What type of business (legal type) are you looking to start, and what are the reasons for your option? What is the estimated general start-up cost? Provide a summary break-down of the key components..
This assignment makes up 50% of your overall final grade for the IY418 module.
It is a portfolio of work that you will complete with a final submission date in week 5.
You are required to submit a draft copy from week two.
You will receive feedback on your work from your tutor so that you can improve.
You have decided to start a new business, but the problem is that you don’t have enough funds to do so. This means that you only have very limited savings and your family and friends cannot provide you with the necessary funds either. You decided to consider external funding for your business idea as you think it is a very good business idea. You must write a Proposal Report about your business idea, your forecasted costs and budgets and how you intend to secure funding.
• Cover page with the name of your group
• Table of contents
• Executive Summary
Business Idea (15%):
This section will introduce your business idea and should include a summary of the following key points.
• What is your business idea?
• What are the unique selling points of your product?
• What type of business (legal type) are you looking to start, and what are the reasons for your option?
• What is the estimated general start-up cost? Provide a summary break-down of the key components.
• Explain what kind of start-up costs will be incurred by the business.
• What will the business capital structure be? (the combination of debt and equity).
• If your business requires external funding, provide a summary of how much this funding requirement is.
• Summarise the outline structure of your reports. E.g. this report is divided into 7 sections. Section 2 discusses the budgeted financial statements. Section 3 discusses the cash flow forecasts etc.
Financial Statements (30%)
• What is ‘budgeting’?
• Explain the purpose and importance of budgeting.
• Define Budgeted Income Statement and Budgeted Balance Sheet.
• Explain the purpose and importance of Budgeted Income Statement and Budgeted Balance Sheet.
• Explain what your estimates are based on.
• Prepare very simple Budgeted Income Statement and Balance Sheet.
Cash-flow Forecast (40%)
• What is a ‘cash flow forecast’
• What are the benefits and disadvantages of a cash flow forecast?
• Identify cash inflows (money in) and cash outflows (money out) per year.
• Prepare a cash flow forecast for 5 years and identify what your estimates are based on.
• Explain any changes in cash inflows and cash outflows over the period of 5 years.
• Analyse the closing cash balances per year.
• Consider whether additional funding might be required in any of the years.
• If yes, what funding would you consider and why? Alternatively, you may consider how the surplus of cash should be managed.
Cost – Volume Profit Analysis (40%)
• Explain ‘break-even analysis’
• What are the benefits and disadvantages of creating a break-even analysis?
• Create a break-even analysis for your business – what can your business learn from the break-even analysis based on your estimated costs?
• Estimate the target profit for Year 1 (or Year 2) and calculate how many units must be sold to achieve this target profit.
• What should be the sales revenue in order to achieve this target profit.
• Explain ‘margin of safety’ Calculate the margin of safety for your business based on your target profit.
• Discuss how changes in costs, volume and selling price may affect the profitability. Support the discussion with the relevant calculations
Investment Appraisal (40%)
• Define investment appraisal and discuss its purpose and importance for the business.
• Explain four investment appraisal techniques (Accounting Rate of Return, Payback Period, Net Present Value and Internal Rate of Return).
• Consider the pros and cons of each technique.
• Conduct the investment appraisal using the following techniques: Accounting Rate of Return, Payback Period and Net Present Value.
• Identify and discuss the risks associated with the above investments.
Sources of Finance (40%)
• List and explain various internal and external sources of finance that are available to the business in general.
• Choose 4 possible sources of finance that you might consider to fund your business idea.
• Evaluate the pros and cons of each of these sources of finance.
• Indicate what is your preferred source of finance from the range of possible funders and why.
• You must indicate and explain the costs associated with this choice and justify why it is acceptable and the most advantageous for your plan.
• Explain why the other sources of finance were not selected specifically to this proposal.
• Explain what the impact on your business idea would be if you don’t get the necessary funding or if you have selected an inappropriate form of finance.
• You must end the proposal with a conclusion in which you briefly summarise everything that you have said in your proposal.
• Emphasize the potential of your idea and express the hope that you will be given the funding.
• You must convince your potential financier of the success of your idea.
• Group Reflection: a reflective discussion of the project work as a group (including the challenges faced and how you tried to overcome them) and what you learnt from the group project.
• The list of References (part of individual mark) List all the references you have used in-text throughout the report in alphabetical order.
• Remember to use the Harvard referencing style
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