Competitive Pricing For The Quality Of Services Offered Accounting Essay

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Event management is comprised of the study of the complexities of brands, identifying target audience, creating event concepts, and planning the logistics. It also includes coordination of technical aspects before getting down to truly implementing the modalities of the planned event. Event management implies the application of management science to the creation and development of festivals and events.

Event management is one of the strategic advertising and communication tools used by businesses of all sizes. Right from product launches to press conferences, businesses develop promotional events so that they can communicate with clients as well as potential clients. They may target their audience by using the news media, wishing to generate media coverage, which will reach thousands or millions of people. They can also invite their audience to their events and reach them at the actual event.

Event management company services areas include corporate events such as product launches, corporate seminars, and forums. Services also comprise of retail advertising programs such as road shows, training programs, event promotions, television-based events, special events such as concerts, fashion shows and more.

Event managers are the people who plan and execute events. They are involved in the planning, execution, brand building, marketing, and communication strategy of events. Event managers are experts in the creative, technical, and logistical fronts that help an event succeed.

Event management is an industry that is growing quickly, with mega shows and events hosted regularly. Considering the professional side, event management is a glamorous and exciting profession that requires a lot of hard work and enthusiasm.

Only a few universities offer diplomas in event management. The study includes organizational skills, technical understanding, public relations, marketing, advertising, and catering. The course also includes study of logistics, glamour identity, human relations, law and licenses, risk management, and budgeting. Knowledge of related industries such as television, cinema, and other media also form a part of the curriculum.

Executive Summary

Welcome to the future of event planning! Occasions, The Event Planning Specialists, brings to the community of Portland a new breath of air in the event planning market.

By combining old fashioned values, going the extra mile, and using cutting edge event-planning software, Occasions will lead the market, providing the same quality results, every time.

Occasions is an equal opportunity business making its expertise and its products available to help its customers plan their own events. Party Packs (complete kits for their event), make hosting a party a snap, right down to the refreshments. The event planning software brings interactive event planning as close as their personal computer. Through these and other affordable products and services, Occasions aims to be the number one resource for any event.

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1.1 Objectives

Occasions is a small business aimed at the big time. In order to reach its lofty goals, Occasions must focus on the mission behind the vision. It will take all the employees, owners, founders, and vendors daily living the vision that Occasions represents. The vision manifests itself in three ways:

Be one of the top three event planning specialists in the Northwestern United States.

Justly compensate the employees, owners, and founders of Occasions.

Produce the same quality results, every time.

1.2 Mission

In an ever changing, fast-paced world, success is determined by good choices for lasting effects. Communication is essential. Occasions strives to be the best choice of clients by helping to ease their event planning burden. Through consistent, predictable professionalism, Occasions will ensure a worry and hassle-free event at a reasonable price.

But, not all our clients will be external. Occasions has internal clients to serve. Occasions will strive to provide the same predictable and professional working environment to its employees and contracted vendors, justly compensating them for their services. It is also a priority to make a comfortable living wage for its owners, founders, full-time staff, and their families.

Keeping in tune with the needs of the market, utilizing the latest technology and trends, all while ensuring the client receives the individual attention they deserve, is the vision and daily mission of Occasions; The Event Planning Specialists.

1.3 Keys to Success

Our keys to success include the commitment to quality by every person who is part of the team. Each of us will be responsible to push ourselves to a higher level of professionalism in three areas:

Consistent, accurate fulfillment of the client's wishes.

Competitive pricing for the quality of services offered.

Significant profit made on each event planned.

Company Summary

Founded originally on a part-time basis, Occasions is a small business designed to meet the needs of the ever changing social world. Portland, Oregon is the current home with plans to expand to branch offices within four years. Occasions' staff of two, with numerous contract vendors, plans events, writes event-planning products, and trains area students in the art of event planning. Occasions is invested in the community it resides in.

Occasions is, in part, the answer to demands of the social world, on the working family, heavily-burdened office, out-of-town business, or special occasion in need of special recognition. As a business, we understand the needs of public and private organizations. As parents and family members, we understand the needs of setting special time apart from other events in our lives. Occasions strives to accomplish these goals, in Portland and eventually other areas of the Pacific Northwest.

2.1 Company Ownership

Occasions is established as a sole proprietorship with the intention of selling the business when it is established to one of the employees invested in the vision of event planning. All aspects of the business will be documented to ensure clients can count on the same results every time. It is these documents that will become the basis of ownership. The sole proprietor will use his or her name as the guarantor of each service. Therefore, the sole proprietor must embody the vision and mission of Occasions.

2.2 Start-up Summary

Through careful planning on the part of the founders, the start-up costs for Occasions are minimal. It began as a home-based business with little overhead, and it continues to demand fewer outlay of funds as a service-based business. The start-up cost investment funds were assets saved from prior earnings by the owners who did event planning on a part-time basis before establishing themselves as a business.

It is the wish of the founders to remain a debt-free establishment. However, recognizing that in reality not all variables are controllable, outside financing is a viable option. Both founders own homes and have a perfect credit rating.

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Start-up Requirements

Start-up Expenses

Legal

Rs.200

Stationery etc.

