Sunapto desires to finance growth through a combination of equity investment and internally generated cash flow. Because of the cost of initial product development and marketing costs of establishing a market presence, the business will be financed primarily by investment in the early stages and is expected to burn cash.
The company intends to raise an amount of seed capital before launch and an secure additional outside investment after prototype development.
The financial plan depends on important assumptions, most of which are shown in the following table. The important underlying assumptions are:
Margins are harder to assume. Sunapto's overall average is based on projected total sales in Year 2 and Year 3.
The chart shows what Sunapto needs to sell per month to break-even, according to these assumptions.
Barring any unforeseen circumstances, Sunapto is anticipated to break-even by Year 2 of operations. Profits for the company in subsequent years will accelerate with the increase in anticipated sales volume, yielding good net profit in Year 2 and better in Year 3.
It should be noted that the company's cash flow will be steadily declining for the first year of operations. This is expected due to large capital investments and no sales. Sunapto anticipates having negative net cash flows throughout Year 1 as they incur expenses for prototype development during the first half and as they get ready for production by their contract manufacturer during the second half. Two infusions of capital will get Sunapto through the cash flow drain as they build up for production and sales to begin in Year 2. A monthly breakdown of Year 1 cash flow may be found in the appendix.
The table below presents the Balance Sheet for Sunapto.
The table follows with Sunapto's main business ratios. The Industry figures come from the Standard Industry Classification (SIC) Index Code 3845, Electromedical Equipment.
Sunapto is in business to earn a higher than normal return for its business partners. They intend to seek a fair, yet aggressive profit, which will allow the company to be financially healthy for the long term as well as provide compensation to both owners and investors for their money and risk. Sunapto's founders intend to be part of the ownership and management of Sunapto. Sunapto recognizes that all of its investors will eventually want to reap the rewards of their investments. The following exit strategies are possible ways that Sunapto may choose to reward its early round investors.