The purpose of this assignment is to build and defend financial projections for your business idea. This includes estimating units sold, revenue, and costs for the first 3 years (12 Quarters)
The purpose of this assignment is to build and defend financial projections for your business idea. This includes estimating units sold, revenue, and costs for the first 3 years (12 Quarters) of the business.
Part 1
Build a pro forma Excel sheet estimating revenue and all operating cost items of the business for each of the first 3 years (12 quarters) of operation. Review the pro forma examples provided in the attachments. Pro forma estimates should be based on researched information and rational assumptions.
APA style is required, and solid academic writing is expected.
Part 2
Write a 750-1,000-word summary of your pro forma spreadsheet. Include the following items:
- Describe how you developed the pro forma projected expenses and operating costs.
- Explain your revenue estimates, variable costs, fixed costs, margin, and how your arrived at your figures.
While APA style is required for the body of this assignment, solid academic writing is expected, and documentation of sources should be presented using APA formatting guidelines.
General Requirements
Together, the Excel spreadsheet and summary should define and defend financial projections for your business idea as if you were presenting to key stakeholders. Submit both the pro forma Excel spreadsheet and the Word document.
Sheet1
| PRO FORMA EXAMPLE | |||||||||||||
| GENERIC – Numbers mean nothing – project specific | |||||||||||||
| Group Entered Variables | |||||||||||||
| Calculated data is unshaded | |||||||||||||
| Revenue Basis | |||||||||||||
| Cost Basis | |||||||||||||
| Calculated Gross Profit | Q1 | Q2 | Q3 | Q4 | Q5 | Q6 | Q7 | Q8 | Q9 | Q10 | Q11 | Q12 | |
| VARIABLES (GREEN) | |||||||||||||
| Number of Product Units: | 1 | 3 | 5 | 20 | 100 | 140 | 180 | 240 | 300 | 350 | 400 | 500 | |
| Material Cost/Unit: | $50 | $50 | $50 | $50 | $40 | $40 | $40 | $40 | $40 | $40 | $40 | $40 | |
| Manufacturing Cost/Unit: | $25 | $25 | $25 | $25 | $20 | $20 | $20 | $20 | $20 | $20 | $20 | $20 | |
| Operating Cost/Unit: | $10 | $10 | $10 | $10 | $8 | $8 | $8 | $8 | $8 | $8 | $8 | $8 | |
| Maintenance Cost/Unit: | $10 | $10 | $10 | $10 | $8 | $8 | $8 | $8 | $8 | $8 | $8 | $8 | |
| Org/OH (Founders) Staffing (full time equivalents – FTE) | 2 | 3 | 3 | 3 | 4 | 4 | 4 | 4 | 4 | 4 | 4 | 4 | |
| Consultants (App Dev, SW – FTE) | 0.5 | 0.5 | 0.5 | 0.5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Selling Price/Unit: | $200 | $200 | $200 | $200 | $220 | $220 | $220 | $220 | $240 | $240 | $240 | $240 | |
| Org/OH (Founders) Staffing Cost ($/day) | $100 | $100 | $100 | $100 | $110 | $110 | $110 | $110 | $110 | $110 | $110 | $110 | |
| Consultants Cost ($/day) | $150 | $150 | $150 | $150 | $150 | $150 | $150 | $150 | $150 | $150 | $150 | $150 | |
| Product Revenue: | $200 | $600 | $1,000 | $4,000 | $22,000 | $30,800 | $39,600 | $52,800 | $72,000 | $84,000 | $96,000 | $120,000 | |
| Website Revenue: | $0 | $500 | $500 | $500 | $500 | $500 | $500 | $750 | $750 | $750 | $1,000 | $1,000 | |
| Licensing Revenue: | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $1,000 | $2,000 | $5,000 | $10,000 | |
| Advertising/Other Revenue: | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $500 | $750 | $1,000 | $2,000 | |
| Year 1 | Year 2 | Year 3 | |||||||||||
| Item | Basis | Q1 | Q2 | Q3 | Q4 | Q5 | Q6 | Q7 | Q8 | Q9 | Q10 | Q11 | Q12 |
| TOTAL REVENUE: | $200 | $1,100 | $1,500 | $4,500 | $22,500 | $31,300 | $40,100 | $53,550 | $74,250 | $87,500 | $103,000 | $133,000 | |
| VARIABLE COSTS | |||||||||||||
