We are Right and You Need Us

Financial Model

We are Right and You Need Us
 Current  Forecast
Financial Statements  Year 1  year 2  Year 3  Year 4  Year 5 Year 6
Income Statement
Revenue  $  1,800,000.00  $    1,980,000.00  $   2,160,000.00  $   2,700,000.00  $    3,240,000.00  $  3,420,000.00
Cost of Service
Trips  $          225,000.00  $        291,500.00  $      336,000.00  $      390,000.00  $        405,000.00  $        44,100.00
New Computer and Software  $            15,000.00  $          16,500.00  $         18,000.00  $         19,500.00  $          21,000.00  $        22,000.00
Gross Profit  $      1,560,000.00  $    1,672,000.00  $   1,806,000.00  $   2,290,500.00  $    2,814,000.00  $  3,353,900.00
Expenses
Salaries and Benefits for employees  $          216,000.00  $        216,000.00  $      234,000.00  $      270,000.00  $        270,000.00  $      288,000.00
Rent  and Overheads  $            72,000.00  $          72,000.00  $         78,000.00  $         11,400.00  $          11,400.00  $        12,000.00
Electricity  $              6,000.00  $             6,800.00  $           7,500.00  $           8,400.00  $             8,400.00  $          9,000.00
Fuel  $              5,000.00  $             5,000.00  $           5,500.00  $           7,000.00  $             7,000.00 7500
Total Expenses  $          299,000.00  $        299,800.00  $      325,000.00  $      296,800.00  $        296,800.00  $      316,500.00
Earnings Before Tax  $     1,261,000.00  $    1,372,200.00  $  1,481,000.00  $  1,993,700.00  $    2,517,200.00  $ 3,037,400.00
Share of profit for each partner (A, B, C) $ 420,333 $ 457,400 $ 493,667 $ 664,567 $ 839,067 $ 1,012,467

 
The financial model for “We are Right and You Need Us” partnership aims at forecasting the business profits over a period of five years. Some assumptions have been made of what is expected to happen in the oncoming five years in order to establish a realistic financial model. In particular, the partners are expected to have acquired more customers. Similarly, the businesses expenses are expected to increase during this period.
Year 1
In year 1, the business has sales of $150,000 per month, which results in a revenue of $180,000 annually. The three business partners average 30 trips a year at a cost of $2,500 per trip. Therefore, the annual cost of the trips is $225,000. Additionally, each partner purchases a computer at $5000 in the year, which translates to $15000 for all the partners. Therefore, the gross profit for the partnership is $1,560,000.
In year 1, the salaries and benefits expense for employees are $216,000. The annual rent, electricity, and fuel expenses for the business is $72,000, $6,000, and $5,000 respectively. Therefore, the total expense for the business is $299,000 per annum. The earnings before tax for all partners in the year are $ 1,261,000.00. Since all partners have an equal contribution in the partnership, they each receive an earnings before tax income of $ 420,333.
Year 2
In year 2, it is predicted that the business will have 11 customer a month who will pay a total of $165,000 monthly. In effect, the partnership will have a revenue of $1980,000 a month. The average cost of each trip is also expected to increase from the current $2,500 to $2,650. In addition, the partners will also have to increase their trips to 110 to acquire more business. Therefore, the annual cost of the trips will be $291,500. The cost of computers and software for each partner is also expected to increase from $5000 per partner to $5,500. As a result, the annual cost of new computer and software will increase to $16,500. Therefore, the gross profit for the business in year 2 will be $1,672,000.
The salaries and benefits, rent and overheads, electricity, and fuel expenses for the business will be $216,000, $72,000, $6,800, and $5,000 respectively. There is expected to be only be a slight increase in electricity expense during the period. Therefore, the total expense for the period will be $299,800. The earning before tax for the year will be $1,372,200, and the share for each of three partners will be $457,400.
Year 3
In year 3, each of the partners is expected to have brought 4 customers worth $60,000 monthly to the partnership. Therefore, the partnership will have a revenue of $180,000 a month translating to a revenue of $2,160,000 annually. The partners are also expected to have 120 trips due to their increased activities, and the cost of each trip is expected to increase to $2800 each, which will translate to $336,000 annually. The price of new computers and software are expected to increase to $6,000 per partner, which translates to $18,000 for all partners. Therefore the gross projected gross profit for the business will be $1,806,000.
The annual salaries and benefits expense, rent and overheads, electricity, and fuel expenses for the business are expected to increase to $234,000, $78,000, $7,500, and $5,500 respectively. Therefore the total expense for the business will be $325,000. The earning before tax for the partnership will be $1,481,000, and the profits share for each partner will be $493,667.
Year 4
In year 4, the business is expected to have an annual income of $225,000, which will result in an annual revenue of $2,700,000. The partners are expected to have 130 trips in year 3, at an average cost of $3000. Consequently, their annual cost of trips will be $390,000. The cost of each partner’s new computer and software will be $6,500, which will translate to $19,500 annually. Therefore, the gross profit for the business will be$2,290,500.
The salaries and benefits, rent and overheads, electricity, and fuel expenses for the business are expected to increase to $270,000, $11,400, $8,400, and $7,000 respectively. The total expenses for the business will be $296,800. The earnings before tax will be $1,993,700 and the share of profits for each partner will be $664,566.
Year 5
The partnership will have an annual revenue of $3,240,000 in year 5, which is an average of $270,000 a month. The partnership is expected to have 135 trips each at an average cost of $3,000. Thus the annual cost of the trips will be $405,000. The cost for a new computer and software for each partner will be $7000, which will result in a total cost of $21,000. Therefore, the gross profit for the business will be $2,814,000.
The salaries and benefits, rent and overheads, electricity, and fuel expenses for the business are expected to increase to $270,000, $11,400, $8,400, and $7,000 respectively. The total expenses for the business will be $296,800. The earnings before tax will be $2,517,200 and the share of profits for each partner will be $839,067.
Year 6
In year 6, the business is expected to have a total of 19 customers, who will enable it make an average revenue of $285,000 monthly and annual revenue of $3,420,000. The partners are also expected to make 140 trips annually, and each trip will cost $3150. This will translate in a total cost of $44,100. The cost of new computers and software for the partner will be $22,000. Thus, the gross profit for the business will be $3,353,900.
The salaries and benefits, rent and overheads, electricity, and fuel expenses for the business are expected to increase to $288,000, $12,000, $9,000, and $7,500 respectively. The total expenses for the business will be $316,500. The earnings before tax will be $3,037,400 and the share of profits for each partner will be $1,012,467.