Business Plan Project
canmic
sample_business_plan_b.docSample Business Plan B: Retail Product
Business
Webster BUSN 5000 Online Course
Your Memories
Transforming Your Images into Treasured Memories!
George C. Scott, Owner
4200 Weathering Heights Drive
Atlantis, Georgia 30144
Phone: (678) 555-1212
Fax: (678) 555-1214
E-mail: [email protected]
Last Revised: January 2, 2015
This business plan is intended solely for informational purposes to assist you with a due-diligence investigation of this project. The information contained herein is believed to be reliable, but the management team makes no representations or warranties with respect to this information. The financial projections that are part of this plan represent estimates based on extensive research and on assumptions considered reasonable, but they are, of course, not guaranteed. The contents of this plan are confidential and are not to be reproduced without express written consent.
Table of Contents
Executive Summary 3
Company Direction 5
Present Situation 5
Vision and Mission 5
Strategic Goals and Objectives 5
Company Overview 5
Legal Business Description 5
Management Team 5
Strategic Alliances 6
Product/Service Strategy 6
Current Services 6
Days and Hours of Operation 7
Research and Development 7
Production and Delivery 7
Market Analysis 8
Market Definition 8
Customer Profile 8
Competition 8
Risks 9
Marketing Plan 9
Sales Strategy 9
Pricing Strategy 9
Distribution Channels 10
Advertising and Promotion 10
Publicity 10
Financial Plan 10
Assumptions 10
Summary of Financial Statements 11
Capital Requirements 12
Exit/Payback Strategy 12
Conclusion 13
Supporting Documents 13
Income Statements (2017, 2018, 2019) 14
Cash Flow Statements (2017, 2018, 2019) 17
Balance Sheets (2017, 2018, 2019) 20
Note: To minimize problems with Table of Contents alignment in your business plan, you can copy and paste this page to your document. As long as your Page Setup has a 1.25" left margin and a 1" right margin, the alignment should work.
Executive Summary
Your Memories is a sole proprietorship video production business designed to tap into an underserved customer population. Operating as a home-based business in northeast Atlantis, Georgia, Your Memories will target customers in upper- and middle-income families with children in middle/high school. These consumers have large numbers of pictures, slides, films, and camcorder videotapes that can be developed into theme-oriented productions. The urban area of Atlantis has over 555,000 people with above- average income levels due to the high technology work force. In addition, Atlantis is ranked second in the United States for fastest growing high technology jobs so the pool of potential clients should continue to expand.
The owner, George C. Scott, has 30 years of computer and video equipment operations experience. A strategic alliance will be established with a local studio for use of professional quality tape production and copying until Your Memories has established the customer base necessary to justify the purchase of this equipment.
While there are many existing video production businesses that could serve the target market, they generally wait for the customer to come to them, rather than identifying and pursuing the customer. The unique selling proposition of Your Memories is to identify, target, and pursue upper- and middle-income customers through direct mailing of a specially developed advertising DVD.
Video production services will include transferring photographs and slides to computer memory and DVD disks; developing videotapes of theme-oriented images with musical overlay; and editing and transferring 8mm film and camcorder videotapes to DVDs. The average price for product and services will be $250 per customer.
Your Memories is the result of the proprietor’s desire to grow a hobby into a full-time video production business. Currently the business is home-based, and much of the required startup equipment is already owned; therefore, initial costs are oriented to developing the advertising DVD.
The business should move from a loss of approximately $12,500 in the first year to a profit of approximately $9,500 in the third year, at which point the owner anticipates moving Your Memories to a full-time business. There is no borrowing anticipated for the business since the owner will invest his own money. If business conditions dictate, the phased approach to moving to a full-time business can be slowed or accelerated. Finally, if needed, the owner will seek funding through the Small Business Administration and adjust financial statements accordingly to reflect the liability and subsequent fixed costs related to loan repayment.
Note: Listed below are suggested guidelines for preparing the Executive Summary. As appropriate for your business plan, include paragraphs or comments as described in the list.
a. Include the business name and location.
b. Provide a brief description of your company’s management capabilities.
c. Provide a brief description of your company including history (if not a start-up business), industry and target market.
d. Describe your products and services and the marketing mix to be used to reach your customers.
e. Explain how (and why if you are confident) your company will succeed in the future.
f. Summarize your financial request (if you are applying for a loan).
g. Describe your funding requirements including how the money will be spent and your repayment proposal if you are applying for a loan.
Note: This sample plan was submitted by a former BUSN 5000 Online student in 2000. After securing permission to use the plan with changes, I changed the name of the town and other information so that you cannot tell who submitted it. I also made significant changes and additions to the financial statements to make corrections and to provide extra footnotes and notes so you can see how the statements fit together. In 2009 I revised the business plan so that the business produced DVDs instead of CD-ROMs. When preparing your business plan, please use the year values appropriate for your business plan and your financial statements.