Rs.300

Brochures

Rs.185

Consultants

Rs.200

Insurance

Rs.145

Rent

Rs.150

Expensed Equipment

Rs.1,985

Other

Rs.200

Total Start-up Expenses

Rs.3,365

Start-up Assets

Cash Required

Rs.2,300

Start-up Inventory

Rs.0

Other Current Assets

Rs.0

Long-term Assets

Rs.0

Total Assets

Rs.2,300

Total Requirements

Rs.5,665

Start-up Funding

Start-up Expenses to Fund

Rs.3,365

Start-up Assets to Fund

Rs.2,300

Total Funding Required

Rs.5,665

Assets

Non-cash Assets from Start-up

Rs.0

Cash Requirements from Start-up

Rs.2,300

Additional Cash Raised

Rs.0

Cash Balance on Starting Date

Rs.2,300

Total Assets

Rs.2,300

LIABILITIES

Current Borrowing

Rs.2,000

Long-term Liabilities

Rs.0

Accounts Payable (Outstanding Bills)

Rs.0

Other Current Liabilities (interest-free)

Rs.0

Total Liabilities

Rs.2,000

Capital

Planned Investment

Alicia Nollan

Rs.3,400

Other

Rs.265

Additional Investment Requirement

Rs.0

Total Planned Investment

Rs.3,665

Loss at Start-up (Start-up Expenses)

(Rs.3,365)

Total Capital

Rs.300

Total Capital and Liabilities

Rs.2,300

Total Funding

Rs.5,665

2.3 Company Locations and Facilities

Occasions are located inside the city limits of Portland, Oregon. It is a home-based business. Most meetings with clients are conducted in social settings, such as restaurants, coffee houses, the client's home, facilities wishing to be used for the event, or over the phone. Although the demand has not yet reached its peak, Occasions will eventually move from its home base into a small office complex, also within the city limits of Portland, Oregon. When the company has reached its finished point, Occasions will have branch offices in Portland, Eugene, and Bend, Oregon, Seattle, Vancouver, and Olympia, Washington, and Boise and Sun Valley, Idaho.

The company will maintain a high degree of professionalism. All offices are equipped with the latest in business technology, such as telephone systems, computers, fax machines, email, duplicators, printers, and software. Each location will have a secure storage area for supplies and equipment used in events, such as walkie-talkies, cellular phones, portable fax machines, and laptops

Products and Services

Although Occasions is primarily a service business, we also offer products to aid our customers in planning the event themselves. The following products are tools used inside our operation for the best possible results:

Party Pack

The Party Pack is a complete kit for any party. It includes decorations, lighting effects guide, disposable theme cameras, cutlery, plates, napkins, cups, punch mix (or recipe), snack supplies (or recipe), tablecloths, theme music (where applicable), invitations, thank-you cards, and a step-by-step guide to planning, putting together, and hosting the event.

Step-by-Step Guides

These booklets include a calendar to map out the event, a step-by-step guide on what is needed for and how to put together a successful, worry-free event, resource information, popular refreshments with recipes, games, and tips to put their event in the record books. The events available include birthdays for all ages, meetings, retreats, parties, vacations, and special occasion celebrations such as graduations, holidays, showers, weddings, and receptions.

Event Planning Software

Due to be released June 2000, this cutting-edge tool will allow the client all the resources and visual aids for their event planning. They will be able to play with decoration themes, listen to theme music, design invitations, thank-you cards, and RSVP cards, use the interactive planning calendar, and much more. This software will bring their event into the millennium with cutting edge technology that is designed to save time and money.

Resources Manual

This valuable guide acts as a review for all the resources located in the surrounding area. A ranking is given to the various services, such as caterers, decorators, disc jockeys, bands, and facilities. This manual gives the client the freedom of making a choice based on experience.

Free Event Planners Training for High School and College Students

As a member of the Portland community, it is our mission to support our community. Ten hours each month will be devoted to training area students in event planning. This will aid them in planning proms, graduation parties, river clean-ups, homecoming, and other important events. This is a priority of Occasions. It will not be cut back as the business grows.

MARKETING SUMMARY

Occasions provides event planning in a wide range of applications. We guarantee satisfaction in the areas of appearance, performance, and taste. The following is a sampling of the types of events we plan every year:

Meetings, Trainings, and Retreats.

Conferences and Workshops.

Birthdays, Anniversaries, Graduations and Holidays.

Weddings, Receptions, and Showers.

Company picnics, banquets, and award ceremonies.

Any other event that needs to be planned.

3.1 Competitive Comparison

Occasions, although young, draws from the age-old tradition of going above and beyond what is expected, every time. Our systems for event planning have been drawn up, evaluated, practiced, worked, and reworked to ensure the maximum efficiency while minimizing the possibility of error. We employ local vendors who have the same desire to be the best at what they do, while providing unmatchable services. Thus, we give back to the community by providing jobs outside of our organization. We encourage new and upcoming small businesses that provide a service within our need base to step up to the challenge of being the best through their contract with Occasions.

