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    Finance Profitability

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    Daniela Barzallo Alvarez
    The document discusses concepts related to the profitability and financial aspects of a business, including defining revenue, expenses, profit, cash flow, and working capital requirements. It provides examples of how to estimate revenue, investments, expenses, and profitability for a new coworking business. The document emphasizes the importance of accurately assessing profitability over time by considering factors like revenue ramp-up and break-even point.

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    © All Rights Reserved
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    Finance Profitability

    Uploaded by

    Daniela Barzallo Alvarez
    4 views58 pages
    The document discusses concepts related to the profitability and financial aspects of a business, including defining revenue, expenses, profit, cash flow, and working capital requirements. It provides examples of how to estimate revenue, investments, expenses, and profitability for a new coworking business. The document emphasizes the importance of accurately assessing profitability over time by considering factors like revenue ramp-up and break-even point.

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    The document discusses concepts related to the profitability and financial aspects of a business, including defining revenue, expenses, profit, cash flow, and working capital requirements. It provides examples of how to estimate revenue, investments, expenses, and profitability for a new coworking business. The document emphasizes the importance of accurately assessing profitability over time by considering factors like revenue ramp-up and break-even point.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    4 views58 pages

    Finance Profitability

    Uploaded by

    Daniela Barzallo Alvarez
    The document discusses concepts related to the profitability and financial aspects of a business, including defining revenue, expenses, profit, cash flow, and working capital requirements. It provides examples of how to estimate revenue, investments, expenses, and profitability for a new coworking business. The document emphasizes the importance of accurately assessing profitability over time by considering factors like revenue ramp-up and break-even point.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 58

    Finance & Profitability

    You should have:

    Last question:
    Business
    Product Place Model
    IS IT PROFITABLE?

    Promotion
    Price
    Key definitions
    FOR
    SALE
    USP
    REVENUE
    REVENUE

    REVENUE = TOTAL AMOUNT OF SALES

    Products & Services


    Quantities sold x price/unit

    Sales pipeline is key


    REVENUE

    • 5 000 apples sold


    • Price : 2 € / unit

    Total REVENUE = 10 000 €


    TURNOVER
    TURNOVER

    TURNOVER = total sales made in a certain period.

    Quarter / Fiscal year


    TURNOVER

    • If I sell 10 000 € of apples


    every month, my annual
    turnover is ?

    • Annual TURNOVER
    10 000€ x 12 months = 120 000 €
    $576 billion
    $386 billion
    $280 billion
    $224 billion
    $37 billion
    €441 million
    EXPENSES
    EXPENSES
    Costs

    Total costs

    Raw material Commissions


    Variable costs Production costs Delivery…

    Salaries Insurance
    Fixed costs Rent Utilities…

    Quantities
    EXPENSES Total EXPENSES
    for 5000 apples:
    VARIABLE COSTS
    5000 x (1+0,1)
    • Cost of the apple: 1 € each + 1000
    • Cost of sticker on apple: 0,1 € each = 6 500 €

    FIXED COSTS

    • Cost of sales stand: 1 000 €


    PROFIT
    PROFIT

    PROFIT = REVENUE - EXPENSES


    PROFIT

    • Total Revenue = 10 000 € • Total Revenue = 0 €


    • Total expenses = 6 500 € • Total expenses = 6 500 €

    PROFIT = 3 500 € LOSS = - 6 500 €


    PROFIT / LOSS
    Costs

    C o s ts

    Variable costs

    Fixed costs

    Quantities
    PROFIT / LOSS
    u e
    ve n
    Costs Re

    PROFIT C o s ts
    Break Even Point

    LOSS

    Quantities
    CASH FLOW
    CASH FLOW

    Amount resulting from


    • the payments you receive
    • the expenses that you pay
    CASH FLOW
    Customer’s
    payment
    10 000 €

