The starting capital for the firm will be about $100,000. The capital amount will be utilized in building and developing the business. Additional sources for the beginning will not be sought as additional funding especially in the first year of the business. The capital is sourced from the company owners and therefore security guarantee is not needed to the capital providers. In this case, other sources of capital have not been utilized yet. The company intends to use the internal cash that is generated to facilitate the provision of the required business funding. The main metrics of performance that would be utilized as the business is growing is the growth of sales over a period of five years. The following part of this section examines projected financials and related business metrics.
|Year 1||Year 2||Year 3||Year 4||Year 5|
|Sales||$ 95,000.00||$ 150,000.00||$ 205,000.00||$ 260,000.00||$ 315,000.00|
|Cost of Sales||$ 55,000.00||$ 45,000.00||$ 40,000.00||$ 45,000.00||$ 60,000.00|
|SG & A||$ 40,000.00||$ 50,000.00||$ 55,000.00||$ 65,000.00||$ 70,000.00|
|Profit before tax||$ –||$ 55,000.00||$ 110,000.00||$ 150,000.00||$ 185,000.00|
|Tax Expenses||$ 15,000.00||$ 25,000.00||$ 35,000.00||$ 45,000.00||$ 55,000.00|
|Profit After Tax||$ (15,000.00)||$ 30,000.00||$ 75,000.00||$ 105,000.00||$ 130,000.00|
Table 1: Business Budget
As revealed under table 1 above, it is projected that the sales in the first year would be $95,000. The sales are projected to increase significantly at a constant rate in the first five years of operation. The second year is expected to report $150,000 while the third and fourth year are expected to report $205,000 and $260,000 respectively. The fifth year is projected to report a higher value of $315,000. The following figure shows the summary of projected sales revenue performance over the period and the rate of change in revenues.
Figure 1: Project revenue performance
The graph shows revenue projection over a period of five years. The bars display the amount of revenue size per period while the trend line shows the rate of change in the firm revenue from one period to the other. From the graph, it can be shown that although the solid projection reveals that there is an increase in the company revenues, the rate will be declining from year one to the next. The company is expected to report the highest rate during the second year, estimated to be 61.4%. However, the subsequent years will register a drop to 58.0%, reducing gradually and becoming steady from the third year. The change can be attributed to the fact that advertisement will be high as the firm continues to recruit potential market. Towards the third and fourth year, the company would have exhausted its revenue base, therefore, strategizing on concentrating on the already established market as the main source. Compared to other indicators as revealed under figure 2 below, sales are expected to maintain a higher performance. The firm is projected to reach a break-even point 2.5 years on the market. At this point, positive profits will be registered while costs remain at a steady rate onwards.
Figure 2: Sales, Costs and Profit Compared
However, it is not possible to ascertain the firm’s market share because of the lack of information from the target market. Besides, the firm estimates that by the end of year 5, at least a market share of about 15% should have been captured. The following is a budget of the firm’s balance sheet:
|Sources of Funds||Uses of the Funds|
|Startup Capital||$ 100,000.00||Cash||$ 15,000.00|
|Initial Clothing Inventory||$ 35,000.00|
|Retail Store tenancy & furnishing||$ 20,000.00|
|Business Startup Costs||$ 10,000.00|
|Staff payment||$ 20,000.00|
|Total||$ 100,000.00||$ 100,000.00|
Table 3: Mini Me Contemporary Budget Balance Sheet
As projected under the budget balance sheet, the firm plans to invest $100,000 into the business as a start-up capital. The sources of capital would be the owner. The capital would be distributed across the business requirements as indicated in the balance sheet report. Cash amount would be $15,000. The amount would be held available to cover liquidity costs of the business. The initial inventory would be allocated $35,000 while retail store tenancy and furnishing are estimated to cost $20,000. The amount covers expenditures required to ensure that the business stores are up to the desired standards before the business is set up to begin operating. The business startup costs are projected to cost $10,000 and this majorly includes tax and initial licensing expenditures. Finally, the amount of $20,000 is set aside to be spent on paying staff salaries. The business projects that the capital invested would help the business run effectively across the first five years. No other sources of capital have been recruited to support the business at the moment. Initial inventory takes the largest share of the budget to ensure that sufficient stocks are available to satisfy the projected market demand.