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FINANCE 101David Steltenkamp, MBA, Dragon's Den/Gamer's Gambit & Aaron Whitten, CFP, Whitten Financial
BASICS
•Revenue and Costs•COGs and Expenses•Pricing•Cash Flow•Balance Sheet•Accounting
REVENUE VS COSTS VS EXPENSES
• Revenue is how much $ you make from Sales of Goods and Services, commonly called GROSS SALES• COST of GOODS SOLD COGS (how much stuff you bought)• GROSS SALES minus COGS is GROSS PROFIT• EXPENSES are all the other costs of doing business (rent,
staff, utilities)• GROSS PROFIT minus EXPENSES is NET REVENUE• NET REVENUE minus TAXES is the money you get to KEEP!• PROFIT!!!!
FIXED COSTS VS VARIABLE COSTS
•Fixed Costs are those that you can not change quickly• Rent• Utilities• Insurance• Fees• Inventory
FIXED COSTS VS VARIABLE COSTS
•Variable Costs are expenses that you can change quickly• Purchasing Inventory• Staffing• Advertising• Certain Utilities High Speed vs Regular
PRICING
• Price is the amount of money you sell an item for (See GROSS REVENUE)• The difference between what you paid for the item and what you sell it for
is the GROSS INCOME you have to pay EXPENSES• Sometimes called MARKUP (GROSS SALES minus COGS)• Goal is KEYSTONE (or 100% or better) markup• For example, if you buy for $1, you hope to Sell for $2 or better• Critical element as it affects PROFIT as well as how MUCH inventory
PRICING EXAMPLE
Magic the Gathering Booster Box• Cost → $76 for WPN Stores → MSRP $143.64 → Gross Income $67.64 or
47%• Goal → Make $500 in Gross Income• Price of Box Boxes Make Goal Inv. Cost Gross
• $143.64 7.4 $561.8 $500• $119.00 11.4 $863.8 $500• $99.99 23.8 $1808.8 $500• $89.99 35.7 $2713.2 $500
• Balancing Act i.e. reinvest inventory in Accessories• Box $119.99, Cost $302 Less → Buy Sleeves and Dice → Gross another $300-
500• Proper Pricing means MORE Gross and Better Selection, Improved Cash
Flow
CASH FLOW
• How much money you need to run your business on a regular basis• Consider how much cash you need to pay your fixed costs
for 1-3 months• Consider planning ahead for larger cash outlays
- Magic Release• Cash does not need to be CASH but is incoming funds• Flow is planning on your incoming and outgoing funds• Consider making a CASH FLOW BUDGET
BALANCE SHEET
• Mostly used as an accounting tool to determine owner equity• OWNER EQUITY is how much of your business you actually own• LIABILITIES are what you owe and are divided into SHORT and
LONG TERM• EQUITY is those items you own outright• These two numbers ARE ALWAYS BALANCED• It can be a measurement of how well you are doing but is mostly
important when you want to FINANCE or SELL the business
ACCOUNTING
•ACCOUNTING is keeping track of where your income and expenses went•HIRE A REALLY GOOD ACCOUNTANT!!!•DO NOT TRY THIS YOURSELF!!•Taxes are the ONE thing you do not want to F*** with!!!!!!
SOURCES OF CAPITAL
• Where can you get money to start or expand your business? • Family Loans/Investment • SBA Loan • Unsecured Loan • HELOC • Crowd Funding • Recruit Investors • Credit Cards • Save Your Pennies • Turn Key vs Start Up
