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Online Print Shop - Start up
Business Plan
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| 7.0 Finance | [back to top] |
Funding Requirements and Uses
The company will be raising $5 million for the purposes of:
- Establishing an organization and office presence within the USA and overseas.
- Completing the development of the Internet print shop.
- Marketing the website and its services and products.
- Providing a world-class customer service website.
The following table provides a breakdown of how the funds will be used.
| Operating Expenses: | |
|
Office Setup |
$525,000 |
| Salaries | $250,000 |
| Marketing | $2,500,000 |
| Administrative, Other | $25,000 |
| Sub-total | $3,300,000 |
| Product Development: | |
| Development of Internet Print Shop | $1,500,000 |
| Customer Service Website | $200,000 |
| Sub-total | $1,700,000 |
| Total | $5,000,000 |
| 7.1 Significant Assumptions | [back to top] |
Nature of Operations. The company operates as an Oregon C-corporation.
Revenues. PrintingSolutions.com will generate revenues from the sale of a variety of printed products to end user customers. The company's products and services will be available to customers through the PrintingSolutions.com and PrintingSolutionsB2B.com websites, managed PrintingSolutionsB2B.com affiliates and co-branded websites, and privately-branded websites.
The company will not recognize revenues until the product is shipped, collection of the receivable will be probable, and commercial print vendors have fulfilled all contractual obligations to the customer. PrintingSolutions.com will take title to all products that the company instructs its commercial print vendors to produce. PrintingSolutions.com believes that purchases by businesses will account for a majority of its revenues and will record sales net of discounts. The company will record the cost of promotional products that it will give away at no charge as a sales and marketing expense.
A significant portion of revenue will be generated through barter transactions with participants in the co-branded program in which PrintingSolutions.com will sell printed products in exchange for online advertising. Barter transaction revenues and related advertising costs will be recorded at the fair value of the goods or services provided or received, whichever will be more easily determined in the circumstances. The majority of revenues will be generated from sources within the United States; therefore, all sales will be in the United States dollar currency.
Expenses. The company's expenses will be primarily those of salaries, sales commissions, and administrative costs. The company will categorize its operating expenses into research and development, sales and marketing, and general and administrative.
Research and development expenses will primarily consist of personnel costs, including costs related to consultants and outside contractors.
Sales and marketing expenses will consist of the cost of free promotional products, the cost of marketing programs including advertisements, costs to acquire email lists, personnel and related costs for our marketing staff and customer support groups, and participation in trade shows.
General and administrative expenses will primarily consist of personnel and related costs for corporate functions, including finance, accounting, legal, human resources, facilities, and management of commercial print vendor relationships.
Cost of sales. Cost of sales will primarily consist of direct expenses relating to printing products, rework and reprinting charges, shipping and handling fees, royalties on software licenses, and credit card processing fees.
| 7.2 Break-even Analysis | [back to top] |
The following chart and table outline the break-even analysis for PrintingSolutions.com.
Break-even Analysis
Click to Enlarge
| Break-even Analysis: | |
| Monthly Units Break-even | 1,250 |
| Monthly Revenue Break-even | $212,500 |
| Assumptions: | |
| Average Per-Unit Revenue | $170.00 |
| Average Per-Unit Variable Cost | $110.00 |
| Estimated Monthly Fixed Cost | $75,000 |
| 7.3 Projected Profit and Loss | [back to top] |
PrintingSolutions.com is in the early stage of development; thus, initial projections have only been made on accounts that are believed to most drive the income statement. The following table provides Printing Solution's projected income statements for 2000-2002. PrintingSolutions.com operates on a fiscal year ending in December. In order to reflect fiscal year projections of revenue and profit, only the last six months of year 2000 shows income. This reflects the projected launch date of the company.