This sample business plan is for a small retail business that carries an inventory; therefore, it includes a Cost of Goods Sold (COGS) section in its Income Statement. This business uses accrual accounting since it allows customers to pay after receipt of goods (i.e., it uses accounts receivable, or AR) and takes advantage of trade credit with its vendors, paying them in 30 days (i.e., it uses accounts payable, or AP). The business also waits until January of the following year to pay some of its income taxes due from the previous year.
I and the other BUSN 5000 Online instructors do not expect most of you to be able to submit a perfect set of financial statements with your business plan. We are looking for a decent attempt at getting the income statement fairly close, at least a fairly complete cash flow statement, and a balance sheet that hopefully balances. (For those of you who go on to take the BUSN 5600 Accounting course, you can perfect your approach then.)
Eddie Schwertz, BUSN 5000 Course Lead, Webster University
Company Direction
Present Situation
This business plan is for the startup of Your Memories. Video production services are currently accomplished as a hobby. These services include the following:
(1) Transferring photographs and slides to computer memory or DVD disks
(2) Development of DVDs of theme-oriented images with musical overlay
(3) Editing, integration and transfer of 8mm film and Camcorder tapes to DVDs.
Vision and Mission
The vision of Your Memories is to provide quality integration of customer images and video into a product that will be treasured by the recipient. The mission of Your Memories is to take customer image products in all their various forms and translate them into a product that meets the customer's theme-oriented desires at an affordable price.
Strategic Goals and Objectives
The strategic goal of Your Memories is to have a customer base and business reputation for quality products, such that desired projects can be selected from those that are requested, while maintaining flexibility in work schedule and hours. The objective of the business is to enable the proprietor to transition from his present line of work to the video production field while maintaining his current standard of living. In retirement the business will provide additional income while allowing a reduced and flexible work schedule.
Company Overview
Legal Business Description
Your Memories will be established as a sole proprietorship in northeast Atlantis, Georgia, operating out of the proprietor’s home, using 300 square feet of finished basement area.
Note: If a student wants to use his or her home as the location for the business, please keep in mind that home office deductions are beyond the scope of this course. Therefore, please simply claim rent, utility, and insurance expenses as if you were renting space from someone. Income tax treatment of home offices is covered in the Webster BUSN 5600 course.
Management Team
Founder and President, George C. Scott, brings 30 years of computer and video equipment operations experience to Your Memories. Hendricks, Hendricks and Shakes, PC will provide legal services. Wyckoff and Associates, PC will provide financial services.
Strategic Alliances
A strategic alliance will be established with FedEx Kinko’s for color printing and copying of advertising brochures and the inserts for the DVD cases. A strategic alliance will be established with Windstar Studios, Inc. for use of professional quality tape production and copying until Your Memories has established the customer base to justify the expense of this equipment. In addition, Windstar will be used, as needed, for digitizing large volumes of photographs and/or slides and for difficult computerized editing of images for particular projects.
Product/Service Strategy
Current Services
Video production services are currently accomplished as a hobby. These services include: (1) Transferring photographs and slides to computer memory and DVD disks; (2) Development of DVDs of theme-oriented images with musical overlay; and (3) Editing, integration and transfer of 8mm film or Camcorder videotapes to DVDs.
Transferring photographs and slides to computer memory and DVD disks
Photographs and slides are digitized using a computer connected scanner and are initially stored on the computer hard drive. If needed, the digitized images are “repaired” to correct for problems like “red-eye,” scratches, and tears in the original, lighting changes, etc. The digitized images are then available for the desired use, such as a simple “slideshow” on a DVD, or incorporation into a video presentation.
Development of DVDs of theme-oriented images with musical overlay
Production of theme-oriented video presentations is the desired “bread and butter” of Your Memories. Customer-provided images are reviewed to determine what images will be included into the desired presentation. Images are converted as necessary to digital and video formats, and sequenced to establish the initial order and timing. The selections are then formatted into a draft video-only presentation. Once the video portion is established, selected musical, voice-over or other audio are synchronized with the video to provide the draft audio-visual presentation. The next production step is to add any requested titling/visual enhancements and to add credits. The presentation is then “produced’ on DVD, and any additional copies made as desired by the customer. Finally, the presentation case graphics are completed and the product is finalized for delivery.
Editing, integration and transfer of 8mm film or Camcorder videotapes to DVDs
This production would take recordings from one or more 8mm films or Camcorder videotapes and integrate them into one or more DVDs. The goal would not be to develop a full presentation, but to take related video segments, edit out recording errors (such as recorder inadvertently left on) and record the segments to DVDs.
