How To Prepare A Business Plan For A Contracting School: Financial Needs, Financing Options

Overview of Financial Needs for a Contracting School

To derive a business plan several layers needs to be included. The overall financial needs of the business shall be overviewed with respect to the desired assets purchased to keep the business for the long run. A contracting school engages in the community outreach, and for this purpose the business requires specific amount of funding. A place whether purchased or leased or rental for starting the contracting school. Also the funds would be required to get equipment that the business would require for training the people. The contracting school also requires huge amount of advertisement so that people get to know about the courses available, the fees and they can compare the same. The company also needs to tie up with other companies to provide placement to trained people.

There are various alternatives available for financing. Either the contractor school can get short term or long-term funds or a combination of both depending upon the needs. The priority shall be the highest level of liquidity so that the contractor school. Short term methods of financing involve, taking loan from the banks, investment in funds and on the other hand short term loans can be derived from the money lenders. Long term financing involves arrangement of funds from the financial institution and long term loans from banks. Therefore, the requirements of the business form the basis of the type of financing that the company will require.

For the purpose of the business plan a pro forma balance sheet, income statement, ad cash budget is prepared to have an in-depth analysis of the start-up.

The financial statements are general purpose financial statements for any company. These statements are prepared on the basis of the accrual methods in accordance with:

• Accounting standards of United States (which includes evaluations from United States accounting) and
• The financial reporting directors which are compulsory to be followed by the treasure.

The following key assumptions and judgements have been applied by the management in preparing the financial statements.

Note 3a-Sale of goods and services includes the duration of the enrolments of the students for the purpose of the recognition. It determines the number of students who are going to enrol for the courses and the services are delivered to them. The sales also involve the fees of the entire course material (Warren & Jones, 2018).

Note 3b- The grants and contributions are received via donations from the financial institutions. Grants are provided by the Skills and Regional Development Department, the Commonwealth, governmental organisations and third party entities.

Note 3c- Employee benefits and other liabilities include insurance benefits, retirement benefits ad vacation policy.

Options for Financing a Contracting School

Note 7 Current/Non-current Assets – Receivables – Management have estimated the allowance for the impairment in accordance with the relevant accounting policy.

Note 8 Non-Current Assets –Property and Equipment- land and building were purchased in the start of the January month, and further plant and machinery for practical applications by students was purchased in the month of June (Goddard, 2017).

Note 11-Payables includes the creditors from the educational material have been purchased to be attributable to the students (Mohapatra, 2016).

Note 12-Provisions-Provisins regarding the estimation of the settlement of employment benefits and related costs.

Note-13-Provisions include the payables like rent, electricity, telephone, salary to employees.

• It is assumed that the 80% of the sales are in cash and the rest of the sales are in credit.
• The loan is taken in the starting to purchase partial land and building and plant and machinery.
• It is assumed that the stores, the materials for practical training given to the students have been acquired by the creditors (Rajasekaran, 2014).
• Fixed assets have been purchased in the beginning as well as in the middle of the month. It is assumed that the partial amount is taken from the bank and partially is self- invested. However, it is a onetime investment. There are certain expenses of the miscellaneous nature which are fixed in nature and have been incurred monthly.
• Further, the closing balances have been carrying forwarded after the end of each month as the opening balances for the next month (Tracy, 2016). 

It is assumed that the small portion of the land and building is served by the loan from the bank partially and a piece of land was already available. The rest of the assets like plant and machinery have been taken against the loan form the bank fully (Ilott, 2013).

Equity valuation

The main aim of equity valuation is to estimate the value of a firm or its security. This method is based on the assumption that the value of security is driven by the fundamentals of firm’s business at the end of the day. The techniques involve three main methods which are:

• Discounted cash flow
• The cost approach
• Comparable approach

The main purpose of comparable approach is that the value of equity should be same as the value of other equities also, to some extent. In financial terms, equity valuation is the process of measuring the fair market value of securities (Swain  & Reed, 2014). It is very important to use these techniques because it is basically a backbone of new financial system. It provides companies sound business models and help those who have a drop in their valuation. The importance of equity valuation is as follows:

• It is very beneficial for the entire stock market ecosystem.
• The art and science of the technique forces the modern economic system for allocating scare capital efficiently among the various market participants.
• It helps in understanding the business as a whole and assists the investors to take correct decisions.
• The data reflected by valuation is important for the shareholders and the potential investors.
• With help of equity valuation a company can measure the performance of its stocks.
• Forecasting about the future trends become easy.

Conclusion

The implementation is satisfied as the start-up is running at a satisfactory level. It will take time to pace up. Due to more advertising and better educational services the students will enrol in this educational start-up for their upliftment of the future. Hence a solid business plan is required for its survival.

References

Ittelson TR, (2013). Financial statements: A step-by-step guide to understanding and creating financial report. New York: Springer.

Goddard, A. (2017). Grounded theory approach to accounting studies: overview of principles, assumptions and methods. In The Routledge Companion to Qualitative Accounting Research Methods, 10(3), 115-135.

Ilott, T. (2013). Budgets and Markets: A Study of the Budgeting of European Films. California: Routledge.

Rajasekaran, V. L. (2014). Corporate Accounting. London: Pearson Education India.
Mohapatra, A. D. (2016). International accounting. United States: John Wiley & Sons.
Swain, J. W., & Reed, B. J. (2014). Budgeting for public managers. California: Routledge.

Tracy J.A, (2016).  Accounting for dummies. United States: John Wiley & Sons.

Warren, C. S., & Jones, J. (2018). Corporate financial accounting. New York: Cengage Learning.

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