Business Plan Tutorial Preface & Credits
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LET’S CONTINUE, PART 3
G&A OVERHEAD: For “Sample Start-Up Company”
In Exhibits C and D, Administrative Overhead (for management and administrative staff, clerical, payroll taxes and benefits) as well as General Expenses (such as office supplies, mail and telephone, utilities and rent) remains consistent between the franchise and non-franchise scenarios.
Administrative Overhead in both examples is $24,300 for the six-month period. General Overhead totals $18,400 for the same period in both models.
The two types of overhead are commonly referred to as “G&A” – your accountant or CPA will most often refer to these expenses as your “G&A Expenses.”
Part 3: Overhead
- Management & Administrative Staff
- Payroll Taxes
- Office Supplies
- Internet and Phone
The difference between Exhibits C and D, the franchise and the non-franchise scenario, can be seen in Total Selling Expenses. In the franchise example shown in Exhibit C, the selling expenses totaled $22,300 for the six months, reflecting the 8% charge of the franchise in that total. In Exhibit D, the non-franchise operation incurred $14,600 in selling expenses, as there were no franchise fees applied, only a fixed expense for advertising. What does this do to the “bottom line?” That is, what is left over after all Cost of Sales, and G&A are subtracted from Gross Sales?
Looking now at Exhibits A and B, we turn to the bottom line. Here we see “Net Income Before Taxes” which reflects negative cash flow months as numerals in brackets, representing $ thousands, i.e. [5.4] equals minus or negative $5,400. The end result, shown in an oval, reveals that after six months of business, the franchise is down — or minus — <$6500>. The non-franchise operation is up — or plus — +$1,400. The difference reflects the $7900 additional paid out by the franchise owner for royalties and mandatory ad fees (allowing a $200 discrepancy created by the rounding up of figures in Exhibits).