Draw up a budget with assumptions for a new start up business

You have received R1 million from your rich uncle, and he instructed you to start a new business venture.

It is up to you to decide what business you would like to start.

The uncle however gave it to you with the hopes of getting a healthy return on his "investment" in you.

Draw up a budget for your uncle - showing him how you will be using his money to bring income to yourself as well as give him a healthy return on his investment.

Your uncle has given you 5 years to maximise the return on this investment. After the five years your uncle would like to get his money back in full.

During the 5 years that you have the money on "loan", he would like to get some sort of compensation.

You can decide what you feel is a fair compensation - work it into your budget.

Be sure to motivate why you feel your chosen compensation is "fair".

We have provided you with a booklet called: "Financial projections tool" - published by Jumpstart.

This booklet contains very good tips and information to aid you to prepare a proper budget as a new entrepreneur.

You need to show some research that you performed that will support your assumptions for the budget.

Budget needs to be realistic and the business ought to be viable in today's economic climate.

Required:

1. Provide a detailed list of all your assumptions that supports your budget

Include in your assumptions a short overview of your overall business strategy - eg: what is your products/services? Target market? Why you feel this is good idea etc.

2: Draw up the cash flow forecast/ budget with detailed calculations - make sure to use the cash flow statement format that distinguish between operating, financing and investment activities.

Ensure that you pay your uncle back in year 5 and that you show his compensation over the 5 year period as well.

3. Please explain what you decided your uncle's compensation would be and explain why (with supporting calcs where appropriate)