Our products will serve the function of aiding those that cannot afford the cost of an event planner. We wish to make our event planning tips available to those who need a helping hand. Occasions are a member of the community. Through event planning, Occasions gets the opportunity to laugh when the community laughs and cry when the community cries, to rejoice when the community rejoices and to help put the pieces back together when things change or begin to fall apart. We care about the things that have meaning in the lives of our neighbors.

Market Analysis Summary

The following sections describe the market segmentation, strategies, and industry analysis.

4.1 Market Segmentation

The breakdown of the market for event planning falls in a wide, very diverse grouping. Individuals as well as organizations demand the services we provide. In order to provide the greatest depth of information, the market segments have been broken down into private and public organizations, and age groups.

Private Organizations and Businesses

Private organizations make up the single largest portion of Occasions' client base. Private organizations such as businesses, corporations, and political parties host the most events on the largest scales, therefore, these events generate larger revenues per event. The majority of larger scale holiday functions will fall under this segment.

Public Organizations

Government agencies host many events every year. Occasions hopes to alleviate the pressure of event planning for public employees. The second single largest segment, the public sector, can save money and give back to its community at the same time. These events are moderate in scale with middle to low revenues generated. Emphasis is placed on the visibility of the event for public viewing. The majority of organizational family functions will fall under this segment.

Age Breakdowns

Under 24: Persons under the age of twenty-four (24) using an event planner are rare at best. We hope to tap the early college graduates who have begun their professional careers but have not yet started their families. These events will focus mainly on themes with moderate to high energy appeal. The revenues generated will range from moderate to high, depending on the event. The majority of weddings will fall into this segment.

Ages 25-55: The persons that fall into this age group are employed, middle to upper-middle class families. The reason they choose event planners is they are too busy to do it themselves. Therefore, Occasions will be on hand for questions, contact will be moderate in length but occur regularly so as not to disturb the daily life of the families. These events will generate moderate revenues, with a few generating low revenues. The majority of special occasion planning will occur in this market segment.

Ages 56 and above: Persons over the age of 55 have reached the turning point of life. Many are retiring, others are celebrating anniversaries of significant years, and still others are seeing that their children's special events are taken care of. These events will generate moderate to high revenues depending upon the income level of the family (direct correlation to social status). Most holiday parties, and other special occasions, such as wedding receptions and reunions, will occur in this market segment.

Other

This segment has no direct information to compile for a description. It consists of any event planned that does not fit into one of the above categories.

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Market Analysis

Year 1

Year 2

Year 3

Year 4

Year 5

Potential Customers

Growth

CAGR

Under 24

0%

18

18

20

21

22

5.14%

Age 25 to 55

0%

33

33

44

51

59

15.63%

Age 56 and over

0%

31

31

37

40

44

9.15%

Private Organizations

0%

40

40

102

163

261

59.83%

Public Organizations

0%

62

62

105

137

178

30.17%

Other

0%

5

5

7

8

9

15.83%

Total

31.95%

189

189

315

420

573

31.95%

4.2 Target Market Segment Strategy

Our target markets are middle to upper-middle class families, couples, individuals, or private and public organizations. We chose these groups because they are most able to afford event planners, and have the least amount of time to spare for event planning in general. Families demand attention, employees are overburdened, and overwhelming detail needed to plan large events are too large a constraint to place on people not trained in the area of event planning.

The fast pace of the world we live in leaves little time for extra things we would like to do, like plan events, parties, and social get-togethers. Occasions fills the need by being available to take on the burden of planning so that people can spend time on more important things, like family and friends. The demand for this service can only increase considering the rise in incomes, population, and need for interpersonal relations in the workplace.

4.3 Service Business Analysis

Occasions are in a unique position of competition. We compete against hotels with conference facilities, conference centers, other event planners both on the large and small scale, persons within an organization who are assigned the task of organizing an event, and people who wish to organize their own events without the benefit of assistance. The benefits and drawbacks of each of our competitors as compared with the services we offer are hardly a match in quality and price.

Hotels and Conference Centers

Strengths: On-site facilities, equipment, and support staff. Able to transport and house persons for overnight stays. Able to internalize costs of transportation and equipment.

Weakness: Often very expensive, impersonal, rely on unskilled labor for support staff. The error rate is high due to high volume and traffic from other events happening at the same time.

Other Event Planners

Strengths: Have been in the market longer; have established a reputation and client base.

Weakness: Reputation precedes them, no systems-based businesses designed to produce consistent results; focus on smaller events, specialized events are main focused rather than all events; do not have the supporting products to market with, or instead of, event planning services.

Employees or Persons wishing to do it themselves

Strengths: Internalized cost of planning the event; able to add tiny personalized touches that have meaning within the group or family.

Weakness: Consumes time that could be spent on other things; don't have access to the best prices, services, and other needed resources available.

Strategy and Implementation Summary

Marketing and Competition

We have discussed our client base as being predominately middle to upper-middle class individuals, couples or families, public and private organizations. We must then look at the needs of these markets and cater to them. We promise the same great results, every time.

When marketing to individuals, the idea of releasing them from the task, freeing their time for family and friends, and the promise of a worry-free event are the buzz words and concepts. Our marketing is predominantly by word of mouth or visual connection to large events these individuals have participated in or worked at.

