The plan of Mirabile Dictu is based on conservative estimates and assumptions. While the firm shows strong financials, the capital investment is needed to make the financials work.
7.1 Start-up Funding
Mirabile Dictu Advertising, LLC start-up costs are detailed above, in the Start-up Table. The following table shows how these start-up costs will be funded by owner and investor capital.
7.2 The Investment Offering
Mirabile Dictu is offering up to 40% ownership of the company to one outside investor/owner with an investment of a minimum $200,000 in investment capital. This owner/investor will share in the annual dividends. Mirabile Dictu Advertising, LLC will be created as a Nebraska LLC based in Creighton County, owned by its principal operators and sole principal investor.
7.3 Important Assumptions
- We are assuming steady growth from good management, barring any unforseen local, or national disasters such as the economic slowdown seen by most of the country following the September 11th, 2001 tragedies.
- We are assuming adequate infusion of owner/investor funding to sustain the firm during start-up.
- The owner/investor will be making a capital investment for a percentage of the firm and will receive annual dividend payments.
7.4 Break-even Analysis
The Break-even Analysis is based on the average of the first-year figures for total sales by promotion, and by operating expenses. These are presented as verage percent variable cost, estimated monthly fixed costs, and monthly revenue break-even. These conservative assumptions make for a more accurate estimate of real risk.
7.5 Projected Profit and Loss
Projected annual estimates of cumulative Profit and Loss of the firm are included here. The detailed monthly pro-forma income statement for the first year is included in the appendix.
The total "Direct Cost of Sales" as Advertising Printing and Distribution costs is estimated at 50% of revenue. There is no risk in assuming these costs without having sufficient revenue on-hand to cover expenses.
Marketing Expenses are estimated at 10% of sales revenue or less.
7.6 Projected Cash Flow
The cash flow projection shows that provisions for ongoing expenses are adequate to meet the needs of the firm as the business generates sufficient cash flow to support operations. Clients pay within 60 day after their promotion.
7.7 Projected Balance Sheet
The balance sheet shows healthy growth of net worth, and strong financial position. The monthly estimates are included in the appendix.
7.8 Business Ratios
The company's projected business ratios are provided in the table below. The final column, Industry Profile, shows significant ratios for the Sales and Promotions Industry, as determined by the Standard Industry Classification (SIC) code 8743.9904.
7.9 Use of Funds
The table below briefly outlines the intended uses for the funds acquired through investment. The Start-up expenses are listed in more detail in the Start-up table. The largest portion is earmarked to cover operations expenses for the first few months as the company gains market share and contracts, and builds accounts receivable. The delay between invoicing of AR and the receipt of the Accounts Payables creates a cash flow lag which this investment cash reserve will cover.
As the table below shows, the initial owner/investor will find that the payback period on that investment will be three years. Our desire is to find an investor who recognizes the potential for long-term gain, again, as shown in the table, and is willing to keep their investment in Mirabile Dictu for at least three additional years.
7.11 Exit Strategy
The principal owners of Mirabile Dictu Advertising, founders McKenzie Bossard and Fernando Hearndon, believe in their business model, and in their experience-based view of the future. They foresee the business growing steadily for many years, and plan to be active participants in the business. By the end of year six the original principal investor will have been repaid several times over.
At that time, they envision several of their employees becoming full partners with concomitant investment. If our original investor wishes to exit the company, this will be the time.