Days and Hours of Operation
Since it is very important to meet customers in their homes at convenient hours for them, the proprietor will have flexible operating days and hours, but will strive to meet customers in the evening hours between 5 and 9 p.m., Mondays through Fridays and on Saturdays between 9 a.m. and 5 p.m. The actual production of the DVDs will be completed during hours while not meeting with customers.
Note: Your business should set days and hours of operation that are most appropriate for your target customers.
Research and Development
The proprietor will monitor developments in video production industry and attend appropriate conferences to keep up on changes in the field. It's critical for the success of the business that the quality of equipment and software be as up-to-date as possible to ensure high quality and timely delivery of completed products.
Production and Delivery
The video production process will be initiated when a potential customer contacts Your Memories. In general, customers will be visited at their home to determine the basics of the desired video production (theme, timeline, inputs, music, etc.). The available image and sound inputs will then be reviewed with the customer to identify specific images for inclusion/exclusion, music desires/tastes, etc. Once the desires of the customer are determined, a contract is signed that delineates the services and the fees to be paid. The customer's images/music will be taken to the production facilities to begin video development. The time required to produce the completed product can range from 8 hours up to 80 hours depending upon what the customer desires.
The production process begins with digitizing photographs and slides and transferring film to digital data as needed. The images and video segments are then sequenced depending on the desired theme/output, product length, special effects, etc. Once the sequencing is established, then the time for each image/video segment is determined and the image transitions are selected. This establishes the rough video portion of the product and the audio dubbing is started. Once the audio and video segments are synchronized, the draft production is reviewed with the customer to determine if any changes are needed. When any requested changes are incorporated, the final product is recorded to DVD and the packaging is completed, with the final product delivered to the customer.
Market Analysis
Market Definition
Most people today have volumes of pictures, slides, film and camcorder videotapes that have accumulated over time. Generally, these products are stored in various states of organization and condition with little to no coordination between the various forms. While all of the images may be available for a desired presentation, the customer is unable to present the products in a coherent or organized fashion.
Customer Profile
The target customers are upper- and middle-income families. Atlantis has over 35,000 families that fall into this target group. These families generally have had the latest “toys” for collecting the various forms of images (pictures, slides, film and camcorder video) and have accumulated a significant amount of these products.
While there are some consumer-oriented products available to accomplish a video production, the target customers generally do not have the inclination or the time to either learn how to put together a production or the desire to spend the time and energy to do so. They value their time and effort more than the costs of having someone else accomplish the task. In addition, the desired product quality would be greater than they might reasonably expect to accomplish themselves, especially for those occasions involving a semi-formal gathering of family, friends and business associates (wedding anniversary, graduation, birthdays, etc.) where the presentation reflects on the provider.
The current population of the Atlantis metropolitan area is over 550,000 and is listed as one of the fastest growing cities in the United States. In addition, Atlantis is ranked number two in the country for growth in high technology jobs (San Jose, California is number one). These types of jobs are generally above average in pay and the work force tends to have more of the image producing products of the target customers.
Note: You should include the source(s) of your demographics (e.g., where you get the population and demographic information for your customer profile) and identify how many potential customers there may be.
Competition
In the Atlantis Yellow Pages, there are 43 businesses listed under the Video production heading. Of these, 15 are primarily oriented towards support of business requirements for training videos, conference support, commercial productions, etc. Seventeen of the remaining businesses advertise support for business products, with wedding support as their primary individual product. Finally, there are 11 businesses that have a personal support orientation or they have only a name and phone number listed. These businesses provide potential competition for Your Memories. However, they generally rely on word-of-mouth advertising and for the customer to seek them out.
The unique selling proposition of Your Memories is to use direct mailed DVDs with example presentations to alert the target customers to the potential of video presentations for special occasions and to direct that interest to Your Memories. Current consumer-oriented, computer-based video presentation products are not a significant competitive threat because they are too complicated and time consuming for the target customers to seriously consider using.
Risks
The primary risks to the business are the currently existing businesses in the consumer- oriented video production industry and the potential that an easy to use computerized capability for the individual might be developed.
The focus of most consumer-oriented video production firms is on providing wedding videos, primarily because they can control most of the original taping and picture taking, with limited integration of customer provided images. If these firms were to change their orientation and aggressively pursue video productions of consumer provided images, they could provide a serious challenge to Your Memories. However, the unique marketing technique of providing DVD-based demo products to target customers should allow establishment of a customer base. Product quality and customer service are expected to maintain repeat customers and support word-of-mouth referrals within the high-end consumer market.
The target customers are upper- and middle-income families. Even if a consumer-oriented, easy-to-use product becomes available to accomplish a video production, the target customers generally do not have the inclination or the time to either learn how to put together a production or the desire to spend the time and energy to do so. They value their time and effort more than the costs of having someone else accomplish the task.
