It is assumed that the owner's private resources will be sufficient to finance any monthly cash-flow shortage. However, it would be advisable to establish a bank relationship as soon as possible. Sales could very well increase at a much sharper rate than assumed in these conservative projections. Sharper sales will result in a greater need for funds in support of inventory and receivables. An over-draft line of credit with the bank will be an excellent cushion to fall back on.
This is considered a very good time to start a new business. The economy is beginning its trek up, and consumer spending is up. The Commerce Department reported, "Consumers had increased their spending, the largest advance in nine months."
A shorter learning curve will be brought to the business by the owner due to his extensive background and in-depth market knowledge. He has a clear understanding of the need to manage costs and forecast future needs so that the business is not "broadsided" by the unexpected.
One other component on which the financial plan is based is wise purchases. Finding the right product, at the right price will enable the business to meet planned margins and maintain inventory at an attractive level with a high turn rate.
Mr. Seramed Garbles will invest $43,000 in Garbles Cellular Phones, Inc. to cover start-up costs. He will also invest an additional $50,000 when operation takes off in April 2005. The table below illustrates funding sources for our start-up costs.
As a general rule our company will not sell on credit. However for very special cases we might offer short-term credit against valid assurances. We shall accept cash and checks, Visa, MasterCard, Discover and American Express, and PayPal on the Internet. All sales paid via credit cards will be deposited in our business checking account within 48 hours.
Our break-even analysis is summarized by the following chart and table.
There are many factors to include when determining a projected profit and loss statement, these are included in the following table.
Our projected cash flow is outlined in the following chart and table.
The table shows the annual balance sheet results, with a healthy projected increase in net worth. Detailed monthly projections are in the appendix.
Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5731.9902, Consumer electronic equipment, nec, are shown for comparison.