| Pro Forma Profit and Loss | |||
| 2000 | 2001 | 2002 | |
| Sales | $250,000 | $2,910,000 | $5,820,000 |
| Direct Cost of Sales | $80,000 | $125,000 | $200,000 |
| Other | $10,000 | $30,000 | $55,000 |
| ------------ | ------------ | ------------ | |
| Total Cost of Sales | $90,000 | $155,000 | $255,000 |
| Gross Margin | $160,000 | $2,755,000 | $5,565,000 |
| Gross Margin % | 64.00% | 94.67% | 95.62% |
| Expenses: | |||
| Payroll | $104,348 | $173,913 | $213,043 |
| Sales and Marketing and Other Expenses | $215,000 | $360,000 | $565,000 |
| Depreciation | $0 | $0 | $0 |
| Software/IS expense | $45,000 | $60,000 | $85,000 |
| Legal and Professiona expense | $10,000 | $10,000 | $10,000 |
| Bank charges | $2,000 | $2,000 | $2,000 |
| Rent | $15,000 | $15,000 | $15,000 |
| Payroll Taxes | $15,652 | $26,087 | $31,956 |
| Other | $0 | $0 | $0 |
| ------------ | ------------ | ------------ | |
| Total Operating Expenses | $407,000 | $647,000 | $922,000 |
| Profit Before Interest and Taxes | ($247,000) | $2,108,000 | $4,643,000 |
| Interest Expense | $295,000 | $295,000 | $295,000 |
| Taxes Incurred | $0 | $453,250 | $1,105,117 |
| Net Profit | ($542,000) | $1,359,750 | $3,242,884 |
| Net Profit/Sales | -216.80% | 46.73% | 55.72% |
| 7.4 Projected Cash Flow | [back to top] |
The following table has calculated that the company will have a negative cash outflow during the first year based on the start-up costs outlined in topic 2.0. However, the company will not begin financing or operations until July, 2000. In order to offset this supposed outflow, increases in the initial cash requirements in the Start-up table have been provided. The differences between calculated cash and actual needs will be used for other start-up costs. It is assumed that there will be no dividend payments for the first three years of business.
| Pro Forma Cash Flow | |||
| 2000 | 2001 | 2002 | |
| Cash Received | |||
| Cash from Operations: | |||
| Cash Sales | $62,500 | $727,500 | $1,455,000 |
| Cash from Receivables | $143,517 | $1,714,517 | $3,853,034 |
| Subtotal Cash from Operations | $206,017 | $2,442,017 | $5,308,034 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 |
| Subtotal Cash Received | $206,017 | $2,442,017 | $5,308,034 |
| Expenditures | 2000 | 2001 | 2002 |
| Expenditures from Operations: | |||
| Cash Spending | $69,867 | $136,525 | $233,900 |
| Payment of Accounts Payable | $672,748 | $1,356,165 | $2,262,220 |
| Subtotal Spent on Operations | $742,614 | $1,492,690 | $2,496,120 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $0 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $0 | $0 | $0 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| Subtotal Cash Spent | $742,614 | $1,492,690 | $2,496,120 |
| Net Cash Flow | ($536,597) | $949,327 | $2,811,914 |
| Cash Balance | $3,403 | $952,730 | $3,764,644 |
| 7.5 Balance Sheets - Projected | [back to top] |
The following table outlines some key financial information for PrintingSolutions.com.
