As a service or knowledge-based corporation, GlobeSpan Meeting Planners, Inc. will begin with very little start-up costs, and one long-term loan to allow the owners the ability to establish the company. As indicated on the following charts and tables, GlobeSpan will grow to need fewer funds over time to maintain growth. By year five, GlobeSpan will be completely debt-free and working with nearly the same overhead as it did on day one.
The following table of General Assumptions outline our conservative general assumptions on an annual basis. A monthly outline of the important assumptions is included in the appendix. Overall, we are assuming the forecasted business climate as outlined in the Business Climate Section will remain steady. Additionally, we assume our strategic partner, HelmsBriscoe's positioning within the industry will continue to grow.
GlobeSpan shows, in the Key Financial Indicators chart which follows, three Benchmarks: Sales, Gross Margin, and Operating Expenses. We expect sales to grow steadily over the next three years while our gross margin remains unchanged and our operating expenses only rise slightly over the next three years.
The following chart and table summarizes our monthly break-even analysis, with fixed costs at approximately $10,200 and commission needed at the same to break even.
GlobeSpan's projected income statement is shown in the following table. We show a conservative first year with approximately $120,000 in commissions; however, this grows to over $170,000 in 2002, and over $280,000 in 2003. With relatively low operating expenses, our net profits nearly quadruple in the second year, and almost double in the third. We have offered a detailed monthly outline of income in the appendix.
As demonstrated by the Projected Cash Flow Chart below, GlobeSpan's cash balance is healthy, with our projected cash flow being negative for our first few months and then a slow recovery during the remainder of the year. Our net cash flow for fiscal year 2001 is -($21,600) with our cash balance at $28,000. Significant to note, in year one our long-term borrowing repayment will amount to over $12,800. A detailed monthly cash flow analysis is provided in the appendix.
GlobeSpan has planned for success as outlined, this is evident in the projected balance sheet below. Our net worth will be a -($11,800) in year one to almost $127,000 in year three. We have outlined monthly estimates in the appendix.
GlobeSpan's projected business ratios are illustrated in the following chart. It is noteworthy that our net working capital will quadruple by year three and our debt to net worth ratio shrinks to an impressive 0.57 by year three. We look forward to healthy ratios for profitability, risk and return. The final column, Industry Profile, contains ratios based on the personal services industry, as defined by the Standard Industry Classification (SIC) Index code 7299.