Sales: Stroll Net is basing their projected Internet usage sales on the financial snapshot information provided to them by Supplier One, Inc. Internet usage was estimated by calculating the average number of minutes each customer will spend accessing the Internet and then generating a conservative estimate as to how many transactions will be made per day.
Cost of Goods Sold: The cost of goods sold was determined by the "retail profit analysis" we obtained from Supplier One, Inc. The cost of prepaid calling cards is 20% of the selling price. The cost of Internet access is $50 per month, paid to Supplier Two for networking fees. The cost of terminal placement is 20% of total internet access sales.
Salaries Expense: The founders of Stroll Net, Cam Piotr and Bob Green, will receive a salary of $24,000 in year one, $26,400 in year two, and $29,040 in year three.
Payroll Expense: Stroll Net intends to hire eight full-time employees at $10.00/hour and a full-time technician at $12.00/hour. The total cost of employing nine people at these rates for the first year is $14,720/month.
Rent Expense: Stroll Net is looking to purchase a 2200 square foot facility at $104.74/sq. foot.
Utilities Expense: Stroll Net is responsible for the payment of utilities including electric, water and garbage disposal. The basic monthly service charge for utilities expense will be $168.04. The phone bill will generated by five phone lines; one will be dedicated to a modem and four for business purposes. The basic monthly service charge for each line provided by Bellsouth is $59.95/month. Therefore, the total cost associated with the five phone lines is estimated at $299.75/month.
Marketing Expense: Stroll Net will allocate $50,000 for promotional expenses at the time of start-up. These dollars will be used for advertising on television, radio, the Internet and the local newspapers in order to build consumer awareness. For additional information, please refer to section 5.0 of the business plan.
Insurance Expense: Stroll Net has allocated $1,500 for insurance for the first year. As revenue increases in the second and third year of business, Stroll Net intends to invest more money for additional insurance coverage.
Legal and Consulting Fees: The cost of obtaining legal consultation in order to draw up the paper work necessary for client contracts is $1,500.
Depreciation: In depreciating our capital equipment, we used the Modified Accelerated Cost Recovery Method. We depreciated our terminals over a three-year time period.
Taxes: Stroll Net is an LLC and, as an entity, it is not taxed. However, there is a 10% payroll burden.
Basic assumptions are presented in the table below.
Break-even data is presented in the chart and table below. With estimated monthly operating expenses at approximately $37,400, including everything from payroll to rent and insurance to maintenance of the kiosks, and average direct costs at roughly 90¢ for every $7.46 of sales, we reach break-even at approximately 5,700 sales per month. We project reaching the break-even point in the seventh month.
The following table contains our projections for profit and loss data. We anticipate a net profit of approximately $134,300 in the first year, as the Stroll Net idea catches on and sales increase. With a net profit margin of 18%, these projections are well within a reasonable range.
Cash flow data for the first three years is presented in the chart and table below. The table shows anticipated repayment of the long-term loan, as well as projected dividends which will be paid to investors in years two and three. In year three, we will purchase two more paykiosks terminals for new locations. The more detailed monthly cash flow data can be found in the appendix.
Our projected balance sheet is presented in the table below. As sales increase, and we repay our long-term loan, the net worth of the company will increase from $281,710 at start-up to over $610,000 by year three.
The following table outlines some of the more important ratios from the Data communications services industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 4899.9901.