Cash flow forecasts Student Worksheet

Cash flow forecasts Student worksheetactivity 1.

Putting theory into practice

You are a business adviser and you have been approached by a former All Black looking to start up an inner-city gym. He has given you his financial figures (below) and needs a financial forecast for the first six months of operation.1. Fill in the template to provide your client with a cash flow forecast.Former All Blacks financialsInitial investment$150,000

Gym sales price $99Joining Fee

Monthly membership fee $86

Estimated salesEstimated costs

January100 xLaunch event$50,000

February75 xEquipment$100,000

March50 xRent$5,000a month

April75 xStaff$140,000per annum

May60 xUtilities$3,000a month

June60 xOther expenses$2,000a month

1. Cash flow forecast

JANFEBMARAPRMAYJUN

OPENING BALANCE

CASH IN

Gym fees

Media fees

TOTAL

CASH OUT

Launch

Asset spend

Rent

Wages

Power, etc.

General expenses

TOTAL

NET CASHFLOW(+/-)(+/-)(+/-)(+/-)(+/-)(+/-)

CLOSING BALANCE(+/-)(+/-)(+/-)(+/-)(+/-)(+/-)

1. Will the former All Black lose money in the first month?

2. If he signs up an average of 40 new clients each month between July and December, will he see a return on his investment by Christmas?3. He has the option to rent his gym equipment for $6,000 a month. On that basis:

a) When will his $100,000 equipment investment break even?

b) If he was planning to sell off the business as a going concern after two years, is buying or renting the equipment the better option?

Activity 1 - Answers

1. Cash flow forecast

JANFEBMARAPRMAYJUN

OPENING BALANCE150,000-3,167-2,35927411,83227,065CASH IN

Gym fees18,50022,47524,30033,22536,90042,060

CASH OUT

Launch50,000-----

Asset spend100,000-----

Rent5,0005,0005,0005,0005,0005,000

Wages11,66711,66711,66711,66711,66711,667Power etc.3,0003,0003,0003,0003,0003,000

Gen. expenses2,0002,0002,0002,0002,0002,000

TOTAL171,66721,66721,66721,66721,66721,667NET CASHFLOW-153,167+808+2663+11,558+15,223+20,393

CLOSING BALANCE-3,167-2,359+274+11,832+27,065+47,458

2. Will the former All Black lose money in the first month?

YES3. If he signs up an average of 40 new clients each month between July and December, will he see a return on his initial investment by Christmas?YES, OCTOBER4. He has the option to rent his gym equipment for $6,000 a month. On that basis:

c) When will his $100,000 equipment investment break even?

d) If he was planning to sell off the business as a going concern after two years, is buying or renting the equipment the better option?

a) 17 MONTHS FROM NOW b) BUYINGFind out more with Business.govt.nz:

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Next steps:

Cash flow forecasting Introduction to raising capital Can you afford to start a business Finding sources of capital SWOT analysis Assess if you are ready to start upPAGE 2More education resources from business.govt.nz/resources/educational-resources