The document summarizes Annie Price's workshop on business cost planning and financial management from an aerial perspective. The workshop covers personal and business cash flow, start-up and overhead costs, unit and variable costs, gross and net profit, break-even analysis, and key financial documents like profit and loss statements and balance sheets. Farm business owners in attendance are polled on their operation details and needs. The goal is to help operators understand their cost structure and financial goals.

1. ASAP
Business
Farming
Conference
2014
Business
Cost
Planning
from
an
Aerial
Perspec:ve
Annie
Price
of
Mountain
BizWorks
annie@mountainbizworks.org
www.mountainbizworks.org

2. www.mountainbizworks.org

3. Introduc;on
to
Today’s
Workshop
• Conference
Opportuni:es
• Aerial
Perspec:ve
• The
Twin
Engines
of
the
Business
Planning
Process
• Compile
Ques:ons
for
Lunch
Time
Consultant
Sessions
• Sources
of
Informa:on
and
Addi:onal
Resources
www.mountainbizworks.org

4. Who’s
here
today?
• What
is
your
name?
• What
is
the
name
and
loca:on
of
your
farm
business?
• What
products
and/or
services
do
you/will
you
offer?
• What
is
something
you
currently
need
help
with?
• Please
share
your
email
address
if
you
would
like
to
learn
about
training
or
lending
opportuni:es
at
Mountain
BizWorks.
www.mountainbizworks.org

5.
• Costs
to
Consider
-­‐Personal
Cash
Flow
-­‐Start-­‐up
-­‐Overhead
-­‐Unit
and
Variable
Costs
-­‐Gross
and
Net
Profit
• Determining
a
Break-­‐Even
Point
• Introduc:on
to
Cash
Flow
www.mountainbizworks.org

6. Personal
Cash
Flow
• A
detailed
look
at
how
income
is
currently
flowing
in
and
out
of
your
household
and
accounts
for
all
earnings
and
expenditures.
• Use
this
informa:on
to
determine
what
you
need
your
farm
to
pay
you.
Ex:
family
living
expenses-­‐non
farm
home
income
+
savings
goal
=
es:mated
farm
income
goal
3000-­‐1500+500=2000
• Resources
for
budget
assistance:
– Mint.com-­‐organizes
and
categorizes
your
money
and
helps
you
create
and
meet
your
financial
goals
– OnTrack
of
WNC
(828)
255-­‐5166
or
ontrackwnc.org
www.mountainbizworks.org

7. Start-­‐Up
and
Expansion
Costs
• Defini:on:
All
of
the
costs
necessary
to
make
your
first
sale.
They
are
typically
items
that
do
not
have
to
be
replaced
on
a
regular
basis.
For
already
exis:ng
businesses,
these
are
called
expansion
costs.
• Picture
a
“grand
opening”
or
grand
reopening
for
your
business.
What
do
you
need
to
get
there?
www.mountainbizworks.org

8. Overhead
Costs
• Defini:on:
Costs
that
have
to
be
paid
each
month
whether
or
not
any
sales
are
made.
They
are
also
called
“fixed
costs”
because
they
ofen
stay
about
the
same.
• What
are
your
current
overhead
costs
and
how
will
these
shif
with
some
of
your
current
goals?
Take
a
look
at
the
resource
sheet
to
begin
brainstorming
what
you
need
to
look
into.
www.mountainbizworks.org

9. Variable
Costs
• Defini:on:
Expenses
that
are
directly
linked
to
the
unit
of
sale.
Everything
that
goes
into
the
product
is
considered
a
variable
cost.
Also
known
as
“Cost
of
Goods
Sold”,
“COGS”,
or
“Unit
Costs”.
www.mountainbizworks.org

10. Gross
vs.
Net
Profit
• Gross
profit:
A
company’s
revenue
minus
its
cost
of
goods
sold.
Also
referred
to
as
“gross
margin”
or
“gross
income”.
• Net
profit:
A
company’s
revenue
afer
ALL
expenses
have
been
paid.
www.mountainbizworks.org

