Financing the Dance: Part II

In order for me to truly pursue opening up and running a successful dance studio, I need a solid financial plan.  I need to break down all of the financial aspects of running a studio and put the numbers down on paper.  I would start with an income statement and then move on to a balance sheet.  An income statement “is like a motion picture: It shows what has happened during the accounting period with regard to the revenues (income) and expenditures (expenses) of the business.” (Entrepreneurial Finance, pg. 65)  This will help me budget my company’s money in a responsible manner that will ensure longevity of my business.  On a typical income statement, you have things such as: gross sales, cost of goods sold, and operating expenses.  Your gross sales are basically just the money you make off of the sales of your product or service.  Your cost of goods sold is the money you spend on acquiring the goods that you plan on selling.  Lastly, your operating expenses are all of the costs you have to pay for in order to run your business efficiently.  Some of these expenses may include: salaries, rent, and utilities.  The importance of having my income statement filled out and ready to go is so I can know exactly how much money my studio is bringing in and how much money is going out.  Keeping a record of all of my business expenses and revenue is critical to the vitality of my company.

            Now, a balance sheet is also very critical.  A balance sheet, also known as “the statement of financial position, lists all assets and liabilities.  It is like a snapshot taken at an instant in time.” (Entrepreneurial Finance, pg. 71) This gives me a record of all of the aspects of my company that are of value and all that are risks.  In the case of building my studio, being knowledgeable of everything that holds value and everything that poses a potential risk is extremely critical to the longevity and success of my business.

Source:

Adelman, P. J., & Marks, A. M. (1997). Financial Management and Planning. Entrepreneurial finance: finance for small business (5th ed., pp. 65, 66, 71). Upper Saddle River, NJ: Prentice Hall.