When marketing to public or private organizations, the idea of greater efficiency for the money and a professional event without error would be the key concept. Groups, especially large ones, do not wish to deal with problems that arise due to oversight on their part. If the guarantee of worry-free, error-free events is available at a cost benefit to them, there really appears to be no better choice.

5.1 Sales Strategy

Occasions deals with a diverse market of clients. Within each market segment, closing of sales will differ. Each approach is described as follows:

Private and Public Organizations

Sales will be concluded one to two days after the end of the event. A follow-up phone call will be placed informing the client of the total cost, number of attendees, and information about the billing packet that will arrive at their offices. Feedback forms will be included in these packets to ensure the client is being served as they deem appropriate. Form letter thank-you will be sent following each event.

Individuals

Sales will be concluded with a follow-up phone call one to two days after the event. The phone call will explain the total cost of the event, number of attendees, and information concerning the billing. Individual parties of any age group are placed on a billing cycle. Invoices will be sent out the 25th of the month and will be due the 10th of the following month. Feedback forms will be included in these packets to ensure the client is being served as they deem appropriate. Thank-you cards will follow each individual event.

5.1.1 Sales Forecast

By beginning on a smaller scale, Occasions has the foresight to grow at a rapid pace to keep up with demand. We wish to maintain a steady rate of sales growth; however, we understand that sales of products and services will vary in different months. As noted in the graph and chart, rapid increases during the holiday season will boost sales, then allow that growth to level off at a steady rate.

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Sales Forecast

Year 1

Year 2

Year 3

Sales

Private

Rs.206,170

Rs.276,099

Rs.299,002

Public

Rs.113,185

Rs.178,490

Rs.193,000

Other

Rs.33,794

Rs.40,081

Rs.62,777

Total Sales

Rs.353,149

Rs.494,670

Rs.554,779

Direct Cost of Sales

Year 1

Year 2

Year 3

Private

Rs.28,864

Rs.38,654

Rs.41,860

Public

Rs.11,319

Rs.17,849

Rs.19,300

Other

Rs.1,690

Rs.2,004

Rs.3,139

Subtotal Direct Cost of Sales

Rs.41,872

Rs.58,507

Rs.64,299

5.2 Milestones

The milestones table and chart show the specific detail about actual program activities that should be taking place during the year. Each one has its manager, starting date, ending date, and budget. During the year we will be keeping track of implementation against plan, with reports on the timely completion of these activities as planned.

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Milestones

Milestone

Start Date

End Date

Budget

Manager

Department

Sample Milestones

1/4/2008

1/4/2008

Rs.0

ABC

Department

Finish Business Plan

5/7/2009

6/6/2009

Rs.100

Dude

LeGrande Fromage

Acquire Financing

5/17/2009

7/6/2009

Rs.200

Dudette

Legumers

Ah HA! Event

5/27/2009

6/1/2009

Rs.60

Marianne

Bosses

Oooooh Noooooo! Event

6/26/2009

7/1/2009

Rs.250

Marionette

Chèvre deBlâme

Grande Opening

7/6/2009

7/11/2009

Rs.500

Gloworm

Nobs

Marketing Program Starts

6/6/2009

7/1/2009

Rs.1,000

Glower

Marketeers

Plan vs. Actual Review

11/1/2009

11/8/2009

Rs.0

Galore

Alles

First Break-even Month

3/5/2010

4/4/2010

Rs.0

Bouys

Salers

Hire Employees

2/1/2010

3/3/2010

Rs.150

Gulls

HRM

Upgrade Business Plan Pro

4/22/2010

4/24/2010

Rs.100

Brass

Bossies

Totals

Rs.2,360

Management Summary

Information and expense details are presented in subtopics Organizational Structure and Personnel Plan.

6.1 Organizational Structure

The management team within Occasions will be small in the beginning. The primary employee is the founder, who plans events, then contracts with caterers, decorators, disc jockeys, and bands to fill out the event. A contract labor site manager will be on hand to work the events as a liaison and vendor coordinator. Thus, there are two main employees with various levels of vendors.

When Occasions reaches its expansion goals, each office will have one to two event planners, an office assistant, two to three site managers for the events, and a product and marketing specialist. This team will function as one with constant communication through weekly staff meetings, email, and message boards. All jobs are interrelated. The performance of one effects the performance of the others; therefore, each team member expects nothing but the best from each other.

As it functions currently, we see no gaps in the management of this organization. Should Occasions grow beyond its estimated size, more positions in specialized areas will need to be added as well as additional site support and office assistance. To fill these positions, Occasions is looking for energetic, teachable, detail-oriented persons who want the potential to grow and improve their skills within the organization. Occasions want to be the best; therefore, they will hire those who want to succeed.

6.2 Personnel Plan

The following table shows the estimated personnel needs for Occasions.

