Business Plan

102$2 207$0Net change in cash$2 025$4 750$3 266Cash at the beginning of year$0$2 025$6 774Cash at the end of year$2 025$6 774$10 040 Balance Sheet Assets200320042005Current assets:Cash$2 025$6 774$10 040Fixed assets:a computer$500$1 025$1 576a monitor$250$513$788a modem$80$165$253a printer$153$313$481office equipment$200$410$631a telephone/fax$90$185$284Less accum. depreciation$420$1 434$2 689Total fixed assets$853$1 175$1 323Intangible assets:a database$661$1 355$2 083Other software$168$345$531Less accum. depreciation$274$934$1 752Total intangible assets$556$766$862Total assets$3 433$8 715$12 225LiabilitiesLong-term notes payable-$2 207$2 207Owner's equityNikolay Belih, capital$3 433$6 508$10 018Total Liab. and Equity$3 433$8 715$12 225 Income Statement The amounts are given as they are in Russia 200320042005Revenues$8 464$18 050$33 940Operating expenses:Salary expense$2 400$5 040$15 876Office rent expense$1 600$3 480$6 854Depreciation furniture and equipment$694$1 674$2 073Advertising$659$631$609Insurance$105$210$315Utilities expenses $62$131$413Total operating expenses$5 520$11 167$26 141General expenses:Telephone & Internet$525$630$756Other expenses:Interest$0$662$662Total expenses$6 045$12 458$27 559Net income before taxes$2 420$5 591$6 381taxes (45%)$1 089$2 516$2 872Net income$1 331$3 075$3 510 Ratio Analysis 200320042005Leverage ratiosDebt ratio-0,250,18Debt -to-net worth ratio-0,460,30Times interest earned ratio-8,449,64Asset ManagementFixed assets turnover9,9315,3625,65Total assets turnover2,472,072,78Profitability ratiosProfit margin on sales0,160,170,10Return on total assets0,390,350,29Return on equity0,390,470,35I did not indicate accounts receivables and accounts payables, as my business will be very small and all operations will be done in cash by personal sales during first three years. In addition, invoices and credit cards are not common in Russia, so it is one more reason of not indicating them. So, I did not count liquidity ratios, as all of them are based on current liabilities. From my analysis of projected future operations, we can see that debt ratio will decrease in 2004 and 2005 from 0,25 to 0,18. It tells about the decrease of funds provided by creditors and increase in the attractiveness of business for investments, as creditors prefer lower ratios. Debt -to-net worth ratio will also decrease in 2004 and 2005 from 0,46 to 0,30, what tells about the increase of businesss ability to meet both its creditor and owner obligations in case of liquidation. The times interest earned ratio will decrease. It indicates that the firm will have fewer difficulties in meeting the interest payments of loan. The net income can decrease almost by ten times until the business will not be able to pay its interest obligations in 2005. The fixed assets turnover will constantly increase, what indicates the increase of effectiveness of the fixed asset usage. The total assets turnover ratio will decrease from 2003 to 2004 and increase from 2004 to 2005. It tells about the decrease of the volume of the business produced on the total asset investment in 2004 and increase of it in 2005. The main cause of decrease will be more significant increase in total assets and less significant in sales. The profit margin on sales ratio will slightly increase in 2004 and more significantly decrease in 2005. It indicates the decrease of income per dollar for the first three years of existence. The cause of the decrease in 2005 will be the more intensive use of debt. The ROA will constantly decrease in the first three years of existence of the business. It indicates the decrease of the return on assets. The cause of it will be more significant increase in total assets and less significant in net income. The ROE will increase from 2003 to 2004. It will indicate the increase in the rate of return on the owners investments. The cause of it will be more intensive use of debt. But in 2005 there will decrease in ROE, what is explained by the more significant increase in equity and less significant in net income. Depreciation Estimation I will use the modified accelerated cost recovery system method of depreciation. According to my opinion it is the best for me because it will allow getting some tax savings because of the decrease of income due to accelerated depreciation. All assetsFixed assetsIntangible assetsDepreciationDepreciationDepreciation20032004200520032004200520032004200533%45%15%33%45%15%33%45%15%33%45%33%45%33%45%33%33%33%Accumulated depreciationAccumulated depreciationAccumulated depreciation$694$1 674$2 073$420$1 014$1 255$274$660$818 Fixed Capital Estimation I made the estimation for the first year. As all assets are almost the same in each consulting service than I determined the price for the next period by making inflation adjustments. Name of assetsCostsPessimisticRealisticOptimisticMost probablya computer$550,00$500,00$450,00$500,00a monitor$275,00$250,00$225,00$250,00a modem$96,00$80,00$66,06$80,34a printer$180,00$150,00$135,00$152,50the database$1 040,00$650,00$325,00$660,83Other software$400,00$150,00$10,00$168,33office equipment$220,00$200,00$180,00$200,00a telephone/fax$100,00$90,00$80,00$90,00Total:$2 861,00$2 070,00$1 471,06$2 102,01Working Capital Estimation I also made the estimation for the first year, as with the fixed capital, and than determined the price for the next period by making inflation adjustments. Name of assetsCostsPessimisticRealisticOptimisticPaper$36,00$24,00$13,00Cartridges$27,50$25,00$22,50Writing implements$15,00$12,71$7,14Total:$78,50$65,71$42,64Basing on the cash receipt forecast, I will need 1*$78,50+4*$62,71+1*$42,64= $62 a year for working capital. Marketing Estimation The sales estimation I based on the next assumptions: 1. The share of the ''Irkutskiy'' market will decrease, as there will appear some competitors. 20032004200545%43%41%The amount of purchases a day in average in the "Irkutskiy" market: in items 2003200420051932192422. The share of the the ''Fortuna'' martet will decrease as there will appear some competitors. 2004200512%10%The amount of purchases a day in average in the "Fortuna" market: in items 2004200561593. The share of the ''Complex'' market will stay constant. 200519%The amount of purchases a day in average in the "Complex" market: in items 2005112The assumed amount of potential clients that will use my database: Share: 1 year2 year3 year50%70%85%The amount of potential clients a day 2003200420052959105The amount of potential clients a year: 200320042005106502148838481 The projected sales price 200320042005$0,80$0,84$0,88 Advertisement expenses 200320042005Printed materials$347$303$265News papers$312$328$344Total:$659$631$609 Labor Expenses Labor expenses are based on assumption that every year I will open one additional consulting center. So, there should be one additional consultant each year. A month: 200320042005Salary$200$210$221A year: 200320042005Salary$2 400$5 040$15 876