Marketing Plan
Sales Strategy
The sales strategy of Your Memories will be primarily oriented to direct marketing of the target customers. Mass marketing by “coupon” advertising is not expected to be effective with the target customers. The initial development effort of Your Memories is to create an advertising DVD that has several video production themes, such as birthday party, wedding anniversary, graduation, and life tribute. This advertising DVD would be direct mailed to targeted customers who are expected to have home computers, with the intent of letting them know the capability is available and to trigger their interest in the possibilities for providing a unique gift to their loved ones. The list will be culled from real estate information about homes meeting the $300,000 value level.
Pricing Strategy
Since the target base of Your Memories is upper-and middle-income families, a quality product and quality services will be expected. Therefore, the proprietor will use a prestige pricing strategy in setting prices. The average price for product and services will be $250 per customer. This price was determined using a cost-based pricing method.
Note: Students will need to determine the most appropriate pricing strategy and pricing method to use for their business. Please refer to you textbook for information concerning pricing strategies and pricing methods.
Distribution Channels
Your Memories will work directly with customers in the development, production and delivery of products.
Advertising and Promotion
The primary advertising method will be direct mailing of a promotional DVD to targeted potential customers. A mailing list of potential customers will be purchased from the Atlantis Realtors Association, based on neighborhood, income level, age and marital status. The ideal customer would probably be a family with two to three children in high school/middle school living in a $300,000+ house with a $120,000+ family income.
The video production products will include “credits” to advertise Your Memories, both within the production and on the DVD cover. Customers will be offered discounts for repeat business and credits for referring customers to Your Memories.
We will also have our website (YourMemories.com) and use social media to advertise our services. Other advertising will be use of a small ad in the Yellow Pages.
Publicity
Publicity will be generated for Your Memories through productions supporting non-profit organizations in their awards banquets and fund-raising events that are generally attended by people in the target customer profile.
Financial Plan
Assumptions
Your Memories will be gradually established to coincide with a gradual withdrawal from the proprietor’s current work. During the product development phase and production of the advertising DVD, the proprietor will continue with a fulltime work schedule, accomplishing the development work in the evening and on weekends. In this manner, there will be no decrease in income during this period, which is expected to last six to nine months. The average customer revenue per sales is estimated to be $250. It is also estimated that it will take approximately six hours per customer to transfer their memories to the specialized DVD creations. The proprietor anticipates about 60 customers during the first year.
The second phase will begin after the advertising DVD is completed. During this phase, the proprietor will decrease the work hours in the current field to 30 hours per week, which still provides full employee fringe benefits support. The reduced work schedule will enable more hours for networking to identify prospective customers, as well as time to meet with customers and accomplish the production work. About 180 customers and the generation of $45,000 in sales are expected in the second year. This phase should last approximately six months after which the business should be developed enough to support working it full time to develop its full potential.
The third phase is the full-time work of the proprietor to mature and grow the business to a level consistent with desired income level and work flexibility. It is anticipated that the business will have about 268 customers and the generation of about $67,000 in sales. This phase is anticipated to continue until the proprietor is ready to start phasing back the business to allow more free time, consistent with reduced need for income and gradual retirement.
The phased expansion of the business should allow the business development and growth to be financed through personal resources and internally generated income. Operating out of the home with most of the required equipment for startup already available should limit capital required.
Summary of Financial Statements
Reminder: The Instructor has decided not to require you to calculate home office deductions since this level of detail is beyond the scope of BUSN 5000.
The first year of Your Memories operations are oriented towards development of the advertising DVD and a gradual transition from a hobby to a fulltime business. Therefore, expected gross sales are fairly low and are expected to be generated primarily in the last two quarters of the year with quarterly sales projected to be $1,000, $3,000, $4,500 and $6,500. Expenses are significantly higher than would be expected based on the sales volume due to startup costs, including initial supplies, professional services and the expenses of developing the advertising DVD. The first year loss of approximately $12,500 is somewhat offset by the depreciation expense of already owned equipment ($455 for the first year) and Section 179 depreciation expensing for the newly purchased equipment ($3,142) since depreciation does not require a current year payment.
This would reduce to “out-of-pocket” loss to approximately $8,858. Another point to note is that when a small business has a Net Income loss before taxes, they can claim that loss on their Federal income tax Form 1040. In this case, assuming that the business owner is in a 25% marginal tax rate (MTR) bracket, this would reduce taxable income for the business owner by the $12,455 for the tax year and reduce taxes owed by $3,114. The owner would invest $12,275 into the business during the first year ($10,000 for expenses and $2,275 for equipment (at fair market value (FMV)) converted from personal/private to business use.
