The financial plan of WorkChairs is very simple and conservative. We aim to keep our expenses low while growing sales very slowly and under control. Because we don't have any major expenditures to make, we don't need to have huge amounts of cash on hand. We just need enough to pay our bills and our salary, and provide additional cushion to our account.
We expect to have a positive cash balance at all times.
We expect to be profitable in 2002 and 2004 while losing a little bit of money in 2003 as our payroll growth jumps up.
We expect our cash on hand to be stable and growing steadily by 2004.
8.1 Important Assumptions
We assume that interest rates and tax rates will stay the same as can be seen in our general assumptions table. We assume the economy will not become much worse than it is right now. At the current level of the economy we believe our goals and projections are attainable.
8.2 Break-even Analysis
Our Break-even Analysis is based on an average revenue per sale. This is an average because although we sell high-priced chairs that range from $200-$2,000, we also sell a larger number of cheaper products like copy holders, mice, wrist rests, keyboards, keyboard trays, monitor glare screens, and other products.
We aim to take a keystone mark-up on our products, i.e. 100%.
Our monthly fixed costs consist of three salaries and operating expenses.
The table and chart below calculate our break-even point in revenue per month.
8.3 Projected Profit and Loss
The accompanying Profit and Loss table is a good example of how we will be keeping our expenses and payroll low while we grow sales. This will cause us to lose a little money in 2003, but we'll be profitable from 2004 on. Our sales projections are very conservative, so we're actually hoping that we'll be profitable in 2003 as well, but we're going with the conservative estimates shown in the table.
We aim to keep our gross margin up, and we think we can improve this over time as we gain more customers because we won't have to battle on price with other retailers.
8.4 Projected Cash FlowOur Projected Cash Flow table and chart show that we have little risk in this business as we'll always keep a sizeable cash balance. We have a projected period of three months in the slow summer period were we'll see a negative net cash flow, but our balance will stay positive so we'll be able to pay our bills and stay in the positive.
8.5 Projected Balance Sheet
WorkChairs is not looking to grow at a super-fast pace, but we do project to grow our net-worth and cash slowly as time goes on. By 2004 we project to have a cushion of cash on hand while still paying our three employees decent salaries for their work.