Financial Needs and Financing Options

As a start-up, financial planning is one of the most critical steps for Krazy Bite, as it
allows for efficient resource allocation and budgeting of the available funds. By recognizing a
start-up’s financial needs, managers can allocate time, personnel, and money to the business
sections that are in most need (Cavallaro, 2021). For a startup, this means reducing unnecessary
waste and spending and ensuring resources are utilized efficiently. Recognizing its financial need
can also allow a startup to raise funds through loans. This paper outlines Krazy Bite’s,
approaches and options for securing financing, and financial ratios for tracking business
performance.

Financial Needs

Krazy Bite will primarily use the online business model instead of walk-in physical
stores; the online approach is more cost-effective. An estimated $15,000 in working capital and
$25,000 in startup funds are required to launch the business and sustain it for a year. The $15,000
in working capital would cover ongoing variable operating expenses, including ingredients,
packaging & shipping, online ads, contract labor, transaction fees, supplies & maintenance, and
contingencies.
Table 1: Subdivision of the $25,000 startup funds
Item Description/Rationale Amount
Website design and
e-commerce
platform

This amount would cover building a custom WordPress
site with WooCommerce for taking online orders. The
site needs an appealing, professional design and seamless
user experience to foster trust and conversions.

$5,000

Kitchen equipment This would cover major equipment like commercial-
grade mixers, ovens, refrigeration, scales, and small ware
for prep and baking are needed to produce consistent,
high-volume output.

$5,000

Ingredients,
packaging, & labels

It will cover initial inventory of ingredients, packaging
supplies like boxes and shipping materials, and
brandings like custom labels and stickers are required

$3,000

3

before opening for business.

Licensing & permits Proper business licensing, food safety permits, and other
required permits for kitchen use and e-commerce sales
will be obtained

$2,000

Legal & accounting This will cover professional fees for business formation,
contracts, and bookkeeping will provide a solid legal and
accounting foundation.

$2,000

Marketing assets This will cover design assets like logos, product photos,
and graphic elements will be created for websites, social
media, and other marketing materials.

$1,000

Fixe costs (3
months)

Three months of fixed overhead expenses like rent,
utilities, insurance, and other fixed costs protect against
variability in early revenues

$5,000

Contingencies A contingency budget for unanticipated expenses is

prudent to avoid funding shortfalls.

$2,000

Table 2: Utilization of the $15,000 working capital
Item Description/Rationale Amount
Ingredients The most significant variable is the cost of goods
sold from continual ingredient purchases. Stock
levels of key ingredients will be maintained.

$5,000

Packaging & shipping Packaging supplies will need regular
replenishment, and shipping costs are variable
based on sales volume.

$3,000

Online advertising Paid digital ads are an effective way to drive traffic
and boost sales. Ads will be tested and run on
platforms like Google and social media.

$2,000

Contract labor Delivery drivers will be contracted as needed to
provide same-day delivery services. Additional
kitchen staffing may be brought on for large orders.
$2,000

Transaction fees The e-commerce platform will charge subscription
and variable payment processing fees based on
transaction volume.

$1,000

Supplies &
maintenance

Miscellaneous operating supplies and any
equipment maintenance costs arise on an ongoing
basis.

$1,000

Contingencies A buffer for unforeseen variable expenses should

be maintained.

$1,000

Financing Options

4
Once you have estimated the start-up needs for this business, determine the best financing options
to obtain the needed capital and how you would approach securing this type of financing. Justify
your selection.

Financial Ratios

Evaluate the two most important financial ratios that you will use to track the health of the business
and explain how each would provide insight to the business performance. Provide a rationale with
your response.

5

References

Cavallaro, M. (2021). Starting a business when you’re afraid to: The step-by-step blueprint to
getting rich fearlessly. Centennial Books.