Note: You cannot claim equipment or capital items as an expense on your Income Statement. Instead, you have to claim allowable depreciation in the General and Administrative section of Operating Expenses part of your Income Statement.
During the second year, operations will transition from the part-time business development phase to a full-time business. Gross sales are expected to triple from $15,000 to $45,000 in the second year of business. However, when gross sales are compared to sales in the last quarter of 2017 ($6,500), projected growth is more modest and projected to increase by at least 20% per quarter. Projected gross sales by quarter are $8,000, $10,000, $12,000 and $15,000. Since the business is still in the initial business development stages, the Selling Expenses to Net Sales ratio remains higher than desired at approximately 40% ($17,044/$43,000), but significantly reduced from the first year's 67%. Additional equipment purchases of $4,925 are directly written off using Section 179 deduction while the $455 of depreciation for the used personal equipment that was converted to business use in 2017 is also deducted. Based on the projected sales, Your Memories is projected to generate a modest after-tax profit of $4,737. The owner plans to invest an additional $6,000 in the business during the second year.
Note: You are only required to prepare two years of financial statements for your business plan.
During the third year of operations, sales growth is expected to moderate, with quarterly Net Sales averaging approximately $15,750. The Selling Expenses to Net Sales ratio continues to decrease to approximately 34% ($21,414/$63,000) of sales from 40% in the second year (2018). The General and Administrative Expenses to Net Sales ratio also continues to decrease slightly from 45% ($19,330/$43,000) in 2018 to 44% ($27,422/$63,000) in 2019. Equipment purchases continue to be a significant portion of those expenses, with $9,917 in Section 179 deductions for 2019 plus the $455 for used equipment depreciation. During the third year, the business is able to pay back $15,000 to the owner.
Note: Students are not required to include ratio figures in their business plans. The plan submitted by the former student included these figures so we included them. However, you should include gross sales projections in your financial narrative for each year.
Capital Requirements
The owner will invest $10,000 in cash into the business during the first year, in addition to equipment already owned and transferred to the business, with the fair market value of this equipment appraised at $2,275. The owner will invest an additional $6,000 in cash in the business during the second year and purchase new equipment worth approximately $4,925. During the third year, the owner will purchase $9,917 in new equipment.
Exit/Payback Strategy
There is no borrowing anticipated for the business, so payback is not required. The exit strategy for the business depends on the phase of the business development when a determination to exit is made. If product and advertising DVD development during the first phase do not meet expectations, or if the anticipated initial customer development is not forthcoming, the business can easily return to a hobby status, or the phase can be extended to improve the product, develop the customer base, or re-evaluate the potential customer base.
Similarly, during phase two it would not be difficult to still return to hobby status, extend the time in the phase or to further refine and develop the product and customer basis. After phase two, there would be a significant financial disruption to exiting the business, since the current work relationship of the proprietor with their present full time employer would have been severed and the equipment expanded beyond the hobby level.
Once the business is firmly established, the exit strategy could be to begin phasing down the business volume and work time as the proprietor gradually transitions to retirement. The business could be maintained at a reduced level or transitioned back to a hobby status as the desired work schedule is reduced. Another alternative would be to sell the business – at a profit of course.
Conclusion
Your Memories is designed to tap into an underserved potential for consumer video production. While there is plenty of existing video production businesses that could serve the target market, they do not because they are generally waiting for the customer to come to them, rather than identifying and pursuing the customer. The unique selling proposition of Your Memories is to identify and target upper- and middle-income customers and then pursue them through direct mailing of the specially developed advertising DVD.
Since the business is home-based and much of the required startup equipment is already owned, initial costs are oriented to developing the advertising DVD and company website. While significant losses are expected in the first year, the business should reach break-even status in the second year and become profitable in the third year. If business conditions dictate, the phased approach to moving to a full-time business can be either slowed or accelerated.
Supporting Documents
Income Statements (3 years): 2017, 2018, and 2019
Cash Flow Statements (3 years): 2017, 2018, and 2019
Balance Sheets (3 years): 2017, 2018, and 2019
Note: The footnotes on the financial statements are provided to help you understand some of the amounts. Italicized footnotes are merely explanatory comments; you do not need to include them in your plan. However, if the footnote is NOT italicized, you may want to include appropriate explanatory comments. Please also be aware that the Cash Flow Statements in the sample business plan have been set up using Word tables.
