Editor's Note:

While some charter school developers have demonstrated considerable skill and acumen in developing the "business side" of their schools, others are sorely lacking in some basic financial planning and management experience. This brief guide provides some simple, yet important, suggestions for those developing and operating charter schools who want to demonstrate that their school is on a strong fiscal footing. It was developed by an anonymous leading funder of charter schools. It shows how charter schools can begin to make the case that their school is a prime candidate for a loan or grant by answering the following fundamental questions:

• Is our school's current year operating budget in balance?
• Does our school have adequate cash and "working capital" resources to meet our monthly expenses such as payroll, rent, and benefit costs?
• Is our school's long-term fiscal picture in focus and in balance?
• Has our school demonstrated (or has the school's development team demonstrated) that it has the capacity to implement (or establish) sound financial management practices?

Charter schools that have developed such a business plan are in a strong position to make the case to prospective lenders or donors that their loan will be repaid in a timely manner or grant will achieve its stated purpose.

Other Charter School Finance Links:

Click here to link to the "US Charterschools" charter school finance resource page with its many links to other charter school financial planning and management resources.

The charter school business plan is a management tool. When developed and used properly, it is one of the most effective communication tools used to obtain grants or loans for your charter school whether it comes from traditional lenders or the philanthropic community. It also can assist the school developer(s) in achieving his/her goals by identifying financial needs and/or problems early in the school planning process. The charter school business plan should reflect the school's developers' ideas clearly and succinctly and/or could be a component of a larger school wide strategic plan that addresses the school's short and long-term plans in more detail. (Click here to view the San Carlos Charter Family Learning Center's long term strategic plan.)

Before you start developing your business plan you might ask yourself the following questions. Although some of these questions may seem too simple for some, they might be helpful to newer charter school developers. Do not attempt to answer these questions as part of your written Business Plan.

1. Have you worked in a school and/or educational setting similar to the one you want to start?

2. Have you had any business and/or education training in school?

3. Do you know how much money you will need to get the school started?

4. Have you decided on a marketing plan?

5. Have you talked with other school developers/operators about what they think of the school?

6. Can you determine the amount of money you should receive in terms of revenues per student?

7. Have you tried to find out how well schools similar to the one you want to open are

doing in your community and in the rest of the country?

8. If you need to hire someone to help you, do you know where to look?

9. Do you know what benefits to provide?

10. Do you have a plan for training your employees?

11. Have you talked with the parents and schools (both public and private) in the area?

12. Have you determined the type of payment you intend to accept for student fees, etc.?

13. Have you talked with an insurance agent about what kind of insurance you need?

14. Do you know what equipment and supplies you will need and how much they will

cost?

15. Can you save money by buying second hand equipment?

16. Have you compared the prices and credit terms of different suppliers?

When preparing projected financial statements for your charter school business plan you must start with basic assumptions for income and expenses. These assumptions for income and expenses should be detailed in your charter school business plan with supporting documentation derived from the market study and the market strategy. The projected financial statements should indicate financial changes in your revenue cycle. For instance, if your school receives fees and funds from the state during a specific time, i.e. quarterly, revenue during that period will be greater. Your financial projections should indicate the fluctuation in income and expenses.

There are four types of financial statements that should be included in your business plan:

1. * Annual Operating Budget (required in your business plan)

The annual operating budget will take your income minus expenses and equal either a surplus or a deficit. The budget would show revenues by source (e.g., state aid, federal aid, grants, fees, etc.) and expenditure by object (e.g., salaries, benefits, rent, materials, books, services, professional training, utilities, insurance, etc.) for the first year of operations (or current fiscal year for a preexisting school).

Click here to view a sample annual operating budget.

2. * Cash Flow Statement (required with this application unless your annual budget above is broken into monthly columns).

The cash flow statement will show the cash generated and collected from school operations. This statement will utilize the same income and expense as the annual operating budget, however, it breaks the information down into monthly or quarterly columns showing whether the school will have enough money to pay its bills at the end of each month or quarter. Naturally, if the school's annual revenues arrive at the school later than its expenditures must be paid, the school will need "working capital" (e.g., a short-term loan) in order to pay its expenses on time.

Click here to view a sample monthly cash flow projection.

3. * Three-to-Five Year Projections of income and expenses --(required in your business plan).

A three or five year projection of anticipated income and expenses will show the planned growth, development and needs of the school over time.

Included in this kit are forms that may be used in the financial forecasting of your school. A rule of thumb when forecasting; "be as conservative and as realistic as possible."

Click here to view a sample five year budget projection.

4. * For those schools that are independent of their charter sponsor: An Audited Balance Sheet of the most recent year, prepared by an external, certified public accountant (if the school has been open and audited after its first year). Schools that are in the planning state, or the first year of operations, and do not yet have an annual audit report, should develop a set of financial management policies. These policies would specify who is responsible for preparing and monitoring the school's budget and how the "powers of the purse" are distributed within their school among board members, staff, and others.

The questions outlined on page 2, along with the four financial statements described on page 3 are instrumental in developing your charter school business plan. Once you have formulated answers to the questions and have developed the necessary financial statements, you should begin developing your charter school business plan.

NOTE: The following section to the Business Plan is not required as part of your charter school grant application. However, it is encouraged that you develop such a plan for your school. Traditional lenders and others who are requested to support your school over time will be impressed with such a plan.

I. Summary

A. School Description

1. Name and address

2. School description (grade levels, etc.)

3. Mission statement

4. Instructional focus

5. Governance/Administrative structure

• Charter accountability (describe briefly how your school plans to remain viable at renewal)
• Relationship with charter granting agency

II. Market Analysis

A. Description of the area or market/ district(s) that the school will serve

B. Target market/student population (what segment of district's population you plan to serve?)

C. Competition - other school(s) seeking the same student population to include private, public, magnet, parochial and other charter schools

III. Marketing Strategy

A. Overall strategy (awareness for students and parents)

B. Specific admission and recruiting plans and policies

IV. Management Plan

A. Form of business organization (e.g., for profit or nonprofit corporation)

B. Board of Directors (Owners, partners, or governing board)

C. Administrator(s): organization chart and responsibilities (if applicable)

D. Resumes of key personnel (omit if included with your application)

E. Staffing plan/number of employees.

F. Facility plan/ planned capital improvements (omit if included with your application)

G. Operating plan/schedule of work for next year.

V. Financial Data

1. The appropriate financial statements described on page 3 of this form. Your Business Plan will include at least the Annual Operating Budget and the Three-to-Five Year Projections.

C. Explanations of assumptions underlying the budget and projections

1. Explanation of use and impact of new funds (if seeking a loan or grant