Personnel Plan

Year 1

Year 2

Year 3

Event Specialist

Rs.36,000

Rs.40,000

Rs.42,000

Site Manager

Rs.11,097

Rs.13,750

Rs.14,560

Other

Rs.8,947

Rs.9,560

Rs.10,000

Total People

45

100

350

Total Payroll

Rs.56,044

Rs.63,310

Rs.66,560

Personal Event Planning Business Plan

Occasions

Financial Plan

Service-based businesses require little funds to start-up, and as they grow and expand, less funds to maintain. The charts and graphs that follow will show that investment up front allows Occasions to function debt-free with little overhead. This gives Occasions a quicker break-even point and increased profit margins from the start. As Occasions grows, the debt-free philosophy will be maintained until it is impossible to function during growth periods without financial assistance.

7.1 Important Assumptions

Tax rates are noted for information. We carry no loan burden that would be affected by these rates. What hits Occasions the hardest (but not nearly are bad as other service businesses), is the tax rate of 24%, which is nearly one quarter of the total sales. As Occasions continues to grow, these numbers will be reference rather than influence.

General Assumptions

Year 1

Year 2

Year 3

Plan Month

1

2

3

Current Interest Rate

10.00%

10.00%

10.00%

Long-term Interest Rate

10.00%

10.00%

10.00%

Tax Rate

24.00%

24.00%

24.00%

Other

0

0

0

7.2 Key Financial Indicators

The break-even point for Occasions is based on the assumption that we will produce 22 events per month and average approximately Rs.521 per event. In the current situation, we average more than this assumption for our public and private organization events. These currently make up 18 of the 22 average events hosted per month.

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7.3 Break-even Analysis

The break-even point is based on the assumption that we will produce 22 events per month and average approximately Rs.521 per event. In the current situation, we average more than this assumption for our public and private organization events. These currently make up 18 of the 22 average events hosted per month.

The break-even point will appear more rapidly for Occasions than for other types of home-based businesses. Start-up costs are limited to minimal equipment, there is little or no staff to pay in the beginning, and contracted companies will handle any additional equipment required for the planned events.

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Break-even Analysis

Monthly Revenue Break-even

Rs.19,313

Assumptions:

Average Percent Variable Cost

12%

Estimated Monthly Fixed Cost

Rs.17,023

7.4 Projected Profit and Loss

Leading the industry in event planning requires the use of the resources available at the lowest cost. As noted in the table, we spend less money on overhead than another event planners with an outside office or office space in their own facility. This savings allows us to market in creative ways and spend funds on expansion into other areas when the time is right.

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Pro Forma Profit and Loss

Year 1

Year 2

Year 3

Sales

Rs.353,149

Rs.494,670

Rs.554,779

Direct Cost of Sales

Rs.41,872

Rs.58,507

Rs.64,299

Other Costs of Sales

Rs.196

Rs.203

Rs.221

Total Cost of Sales

Rs.42,068

Rs.58,710

Rs.64,520

Gross Margin

Rs.311,081

Rs.435,960

Rs.490,259

Gross Margin %

88.09%

88.13%

88.37%

Expenses

Payroll

Rs.56,044

Rs.63,310

Rs.66,560

Sales & Marketing & Other Expenses

Rs.146,013

Rs.68,400

Rs.73,400

Depreciation

Rs.0

Rs.0

Rs.0

Leased Equipment

Rs.0

Rs.0

Rs.0

Utilities

Rs.516

Rs.750

Rs.800

Insurance

Rs.264

Rs.750

Rs.1,000

Rent

Rs.1,440

Rs.1,800

Rs.1,800

Payroll Taxes

Rs.0

Rs.0

Rs.0

Other

Rs.0

Rs.0

Rs.0

Total Operating Expenses

Rs.204,277

Rs.135,010

Rs.143,560

Profit Before Interest and Taxes

Rs.106,804

Rs.300,950

Rs.346,699

EBITDA

Rs.106,804

Rs.300,950

Rs.346,699

Interest Expense

Rs.406

Rs.279

Rs.362

Taxes Incurred

Rs.25,535

Rs.72,161

Rs.83,121

Net Profit

Rs.80,862

Rs.228,510

Rs.263,216

Net Profit/Sales

22.90%

46.19%

47.45%

7.5 Projected Cash Flow

Our cash situation is great. Although we begin with little extra cash, our increased growth allows us to make up for lost time. Our cash balance is always above the mark with the cash flow not too far behind. We have no negatives in our cash analysis.

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Pro Forma Cash Flow

Year 1

Year 2

Year 3

Cash Received

Cash from Operations

Cash Sales

Rs.141,260

Rs.197,868

Rs.221,912

Cash from Receivables

Rs.178,271

Rs.283,330

Rs.327,145

Subtotal Cash from Operations

Rs.319,531

Rs.481,198

Rs.549,057

Additional Cash Received

Sales Tax, VAT, HST/GST Received

Rs.0

Rs.0

Rs.0

New Current Borrowing

Rs.4,000

Rs.1,080

Rs.1,080

New Other Liabilities (interest-free)