| Materials | $50 | $150 | $250 | $1,000 | $4,000 | $5,600 | $7,200 | $9,600 | $12,000 | $14,000 | $16,000 | $20,000 | |
| Manufacturing | $25 | $75 | $125 | $500 | $2,000 | $2,800 | $3,600 | $4,800 | $6,000 | $7,000 | $8,000 | $10,000 | |
| Operating Labor | $10 | $30 | $50 | $200 | $800 | $1,120 | $1,440 | $1,920 | $2,400 | $2,800 | $3,200 | $4,000 | |
| Maintenance | $10 | $30 | $50 | $200 | $800 | $1,120 | $1,440 | $1,920 | $2,400 | $2,800 | $3,200 | $4,000 | |
| Legal/Acctg – $/quarter | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | |
| IT, Website, Application and other Outreach-Sales-Advertising recurring costs | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | |
| Organizational/Overhead (Founders) | See above | $12,990 | $19,485 | $19,485 | $19,485 | $28,578 | $28,578 | $28,578 | $28,578 | $28,578 | $28,578 | $28,578 | $28,578 |
| Expenses (% of Operating Labor and Org/OH) | 10% | $1,300 | $1,952 | $1,954 | $1,969 | $2,938 | $2,970 | $3,002 | $3,050 | $3,098 | $3,138 | $3,178 | $3,258 |
| Financing Costs | Typical 2% one time points/fees for equity and debt needs, plus 6-8% interest on debt – DEVELOP WITH FUNDING STRATEGY | ||||||||||||
| TOTAL VARIABLE COSTS | $14,385 | $23,722 | $23,914 | $25,354 | $41,116 | $44,188 | $47,260 | $51,868 | $56,476 | $60,316 | $64,156 | $71,836 | |
| FIXED COSTS | |||||||||||||
| Intellectual Property (Q2 one time cost) | $15,000 | $15,000 | |||||||||||
| Permits/Regulatory (Q2 one time) | $500 | $500 | |||||||||||
| Company Formation/Financial Structure | $2,000 | $2,000 | |||||||||||
| IT, Website, Advertising and Application Platform Costs | $20,000 | $20,000 | |||||||||||
| Consultants | See above | $4,871 | $4,871 | $4,871 | $4,871 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| TOTAL FIXED COSTS | $6,871 | $40,371 | $4,871 | $4,871 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
| TOTAL COSTS | $21,256 | $64,093 | $28,785 | $30,225 | $41,116 | $44,188 | $47,260 | $51,868 | $56,476 | $60,316 | $64,156 | $71,836 | |
| GROSS PROFIT (EBITDA) | ($21,056) | ($62,993) | ($27,285) | ($25,725) | ($18,616) | ($12,888) | ($7,160) | $1,682 | $17,774 | $27,184 | $38,844 | $61,164 | |
| Cash Needs: | ($21,056) | ($62,993) | ($27,285) | ($25,725) | ($18,616) | ($12,888) | ($7,160) | $0 | $0 | $0 | $0 | $0 | |
| Cumulative Cash Needs (for Funding Strategy): | ($21,056) | ($84,049) | ($111,334) | ($137,059) | ($155,674) | ($168,562) | ($175,722) | ($175,722) | ($175,722) | ($175,722) | ($175,722) | ($175,722) | |
| LOW TECH/MKT VALUATION – Multiple of Annual EBITDA Year 3 | 6 | $869,801 | Note: Simple approach – more sophisticated techniques for valuation are available | ||||||||||
| HIGH TECH/MKT VALUATION – High Multiple of Annual EBITDA Year 3 | 10 | $1,449,668 | |||||||||||
Revenue Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 200 1100 1500 4500 22500 31300 40100 53550 74250 87500 103000 133000 Cost of Sales Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 21256.25 64092.75 28784.75 30224.75 41115.800000000003 44187.8 47259.8 51867.8 56475.8 60315.8 64155.8 71835.8 Gross Profit Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 -21056.25 -62992.75 -27284.75 -25724.75 -18615.800000000003 -12887.800000000003 -7159.8000000000029 1682.1999999999971 17774.199999999997 27184.199999999997 38844.199999999997 61164.2 Cumulative Cash Needs Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 -21056.25 -84049 -111333.75 -137058.5 -155674.29999999999 -168562.09999999998 -175721.89999999997 -175721.89999999997 -175721.89999999997 -175721.89999999997 -175721.89999999997 -175721.89999999997
Breakeven
Investment Needed
Sheet2
Sheet3
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