The Financial Plan

Financial Feasibility Analysis 

Financial Feasibility
For feasibility analysis, a quick financial assessment is usually sufficient. The most important issues to consider at this stage are: 
  

Capital requirements Revenue requirement till BEP Financial rate of return Overall attractiveness of the investment

1/27/2011

SSB/ISEM/ES

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The figure that is determined provides important information about the rate of return that can be anticipated from the business and about the type of financing or funding that will be needed. it is important that an entrepreneur have a sense of what the business¶s initial capital requirements will be.Financial Feasibility Analysis  Capital Requirements & Revenue requirement till BEP In the feasibility analysis stage. 1/27/2011 SSB/ISEM/ES 3 .

an entrepreneur should have a sense of the rate of return that the proposed business will produce.Financial Feasibility Analysis  Financial Rate of Return Although the estimate may be rough. 1/27/2011 SSB/ISEM/ES 4 . and then adjusting upward or downward depending on the unique characteristics of the proposed business. This figure can be determined in part by looking at the rate of return of similar businesses.

1/27/2011 SSB/ISEM/ES 5 . the extent to which a business opportunity is positive relative to each factor is based on an estimate rather than actual performance.Financial Feasibility Analysis  Overall Attractiveness of the Investment A number of other financial factors are associated with promising business startups. In the feasibility analysis stage.

The Financial plan seeks to reflect the financial implications of your marketing.Financial objectives are both the starting & finishing point of a good business plan. people and operational plans in the form of profit-loss accounts. and balance sheets. . cash flows.

waste is avoided and in turn makes value for money possible. serving south-indian food on a quick throughput basis but without the fast-food image.SARAVANA BHAVAN Saravana bhavan will set up and operate a small chain of south-indian restaurants in UK.Planning Assumptions  Example . Labour costs are low and with a limited menu. These will provide traditional south-indian food in a relaxed atmosphere offering value-formoney food in the middle priced NRI market. One Saravana Bhavan has been in operation for six months in London. . so the following assumptions have been drawn partly from experience and partly from market research. The chain of Saravana Bhavan is already a proven concept in parts of Indian subcontinent.

Profit & Loss Assumptions  A) Sales Number of outlets in operation will be :  Year 1 2  Year 2 4  Year 3 7  Year 5 onwards 10 Operating six days a week. .50  B) Cost of sales per meal Food £ 1. meals sales will be :  Year 1 40 per day  Year 2 50 per day  Year 3 onwards 60 per day Sales value per meal will be :  Food £ 6.00 Labour £ 2.45 This equals 61 % of sales.50  Drink £ 2.70 Total £ 5.75 Drink £ 1.

Profit & Loss Assumptions  C) Wages: each outlet will employ seven staff at a cost of £ 42.000 per year. which compares favorably with a general restaurant¶s 40 percent).600 per annum (labour costs = 30 % of sales. D) Directors: paid £ 15. E) Administrative staff: needed mainly from year 2.000 from year 3. equipment and decoration : £ 40. H) Advertising : £ 2.000 over seven years.000 per outlet per annum I) Inflation: all income and expenditure is stated at current prices. rising to £ 20. Costs will rise from £ 5.000 to £ 40.       .000 per outlet. F) Rent and services : £ 30.000 per outlet per annum G) Alterations.

20 percent per annum. fixtures and fittings.Cash-Flow assumptions         No debtors ± all meals paid in cash Salaries and wages paid monthly Purchases paid monthly Rent paid half-yearly Rates paid monthly Loan interest paid quarterly from month 1 Overdraft interest paid quarterly from month 3 Sales spread evenly over each month of year Balance sheet assumptions    Closing stock : building up to six weeks¶ sales Depreciation of fixed assets: improvements and office. 25 percent per annum Creditors: Equivalent to one month¶s cost of sales .

when it should actually be taken . Once the set of assumptions is made one has to take care of the following : Key assumptions Basis of each Assumption Confidence in each assumption What will happen if the assumption proves incorrect When contingency action can be taken.

. The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported.Income Statement or Profit & Loss Account  A financial statement for companies that indicates how Revenue (money received from the sale of products and services before expenses are taken out. also known as the "bottom line"). also known as the "top line") is transformed into net income (the result after all revenues and expenses have been accounted for.

Income Statement or Profit & Loss Account .

and financing activities. The statement shows how changes in balance sheet and income accounts affected cash and cash equivalents. and breaks the analysis down according to operating.Cash-Flow Statement  A financial statement that shows a company's incoming and outgoing money (sources and uses of cash) during a time period (often monthly or quarterly). . investing.

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liabilities and Ownership equity on a specific date. such as the end of its financial year. A balance sheet is often described as a snapshot of a company's financial condition. .Balance Sheet  A summary of a persons or organization's assets.

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Financial assistance has two components : Loan for Fixed Capital Loan for Working Capital .etc«. Regional Rural Banks.Financing a New Venture   Financial assistance to entrepreneurs is available from institutions such as Nationalized banks. depending upon the project requirement and promoters background. Small Industries Development Bank of India.

Industrial Finance in India  National Level Industrial Development Banks Industrial Development Bank of India (IDBI) Industrial Finance Corporation of India (IFCI) Small Industries Development Bank of India (SIDBI) Industrial Reconstruction Bank of India (IRBI) Shipping Credit and Investment Company of India (SCICI)  Specialized Financial Institutions Technology Development & Information Company of India Limited (TDICI) Risk Capital & Technology Finance Corporation Limited (RCTC) Tourism Finance Corporation of India (TFCI) .

Industrial Finance in India  Investment Institutions Unit Trust of India (UTI) General Insurance Corporation of India (GIC) Life Insurance Corporation of India (LIC)  Other Banks Offering Financial Assistance Small Industries Development Bank of India (SIDBI) Industrial Development Bank of India Industrial Finance Corporation of India ICICI Bank National Bank for Agriculture and Rural Development (NABARD) State Bank of India .

Venture capital is a type of private equity capital typically provided by professional. growth businesses. Venture capital investments are generally made as cash in exchange for shares in the invested company. outside investors to new.Venture Capital   Venture Capital . .

 Venture Capitalists Generally : Finance new and rapidly growing companies Purchase equity securities Assist in the development of new products or services Add value to the company through active participation Take higher risks with the expectation of higher rewards Have a long-term orientation  Some Venture Capital Organizations ICICI Venture Funds Management Company Limited SIDBI Venture Capital Limited (SVCL) IFCI Venture Capital Funds Ltd. (IVCF) Gujarat Venture Finance Limited (GVFL) IL & FS Group Businesses .

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