BUSINESS IDEAS Forum

7.0 Financial Plan

Our goal is to borrow $50,000 for 10 years. Our present plan is to utilize the borrowed money for the first year's operating capital, with cash input on a monthly basis. Such cash input will aid our operating costs and salaries. We should reach our break-even point after our first year. Upon receiving our loan, we would like to incorporate, as this will protect our company, investors, lenders, products, and stockholders. We expect sales to reach $473,843 after the first year, $1,104,890 after our second year, and $1,699,830 after the third year.

If sales don't measure up to our expectations, this could add an additional six months and an influx of another $20,000, which could be carried by credit card, but we don't expect this to happen.

These are our strong points:

• We want to finance growth mainly through cash flow. We recognize that this means we will will have to grow at a slower pace than we would like, but this will enable us to build sales through investing in more advertising.
• Our most important asset is inventory turnover. Our ability to schedule production from month to month will help to control inventory costs.
• Collection is not a problem, since we will be credited payment to our bank account in two days by American Merchant Center for all our credit card sales over the Internet.

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7.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the General Assumptions table. The key underlying assumptions are:

• A slow-growth economy, without major recession.
• No unforeseen changes in technology to make our products immediately obsolete.
• Access to equity capital and financing sufficient to maintain our financial plan as presented in this table.

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7.2 Key Financial Indicators

• The most important indicator is inventory turnover. We have to make sure that turnover stays above 10, or we are clogged with inventory.
• Collection is not a problem, since payment to our bank is two days after receiving our orders via credit card. However, by October 1999, we will initiate skate shop sales and experience an approximately 30-45 day average payment delay. This could cause a change in cash flow, but can be easily managed.

Benchmarks

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7.3 Break-even Analysis

Aside from the standard financial break-even shown, the following is a simplified breakdown of our first year's overall numbers in broad terms:

For more detail, see the Projected Profit and Loss Table in the Appendix.

Break-even Analysis

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7.4 Projected Profit and Loss

Our goal is to borrow $50,000 for the total of ten years. Our present plan is to utilize the borrowed money for the first year's operating expenses, with cash input on a monthly basis. Such cash input will aid in our advertising, operating costs, and salaries. This loan should help us maintain production and operating costs while developing our customer base and sales. Should sales lag, we plan to maintain solvency with credit card financing. We should reach our break-even point after our first year. We expect sales to hit $473,843 the first year, $1,104,870 our second year, $1,699,830 the third year. Our sales projection is very conservative, considering the sales potential.

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7.5 Projected Cash Flow

• We want to finance our first year's growth through a loan.
• The most important indicator is inventory turnover. Our ability to schedule production from month to month will help control inventory costs.
• Collection is not a problem since we will be credited payment to our bank account in two days by American Merchants Center, our credit card company for Internet sales.
• Selling our products over the Internet will allow us full retail price and maximize our profit.

Cash

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7.6 Projected Balance Sheet

As shown on the balance sheet in the following table, we expect a healthy growth in the net worth to more than $1,664,260 by the end of the third year.

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7.7 Business Ratios

Standard business ratios are included in the table, based on SIC code 3949. The ratio shows a plan for balanced and healthy growth.

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