Week 8/ Assignment 3 Bus 599 Strategic Management

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Name of Student

Financial part of business plan

Instructor’s name

Date Submitted

Section II

Sources and Use of Funds

The company is lucky to already have some of the owned equipments as well as donated equipments from the owner’s family. This provision reduces the cost of startup investment which will reduce the overall cost of startup significantly. However, some money will be required to facilitate the various operations the company will be undertaking so outsourcing will be very much necessary.

1. The main source of funds for the start up capital will be friends and family members. We have already managed to gather $20,000 from friends and relatives with an agreement to have their money back before the end of their first year. The other option was to refund their money after 2 years in business with a 5% interest. We preferred the first choice because it reduced the burden of loan.

2. However due to the financial difficulties that may arise in the course of business, the company will be reserving the bank financing options for such emergencies so as to avoid unnecessary financial liabilities. This liquidity rate of this source of capital is also another reason for its consideration. The kickstarter part of the business also comes with its own share of challenges and as such.

3. Shareholder equity will also be a key area in regard to outsourcing for funds. It’s also referred to as angel equity. It mainly refers to selling an ownership part of the company in form of stakes to kickstart the company. The company will be keen to reinvest significant share of their retained earnings and profits back into business to facilitate faster growth.

These funds will be used to facilitate the various capital expenditures and also operational costs that will be used in the organization.

Assumptions

Future Personnel:

The constant number of personnel in the company to be maintained through out the first year will be one administrative personnel, three professionals and one supervisor. However, the company anticipates the number to grow after the first year due to the complexity of the operations after expansion. The projected number will be two administrative personnel, six professionals and two supervisors. There will be also the addition of the manual hourly paid labors. This will also be because of the increase in work shifts and also the increase in the workload in the production line.

Financing:

The company is going to be financed by a $20,000 non interest loans from the friends and relatives who according to the agreements needed their money back before December 1st 2020. The alternative to this was an addition of 5 % interest within the second year of the company’s operations. The projected profits which will stand at $2,628,184 are expected to avail cash to reinvest back in the company thus no need for external sources of funding.

Break-even analysis

The project break even for year one will be $128,935 which means that by the end of year one, thee company will not have yet returned the capital investments in the business. This is after cancelling out all the liabilities from the total assets at the end of the year. This was the mean of the accumulation of the total individual monthly breakeven analysis.