Me: In response to Module 13:
"Christine - who are you paying 864 per month for - that is not even poverty level. Also I added rent in there and well as some other expenses. Your profit should be less than 10%"
I originally said:
"Also, under wages, I only included hourly rates for 3 people for the time we're at trunk shows...I don't plan to pay myself the first year or hire anyone else until a bit later. Not sure how realistic this is, though.
I don't have rent or utilities because I'll be working out of my house and using space there as storage."
To expand on that:
I have only plan to hire people on a temp basis to help run mobile truck events. I figured 3 people per event at 8 hours per event (which is an over-estimate for some) at 3 events per month from March through September. I plan to pay each person $12/hour. That's where the $864 number came from.
Rather than just adding additional expenses, perhaps I can hire one assistant for marketing/merchandising/general admin work full-time since you said my profits are too high and relegate more into a marketing and PR budget because I'd really like to hire a PR firm.
So:
12/hour x 8 hours = $96
$96/day x 3 people= $288
$288/per day x 3 events per month=$864
I will not have rent expenses because I am running this out of my house and do not have a store front. However, I'd imagine I need to include maintenance and gas expenses for the truck. Can I swap that line item out for rent?
Also, in the sales table, what goes in the Purchases Costs field?
Thanks!
Instructor Response: the cost of the merchandise that you are selling - your jewelry. You should include the gas etc. also you will be able to take some of your rent off your income taxes so you could include that in your rent. You also need to pay yourself.
Me: How do I determine how much of my mortgage I can use for rent? I know for income taxes, the space has to be strictly used for the business and can't have other purposes. Do I just take the square footage of that room and figure out how much of my mortgage that space is?
Also, is there a reason I have to pay myself in the first few years? I know many business owners who have not done this because it's not always a realistic scenario to do so, especially if they hire any other staff members whom they are obligated to pay.
Instructor Response: I would do 25%. And yes the reason you have to pay yourself is that this is a business and you have to pay your rent and/or mortgage as well as live. It is not realistic to not pay your employees or yourself. You must pay yourself a living wage. This is an actual business plan as you would present to investors and you must pay yourself.
Me: My financials are attached. I'm not sure I've pulled the right numbers into my cash flow chart and I have a negative cash flow most months, which is terrible. Not sure how to rectify this.
Instructor Response: Christine - your markup for your purchases is 42% but the markup for your sales is 58%. How does that compute? Also why are you selling clutches?
Attachments:
Module14_EsoldoFinancials
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