Rs.0

Rs.0

Rs.0

New Long-term Liabilities

Rs.0

Rs.0

Rs.0

Sales of Other Current Assets

Rs.0

Rs.0

Rs.0

Sales of Long-term Assets

Rs.0

Rs.0

Rs.0

New Investment Received

Rs.0

Rs.0

Rs.0

Subtotal Cash Received

Rs.323,531

Rs.482,278

Rs.550,137

Expenditures

Year 1

Year 2

Year 3

Expenditures from Operations

Cash Spending

Rs.56,044

Rs.63,310

Rs.66,560

Bill Payments

Rs.199,964

Rs.209,268

Rs.223,979

Subtotal Spent on Operations

Rs.256,008

Rs.272,578

Rs.290,539

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out

Rs.0

Rs.0

Rs.0

Principal Repayment of Current Borrowing

Rs.3,500

Rs.500

Rs.0

Other Liabilities Principal Repayment

Rs.0

Rs.0

Rs.0

Long-term Liabilities Principal Repayment

Rs.0

Rs.0

Rs.0

Purchase Other Current Assets

Rs.0

Rs.0

Rs.0

Purchase Long-term Assets

Rs.0

Rs.0

Rs.0

Dividends

Rs.0

Rs.0

Rs.0

Subtotal Cash Spent

Rs.259,508

Rs.273,078

Rs.290,539

Net Cash Flow

Rs.64,023

Rs.209,200

Rs.259,598

Cash Balance

Rs.66,323

Rs.275,523

Rs.535,121

7.6 Projected Balance Sheet

Occasions is set up for success. According to the numbers, we start out fair and end up amazing. By FY2000, we will be worth over Rs.125, 000 with a profit margin of over 30%. We are operating with little to zero debt, boosting the net worth even higher. Our only weakness is the products to be released in FY2000 have not been accounted for as an investment of funds. This will affect the cash flow in a moderate way, and is undetermined how it will affect the profit ratio of the business.

Pro Forma Balance Sheet

Year 1

Year 2

Year 3

Assets

Current Assets

Cash

Rs.66,323

Rs.275,523

Rs.535,121

Accounts Receivable

Rs.33,618

Rs.47,090

Rs.52,812

Inventory

Rs.4,991

Rs.6,975

Rs.7,665

Other Current Assets

Rs.0

Rs.0

Rs.0

Total Current Assets

Rs.104,933

Rs.329,588

Rs.595,598

Long-term Assets

Long-term Assets

Rs.0

Rs.0

Rs.0

Accumulated Depreciation

Rs.0

Rs.0

Rs.0

Total Long-term Assets

Rs.0

Rs.0

Rs.0

Total Assets

Rs.104,933

Rs.329,588

Rs.595,598

Liabilities and Capital

Year 1

Year 2

Year 3

Current Liabilities

Accounts Payable

Rs.21,270

Rs.16,836

Rs.18,550

Current Borrowing

Rs.2,500

Rs.3,080

Rs.4,160

Other Current Liabilities

Rs.0

Rs.0

Rs.0

Subtotal Current Liabilities

Rs.23,770

Rs.19,916

Rs.22,710

Long-term Liabilities

Rs.0

Rs.0

Rs.0

Total Liabilities

Rs.23,770

Rs.19,916

Rs.22,710

Paid-in Capital

Rs.3,665

Rs.3,665

Rs.3,665

Retained Earnings

(Rs.3,365)

Rs.77,497

Rs.306,007

Earnings

Rs.80,862

Rs.228,510

Rs.263,216

Total Capital

Rs.81,162

Rs.309,672

Rs.572,888

Total Liabilities and Capital

Rs.104,933

Rs.329,588

Rs.595,598

Net Worth

Rs.81,162

Rs.309,672

Rs.572,888

7.7 Business Ratios

Data on our business ratios is shown in the table below. Industry Profile ratios are based on Standard Industry Classification (SIC) Index code 7299.

Ratio Analysis

Year 1

Year 2

Year 3

Industry Profile

Sales Growth

5%

40.07%

12.15%

11.37%

Percent of Total Assets

12%

35%

22%

14%

Accounts Receivable

32.04%

14.29%

8.87%

10.40%

Inventory

4.76%

2.12%

1.29%

3.83%

Other Current Assets

0.00%

0.00%

0.00%

48.41%

Total Current Assets

100.00%

100.00%

100.00%

62.64%

Long-term Assets

0.00%

0.00%

0.00%

37.36%

Total Assets

100.00%

100.00%

100.00%

100.00%

Current Liabilities

22.65%

6.04%

3.81%

23.10%

Long-term Liabilities

0.00%

0.00%

0.00%

24.97%

Total Liabilities

22.65%

6.04%

3.81%

48.07%

Net Worth

77.35%

93.96%

96.19%

51.93%

Percent of Sales

Sales

100.00%

100.00%

100.00%

100.00%

Gross Margin

88.09%

88.13%

88.37%

100.00%

Selling, General & Administrative Expenses

69.22%

35.37%

34.65%

65.24%

Advertising Expenses

0.51%

0.44%

0.47%

2.43%

Profit Before Interest and Taxes

30.24%

60.84%

62.49%

4.31%

Main Ratios

Current

4.41

16.55

26.23

1.83

Quick

4.20

16.20

25.89

1.31

Total Debt to Total Assets

22.65%

6.04%

3.81%

58.52%

Pre-tax Return on Net Worth

131.09%

97.09%

60.45%

7.33%

Pre-tax Return on Assets

101.40%

91.23%

58.15%

17.66%

Additional Ratios

Year 1

Year 2

Year 3

Net Profit Margin

22.90%

46.19%

47.45%

n.a

Return on Equity

99.63%

73.79%

45.95%

n.a

Activity Ratios

Accounts Receivable Turnover

6.30

6.30

6.30

n.a

Collection Days

43

50

55

n.a

Inventory Turnover

10.91

9.78

8.78

n.a

Accounts Payable Turnover

10.40

12.17

12.17

n.a

Payment Days

27

34

29

n.a

Total Asset Turnover

3.37

1.50

0.93

n.a

Debt Ratios

Debt to Net Worth

0.29

0.06

0.04

n.a

Current Liability to Liability.

