7: Financial contingency
The C.H.D.S (Chinese Home Delivery Service)'s Financial Contingency plan falls into two categories: (1) Raising more finance through Internal Sources of Finance and External Sources of Finance and (2) Cutting-back on estimated expediture.
Internal Sources of finance:
Own savings: Raise additional £10,000 from Directors Gifts from friends and relative: Raise £5,000 given debenture stock or share options as security.
External Sources of finance:
Grants and sponsorship: The Prince's Trust will assist young people (18-30) who are/have starting-up business ventures, and are on their Enterprises programme, with support, such as:
- Initial start-up capital,
- 24 Hour Legal Helpline,
- Free access to an easy-to-use online accounting system,
- A free office-on-your-phone service suitable for running and growing a small business,
- Free and professional web design package,
- Reconditioned PCs and computing software,
- A range of discounted rental options including fully serviced and equipped offices plus meeting room facilities,
- Preferential rates on indoor and outdoor market stalls in various locations across the UK and/or
- Online software and business services to start and run a small business or home office.
Loans and Borrowing: Bank loans, Overdrafts, Mortgages, Leasing and Venture Capital
(2): Cutting-back on 1st year estimated expediture.
The Break-Even-Point of the business proposal is estimated @ 382 deliveries (£11.40 per order), which is equivalent to a weekly sale revenue £4,355. However, to finance the estimated profit and loss account and estimated cash-flow analysis the business venture will need to generate approximately weekly target for sales of at leasr 614 orders, which is equivalent to a weekly sale revenue £7,000.
Notwithstanding, if the business does not perform as expected the following financial contingency scenarios will be apply:
Scenario 1: Sales Revenue @ 90% of target
To maintain cash-flow and to supply the share-holders with a dividend; the following variable-costs have all be reduced - by 10% - to accommodate the reduction in sale volume: Power (light, heat, electricity, gas), Telephone, Insurance, Postage and carriage, Wages, or salary, Food purchases and Drawings.
To maintain cash-flow and to supply the share-holders with a dividend; the following variable-costs have all be reduced - by 20% - to accommodate the reduction in sale volume: Power (light, heat, electricity, gas), Telephone, Insurance, Postage and carriage, Wages, or salary, Food purchases and Drawings.
In addition, repayment of Director's loans were reduced from £15,000 to £5,000.
Scenario 3: Sales Revenue @ 60% of target
To maintain cash-flow and to supply the share-holders with a dividend; the following variable-costs have all be reduced - by 40% - to accommodate the reduction in sale volume: Power (light, heat, electricity, gas), Telephone, Insurance, Postage and carriage, Wages, or salary, Food purchases and Drawings.
In addition, repayment of Director's loans not paid-back this year and Drawings were reduced from 20% to 10% of Total Cash Receipts.
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