There will be six barbers, each working ten hours per day. They will be able to do 2 haircuts per hour, with an average charge above the median at £35 per cut. They will be at capacity during the two-week run of the Olympics and at 75% capacity during the week before the Games. Revenues during set up and take down will be non-existent. The barbers will make £15 per cut, so roughly £30 per hour. The manager's salary will be £500 per week, with rent being a further £400 per week. All of the equipment will be rented, but this needs to be paid up-front.
Cash Flow Statement
1
2
3
4
5
6
Set-Up Costs
-2000
-1000
0
0
0
0
Rent
-400
-400
-400
-400
-400
-400
Supplies
0
-1500
-1500
-1500
-500
0
Salaries
-500
-500
-5225
-6800
-6800
-500
Revenue
0
0
11025
14700
14700
0
Take-down Costs
0
0
0
0
0
-1000
Cash Flow
-2900
-3400
-1900
Total
In total, the venture will need the first three weeks' worth of costs, aside from the barber's salaries. This total will be £8700, which is the amount that we will need to borrow from the bank. This amount will be paid back at the end of the Olympics.
The primary cost categories are the set-up costs, the operating costs and the take-down costs. The equipment will be leased and this cost must be paid at the outset, during the set up phase. Most of the set-up will be undertaken by the owner and the manager, and will consist of the installation of equipment, and the licensing of the business. Supplies will be purchased in advance of usage. The barbers will be paid on a per-cut basis, so their pay will not be covered in advance. If they work overtime, the shop should be able to generate additional revenues. It is not expected that there will be...
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