Cash Budgets for a New Venture.

Cash Budgets for a New Venture.

Speak-on something refers to the act of giving a speech, lecture, or particular discourse about a given topic (Chen, 2020). Speak-on refers to you expressing your thoughts and feelings about a particular topic or scenario. However, this type of Speak-on is an educational game designed to be used in high school classrooms to improve on communication and public speaking skills among all students. In this discussion, we are going to focus mainly on Mr. Harsh Omari, a student at Western University, whose Speak-on demonstration at his former high school has attracted huge interest from his teacher Mrs. Potter. While Mr. Harsh Amari received the government’s summer grant, he should focus on how to implement managerial accounting analyses to ensure cash budgets are sufficient for his new business venture.

Mr. Harsh Amari’s Expenses

In order to assess which expenses among all those that Mr. Harsh Amari is considering for his future Speak-on activities and business plans, several categories have to be involved. One of the categories is fixed cost. Some of the fixed cost expenses include banking fees and business insurance. According to Park (2020), starting a business looks like a straightforward process; however, Mr. Amari has to approach and register with the Government of Ontario. He goes ahead to register his company under the name, Confidence Games Canada. The fixed cost of his business registration is $68 to be paid in September. Mr. Amari also requires insurance, which will offer him protection against any events of a disaster. The fixed cost of his business insurance is $138 for the first three months and then revert to the monthly payment format.

The other vital category is known as variable costs. Some of the variable cost expense include logo designing, website, and domain name development. Mr. Amari requires to come up with his company’s logo that is permanent for Speak-on. However, his current logo is not good enough and should be improved as time goes by. The logo is a variable cost as Logo Joy company usually allows customization of logos. On the other hand, the initial set-up fee for designing a website is $87 to be paid in September. Besides, the cost of the Canvas subscription is $168 for the first year. However, payment was to be made in monthly installments starting in September. Even though Mr. Amari does not design the company’s domain name, he has to purchase it under the name Speak-on.com. The variable cost for buying the domain name is a one-time fee of $10 and a membership fee of $5 per month starting September.

Nonetheless, we have other categories, such as one-off costs and recurrent costs. Some of the one-off costs include the domain name and web development. Recurrent costs include inventory and card design. Mr. Amari has to purchase an inventory prototype in December. However, he will have to buy 70 more decks in February as well as 40 more in May. Lastly, we have the categories comprising of costs directly related to products and costs indirectly related to products. Some of the costs directly related to products include the company’s logo and website. The costs indirectly related to products include purchasing domain name and opening a separate bank account. These two are just additional costs that Mr. Amari needs to consider when setting up his new business venture.

Mr. Amari’s Line of Credit

There is a need to establish whether the figures relative to sales, costs, and every other element presented in the case scenario. These figures suggest that Mr. Amari will either have sufficient financing or inadequate funds to set up his business. In my personal view, Mr. Amari is facing financial troubles in his process of starting a successful business venture. He should request more lines of credit from financial institutions since the line of credit that Mr. Omari was able to get approved funds that will not cover all his plans for the Speak-on business.

Furthermore, Mr. Amari’s line of credit has an annual interest rate of eight percent based on the outstanding balance at the end of each month. Mr. Amari says that if more financing was needed above the line of credit, he was uncertain of where to get additional funds as his finances and savings had been stretched thin with school payment. Moreover, for one to start a new business enterprise, there is a need to have additional funding that ensures a back-up financial strategy in case the first line of credit does not work out for the best (Cox, 2017). Despite Mr. Amari being approved for a line of credit, $10,000 is not enough for his business venture in the long run. Mr. Amari should ensure that he exhausts all possible avenues in ensuring that he has adequate funding for his business venture.

Base-case scenario and alternative scenarios

The case writes up presents a base-case scenario for Mr. Amari sales prospects, but it also discusses alternative scenarios. Although Mr. Amari believes he is conservative with his sales projections, he also would like to venture into sensitivity analysis on his calculations. The mere fact that Mr. Amari Speak-on demonstration game was being requested by his former high school teacher, Mrs. Potter, drives him to develop the need for sensitivity analyses. The main question that Mr. Amari needs to ask himself is, what if his sales will be higher than in his base-case scenario?  The quick reaction and sales request by his former private school is not a common phenomenon for Mr. Amari. Being caught unaware, the next course of action is to start the sales process earlier than he had anticipated.

