financial plan

Startup Costs:

Startup costs for “HELP” are estimated and budgeted at $10,000. The $10,000 startup cost for “HELP” will come from seed money provided by family. Family will also donate time and expertise in getting the business up and running. The help and expertise from family will assist “HELP” in getting off the ground and being successful this concept is reinforced by Scott Gerber of the Entrepreneur website: “Surround yourself with advisors and mentors who will nurture you to become a better leader and businessman.”  Family has volunteered labor in the $1,000 light remodel of the $750 rented storefront to include painting and electrical work. The physical labor to set up the $2,000 worth of office furnishings (that will include cubicles, desks and furniture) will also come at no expense due to the free labor provided by family and friends. An additional $3,060 is budgeted for the storefront computer lesson areas to include 5 laptops, computerized white board and a printer. Family has also volunteered to assist with the initial promotion of the business by folding and distributing pamphlets, magnets and brochures which have an estimated cost of $300 from a local printer. Initial inventory and future inventory will be kept to a minimum due to the quick order and delivery time of less than 48 hours. Initial startup cost for inventory will include 2 laptops at cost of $400. Fees required to operate a business in Schuylkill Haven include a business license as well as a $250 utility deposit fee. Additional fees include legal and accounting fees to include set up of a LLC, bonding certification, and business bank account and are estimated/budgeted at $600. Family will assist with word of mouth advertising to include presentation appointments at various civic and church groups that comprise a majority of the targeted demographic market of the over 50 population in the Schuylkill Haven area. $100 is budgeted for office supplies that will include the basics: pens, printer paper, toilet paper, paper towels, 3 ring binders, folders, envelopes and stamps. Graduation gift money will be used to purchase 2 car skin graphics to take advantage of free mobile advertising that comes with driving around town.

Operating Costs:

Initially “HELP” will have the owner (myself) as the only paid employee, as family have graciously offered to provide scheduled expertise and time. I plan to draw a monthly salary of $2000 and estimate the hours worked to be between 40-60/week. Estimated payroll taxes come to $398 per month. As the business grows it will become necessary to hire 1-2 part-time employees/interns at a cost of $12/hr up to 20 hours each a week. The hiring of part-time staff permits the business to avoid paying expensive health benefits or other benefits. Routine and recurring monthly operating costs include:

· Monthly rent $750

· Utilities estimated at $150

· Advertising $100

· Car expenses $250

· Credit card and bank charges $25

· Insurance ( Liability and Property) $63

· Internet $55

· Repairs and Maintenance $50

· Telephone and communications $50

· Office Supplies $25

Other expenses included in fixed operating costs include depreciation estimated at $82 and Line of Credit cost estimated at $23. Total Fixed Operating costs are estimated at $1,652 a month. “HELP” like many other small business startups will be operating in the negative the 1st 2 months but then should see a steady profit and healthy bottom line thereafter. The owner’s monthly salary will increase proportionally to the increase in sales and subsequent positive increase in cash flow to a max cap of $5,000/month.

Sales Forecast:

“HELP” is forecasting a steady flow of customers after the first month as word of mouth spreads and the mobile car graphic draws attention and interest around town. Donation of gift certificates for 1 free in home lesson or 2 storefront lessons to the local churches’ Chinese auctions will also generate interest and word of mouth advertising among the targeted marketing demographic of the over 50 population. In home computer lessons at $75/hour are forecasted to be 10 per month initially with a slow steady increase to top off at 100/month in the first year to accommodate scheduling. In home computer packages at $750 which comes with a laptop, in home set up and 5 in home lessons is forecasted to be 2 the first month, with a steady increase and capped at 8/month to permit scheduling and quality personal service to the customer. Storefront lessons at $60/hour are also projected to have a steady flow of customers with an anticipated 10 private instruction lessons the first month with a slow steady increase to 100 by end of year 1. The $625 in home set and storefront lesson package is forecasted to start with 2 customers and grow as word of mouth spreads and will also be capped at max of 8 per month due to scheduling demands. As the business grows it is anticipated that the need to hire 1 part-time employee up to 20 hours/week will come about month 4 with a 2nd part-time employee being hired around month 7. The part-time employees will initially be started in the storefront and under direct supervision to evaluate their skill, knowledge, performance and ability to connect with the targeted demographic. The part-time employees will also need to sign a no compete clause and confidentiality statement as well as the bonding certification before working at “HELP.”

Sales forecast includes Account Receivables collection estimated at 90% in the first 30 days, 9% within 60 days and 1% more than 90 days. Accounts Payable disbursements will be made within 30 days. If sales reach the max/capped amount forecasted, “HELP” should see a positive net income of $9,378/month and a positive cash flow of $84,728 for the year. This positive net income and positive cash flow are essential to growing the business and investing in the business. It will be imperative for the business to adapt and change in 5 years as the targeted demographic will become smaller as the years go by.

Sources of Capital:

Capital investment will come from the initial $10,000 in seed money from family. Fortunately “HELP” is not required to pay back this capital funding as it is considered a gift. As the business grows and expands, capital funding will come from the positive cash flow and net income produced by the business. This is a major component to being self employed and it is echoed by Jeff Haden in his web article for inc.com: “Don't think of profits as income; think of profits as a tool to further establish your business.”

References

http://www.entrepreneur.com/article/203254

http://www.inc.com/jeff-haden/the-best-hardest-way-to-start-a-small-business.html