11. Break-­‐Even
Point
• Monthly
Overhead
and
Capital
Expenditures/
Gross
Profit
per
Unit
of
Sale
Steps
in
this
process:
1)
Es:mate
your
monthly
overhead
and
capital
expenditures
2)
Determine
your
Unit
of
Sale
price
3)
Subtract
any
variable
costs
from
your
unit
4)
Divide
your
Monthly
Overhead
and
Expenditure
total
by
your
gross
profit
per
unit
www.mountainbizworks.org

12. Mul;-­‐Unit
Break-­‐Even
Point
• Determine
total
overhead
cost
for
the
business
• Determine
percentage
each
line
of
business
is
responsible
for
and
typical
unit
cost
for
each
line
of
business.
• Determine
overhead
cost
each
line
is
responsible
for
by
mul:plying
percentage
by
total
overhead
• Divide
each
overhead
by
the
gross
profit
for
that
unit.
www.mountainbizworks.org

13. 3
Key
Financial
Documents
• Profit
and
Loss
Statement
• Balance
Sheet
• Cash
Flow
*
Schedule
an
appointment
with
an
accountant
to
gain
a
deeper
understanding
of
these
and
learn
what
you
will
need
to
provide
for
taxes.
www.mountainbizworks.org

14. Profit
and
Loss
Statement
A
financial
statement
that
summarizes
the
revenues,
costs
and
expenses
incurred
during
a
specific
period
of
:me
-­‐
usually
a
fiscal
quarter
or
year.
These
records
show
the
ability
of
a
company
to
generate
profit
by
increasing
revenue
and
reducing
costs.
The
P&L
statement
is
also
known
as
a
"statement
of
profit
and
loss",
an
"income
statement"
or
an
"income
and
expense
statement".
www.mountainbizworks.org

15. Balance
Sheet
The
balance
sheet
presents
a
company's
financial
posi:on
at
the
end
of
a
specified
date.
Some
describe
the
balance
sheet
as
a
"snapshot"
of
the
company's
financial
posi:on
at
a
point
(a
moment
or
an
instant)
in
:me.
www.mountainbizworks.org

16. Cash
Flow
A
statement
that
expresses
a
business's
results
or
plans
in
terms
of
how
cash
flows
in
and
out
of
the
business.
It
is
a
key
tool
in
assessing
the
health
of
your
business
and
helping
with
both
assessment
and
forecas:ng.
It
helps
answer
the
following
cri:cal
ques:ons:
•
•
•
•
•
How
much
cash
is
on
hand
at
the
start
of
the
month?
How
much
cash
will
it
bring
in?
How
much
cash
will
be
spent?
How
much
will
be
gained
or
lost?
How
much
will
be
on
hand
at
the
end
of
the
month?
www.mountainbizworks.org

17. 5
C’s
of
Lending
• Cash
Flow-­‐
a
detailed
es:mate
of
how
cash
flows
in
and
out
of
the
business.
• Collateral-­‐the
assets
the
borrower
pledges
in
case
of
a
repayment
issue.
• Character-­‐reference
checks,
credit
report
review,
and
explana:on
of
a
prior
problem.
• Capital-­‐
also
known
as
equity
or
net
worth.
This
can
be
sweat,
money,
and/or
equipment
that
the
borrower
is
punng
into
the
business.
• Capacity-­‐what
is
the
borrower’s
experience
and/
or
background
in
their
business?
www.mountainbizworks.org

18.
To
find
out
more
about
how
Mountain
BizWorks
can
help
you
move
forward
with
your
small
business,
contact
Zuri
at
zurilma@mountainbizworks.org
or
(828)
253-­‐2834
Mountain
BizWorks’
FARE
of
the
Carolinas
is
supported
by
the
Beginning
Farmer
and
Rancher
Development
Program
of
the
Na;onal
Ins;tute
of
Food
and
Agriculture,
USDA,
Grant
#
2010-­‐49400-­‐21817.
www.mountainbizworks.org