Feasability report based on excel sheet provided for business
jymojica
copy_of_accounting_excel_spreadsheets.xlsxQuestion 1
| Question | |
| How much money will you personally invest into the business? | |
| Create a list of funding sources, the amount each source will provide, and the terms, if any, related to the funds | |
| Answer | |
| I would invest the whole 12000 into the business. This was mainly sourced from my on savings. Besides being simple to obtain, personal investment reflects my personal commitment to the business to both investors and lenders. | |
| The are many options for funding sources. The list includes sourcing from family, a total of 5000 to go towards sustaining the business. In addition to that, a deficit of 8000 required to cover the business operations for the first 6 months would be obtained as a bank loan. The family investment would be repaid in 5 years accumulating interest at an annual rate of 5% while the loan would have to be repaid within 3 years at 5% interest per annum. In addition to that, I would provide free labor to the business, until it is self-sustaining, with a goal of 65000 annual income. | |
Question 2
| Question | |
| Describe if and how investors will be involved in the day to day operations of the business. | |
| Provide a list of the general practices for how investments return will be distributed, assuming different business scenarios. | |
| Answer | |
| Like any other business, investors would not be directly involved in the daily operations. However, they would be concerned about the performance of the business, moreso their investment. Through quarterly reviews, performance reports will be circulated to all investors of the business to keep them up-to-date with operations and performance. | |
| Investors shall receive 10% on their ivestment at the end of each quarter if profits exceed 50000 after the business becomes self-sustaining. With a projected annual income of 65000, the business will strive to keep expenses at the minimum, starting with 46000 during the first year with the aspiration to decrease it in subsequent years. Once the business stabilizes, the net from revenue and expenses will futher be split, with 30% being ploughed back to keep operating the business, spur growth as well as increasing the amount of cash reserves. The investment returns will be distributed annually so as to prevent negatively affecting cash flow. | |
Question 3
| Question | ||||
| Identify the payout period (when investment returns will be distributed). | ||||
| How much cash do you need to start your business and keep it running until it is self-sustaining? | ||||
| Create a pro forma budget of your capital funds (cash, or access to cash) for one to three years | ||||
| Answer | ||||
| The payment period is one year, meaning that investment returns will be distributed on annual basis. This is for the simple reason, to keep the the business cashflow stable during a given financial year. | ||||
| The initial start-up capital includes a total of 25000, which will be used to fund the operations of the business during the first 6 months. The operating expenses mainly include marketing and advertising, insurance, product development, general and administrative costs. The expenses will be covered from the start-up kitty. It is projected that the business will be self-sustaining after 2 years of operations. During the time, the protagonist may be forced to pump in more funds as well as seek more from investors. Once the business stabilizes, cash reserves and ploughed back profit will keep the business running and growing. | ||||
| Capital Funds | ||||
| Source | Year 1 | Year 2 | Year 3 | |
| Personal savings | 12000 | 0 | 0 | |
| Family | 5000 | 0 | 0 | |
| Loan | 8000 | 0 | 0 | |
| Investors | 0 | 20000 | 25000 | |
| Retained earnings | 0 | 10000 | 20000 | |
| Total | 25000 | 30000 | 45000 | |
| Pro forma Budget | ||||
| Item | Year 1 | Year 2 | Year 3 | |
| REVENUE (Sales): | 41900 | 72400 | 93500 | |
| OPERATING EXPENSES: | ||||
| Transaction expense | 21700 | 22100 | 24700 | |
| Transaction and loan losses | 6460 | 6570 | 7450 | |
| Customer support and operations | 9910 | 9980 | 10080 | |
| Marketing and advertising | 9540 | 9540 | 9470 | |
| Product development | 7470 | 7500 | 7500 | |
| General and administrative | 7330 | 7400 | 7830 | |
| Insurance | 5160 | 5160 | 5160 | |
| Restructuring | 0 | 0 | 0 | |
| Total Operating Expenses: | 67570 | 68250 | 72190 | |
| Profit before Interest | -25670 | 4150 | 21310 | |
| Interest Expense | 4500 | 4500 | 4500 | |
| Net Profit (Loss) - Monthly | -30170 | -350 | 16810 | |
