Team

Proforma model

The proforma model will be used to highlight the company's projected status in the coming future, and it's based on the financial statement that is currently available; the five years proforma will be used in estimating the company's overall finances and future estimates. It will be crucial because when a particular individual decides to assess the company's potential investment opportunity, they will be analyzing the company's future. Private equity firms and experienced buyers will check the company's historical growth and current financial statement healthiness since those things will demonstrate how successful a business is. Therefore for people to invest in our solutions, they will need to reassure that the investment they have made will be profitable in the future (Islam, 2017). The work of the five year proforma will be to ease any of their doubts. That is why we will create five-year projected financial statements; they will accurately reflect its potential growth.

The five-year proforma's work will be to establish trust among those who had already invested in our solution and reduce the amount of risk that we might face when doing our businesses. For example, if our company twelve months EBITDA is measured to be $ 4 million, however as a company we recently introduced our online app that sports fans can use to enjoy some of the services we provide and due to that our revenue supply has been projected to have an additional $ 100, 000 every month to our EBITDA. Also, we decided to change the location where our company was situated to a place where it is more cost-effective; this means that when we are developing our five-year proforma model, the company's previous expenses will not apply to the future investor of the company.

Therefore, these costs incurred can be added back to give a more accurate picture of the company's future revenue. The above estimates can play a very key role when eliminating the risk that is associated with the company to an investor; therefore it very crucial for us as a company to be very professional when we are creating the proforma statement of the company for the next five years of our business existence. Since we might find ourselves selling the company's future growth to be short, this basically means that the company's initial valuation is normally not the true reflection of the company’s worth.

Key assumptions

The key assumption is that the difference between success and failure of the business is determined by placing the right price for the products or services, price is usually not the same as the value, and this is because the value is the customers' perception about the products or services. Another key assumption is the cash flow planning where a critical assumption will be made on how the expenses of general expenses of the business will be paid, understanding the terms that the suppliers will provide, the terms in which there will be credit extension to the customer, and the time as well as the amount any of the loans will be requested for a particular approval. Assumptions were also made on the general, and the administration expenses since salaries are the most crucial expenses businesses can incur. When creating a proforma model, accurate monthly labor cost estimates will be made at each planning stage. There will be a projection on the labor cost in the summary of our cash flow, and we will ensure that the company can manage and meet its payroll obligation.

Comparable or industry benchmark

TBSB and ESPN are the two companies we can benchmark in terms of future financial projections since they have been in the industry for a while, and they have been able to determine whether their business has shown positive proforma statements or not. We can take a look at those two companies' last five years' financial statements and since whether they have been growing or declining. TBSB, which has identified new gaps in the industry, can be said to have a positive projection in the future since they will be able to increase their revenues due to the new solutions they have developed. On the other hand, ESPN's future will be on the balance since they have not fully adopted the modern technology in their business processes, and TBSB might end up surpassing it in terms of future financial projection and market share.

Positive Cashflow

The business's cash flow will be positive when the amount coming in will be more than the amount going out; this means that the business would have garnered a reasonable market share, and the customers are buying most of its products and services. Investors would also have injected a considerable amount of money when the business shows a better value proposition more than other companies other the industry, therefore the business will have more money to spend on operations and research and development, and this later will make them diversify the product and services they are offering hence give customers more options to buy from (He et al., 2019). In return, the business will continue to increase its profit thereby making inflows become more than outflows.

Core business cost

The core business cost incurred by the business was the amount of money paid to the employees who had taken part in developing the solutions that the company had come up with, i.e., an app, the rent we are paying to be hosted in a building and also act as our offices are core cost the business incur (Rocha et al., 2018). The equipment we had bought for our information technology infrastructure is also a core cost; the amount of money our personal salespeople spent traveling to the market to look for potential customers can also be considered a core cost of the business.

Assumptions about market size and market penetration

My assumption on the market size was that it was a growing market, and it was filled with a lot of new opportunities since technology had not been embraced fully in this industry, i.e., sports. I also assumed that the existing had unconditional customer loyalty, and it wasn't easy to convince customers to shift to another company. When it comes to market penetration, I assumed that the best way to penetrate the market was developing a partnership with some of the teams that were present, this turned out to be one-sided since members of the opposing teams ended up shying away from our services, and this made us look for an alternative way to penetrate the market without being considered bias (Li & Luo, 2020).

Cost and revenue running higher and lower.

When the cost runs higher by 20%, it will force us to cut off some of the expenses we are using as a company to use that money to fill in the void left. We will employ people on a contractual basis so that we don't spend a lot of money on salaries, and if we feel we are not generating enough revenue, we can lay off some of the workers with ease. If our revenue comes slowly or below 20% than expected, we will do market research and determine what factors are making the projected revenue give us negative results. We will segment our market based on demographics and then determine which group would favor using our products than the others, and what were the things that made them be attracted to the products we were offering in the first place (Dawes, 2020). After doing that and find that we have not gotten tangible results, we will employ a business consulting firm that will help us identify what our weaknesses are and how we can as a company improve the way we offer our products in the market.

Keeping the business going from an operating perspective

I would keep the business going through operation by minimizing the amount of money used in operation to ensure that our cash outflow is lesser than our cash inflows. I will make sure work is done efficiently by employing more use of technology and introducing a just-in-time supply chain mechanism so that we will only get the product that we effectively at any given point of time hence making us shy away from using more money to purchase products which would otherwise be of no use to us at that particular time.

Funding needed

To run the business for 24 months, I would need at least $ 3 million since one million can be used to develop all the company's solutions and two million to run the business operations for the next 24 months.

How big the business can get

In five years, the business can grow to have at least 25% market share and annual revenue of about $ 10 million, and it will also have branches in at least ten states.

How big the business can get ultimately

Ultimately the business can be one of the leading companies in the industry with annual revenue of $ 500 million with a market share of 45%, and has about 20 million people subscribed to its services.

Similar sized companies

We can say we can compete fairly is TBSB since it is not much established like ESPN; therefore, we cannot say we are similar-sized since we are new in the industry, but we can pose a good competition to TBSB.

References

Dawes, J. (2020). Do Customer Satisfaction scores link to business revenue over time?. Available at SSRN 3657826.

He, Y., Zhang, J., & He, Z. (2019). Metaheuristic Algorithms for Multimode Multiproject Scheduling With the Objective of Positive Cash Flow Balance. IEEE Access, 7, 157427-157436.

Islam, K. A. (2017). An Empirical Research on Fu-Wang Foods Ltd: Industry, Strategy, Accounting, Ratio, Valuation and Proforma Analysis. American Finance & Banking Review, 1(1), 1-11.

Li, S., & Luo, R. (2020). Non-Exclusive Dealing with Retailer Differentiation and Market Penetration. International Journal of Industrial Organization, 102591.

Rocha, A. O., Pérez, C. G., Romero, F. C., & del Val Núñez, M. T. (2018). The Business Model and its Core Elements. Proposal of Definition and Table of Core Elements. Contemporary Economics, 12(4), 497-518.