    7 500 €

    5 000 €

    2 500 €

    Buy apples Buy stickers Buy stand


    0€

    -2 500 €

    -5 000 €
    April May June July
    WORKING CAPITAL
    WORKING CAPITAL REQUIREMENT

    Working Capital Requirement is the amount of money needed


    to finance the gap between:
    • disbursements (payments of expenses)
    • receipts (payments of revenue)
    WORKING CAPITAL
    10 000 €

    7 500 €

    5 000 €

    2 500 €

    0€

    -2 500 €

    -5 000 €

    - 6500 €
    -7 500 €
    April May June July
    WORKING CAPITAL
    13 500 €

    9 000 €

    4 500 €

    0€

    -4 500 €

    -9 000 €

    -13 500 €

    -18 000 €
    - 17 000 €
    April May June July August
    WORKING CAPITAL

    • Need of 17 k€ of Working Capital

    • Get cash: Capital / Investors / Bank


    • Negotiate your payement terms
    (power of suppliers - customers)
    CASH FLOW

    REVENUE PROFIT WORKING


    CAPITAL
    Example
    New coworking place

    • Small Coworking place


    • 20 desks available + 1 office
    • Price: 300 € / month or 5 € per hour
    • Small bar to sell coffee + sandwiches
    • Rent: 2500 € / month
    New coworking place
    Estimation of revenue

    Revenue

    • Sales of desk + office / 220 days / 10 h a day 99 k€

    • Sales at the bar + take away 70 k€

    Total: 169 k€
    New coworking place
    Estimation of investments

    • Furnitures
    - 40 chairs + desks, sofa, tables, coffee machine, fridge…
    - Estimated cost: 20 300 €
    • Marketing costs (website): 2 000 €
    • Creation of the company: 1 000 €
    • Contingency: 7 000 €
    Total Investments: 30 300 €
    New coworking place
    Estimation of expenses

    • Rent: 30 000 €
    • Utilities: 7 600 €
    • Insurance: 3 600 €
    • Maintenance (cleaning…): 8 500 €
    • Salaries 1.5 employees: 30 528 €
    • Raw materials: 46 000 €
    • …/…
    Total expenses: 133 028 €
    New coworking place
    Pro tability - First assessment

    • Total revenue: 169 000 €


    • Total expenses: 133 028 €
    Pro t = 35 972 € / year

    • Investment first year: 30 300 €


    Pro t Y1 = 5 672 €
    fi
    fi
    fi
    New coworking place
    Pro tability - the right assessment

    Revenue Ramp Up

    Occupancy Rate
    fi
    New coworking place
    Pro tability - the right assessment

    Cash flow
    Monthly cash flow balance

    Investments

    Break even point

    - 85 k€
    fi
    Profitabillity

    • Created in 2003
    • Break event point
    in Q2 2020
    Profitabillity

    • Created in 1994
    • Break event point
    in 2003
    WORKSHOPS
    Is your project profitable?
    Profitability

    Estimate your profitability

    - Month by month
    - Ramp up
    - Make assumptions (pessimistic, realistic, optimistic)
    Profitability

    1. Estimate your revenue

    - Nb of unit sold / month x Price per unit


    Profitability

    2. Estimate your investments (if any)


    - Tools
    - Furnitures
    - Patents
    - Offices
    - Production plant
    - …/…
    Profitability

    3. Estimate your expenses


    - Production costs
    - Salaries
    - Marketing expenses
    - R&D
    - Supply chain
    - …/…
    Profitability

    4. Estimate your profit


    - Revenue
    - Investments
    - Expenses
    Key investments

    • Offices
    • Patents
    • Production facilities
    • Furnitures
    • Website creation (if e-commerce)
    • PCs, servers, phone…
    • …/…
    Key costs

    • Salaries + taxes • Expert Accounting • Legal


    • R&D • Production costs • Maintenance
    • Raw materials • Financial costs • …/…
    • Rent • Taxes
    • Insurance • Marketing costs
    • Utilities • Supply Chain
    TOOLS

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