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Basic Financial Planning Tools for your Greenhouse Business: Budgets, Cash Flows and Others. Cesar L. Escalante University of Georgia Getting Started in the Greenhouse Business and Propagation School March 19, 2004, Gwinnett Technical College. Storyline Ideas.

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basic financial planning tools for your greenhouse business budgets cash flows and others

Basic Financial Planning Tools for your Greenhouse Business:Budgets, Cash Flows and Others

Cesar L. Escalante

University of Georgia

Getting Started in the Greenhouse Business and Propagation School

March 19, 2004, Gwinnett Technical College

storyline ideas
Storyline Ideas
  • How much will my project/business cost?
    • Do I have this much money to start my project?
    • Where will I get this amount of money?
  • Will my project/business make money?
  • Will I have money when I need it?
a how much will my project business cost
A. “How Much Will My Project/Business Cost”
  • The Project Cost
    • Capital Expenditures (Fixed Assets)
      • Land
      • Building Improvements
      • Machineries and Equipment
    • Working Capital
      • Pre-operating Expenses
      • Marketing and advertising
      • Inventories, receivables, payables
slide4
Sources of Financing
    • Equity Contribution
      • Most lenders: at least 20% of project cost
    • Loan Financing
      • Fixed asset loan
        • Land and Improvements: more than 10 years
        • Machineries and equipment: 5-7 years
      • Working capital loan
        • Operating credit line
        • Term financing up to 5 years
      • Direct vs. guaranteed loans
b will my project business make money
B.Will My Project/Business Make Money?

PROFIT AND

LOSS

(income)

STATEMENT

EXPECTED

SALES

COST

BUDGET

slide8

COSTS

Variable

Costs

Fixed

Costs

Debt Servicing

Costs

costs
COSTS
  • Variable Costs
    • Direct production costs: changes with each additional unit of production
    • Examples: Containers, fertilizers and chemicals, direct labor
  • Fixed Costs
    • Overhead, administrative costs
    • Does not depend on scale of production
  • Debt Servicing Costs
example of cost classification
VARIABLE COSTS

Salary and Labor

Machinery Cost

Seeds and Plants

Fertilizers & Chemicals

Plastic

Containers and Soil

FIXED COSTS

Marketing

Taxes and Insurance

Utilities

General Repairs & Maintenance

Office Expenses

Miscellaneous Expenses

Operator Salary

Example of Cost Classification
break even analysis
Break-Even Analysis
  • The point at which total costs (sum of variable and fixed costs) equal total revenues
    • in other words,

ZERO profit or loss!

will i have money when i need it
“Will I Have Money When I Need It?”
  • PROJECT/BUSINESS CASHFLOWS
    • Timing of cash inflows and outflows

Making money (“Profit”)

(does not necessarily mean)

Having money when needed

what to do with an expected cash deficit
What to do with an Expected Cash Deficit?
  • Operating Loan?
  • More equity capital?
    • Selling idle assets
    • Leasing alternative, if applicable
  • Changing repayment plan (interest payments only in the first year)?
  • Cost reduction?