Our financial plan anticipates one year of negative profits as we gain sales volume. We have budgeted enough investment to cover these losses and have an additional credit line of $60,000 available if sales do not match predictions.
We are assuming approximately 75% sales on credit and average interest rates of 10%. These are considered to be conservative in case our predictions are erroneous.
Our Break-even Analysis is based on the assumptions that our gross margin is 100%. In other words, we will have insignificant direct cost of sales. Since each project will be of different scope, length, and complexity, it is difficult to assign an average per unit revenue figure. However, it is conservatively believed that during the first three years, about three projects per month will guarantee a break-even point. This is because we will be dealing with smaller companies at first that have smaller projects.
The following is our Cash Flow table and chart. We do not expect to have any short-term cash flow problems even though we will be operating at a loss for the first year. Our short-term loan of $16,000 will be repaid in two equal payments in 2004-2005. Our $45,000 long-term loan will be paid off in ten years.
The following table itemizes our revenues and associated costs. We expect to be paying higher costs in marketing and advertising than other companies as we attempt to build sales volume. As the reader can see, we expect monthly profits to begin in August 2003 and yearly profits to occur in 2004. The charts following the table give a visual representation.
The following table shows the Project Balance Sheet for Marrowstone Advertising.
We have included industry standard ratios from the advertising consultant industry to compare with ours. As this is a new sub-market of the overall industry, we expect some significant differences especially in sales growth, financing ratios, long-term asset investments and net worth. However, our projections indicate a healthy company that will be able to obtain and retain long-term profitability.