The initial business plan

Step forward!
Students’ Training Company (STC)

The initial business plan

                                                                                                                                                              

                                                                                                                                           

1. What is your product or service? ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2. Who will be the most interested in buying your product or service? (Ex. Your school students, people who love cooking, families having CD players, football fans, etc.)----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3. How much do you think these people will pay for your product or service? -------------------------------Where do you know this from? (Ex. „It’s as much as I would pay myself”, „I asked my mother and several of her friends” and “Similar product in the music shop costs 0.60 Euros more”). ----------------------------------------------------------------------------------------------------------------------------------------
4. GREAT QUESTION. Will your price cover the costs of materials, labour and costs of your company? ------------------------------------------------------------------------------------------------------------

1. What are the costs of all materials? (Ask your teacher or consultant). ---------------------------------------------------------------------------------------------------------------------------------------------------------------

These are the costs for purchasing materials.

2. Does your price cover the costs of one material? -------------------Yes-----------------------No.

If not. You would rather look at the current price. Otherwise, your company will suffer loss! If so, will the price cover other costs? It is difficult to answer this question without detailed information. However, if you follow the following guidelines, your company will cover the costs of other materials, labour and activities.

                                 Materials costs (€)                                      Retail price (€)         

                                           1.00                                                              2.00

                                           3.00                                                              5.00

                                           5.00                                                              8.00

                                         10.00                                                            15.00

3. Based on this information, what price do you offer? ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5. Almost everything is done! Now you have to set the task of producing and sales. You surely have to sell more than one product. What is the difference between the prices of product and the price of material costs (See previous paragraph 4B)? ----------- How many products will the company have to sell to cover the costs of all materials (See 4A) ------------ In order to sell all the costs multiply that number by 1.5. The resulting figure will be the target of your production and sales. Can these tasks be fulfilled? How many products or services will every member of the company have to sell? ---------------------------------------------------------------------------------------------------------------------------
6. Summarize your plan. We expect to produce and sell------------ products or services by-----------------

     (date) for -----------€ each (including taxes).

Product Pricing Sheet

STEP I.  IDENTIFY YOUR COMPANY’S FIXED COSTS.

Your company’s fixed costs are the costs, which remain the same no matter how many products you produce. The example below shows what the usual fixed costs of students’ training companies are. It suits for the company with 15 members and which works for 15 weeks.

No.	Costs	An example company	Your company
1.	Earnings -10*0,80 € per hour	208€	€
2.	Wages	182.00€
3.	Rent	10.00€
4.	Stationery goods	8.00€
5.	Tools, equipment	10.00€	I
6.	Marketing costs	10.00€
7.	The fee for permission to start	40.00€
8.	Bank services	5.00€
9.	Insurance	5.00€
10.	Annual report	10.00€
11.	Small costs	10.90€
	Total fixed costs	498.90€

Note. Earnings are actually variable costs. Earning costs usually vary when the number of workers and the number of hours needed to produce the product vary. If the demand of a product is growing and the company is increasing its production, the labour costs increase as well. However, the company’s employees are employed on a fixed number of hours. They are paid for the time spent in company’s meetings and other activities.  That is why the company’s earnings are treated as fixed costs.

STEP II. IDENTIFY YOUR COMPANY’S VARIABLE COSTS.

If the company’s variable costs are the costs that vary depending on the number of products or services provided,

Be sure to fill in a separate worksheet for each of your company’s product or service.

Product: ---------------------------------------------------------------------------------------------------------------------

VARIABLE COSTS-------------------------------------------UNITS

No.	Select “Variable costs” estimated in your production plan
1.	The planned costs of materials purchased	€
2.	: Number of units	+
3.	= Material costs of a single product	=                €
4.	* Bias waste, error, etc. (20%)	*  1,2          €
5.	= Revised one product materials costs	=                 €

STEP III. IDENTIFY THE PRICE OF A PRODUCT OR SERVICE.

Once you have rated the fixed and variable costs of the main products, you can set the price, which will be profitable for your company.

Product: ---------------------------------------------------------------------------------------------------------------------

The table below will help to determine your gross profit per unit at various selected prices. Gross profit per unit is the difference between the price and the design of a product and selling expenses.

Examine the example and consistently follow the instructions.

CALCULATE THE GROSS PROFIT OF A UNIT WITH DIFFERENT PRICES

No.		The 1st  selected price	The 2nd selected price	The price of the 1st  sample	The price of the 2nd  sample
1.	Retail price of a unit			5.19€	5.66€
2.	Commissions (minimum 10%)	-	-	0.52	0.57
3.	Retail price = commissions	=	=	= 4.67	= 5.09
4.	The revised costs of materials  for one unit	-	-	1.52	1.52
5.	= Gross profit per unit	=	=	= 3.15	= 3.57

Line 1. Select two control prices of your product. One price should be ‘big’ and the other ‘small’.

Line 2. Calculate the commissions for the sale, which will be paid at the chosen price (Commission for sales must be at least 10%), and enter it into this line. Subtract the commission from the chosen price and enter the result into the 3^rd  line.

Line 3. Record the adjusted material costs of one product, which you calculated in the 2^nd step 5^th  line. Subtract this amount from the amount in the 3^rd line and write down the result into the line 5.

Line 5. This is your gross profit of one unit – the difference between the price of your product and selling expenses.