Another significant question that Mr. Amari needs to consider is what if the sales will be lower? In the scenario whereby the Speak-on sales are lower than expected, Mr. Amari should think of expanding his business venture to public schools. Not only will this establish a new market for the Speak-on business, but it also will help those attending public schools improve on public speaking skills and effective communication. The effects of these opposite sale scenarios on Mr. Amari’s financial needs require a more in-depth look and, if possible, deploy the SWOT analysis as a managerial accounting analysis. This is a business analysis of present strengths, weaknesses, opportunities, and threats (Frye, 2019). One may ask, what is going to happen if Mr. Amari costs modify?  Well, in case of cost modification, Mr. Amari will have to dig into his line of credit to adjust to market demands and prices of various commodities. By doing so, he will save himself from last-minute panic and freeze in starting the Speak-on venture.

Last but not least, we look at two realistic scenarios that correctly measure the effects of surging costs and diminishing costs on Mr. Amari’s financial needs. First, we look at the past decade. Over the last ten years, unprecedented climatic changes and catastrophic events have increased, thus creating a problem in today’s economic state. For example, sudden large-scale escalations in prices of learning materials at high schools develop the need for preparedness and capabilities to cope with such surges. Mr. Amari, therefore, needs to appraise the consistency and utility of the present conceptualization of Speak-on resource capacity and their components. According to Chen (2020), he should have a view of standardizing measurements and concepts to enhance future research to create cumulative knowledge for future practices and policies. The next scenario focuses on academic literature. The surge capacity leading to diminishing costs varies in terms of definitions, applications, and conceptualization of the business venture. However, the absence of comparable data and details makes it impossible for Mr. Amari to develop standardized conceptual models. All in all, something evident is the consensus for the components and effects of surging and diminishing costs on Mr. Amari’s financial needs.

Strengths and Weaknesses of the Business Idea

There is a need to provide a correct assessment of Mr. Amari’s strengths and weaknesses. By having a more in-depth look into Mr. Amari’s business idea, we have to involve managerial accounting analyses.  According to Gartner (2019), it is vital to note that the strengths of a new business venture are linked to innovation and creativity, as well as flexibility. Some of the notable strengths of business include enthusiasm from Mr. Amari, agility, conducive and familiar work environment, informality, and a superior business product. As a new start-up business venture, Mr. Amari is ready to put his heart and soul into this project. He wants to please Mrs. Potter as well other customers who are prepared to request tenders on his Speak-on game and demonstration. Mr. Amari has the opportunity to start building a new business record that will serve him profits and, in the process, acquire future product orders necessary for his business to thrive.

Moreover, Mr. Amari’s new business venture is agile. He is likely going to face favorable market conditions, thus helping him adapt to market adjustments and customer needs. Cox (2017) says that for new business ventures, it is more practical to make adjustments quickly when compared to other long-lasting companies. Another strength is the conducive and familiar work environment that Mr. Amari experiences in his new venture. He is already familiar with his old high school teacher, thus making it very easy for his business operations to run. Mr. Amari will have an easy time bonding with the team from his old high school, thus giving him plenty of time to efficiently make a difference in setting the right business standards and ethics that will have some lasting influence. Another strength is the informality displayed by Mr. Amari. Unlike other business start-ups, Mr. Amari has the right protocols in place to break even with his former high school. The bureaucracy needed is minimal as he is already familiar with one teacher, that is, Mrs. Potter. Lastly, Mr. Amari has a unique and superior business product. His Speak-on business is unique with a lot of market niche such as in private high schools and future, perhaps public schools.