1.00

1.00

1.00

n.a

Liquidity Ratios

Net Working Capital

Rs.81,162

Rs.309,672

Rs.572,888

n.a

Interest Coverage

262.90

1,078.67

957.73

n.a

Additional Ratios

Assets to Sales

0.30

0.67

1.07

n.a

Current Debt/Total Assets

23%

6%

4%

n.a

Acid Test

2.79

13.83

23.56

n.a

Sales/Net Worth

4.35

1.60

0.97

n.a

Dividend Payout

0.00

0.00

0.00

n.a

General Assumptions

Year 1

Year 2

Year 3

Plan Month

1

2

3

Current Interest Rate

10.00%

10.00%

10.00%

Long-term Interest Rate

10.00%

10.00%

10.00%

Tax Rate

24.00%

24.00%

24.00%

Other

0

0

0

Break-even Analysis

Monthly Revenue Break-even

Rs.19,313

Assumptions:

Average Percent Variable Cost

12%

Estimated Monthly Fixed Cost

Rs.17,023

Pro Forma Profit and Loss

Year 1

Year 2

Year 3

Sales

Rs.353,149

Rs.494,670

Rs.554,779

Direct Cost of Sales

Rs.41,872

Rs.58,507

Rs.64,299

Other Costs of Sales

Rs.196

Rs.203

Rs.221

Total Cost of Sales

Rs.42,068

Rs.58,710

Rs.64,520

Gross Margin

Rs.311,081

Rs.435,960

Rs.490,259

Gross Margin %

88.09%

88.13%

88.37%

Expenses

Payroll

Rs.56,044

Rs.63,310

Rs.66,560

Sales & Marketing & Other Expenses

Rs.146,013

Rs.68,400

Rs.73,400

Depreciation

Rs.0

Rs.0

Rs.0

Leased Equipment

Rs.0

Rs.0

Rs.0

Utilities

Rs.516

Rs.750

Rs.800

Insurance

Rs.264

Rs.750

Rs.1,000

Rent

Rs.1,440

Rs.1,800

Rs.1,800

Payroll Taxes

Rs.0

Rs.0

Rs.0

Other

Rs.0

Rs.0

Rs.0

Total Operating Expenses

Rs.204,277

Rs.135,010

Rs.143,560

Profit Before Interest and Taxes

Rs.106,804

Rs.300,950

Rs.346,699

EBITDA

Rs.106,804

Rs.300,950

Rs.346,699

Interest Expense

Rs.406

Rs.279

Rs.362

Taxes Incurred

Rs.25,535

Rs.72,161

Rs.83,121

Net Profit

Rs.80,862

Rs.228,510

Rs.263,216

Net Profit/Sales

22.90%

46.19%

47.45%

Pro Forma Cash Flow

Year 1

Year 2

Year 3

Cash Received

Cash from Operations

Cash Sales

Rs.141,260

Rs.197,868

Rs.221,912

Cash from Receivables

Rs.178,271

Rs.283,330

Rs.327,145

Subtotal Cash from Operations

Rs.319,531

Rs.481,198

Rs.549,057

Additional Cash Received

Sales Tax, VAT, HST/GST Received

Rs.0

Rs.0

Rs.0

New Current Borrowing

Rs.4,000

Rs.1,080

Rs.1,080

New Other Liabilities (interest-free)

