What are the two types of financial goals?
- income= cash available to compensate manager such as salary/wages, commission, dividends
- wealth- value of business if sold, long term needs such as retirement.
Be able to do a “quick and dirty” valuation of a business.
EBITDA \+extra bonuses or compensation to owners =adjusted EBITDA x earnings multiple (or other industry multiple) =valuation -outstanding loans =cash proceeds to owner
Recognize examples of non-financial goals.
- how much time do you want to spend with your family?
- what other interest or hobbies do you want to be able to continue to pursue
- Do you want to continue with your formal education?
- DO you have other aspirations that you want to pursue at some point in your life?
Recognize reasons an entrepreneur might need to adjust goals.
- Getting married
- Having children
- changes in health(yours or family)
- changes in age
- venture either exceeds or falls short of expectations.
Recognize the four phases of the Life Cycle of a Business Venture and what happens in each phase.
- prelaunch: develp business, secure resources, setup ops, hire/train staff
- startup: hands on, build customer base, refine product/servie, identify additional oppurtinities
- Growth: revenue and profits begin to grow quickly, transition to professional management, mgt team grows, mgt and operatins systems put into place.
- Maturity: entrepreneur exits through selling, next generation, bankruptcy, dying
What is the “business model”? What information should it provide?
- Tells you where your revenue comes from: product/service?, target market?, competitive advantage?
- What is your cost structure?
- What is the required initial investment?
What is a Business Plan? How can a written Business Plan help a business, even if outside funding is not needed?
A comprehensive document that thoroughly explains a business idea and how it will be carried out
- story of what the business is and will be
- all costs and a marketing plan
- description of financing
- estimate of projected earnings
Why is the “Executive Summary” the most important part of the Business Plan?
A sales pitch for your business and it may be the only thing read. Contains management strengths, funding request, story of the business, competition details.
