The financial picture is very encouraging. Bottlieb Innovations has a great product. If the company can successfully segment the market and generate interest in the Digital Geographer product, as well as meet the production volumes required, the financial targets are very achievable.
The financial plan depends on important assumptions, shown in the following General Assumptions table.
The following chart shows changes in the following benchmark financial indicators: sales, gross margin, operating expenses, collection days, and inventory turnover. Sales are expected to almost double between FY2002 and FY2003, while operating expenses are only expected to increase by 22%.
Bottlieb Innovations' break-even analysis is based on running costs, the "burn-rate" costs incurred to keep the business running, not on theoretical fixed costs that would be relevant only if the company were closing. Between payroll, rent, utilities, and basic marketing costs, a good estimate of monthly fixed costs is shown in the following chart and table, which details the break-even information.
The break-even analysis is based on an average sales revenue of $425 per unit. An exact average is not necessary, $425 is close enough to help us understand what a real break-even point might be. The essential insight here is that the expected sales level will keep the business running comfortably above break-even.
Management's primary goal is to make Bottlieb Innovations profitable before the end of FY2001. More specifically, management is aiming to make the business turn a profit in the month of September, the final month of FY2001. Maintaining a high gross margin in the first year is a key component of the profitability goal. The following chart illustrates the expected FY2001 monthly profit numbers.
Projected yearly profit numbers are shown in the following chart and table. Although Bottlieb Innovations is expected to be profitable in September of 2001, it will still lose money in FY2001 overall, due to losses in earlier months of the fiscal year. The business is expected to earn healthy profits in FY2001 and FY2002.
Although Bottlieb Innovations is expected to be profitable by the end of FY2001, there are still drains on the cash flow. The cash flow numbers illustrated in the following chart are based on very conservative estimates of first year sales. Since manufacturing and assembling the Digital Geographer is not capital intensive, profits should be directly tied to sales and variable costs. Personnel costs will start to impact the cash flow more severely in FY2002.
The projected balance sheet, shown in the following table, shows a healthy increase in net worth. The company's value is projected to increase steadily over the first three years.
Standard business ratios are included in the following table. Industry profile ratios based on the Standard Industrial Classification (SIC) code 8713, Surveying services, are shown for comparison. Bottlieb Innovations' ratios show a plan for healthy, solid growth. Gross margin, net profit margin and ROA all show increases over time.