Rs.0

Rs.0

Rs.0

New Long-term Liabilities

Rs.0

Rs.0

Rs.0

Sales of Other Current Assets

Rs.0

Rs.0

Rs.0

Sales of Long-term Assets

Rs.0

Rs.0

Rs.0

New Investment Received

Rs.0

Rs.0

Rs.0

Subtotal Cash Received

Rs.323,531

Rs.482,278

Rs.550,137

Expenditures

Year 1

Year 2

Year 3

Expenditures from Operations

Cash Spending

Rs.56,044

Rs.63,310

Rs.66,560

Bill Payments

Rs.199,964

Rs.209,268

Rs.223,979

Subtotal Spent on Operations

Rs.256,008

Rs.272,578

Rs.290,539

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out

Rs.0

Rs.0

Rs.0

Principal Repayment of Current Borrowing

Rs.3,500

Rs.500

Rs.0

Other Liabilities Principal Repayment

Rs.0

Rs.0

Rs.0

Long-term Liabilities Principal Repayment

Rs.0

Rs.0

Rs.0

Purchase Other Current Assets

Rs.0

Rs.0

Rs.0

Purchase Long-term Assets

Rs.0

Rs.0

Rs.0

Dividends

Rs.0

Rs.0

Rs.0

Subtotal Cash Spent

Rs.259,508

Rs.273,078

Rs.290,539

Net Cash Flow

Rs.64,023

Rs.209,200

Rs.259,598

Cash Balance

Rs.66,323

Rs.275,523

Rs.535,121

Pro Forma Balance Sheet

Year 1

Year 2

Year 3

Assets

Current Assets

Cash

Rs.66,323

Rs.275,523

Rs.535,121

Accounts Receivable

Rs.33,618

Rs.47,090

Rs.52,812

Inventory

Rs.4,991

Rs.6,975

Rs.7,665

Other Current Assets

Rs.0

Rs.0

Rs.0

Total Current Assets

Rs.104,933

Rs.329,588

Rs.595,598

Long-term Assets

Long-term Assets

Rs.0

Rs.0

Rs.0

Accumulated Depreciation

Rs.0

Rs.0

Rs.0

Total Long-term Assets

Rs.0

Rs.0

Rs.0

Total Assets

Rs.104,933

Rs.329,588

Rs.595,598

Liabilities and Capital

Year 1

Year 2

Year 3

Current Liabilities

Accounts Payable

Rs.21,270

Rs.16,836

Rs.18,550

Current Borrowing

Rs.2,500

Rs.3,080

Rs.4,160

Other Current Liabilities

Rs.0

Rs.0

Rs.0

Subtotal Current Liabilities

Rs.23,770

Rs.19,916

Rs.22,710

Long-term Liabilities

Rs.0

Rs.0

Rs.0

Total Liabilities

Rs.23,770

Rs.19,916

Rs.22,710

Paid-in Capital

Rs.3,665

Rs.3,665

Rs.3,665

Retained Earnings

(Rs.3,365)

Rs.77,497

Rs.306,007

Earnings

Rs.80,862

Rs.228,510

Rs.263,216

Total Capital

Rs.81,162

Rs.309,672

Rs.572,888

Total Liabilities and Capital

Rs.104,933

Rs.329,588

Rs.595,598

Net Worth

Rs.81,162

Rs.309,672

Rs.572,888

Ratio Analysis

Year 1

Year 2

Year 3

Industry Profile

Sales Growth

0.00%

40.07%

12.15%

11.37%

Percent of Total Assets

Accounts Receivable

32.04%

14.29%

8.87%

10.40%

Inventory

4.76%

2.12%

1.29%

3.83%

Other Current Assets

0.00%

0.00%

0.00%

48.41%

Total Current Assets

100.00%

100.00%

100.00%

62.64%

Long-term Assets

0.00%

0.00%

0.00%

37.36%

Total Assets

100.00%

100.00%

100.00%

100.00%

Current Liabilities

22.65%

6.04%

3.81%

23.10%

Long-term Liabilities

0.00%

0.00%

0.00%

24.97%

Total Liabilities

22.65%

6.04%

3.81%

48.07%

Net Worth

77.35%

93.96%

96.19%

51.93%

Percent of Sales

Sales

100.00%

100.00%

100.00%

100.00%

Gross Margin

88.09%

88.13%

88.37%

100.00%

Selling, General & Administrative Expenses

69.22%

35.37%

34.65%

65.24%

Advertising Expenses

0.51%

0.44%

0.47%

2.43%

Profit Before Interest and Taxes

30.24%

60.84%

62.49%

4.31%

Main Ratios

Current

4.41

16.55

26.23

1.83

Quick

4.20

16.20

25.89

1.31

Total Debt to Total Assets

22.65%

6.04%

3.81%

58.52%

Pre-tax Return on Net Worth

131.09%

97.09%

60.45%

7.33%

Pre-tax Return on Assets

101.40%

91.23%

58.15%

17.66%

Additional Ratios

Year 1

Year 2

Year 3

Net Profit Margin

22.90%

46.19%

47.45%

n.a

Return on Equity

99.63%

73.79%

45.95%

n.a

Activity Ratios

Accounts Receivable Turnover

6.30

6.30

6.30

n.a

Collection Days

43

50

55

n.a

Inventory Turnover

10.91

9.78

8.78

n.a

Accounts Payable Turnover

10.40

12.17

12.17

n.a

Payment Days

27

34

29

n.a

Total Asset Turnover

3.37

1.50

0.93

n.a

Debt Ratios

Debt to Net Worth

0.29

0.06

0.04

n.a

Current Liab. to Liab.

1.00

1.00

1.00

n.a

Liquidity Ratios

Net Working Capital

Rs.81,162

Rs.309,672

Rs.572,888

n.a

Interest Coverage

262.90

1,078.67

957.73

n.a

Additional Ratios

Assets to Sales

0.30

0.67

1.07

n.a

Current Debt/Total Assets

23%

6%

4%

n.a

Acid Test

2.79

13.83

23.56

n.a

Sales/Net Worth

4.35

1.60

0.97

n.a

Dividend Payout

0.00

0.00

0.00

n.a

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