Developing Business Structure and Financial Statements
Remember: please have your adult supervisor review your answers prior to turning your answers in to the Hop on the BUS! Coordinator.
Question #1: What are the core business functions of your organization? How is your organization structured?
About this question: Sales & Marketing, Accounting, Operations are three “core” business functions that every business has, yet there are other functions necessary depending on the type of business you run. What other functions exist in your business? Inventory management? Product delivery? Research & Development? Break your company down by its tasks and functions then organize those tasks into groups that make sense, you may even include an organization chart to visually show how your company operates. Answer this question in a paragraph or more.
Definitions: Core business functions = the types of tasks that are needed to run the company. Organizational structure = is the foundation of how your organization is going to run, who reports to who, and who will do what work.
Helpful Activity: Like earlier activities, make a list of all the tasks your company will do in order to operate (i.e. accounts payable = pay the bills, accounts receivable = collect money from customers, marketing, advertising, take inventory, order inventory, produce the product, etc.). Once you have your list of jobs that need to be completed to run the business, create a chart of who will do what tasks and who will report to whom in the company. For example:
Question #2: What risks does your business venture face? What measure will you take to counter those risks?
About this question: A famous designer once said “take risks based on what you can gain rather than what you can loose.” Taking risks is the core of being an entrepreneur, and every business you see face risks at one time or another. While there are different types of risks, the risks we are talking about in this question focus on the risks your company will face each day. While the risks differ between organizations, new business owners need to examine their business from the outside in to find where their every day risks lie. Business owners need to know what might go wrong and prepare to deal with the challenges that come up in the business!
Definitions: Risk = being exposed to something harmful or dangerous. A business risk is being exposed to loss or damage. Examples of business risks include: inventory management (are you protected from theft?), data management (do you have computer files backed up?), man power (do you have enough employees to run the operation and have you protected your business from employee theft?), customers (do you have the right insurance and protection in case customers are injured?), natural disasters and more.
Helpful Activity: Do you know what the risks your company may face? If not, then investigate what your risks may be (see above definitions for ideas). Write a list of all the possible risks (or the things that could go wrong thus damaging your organization) you can think of. Once you have identified what your risks are, what are ways that you can protect yourself from those risks? Ask an insurance agent what kind of insurance he/she would recommend for a business like yours, ask one of your computer teachers about how to back up computer files and where to store them or ask a parent what are some of the topics in their employee manual. Come up with your own ideas on how to protect your company.
Question #3: What are the most important milestones for your business to reach?
About this question: Milestones are goals. This question wants to see what goals your business has over the next year and beyond. You’ll need to focus some of your goals on starting the company, getting a loan if you need one, serving your first customers and so forth. We want you to be specific about the goals you want to set for your company and when you plan to accomplish those goals. Please answer this question in at least two paragraphs or more.
Definitions: Milestones = company goals stated in specific terms with a specific timeframe for completion. For example, if you are going to set up a shoe repair shop, an important first milestone would be to acquire the necessary tools for shoe repair by a certain date. Next, you might look for a location on Main Street by January 1. The next milestone might be to serve 50 customers by March 1 and so on. Your milestones are specific to your business, but usually include the steps to start, grow and sustain your business.
Helpful Activity: If you’ve ever made a New Year’s resolution while celebrating with the countdown clock, then you’re familiar with setting goals. Creating milestones for a business is much the same as a New Year’s resolution. The difference lies in the accountability you feel for the milestones you set in business. Like previous questions, before answering this question, make a list of all the steps you believe you need to take in order to open your business. Next make a list of goals you believe your business should strive for. Get a calendar out and start matching dates to the items on your lists. You don’t have to pick exact dates for everything, but choose at least the month and year you would like to reach the listed goals. Here’s a start, begin with the due dates for all the rounds of Hop on the BUS!
The REAL Activity Smarties to introduce goal setting
Question #4: (this is a special section that will take more time than the previous questions and rounds) – Prepare your first Cash Flow Statement
Cash flow statements can be difficult to put together, so please spend some time on this section. You will need to prepare a 12-month cash flow statement. Please use the template below (or you can download it from the Hop on the BUS! website at www.hoponthebus.org (click on the “students” page for a link to the “Cash Flow Template”), as this will help you with this section.
Instructions for the Cash Flow Statement
Cash flow statements (sometimes referred to as pro forma statements) are a critical component to each business and business plan. These statements allow business owners to see how much money is being brought into the company as well as how much money the company is spending each month or year. This is critical for businesses to see if they are making more money than they are spending, if inventory is moving as quickly as it needs to, to catch possible theft that may be happening in the company, and if the business is keeping up with customer demand. The cash flow statement is quite a versatile and useful tool.
Cash flow statements are kept in a spreadsheet format (like Excel) so that math calculations can be completed with the computer. The following spreadsheet is an example similar to the one you will be using to work on your cash flow statement. Please make yourself familiar with what kind of information you will need to estimate for your task. Note: below the spreadsheet is a line by line explanation to help you. [The spreadsheets utilized in this section come from the Service Corps of Retired Executives (SCORE) at http://www.score.org.]