| Pro Forma Balance Sheet | |||
| Assets | |||
| Current Assets | 2000 | 2001 | 2002 |
| Cash | $3,403 | $952,730 | $3,764,644 |
| Accounts Receivable | $43,983 | $511,966 | $1,023,932 |
| Inventory | $26,667 | $41,667 | $66,667 |
| Other Current Assets | $200,000 | $200,000 | $200,000 |
| Total Current Assets | $274,052 | $1,706,363 | $5,055,243 |
| Long-term Assets | |||
| Long-term Assets | $0 | $0 | $0 |
| Accumulated Depreciation | $0 | $0 | $0 |
| Total Long-term Assets | $0 | $0 | $0 |
| Total Assets | $274,052 | $1,706,363 | $5,055,243 |
| Liabilities and Capital | |||
| Current Liabilities | 2000 | 2001 | 2002 |
| Accounts Payable | $76,052 | $148,613 | $254,609 |
| Current Borrowing | $500,000 | $500,000 | $500,000 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $576,052 | $648,613 | $754,609 |
| Long-term Liabilities | $2,450,000 | $2,450,000 | $2,450,000 |
| Total Liabilities | $3,026,052 | $3,098,613 | $3,204,609 |
| Paid-in Capital | $2,150,000 | $2,150,000 | $2,150,000 |
| Retained Earnings | ($4,360,000) | ($4,902,000) | ($3,542,250) |
| Earnings | ($542,000) | $1,359,750 | $3,242,884 |
| Total Capital | ($2,752,000) | ($1,392,250) | $1,850,634 |
| Total Liabilities and Capital | $274,052 | $1,706,363 | $5,055,243 |
| Net Worth | ($2,752,000) | ($1,392,250) | $1,850,634 |
| 7.6 Business Ratios | [back to top] |
The table below provides key ratios in the Industry Profile column for the commercial printing industry, as found in the Standard Industry Classifications (SIC) index, code 2759. We have projected healthy ratios for the first three years of operation, and foresee a continuing upwards trend throughout the company's life.
| Ratio Analysis | ||||
| 2000 | 2001 | 2002 | Industry Profile | |
| Sales Growth | 0.00% | 1064.00% | 100.00% | 2.00% |
| Percent of Total Assets | ||||
| Accounts Receivable | 16.05% | 30.00% | 20.25% | 27.00% |
| Inventory | 9.73% | 2.44% | 1.32% | 11.70% |
| Other Current Assets | 72.98% | 11.72% | 3.96% | 23.60% |
| Total Current Assets | 100.00% | 100.00% | 100.00% | 62.30% |
| Long-term Assets | 0.00% | 0.00% | 0.00% | 37.70% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 210.20% | 38.01% | 14.93% | 30.60% |
| Long-term Liabilities | 893.99% | 143.58% | 48.46% | 25.50% |
| Total Liabilities | 1104.19% | 181.59% | 63.39% | 56.10% |
| Net Worth | -1004.19% | -81.59% | 36.61% | 43.90% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 64.00% | 94.67% | 95.62% | 36.90% |
| Selling, General & Administrative Expenses | 280.80% | 47.95% | 39.59% | 19.10% |
| Advertising Expenses | 40.00% | 6.01% | 4.30% | 0.60% |
| Profit Before Interest and Taxes | -98.80% | 72.44% | 79.78% | 2.40% |
| Main Ratios | ||||
| Current | 0.48 | 2.63 | 6.70 | 2.06 |
| Quick | 0.43 | 2.57 | 6.61 | 1.44 |
| Total Debt to Total Assets | 1104.19% | 181.59% | 63.39% | 56.10% |
| Pre-tax Return on Net Worth | 19.69% | -130.22% | 234.95% | 4.90% |
| Pre-tax Return on Assets | -197.77% | 106.25% | 86.01% | 11.20% |
| Additional Ratios | 2000 | 2001 | 2002 | |
| Net Profit Margin | -216.80% | 46.73% | 55.72% | n.a |
| Return on Equity | 0.00% | 0.00% | 175.23% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 4.26 | 4.26 | 4.26 | n.a |
| Collection Days | 42 | 46 | 64 | n.a |
| Inventory Turnover | 6.00 | 3.66 | 3.69 | n.a |
| Accounts Payable Turnover | 9.85 | 9.61 | 9.30 | n.a |
| Payment Days | 23 | 29 | 31 | n.a |
| Total Asset Turnover | 0.91 | 1.71 | 1.15 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.00 | 0.00 | 1.73 | n.a |
| Current Liab. to Liab. | 0.19 | 0.21 | 0.24 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | ($302,000) | $1,057,750 | $4,300,634 | n.a |
| Interest Coverage | -0.84 | 7.15 | 15.74 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 1.10 | 0.59 | 0.87 | n.a |
| Current Debt/Total Assets | 210% | 38% | 15% | n.a |
| Acid Test | 0.35 | 1.78 | 5.25 | n.a |
| Sales/Net Worth | 0.00 | 0.00 | 3.14 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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