continued from previous storyA Thoughtful, Planned Approach Can Test The Financial Feasibility Of A Concept And Thereby Greatly Enhance Its Success
table online sources, the library, Statistics
Canada, your local chamber of
commerce, and provincial agriculture
representatives.
6. Plot the complete operation
In order to acquire a complete picture
of the costs involved in the proposed
venture, document the steps from start
to finish. What s involved in marketing,
selling, producing and delivering your
product or service?
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7. Assess potential profitability
Once you know all of the resources
and steps involved in the new venture,
you need to determine whether it will be
profitable. Depending upon the complexity
of the proposed enterprise, you can
use financial software to project income
and expenses for one to three years or
ask your farm accountant for assistance.
8. Determine affordability
While the projected income statement
for the proposed business may look
profitable, it s also vital to determine the
affordability of the enterprise. Depending
upon the type and size of operation,
startup costs and operating expenses for
the first few months could include:
” Building costs, including improvements
” Administrative expenses such as
licences, permits, rent, fixtures, furnishings,
computers, cash registers, copier,
phone, utilities, insurance, furniture,
office supplies
” Cost-of-production expenses such as
fixtures, equipment, supplies, packaging,
inventory, warehousing, shipping
” Sales and marketing expenses
” Payroll
” Legal and accounting fees
” Costs to service loans and leases
Too many new business owners underestimate
the amount of capital they need
to get a business up and running. In
order to be successful, it is important to
be realistic about not only startup and
operating costs, but also the amount of
time it may take before the business is
generating profits.
By this point in your evaluation,
you ll have a pretty clear picture regarding
the financial viability of the proposed
enterprise. Thus the next step will be to
determine whether you will be able to
finance and structure the new venture.
We ll address that topic in the next issue
of COUNTRY GUIDE. CG
Coralee Foster is a partner of BDO Canada
LLP (
www.bdo.ca)and chair of the
firm s agricultural group. She provides
accounting, taxation, succession, estate
planning and consulting services to clients
including agribusinesses and primary
producers. You can reach Coralee
in the Mitchell, Ont. office at
[email protected]or 519-348-8412.
