Page 157 - Business Plans that Work A Guide for Small Business

148 • Business Plans that Work

Again, we like that Exhibit 10.5 Model Store Operating Expenses
Dan shows this level of
detail. Some investors will
focus on microanalysis Annual Overhead Year 1 Year 2 Year 3 Year 4 Year 5
and ask questions of these
expenses. These questions Factor increase 1.05 1.05 1.05 1.05
may be nitpicking or they
may be probes to test an Expenses
entrepreneur’s knowledge. Advertising expense $15,000 $15,750 $16,538 $17,364 $18,233
For example, “What is your
experience with ‘customer Customer damages $2,500 $3,908 $5,664 $7,782 $9,644
damage’ and what systems
have you developed to Automobile expense $6,600 $6,930 $7,277 $7,640 $8,022
m inimize those losses?”
Total insurance $13,003 $13,653 $14,336 $15,053 $15,805
Total interest expense $7,074 $6,241 $5,331 $4,335 $3,246
Postage and delivery $710 $746 $783 $822 $863
Total professional fees $2,000 $2,100 $2,205 $2,315 $2,431
Primary rent $36,000 $37,800 $39,690 $41,675 $43,758
Secondary rent $4,500 $4,725 $4,961 $5,209 $5,470
Tertiary rent $14,000 $14,700 $15,435 $16,207 $17,017
Repairs $1,036 $1,088 $1,142 $1,199 $1,259
Telephone $3,600 $3,780 $3,969 $4,167 $4,376
Internet $2,113 $2,219 $2,330 $2,446 $2,568
Travel and $500 $525 $551 $579 $608
entertainment
Office supplies $2,000 $2,100 $2,205 $2,315 $2,431
Administrative wages $45,000 $47,250 $49,613 $52,093 $54,698
Think about Customer service $7,255 $7,618 $7,999 $8,399 $8,818
how you label sections. wages
“C orporate Headquarters
Costs” screams overhead. Total expense $162,891 $171,133 $180,029 $189,600 $199,247
“C entralized Store Support”
says scale and competitive
advantage. We would retitle
this section. As we have
noted throughout, it appears Corporate Headquarters Costs
that Dan is overlooking
the cost of supporting his
franchisees. Headquarters costs are dominated by professional fees
and administrative labor. The $150,000 in professional
fees in years one and two pay lawyers and consultants to
Adding expert refer-
ences gives your estimates create franchise agreements and the Franchise Disclosure
credibility.
Document. This estimate came from two sources: discussions
with Babson professor Leslie Charm, an experienced
franchiser, and the book So You Want to Franchise Your Business
by Kestenbaum and Genn.
Professional fees in subsequent years are for updating these documents and
dealing with franchise disputes. The administrative labor includes base salaries
for executives; marketing, financial, and quality consultants; and administrative
assistants. Executive base salaries are quite low, $60,000/year, with the
expectation that they will earn equity and bonuses paid out of net income as