We will finance growth through the cash flow produced in the business. This strategy may force slow growth, however, establishing a stable and extensive network will take time and is the key to the success of the company.
Our sales based on a yearly contract with payment in advance would be the key to our cash flow and growth. We realize that we may have to be flexible in accepting less than one year of payment, but feel if we can get a minimum of three-month commitments from each employer, we will meet cash flow needs.
The financial plan depends on important assumptions, most of which are shown in the following table as annual assumptions. We recognize the collection of accounts receivable is critical, but one over which we have little control.
The following chart and table summarize our break-even point. Since the cost per unit is a commission being paid to the sales persons who will initially be the owners, we are operating at the minimum, with the bulk of our costs being the compensation of the owners. We are using 25% of revenue, which is high based on the above information.
Our profit and loss is shown in the following table. Our sales figures are conservative due to our start-up nature and specific target audience. We still project a small profit the first year while nearly doubling profit in each of the following years. These figures do not take into account the substantial possible profit center of Web advertising revenue from educational tool and resource suppliers, as well as linking with these same suppliers. We expect traffic to be significant enough to begin addressing this large profit center midway through year two and throughout all of three.
Due to our fixed Web hosting costs and the owners being the only employees, our cash flow in the following table remains positive throughout the year. The improvement in the cash flow as the subsequent years progress will allow for the continual updating and maintenance of the site to keep it fresh and viable. The low fixed cost of adding pages (flat fee of approximately $130/page) should be covered by our positive cash flow, thus allowing continuing expansion as necessary.
The balance sheet in the following table shows a small but continued growth of net worth in just three years, presenting a healthy financial picture. This growth in net worth will also be supplemented significantly with the possibility of Web page advertising and related links income that is not yet projected or contained in the figures.
The following table contains important business ratios from the education services industry, as determined by the Standard Industry Classification (SIC) Index, 8299.