EFM03-02

Question 1

What are the two types of financial goals?

Answer 1

• income= cash available to compensate manager such as salary/wages, commission, dividends
• wealth- value of business if sold, long term needs such as retirement.

Question 2

Be able to do a “quick and dirty” valuation of a business.

Answer 2

EBITDA
\+extra bonuses or compensation to owners
=adjusted EBITDA
x earnings multiple (or other industry multiple)
=valuation
-outstanding loans
=cash proceeds to owner

Question 3

Recognize examples of non-financial goals.

Answer 3

• how much time do you want to spend with your family?
• what other interest or hobbies do you want to be able to continue to pursue
• Do you want to continue with your formal education?
• DO you have other aspirations that you want to pursue at some point in your life?

Question 4

Recognize reasons an entrepreneur might need to adjust goals.

Answer 4

• Getting married
• Having children
• changes in health(yours or family)
• changes in age
• venture either exceeds or falls short of expectations.

Question 5

Recognize the four phases of the Life Cycle of a Business Venture and what happens in each phase.

Answer 5

• prelaunch: develp business, secure resources, setup ops, hire/train staff
• startup: hands on, build customer base, refine product/servie, identify additional oppurtinities
• Growth: revenue and profits begin to grow quickly, transition to professional management, mgt team grows, mgt and operatins systems put into place.
• Maturity: entrepreneur exits through selling, next generation, bankruptcy, dying

Question 6

What is the “business model”? What information should it provide?

Answer 6

• Tells you where your revenue comes from: product/service?, target market?, competitive advantage?
• What is your cost structure?
• What is the required initial investment?

Question 7

What is a Business Plan? How can a written Business Plan help a business, even if outside funding is not needed?

Answer 7

A comprehensive document that thoroughly explains a business idea and how it will be carried out

• story of what the business is and will be
• all costs and a marketing plan
• description of financing
• estimate of projected earnings

Question 8

Why is the “Executive Summary” the most important part of the Business Plan?

Answer 8

A sales pitch for your business and it may be the only thing read. Contains management strengths, funding request, story of the business, competition details.