is think about how much you income you would expect to make from one customer (an average customer) each month. Perhaps you will bill each customer monthly (like a nursing home does). Maybe you will bill each customer every time you see them (like a dentist office does). It doesn't matter. Let's fill in one of the two following options: Choose 1 of these 2 options - place a mark in the box for the option you choose: I bill my customers monthly. I expect to receive on average $ (enter the amount) from each of my customers in a month's time. The amount you entered is the average monthly income per customer. -or- I bill my customers every time I provide a service or sell them my goods. I expect to receive on average $ (enter the amount) every time I see a customer. I also expect to see this one customer this many times a month: (enter the number of times you expect to see a customer per month. If you bill this way, multiple the average that you entered by the number of times you expect to see that customer in a month. This then will give you your average monthly income per customer. Average $ monthly income per customer) number of times = $ (this is the average STEP What is my average monthly cost per customer? (What are my Marginal Costs and my Contribution Margin): Break even Analysis worksheet In session 9 we you learned about variable costs. Every time you perform a service for a customer or sell them goods, you will have costs. These variable costs are known as Marginal Costs. Marginal Costs can range from as little as 25% of your sale price to as much as 95% of your sales price. As an example, before you can sell something you will need to pay for supplies and the salaries of your salespeople. The more you sell the more supplies you will need and the more sales people you will also need as well. These are Marginal Costs Every time you sell something or provide a service, the 'average 'Marginal Cost is around 60% of your sales price. That is only an average, if your business is labor intensive or you have to buy a lot of supplies then you will have a larger percent. A smaller percent can also be used if you think your Marginal Costs are lower. Perhaps in your business, you do not need to buy a lot of supplies or you think that your labor costs are less that average. I expect my Marginal Costs (as a percent) to be _% of my sales price. OK, you are getting there. Let's figure out your average monthly cost per customer. All you have to do is multiply the average monthly income per customer (you calculated that in Step 1 on this worksheet) by the Marginal Cost Percent from above. This will give you the average monthly cost per customer: Average monthly income per customer (from STEP 1) is $_ Marginal Cost Percent you entered above_ cost per customer. . Multiply this by the %. This equals your average monthly My average monthly cost per customer is: $ STEP 3: Next we need to know what your Average Customer's Contribution Margin. This is easy. Subtract your average monthly cost per customer you just calculated this) from the average monthly income per customer (from step 1 of this worksheet). My Average Customer's Contribution Margin = The average monthly income per customer minus the average monthly cost per customer. $_ (The average monthly income per customer from Step 1) minus $_ _(The average monthly cost per customer from just above) _(Average Customer's Contribution Margin) What does this tell you? Every time you sell something you will have to spend money. Break even analysis worksheet Your average monthly cost per customer is the amount of money you will have to put aside from monthly sales to each customer cover your variable costs. The average customer's contribution margin is the amount of money you have left from monthly sales to each customer to pay your fixed costs. STEP How many customers per month do I need to break even? To answer this you need to know the total CASH fixed expenses per month. Good news, you already did that and all you have to do is look it up on your Opening Month Expenses Report Spreadsheet. Divide that figure by the average customer's contribution margin (you calculated that at the end of step 2 on this worksheet) and that is how many customers you need per month to break even. The total fixed CASH expenses per month (from your Expense Report Spreadsheet) -divided by The average customer's contribution margin (from the end of step 2) I will need enter the number from your division) customers per month to break even. Now that you know this is the number of customers per month that you need to break even sensible? Will you be able to get to that level within a year of starting your business? If not, the only options you have are either raising your prices or cutting your costs. What do you think?: (type your answer here)