- This section enables you to decide the amount and allocation of money you will need to start your new business or expand your existing one. It is often referred to as
use of funds
- . In this activity we will be itemising and costing out whatever you need to start or expand your business, including items you already have.
Tip: We’ve already identified some of these items, and looked at the costs, in the Your Operations Plan lesson – so ensure you have that information in front of you before you begin.
use of funds
- or s
- is a summary showing the amount needed in each area. While it details the complete picture – only major items should be listed individually. The rest can be “rolled-up” under specific categories.
We will include the following categories and talk about each below:
- Capital items
- Other costs
- Operating line
1. Capital Items
- These are major pieces of equipment you need to start or expand your business. They may be machines, vehicles, computers or furniture etc. You should list these separately and allocate a cost to each one. You may already have an item but still list it along with its current value.
- For a product based (manufacturing or retail) business, inventory is the stock of: raw materials, work-in-process, finished goods, and supplies. For a service based business, inventory is any ongoing supply of materials or items that allows the business to perform the service eg dog treats for a dog training service or shampoo for a hair stylist.
3. Other costs
- This category includes items such as: rent or lease costs, advertising/marketing, business licenses, accounting/ bookkeeping fees, software, staff cost and other costs related to start-up or expansion.
- If you need to make changes to the internal (and possibly external) structure of your place of business (including a home office), this is where you record those costs.
5. Operating line
- Often provided by a line of credit, these are the funds you need to carry you through slow periods and provide a “buffer” to your operation. They may include amounts for rent or other regular payments, new stock, petrol costs, staff payments etc.
Case Study Example
This is an example of Mike’s start up costs:
- Now breakdown your own business start up costs. Some of these items you identified in the Operations Plan, so be sure to go back and check that you account for everything that’s there. Complete the table in the worksheet or in your own notes.