C. Financing a Small Business

4.00 Explain the fundamentals of financing a small business.

4.01 Identify the start-up costs associated with owning and operating

a small business.

Consider this: Jerry decides to start a new ice cream

business in his town. He wants to locate it within walking distance of the new stadium complex that is being built. What expenses will he have to take on just to get started?

On a piece of paper, list as many different things as you can think of that he will have to pay for before he can open his business.

EQ: 4.01 – What is the cost of starting a new business?

Start-up costs associated with opening a small business

Start-up costs: Expenses that are initially paid to establish a business.

•Rent or lease space

•Equipment, furniture, and fixtures

•Decorating and remodeling

•Beginning inventory

•Deposits for utilities

•Accountant and lawyer fees

•Licenses and permits

•Advertising and promotion for grand opening

•Contingency funds

•Nature of the business

Manufacturing

Retail

Wholesale

Service

•Size of the business

•Inventory required

•Customer credit policies

•Other unique factors

• The estimated time between starting the business and earning income from sales.

• The operating expenses that must be paid before cash is received from sales.

Write a paragraph:

• Take 5 different costs that you listed earlier and describe which of the factors you just learned will cause each to go up or down for Jerry.

• In a separate paragraph, explain whether you think all costs act the same. Why or why not?

EQ: 4.01 – What is the cost of starting a new business?

Expenses that remain the same for a period of time.

•Office salaries

•Insurance

•Rent or lease

Expenses that may change from month to month; these expenses are often based on quantity of good or service sold.

•Wages for hourly employees

•Advertising and promotion

•Supplies and materials

•Utilities

Ticket out of the lesson• List 5 new vocabulary words for you from this

lesson.• Write the definition of each.• Use each in a sentence.• Explain: How would the start-up costs be different

for an ice cream shop, a barber shop, an automotive repair shop and a clothing store?

• Homework: Read and Outline Chapter 3 in your book. Answer 1-18, 29 pp 73-74 Due Friday. Write everything out!!

EQ: 4.01 – What is the cost of starting a new business?