Our financial plan anticipates one year of negative profits as we gain sales volume. We have budgeted enough investment to cover these losses and have an additional credit line available if sales do not match predictions.
Annual financial data is presented with associated topics. Monthly table data is provided in the Appendix.
We are assuming approximately 75% sales on credit and average interest rates below 10%. These are considered to be conservative in case our predictions are erroneous.
Our break-even analysis is based on the assumption that our gross margin is 100%. In other words, we will have insignificant direct cost of sales. Since each project will be of different scope, length, and complexity, it is difficult to assign an average per unit revenue figure. However, it is conservatively believed that during the first three years, average profitability per month per "segment" (based on client size) will be about $8,000. This is because, at first, we will be dealing with smaller companies that have smaller projects. We expect that about three to four projects per month will guarantee a break-even point, for the first year, averaged over 12 months.
The following table itemizes our revenues and associated costs. We expect to be paying higher costs in marketing and advertising than other companies as we attempt to build sales volume. As the reader can see, we expect monthly profits to begin in third quarter 2004 and yearly profits to occur in 2005.
The following is our cash flow table and chart. We do not expect to have any short-term cash flow problems even though we will be operating at a loss for the first year. Our short-term loan will be repaid by the end of 2006. Our long-term loan will be paid off in ten years.
The Projected Balance Sheet is shown below.
We have included industry standard ratios from the advertising consultant industry, Standard Industrial Classification (SIC) code 7311.9901, to compare with ours. As this is a new sub-market of the overall industry, we expect some significant differences especially in sales growth, financing ratios, long-term asset investments and net worth. However, our projections indicate a healthy company that will be able to obtain land retain long-term profitability.