Your Memories
Income Statement
For the Year Ended December 31, 2017
Revenue
Gross Sales (60 customers @ $250 each) $15,000
Less: Sales Returns and Discounts (500)
Net Sales 14,500
Cost of Goods Sold
Beginning Inventory 0
Purchases of DVDs 360
Less: Ending Inventory (100)
Less: Cost of Goods Sold (260)
Gross Profit 14,240
Operating Expenses
Selling Expenses
Delivery Expenses 700
Advertising Expenses 3,200
Entertainment Expenses 2,200
Miscellaneous Expenses 3,500
Sales Taxes Paid * 48
Total Selling Expenses 9,648
General and Administrative Expenses
Rent Expenses 3,500
Utilities Expenses 750
Automobile Expenses 1,500
Insurance Expenses 1,200
Supplies Expenses 2,600
Depreciation Expenses 3,597
Legal & Pro Services 2,400
Miscellaneous Expenses 1,500
Total G&A Expenses 17,047
Less: Total Operating Expenses (26,695)
Income before Taxes (12,455)
Less: Income Taxes (@ 25 %) ** 0
Net Income after Taxes ($12,455)
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* Sales taxes are paid on inventory items sold. The sales taxes are normally paid to the state.
** Note: The business owner reports net income on his or her IRS Form 1040. In this case the business owner would reduce personal income taxes for this loss.
Your Memories
Income Statement
For the Year Ended December 31, 2018
Revenue
Gross Sales (180 customers @ $250 each) $45,000
Less: Sales Returns and Discounts (2,000)
Net Sales 43,000
Cost of Goods Sold
Beginning Inventory 100
Purchases of DVDs 360
Less: Ending Inventory (150)
Less: Cost of Goods Sold (310)
Gross Profit 42,690
Operating Expenses
Selling Expenses
Delivery Expenses 2,700
Advertising Expenses 4,500
Entertainment Expenses 3,200
Miscellaneous Expenses 6,500
Sales Taxes Paid 144
Total Selling Expenses 17,044
General and Administrative Expenses
Rent Expenses 3,500
Utilities Expenses 750
Automobile Expenses 3,800
Insurance Expenses 1,200
Supplies Expenses 2,900
Depreciation Expenses 5,380
Legal & Pro Services 1,200
Miscellaneous Expenses 600
Total G&A Expenses 19,330
Less: Total Operating Expenses (36,374)
Income before Taxes 6,316
Less: Income Taxes (@ 25%) (1,579)
Net Income after Taxes $ 4,737
Your Memories
Income Statement
For the Year Ended December 31, 2019 *
Revenue
Gross Sales (268 customers @ $250 each) $67,000
Less: Sales Returns and Discounts (4,000)
Net Sales 63,000
Cost of Goods Sold
Beginning Inventory 150
Purchases of DVDs 1,500
Less: Ending Inventory (135)
Less: Cost of Goods Sold (1,515)
Gross Profit 61,485
Operating Expenses
Selling Expenses
Delivery Expenses 3,900
Advertising Expenses 4,500
Entertainment Expenses 4,800
Miscellaneous Expenses 8,000
Sales Taxes Paid 214
Total Selling Expenses 21,414
General and Administrative Expenses
Rent Expenses 3,500
Utilities Expenses 750
Automobile Expenses 5,700
Insurance Expenses 1,200
Supplies Expenses 3,200
Depreciation Expenses 10,372
Legal & Pro Services 1,200
Miscellaneous Expenses 1,500
Total G&A Expenses 27,422
Less: Total Operating Expenses (48,836)
Income before Taxes 12,649
Less: Income Taxes (@ 25%) (3,162)
Net Income after Taxes $ 9,487
*Note: You are only required to prepare two years of financial statements for your business plan.
Your Memories
Cash Flow Statement
For the Year Ended December 31, 2017
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Operating Activities* |
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Net Sales to Customers |
$14,500 |
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Accounts Receivable from Customers 2017 |
(0) |
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Payments for Total Operating Expenses |
(26,695) |
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Add Depreciation Expenses Taken |
3,597 |
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Add Accounts Payable for Current Year |
2,100 |
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Payments for 2016 Income Taxes (none) |
(0) |
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Payments for 2017 Income Taxes |
(0) |
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Payments for Inventory (DVDs) |
(360) |
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Net Cash Flows from Operating Activities |
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(6,858) |
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Investing Activities |
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Proceeds from Sale of Property/Plant/Equipment |
0 |
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Purchased Property/Plant/Equipment** |
( 3,142) |
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Net Cash Flows from Investing Activities |
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(3,142) |
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Financing Activities |
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Owner Investment (cash only) |
10,000 |
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Owner Withdrawals |
(0) |
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Repayment of Long-term Debt |
(0) |
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Net Cash Flows from Financing Activities |
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10,000 |
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Changes in Cash Balance |
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Net Change in Cash for Current Year |
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0 |
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Add: Beginning Cash Balance |
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0 |
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Ending Cash Balance |
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$0 |
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*The business owes suppliers $2,100 as of 12/31/17 for trade credit purchases. Therefore, Accounts Payable amounts to $2,100 for 2017. There is no income taxes payable for 2017. Depreciation Expenses in 2017 are $3,597, which consists of $455 for personal property converted to business property ($2,275 depreciated at $455 per year for five years) and $3,142 in new equipment purchases.
