Our financial plan is based on our overall strategy of new market development. We will cut our margins from 40% to 30% to increase our appeal to a wider audience. With lower prices, we must rely on online marketing efforts and local jewelers to maintain and enhance the prestige of our brand.
8.1 Important Assumptions
Our assumption is based on the historical 20% annual sales growth since 2002. This is a rather conservative sales projection. As we expand our categories and revamp the technology, in addition to building a stronger image brand, we expect a higher growth percentage during three years of operation.
8.2 Key Financial Indicators
We will decrease our gross margin from 40% in previous years to 30% of all loose diamond sales, to boost sales volume. As mentioned in a previous chapter, we purchased a large amount of loose diamonds directly from our network of diamond cutters with 30 days collection days. Based on our estimated operating expense monthly, we expect to generate more sales to cover our fixed expenses.
8.3 Projected Profit and Loss
Our estimated Net Profit for 2006 and 2007 is presented in the accompanying table and charts.
8.4 Break-even Analysis
With monthly fixed costs and variable costs, the table and chart below show what we need to sell in diamonds each month to break even. We are well past the break-even point, even with these lower margins.
8.5 Projected Cash Flow
Our projected cash flow is outlined in the following chart and table.
8.6 Projected Balance Sheet
The table below outlines the projected balance sheet.
8.7 Business Ratios
Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5999.15, Diamonds, Gems and Precious Stones.