However, there are some emergent threats and weaknesses in Mr. Amari’s new business plan. One of the weaknesses developed in the Speak-on venture by Mr. Amari is the lack of sufficient funds to keep it going. Leidecker (2018) states that access to capital has been complicated for an individual seeking to start a new business venture yet, at the same time pay his school fees. Mr. Amari is risking business failure as well as losing new business opportunities. Lack of cutting-edge technology can also be a weakness to Mr. Amari’s Speak-on venture. The mere inability of Mr. Amari to understand how to handle logo and website development is quite worrying and threatens his business. These technological demands, such as coming up with the domain name, will require IT specialists who can solve them at an agreed fee. As Mr. Amari seeks to grow his new venture, he should ensure his logo does not portray an inferior brand. Since he is trying to appeal to the high school audience, it is crucial that he comes up with a good brand. Social media and online marketing have proven to be the number one strategy to display your business logo and brand.  Another weakness that Mr. Amari faces is a lack of networks and connections. Although Mr. Amari is quite conversant with his former high school board, this not be the case when other customers approach him. According to research, a successful business will require the right contacts and network connections that will help drive it to full potential. Walbank (2017) points out that it is crucial to make use of referrals. Mr. Amari’s Speak-on business also lacks the resources to grow. He has exhausted his finances; therefore, it will be complicated to acquire the necessary resources to keep the business running.   Another weakness that Mr. Amari’s new venture faces is undeveloped business processes. Since Mr. Amari’s venture seeks to be the pioneer in Speak-on games, he has not yet experienced the market variables to understand the dynamics of profits and losses. The lack of fully developed systems often leads to business stalling and hitches, thus leading to inefficiency in operations.

To establish a stable business, Mr. Amari should consider leveraging his strengths on the Speak-on.  Turner (2018) argues that this will not only help him introduce efficient business processes but also build a stable network. To compensate for weaknesses of the Speak-on, Mr. Amari should take calculated risk analysis and have a backup plan in case things do not go according to plan. At times, unforeseen catastrophic events or disasters happen without our knowledge; therefore, there is a need to stay alert. It is imperative to learn from mistakes, but that should not prevent Mr. Amari from taking precautions in case of emergencies. Besides, it has been proven that the success of a new venture can be all about the attitude. Mr. Amari is a visionary person who can learn how to transform his weaknesses into success. Through his creativity and innovation in the Speak-on venture, he can push the boundaries to become the number one learning games and demonstrations consultant. However, this will only happen if he is determined and focuses on the bright future ahead.

Furthermore, Park (2020) states that a successful business person should evaluate his opportunities so that he can capitalize on the competitor’s weaknesses. Not only should he be cautious when conducting business but also embrace new opportunities as they emerge in the market. All in all, Mr. Amari should do away with all the production inefficiencies. For the Speak-on venture to become successful, Mr. Amari needs to come up with an efficient production system that optimizes sales. In so doing, he will not only do away with production inefficiencies but also minimize losses.

After conducting an assessment of the strengths and weaknesses of Mr. Amari’s business idea, it is quite evident that the Speak-on is relatively safe to sales oscillations. In every market, business owners face numerous sales oscillations as prices hike and fall annually. This phenomenon is caused by the fluctuating forces of demand and supply of products (Walbank, 2017). However, with all the precautions put in place, Mr. Amari’s business project is relatively new hence most likely to adapt to sales oscillations. In the scenario whereby future sales materialize as Mr. Amari expects, then the business will have very high-profit margins. If all things fall into plan, Mr. Amari should be able to pitch his business idea to other teachers as well as many more potential investors. He has to work tirelessly in making sure that even teachers in public high schools are receptive, thus increasing the number of decks sold. Despite Mr. Amari being a student at Western University, he should go ahead and launch himself in the Speak-on business. Besides, he should potentially invest even more in the business project rather than wait until he finishes his studies and revives his entrepreneurial plans. By doing so, Mr. Amari will have helped thousands of high school students in effective communication as well as improve their public speaking skills.

In conclusion, Mr. Amari’s business idea is terrific, and if given the right funding support could have an impactful change in public speaking among high school students. Mr. Amari should also bear in mind that there are millions of unemployed graduates looking for jobs; therefore, it is only wise that he follows his entrepreneurial plans. All in all, Mr. Amari should consider starting his business venture early enough before the school year begins.

References.

Chen, C. (2020). Technology commercialization, incubator, and venture capital, and new venture performance.

Cox, C. (2017). New business venture planning.

Frye, A. (2019). New experiences with cash basis budgets.

Gartner, J. (2019). Predicting new venture survival.

Leidecker, B. (2018). Causes of new venture failure.

Park, J. (2020). New venture internalization: The role of venture capital types and reputation.

Turner, J. (2018). Net operating working capital, capital budgeting, and cash budgets: A teaching example.

Walbank, M. (2017). Equity sharing policies in new venture funding.