** Only the $3,142 spent in cash for equipment in 2017 is shown under Investing Activities.
Your Memories
Cash Flow Statement
For the Year Ended December 31, 2018
|
Operating Activities1 |
|||||
|
|
Net Sales to Customers |
$43,000 |
|
||
|
|
Accounts Receivable from Customers 2018 2 |
(4,300) |
|
||
|
|
Payments for Total Operating Expenses |
(36,374) |
|
||
|
|
Add Depreciation Expenses Taken |
5,380 |
|
||
|
|
Add Accounts Payable for Current Year |
3,400 |
|
||
|
|
Payments for 2017 Income Taxes (none) |
(0) |
|
||
|
|
Payments for 2018 Income Taxes (to be paid in 2019)3 |
1,579 |
|
||
|
|
Payments for Accounts Payable from 2017 |
(2,100) |
|
||
|
|
Payments for Inventory (DVDs) |
(360) |
|
||
|
|
Net Cash Flows from Operating Activities |
|
10,225 |
||
|
|
|
|
|
|
|
|
Investing Activities |
|||||
|
|
Proceeds from Sale of Property/Plant/Equipment |
0 |
|
||
|
|
Purchased Property/Plant/Equipment |
(4,925) |
|
||
|
|
Net Cash Flows from Investing Activities |
|
(4,925) |
||
|
|
|
|
|
|
|
|
Financing Activities |
|||||
|
|
Owner Investment (cash only) |
6,000 |
|
||
|
|
Owner Withdrawals |
(0) |
|
||
|
|
Repayment of Long-term Debt |
(0) |
|
||
|
|
Net Cash Flows from Financing Activities |
|
6,000 |
||
|
|
|
|
|
|
|
|
Changes in Cash Balance |
|||||
|
|
Net Change in Cash for Current Year |
|
11,300 |
||
|
|
Add: Beginning Cash Balance |
|
0 |
||
|
|
|
|
|
||
|
|
Ending Cash Balance |
|
$11,300 |
----------------------
1The business owes suppliers $3,400 as of 12/31/18 for trade credit purchases in 2018. Therefore, Accounts Payable amounts to $3,400 in 2018. There is no income taxes payable for 2017. Depreciation Expenses in 2018 are $5,380 ($455 plus $4,925).
2Customers owe $4,300 in Accounts Receivable for services rendered (sales) in 2018.
3If the student decides to defer the payment for the current-year income taxes until the next year the amount deferred should be shown as a positive value here. This amount must also be shown in the Owner's Equity section of the Balance Sheet for that year. It is recommended that students not defer the payment of income taxes to the following year to avoid this more complicated approach.
Your Memories
Cash Flow Statement
For the Year Ended December 31, 2019 *
|
Operating Activities1 |
|||||
|
|
Net Sales to Customers |
$63,000 |
|
||
|
|
Accounts Receivable from Customers 2019 2 |
(5,500) |
|
||
|
|
Add Accounts Receivable from Customers 2018 2 |
4,300 |
|
||
|
|
Payments for Total Operating Expenses |
(48,836) |
|
||
|
|
Add Depreciation Expenses Taken |
10,372 |
|
||
|
|
Add Accounts Payable for Current Year |
3,400 |
|
||
|
|
Payments for Accounts Payable from 2018 |
(3,400) |
|
||
|
|
Payments for 2018 Income Taxes |
(1,579) |
|
||
|
|
Payments for 2019 Income Taxes (to be paid in 2020) |
3,162 |
|
||
|
|
Payments for Inventory (DVDs) |
(1,500) |
|
||
|
|
Net Cash Flows from Operating Activities |
|
23,419 |
||
|
|
|
|
|
|
|
|
Investing Activities |
|||||
|
|
Proceeds from Sale of Property/Plant/Equipment |
0 |
|
||
|
|
Purchased Property/Plant/Equipment |
(9,917) |
|
||
|
|
Net Cash Flows from Investing Activities |
|
(9,917) |
||
|
|
|
|
|
|
|
|
Financing Activities |
|||||
|
|
Owner Investment (cash only-none this year) |
0 |
|
||
|
|
Owner Withdrawals |
(15,000) |
|
||
|
|
Repayment of Long-term Debt |
(0) |
|
||
|
|
Net Cash Flows from Financing Activities |
|
(15,000) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Cash Balance |
|||||
|
|
Net Change in Cash for Current Year |
|
(1,498) |
||
|
|
Add: Beginning Cash Balance |
|
11,300 |
||
|
|
|
|
|
||
|
|
Ending Cash Balance |
|
$9,802 |
----------------------------
1 The business owes suppliers $3,400 as of 12/31/19 for trade credit purchases. It also will pay income taxes of $3,162 for 2019 in 2020 (show this $3,162 on the 2019 Balance Sheet). The payment for Accounts Payable in 2019 amounts to $3,400 for supplies and $1,579 for income taxes not paid from 2018. Depreciation Expenses in 2019 are $10,372 ($455 plus $9,917).
