- Growth will be moderate after Year Three, cash flows steady.
- We will conduct most of our sales by credit card, check, or money order.
- We want to finance growth mainly through cash flow. We recognize that this means we will have to grow more slowly than we might like.
- Marketing will remain below 15% of sales.
- The company will invest residual profits into financial markets and not company expansion (unless absolutely necessary).
8.1 Important Assumptions
- As women continue to be diagnosed with life-threatening diseases, there will be a growing market for our assistance services.
- Benevolent corporate involvement with health causes will continue to be strong.
- Upscale chocolates will continue to gain in popularity.
- We can be first-to-market and establish a strong foothold within the first 8-12 months .
8.2 Key Financial Indicators
We chose these four indicators because they all have real impact on the health of a business. We focus not on gross amounts as much as changes. The chart actually shows changes on a year-to-year basis, rather than gross amounts. For example, growing sales from $1 million to $2 million shows up exactly the same in the chart as growing sales from $20,000 to $40,000. That would also show up the same as increasing gross margin from 20% to 40%, or increasing collection days from 30 to 60, or increasing inventory turnover from four to eight. The chart uses indicator values that are set to compare changes with the base year showing up as 1.00 and all other years showing up as multiples from the base.
8.3 Break-even Analysis
A break-even analysis table has been completed on the basis of average costs/prices. Our cost of goods is 50%. The table below shows our average monthly fixed costs, and the amount we need to sell per month to break-even.
8.4 Projected Cash Flow
We expect to manage cash flow through the cash balance from start-up Investments. No further plans have been made at this point for equity investments through Fiscal Year 2005.
8.5 Projected Profit and Loss
The first year of operations will be spent developing sales and business relationships with key companies and organizations. The sales goal for Year One is conservative and realistic.
We feel that doubling sales in Year Two is very attainable and necessary to fund marketing and personnel objectives. Net profits are reduced in Fiscal Year 2004 as staff members are added and marketing expenditures are increased. This strategy will allow Pink Lady Bug Designs attain the aggressive sales goal in Fiscal Year 2005.
8.6 Projected Balance Sheet
All of our tables will be updated monthly to reflect past performance and future assumptions. Future assumptions will not be based on past performance but rather on economic cycle activity, regional industry strength, and future cash flow possibilities. We expect solid growth in net worth beyond the year 2004.
8.7 Business Ratios
Standard business ratios are included in the table. The ratios show a plan for balanced, healthy growth. The ratios use the Standard Industrial Classification code 5947.0103, Gift Baskets, retail, which is a close approximation of our business.