2 Customers owe $5,500 in Accounts Receivable for services rendered (sales in 2019). Customers paid the $4,300 in monies owed from 2018.
*Note: You are only required to prepare two years of financial statements for your business plan.
Your Memories
Balance Sheet
As of December 31, 2017
Assets
Current Assets
Cash and Equivalents $0
Accounts Receivable 0
Ending Inventory (at cost) 100
Total Current Assets 100
Long-term Assets
Property, Plant and Equipment 5,417
Less Accumulated Depreciation 1 (3,597)
Other Assets 0
Total Long-term Assets 1,820
Total Assets $1,920
Liabilities and Owners’ Equity
Current Liabilities
Accounts Payable (supplies) 2,100
Employment Taxes Payable 0
Notes Payable 0
Total Current Liabilities 2,100
Long-term Liabilities
Long Term Debt 0
Other Liabilities 0
Total Long-term Liabilities 0
Total Liabilities 2,100
Owners’ Equity
Owner Capital (1/1/2017) 0
Owner Capital Paid in 2017 2 12,275
Net Income after Taxes for the Year (12,455)
Less Owner Withdrawals (0)
Total Owners’ Equity (180)
Total Liabilities and Owners’ Equity $1,920
-------------------
1 This includes the $455 for property converted from personal use plus the $3,142 of new equipment purchased in 2017.
2 The owner contributed $10,000 in cash and $2,275 in personal equipment to the business. Notice that the $5,417 of property/plant/equipment includes the $2,275 plus $3,142 of new items purchased in 2017.
Your Memories
Balance Sheet
As of December 31, 2018
Assets
Current Assets
Cash and Equivalents $11,300
Accounts Receivable 4,300
Ending Inventory (at cost) 150
Total Current Assets 15,750
Long-term Assets
Property, Plant and Equipment * 10,342
Less Accumulated Depreciation (8,977)
Other Assets 0
Total Long-term Assets 1,365
Total Assets $17,115
Liabilities and Owners’ Equity
Current Liabilities
Accounts Payable (supplies) 3,400
Accounts Payable (income taxes) 1,579
Employment Taxes Payable 0
Notes Payable 0
Total Current Liabilities 4,979
Long-term Liabilities
Long Term Debt 0
Other Liabilities 0
Total Long-term Liabilities 0
Total Liabilities 4,979
Owners’ Equity
Owner Capital (1/1/2018) (180)
Owner Capital Paid in 2018 6,000
Current-year Income Taxes to be Paid Next Year 1,579
Net Income after Taxes for the Year 4,737
Less Owner Withdrawals (0)
Total Owners’ Equity 12,136
Total Liabilities and Owners’ Equity $17,115
-------------------
* This includes the $5,417 of equipment shown in 2017 plus the $4,925 of new equipment purchased in 2018.
Your Memories
Balance Sheet
As of December 31, 2019 *
Assets
Current Assets
Cash and Equivalents $9,802
Accounts Receivable 5,500
Ending Inventory (at cost) 135
Total Current Assets 15,437
Long-term Assets
Property, Plant and Equipment * 20,259
Less Accumulated Depreciation (19,349)
Other Assets 0
Total Long-term Assets 910
Total Assets $16,347
Liabilities and Owners’ Equity
Current Liabilities
Accounts Payable (supplies) 3,400
Accounts Payable (income taxes) 3,162
Employment Taxes Payable 0
Notes Payable 0
Total Current Liabilities 6,562
Long-term Liabilities
Long Term Debt 0
Other Liabilities 0
Total Long-term Liabilities 0
Total Liabilities 6,562
Owners’ Equity
Owner Capital (1/1/2019) 12,136
Owner Capital Paid in 2019 0
Current-year Income Taxes to be Paid Next Year 3,162
Net Income after Taxes for the Year 9,487
Less Owner Withdrawals (15,000)
Total Owners’ Equity 9,785
Total Liabilities and Owners’ Equity $16,347
------------------------
* This includes the $10,342 of equipment shown in 2018 plus the $9,917 of new equipment purchased in 2019.
*Note: You are only required to prepare two years of financial statements for your business plan.
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