Business Proposal for a Partnership Firm - Assignment Example

? BUSINESS PROPOSAL Table of Contents Table of Contents 2 Management Summary 3 Organizational Structure and the Management Team 3 Management Team Gaps 3 Personnel Plan 4 Financial Analysis 5 Important Assumptions 5 Key Financial Indicators 6 Projected Profit and Loss Statement 6 Projected Cash Flow Statement 7 Projected Balance Sheet 7 Long-term Plan 8 References 9 Management Summary Organizational Structure and the Management Team About Millimeters which is supposed to be a partnership firm with three partners involved in it. They are, Luz Angela Lopez, Christopher Mong, and Johnathan Douglass. These three would be the owner of the company and would be responsible for managing the company as a whole. They would hold the managerial positions in three separate departments and would work as full time employees of the company. Luz having experience in the field of procurement and budgeting would be responsible for the same. Christopher having experience in the field of operations management would be responsible for the daily operations and management of the company. The daily scheduling activities related to the store and the future requirements for the store, all would be managed by Johnathan. Apart from these three, other staffs would assist them in their job. The company would also hire specialists in each field of services that are supposed to be offered by the company. Initially the company would offer few of the proposed services for its customers, and then depending on the increase in demand of other services in the market, the company would hire more specialists to handle other service offerings of the company. In this way the management team of the company would be formulated to help in the utilization of its resources in a most effective way (Ernst & Young, 1997, p.11). Management Team Gaps As such, there are no significant weaknesses of the company regarding the technical knowledge and relevant business activities that are required to be performed to run the company successfully. However, the three owners of the company being new in this field of running a home improvement store business can prove to be disadvantageous for the company in managing its resources effectively and efficiently. In due course of time, this deficiency could be overcome easily through increased knowledge of running the business. Personnel Plan A well-constructed personnel plan has been developed for the company to help in running the business efficiently. The three owners of the company, apart from getting a share in the profits of the company will also receive remuneration for their respective managerial functions being conducted in the company. The personnel plan has been as such that it would include the three managers in the form of its owners, on cashier would be handling all business matters concerned with cash inflows and outflows of the company. Initially there would be four specialists meant for four different services to be offered by the company initially and they would be on-duty at all times during the business hours. The supporting staffs and workers would total around 8 to 10, working on an average every day. The personnel plan constructed for the company has been summarized in the table give below (Table - 1). It includes the first five years’ forecasted figures regarding the salaries and wages of the employees of the company. Table – 1 (Personnel Plan)   Year 1 Year 2 Year 3 Year 4 Year 5             Luz Angela Lopez 50,000 55,000 60,000 65,000 65,000 Christopher Mong 45,000 50,000 55,000 60,000 60,000 Johnathan Douglass 40,000 45,000 50,000 50,000 50,000 Specialists 100,000 125,000 150,000 175,000 200,000 Cashier 20,000 22,000 24,200 26,620 29,282 Others 10,000 11,000 12,100 13,310 14,641 Total Payroll 265,000 297,000 339,200 376,620 404,282 Total Personnel 15 18 20 22 22 Financial Analysis Seating up of the About Millimeters business concern would require a significant amount of investment initially. The major portion of this initial funding would be borne by the three owners of the company. Rest of the money would come from bank loan financing. The bank financing would be mostly mortgage loans for the company buildings, store and the computers that would be in use during its operations. The forecasted sales are expected to be low in the initial years but would increase gradually. The gas revenues generated in the business would be utilized the cash expense requirements of the company. Financial plans are generally prepared which are characterized being conservative in nature (Palo Alto Software Inc., 2002, p.15). Important Assumptions The financial analysis of the proposed business plan requires certain key assumptions to perform the related financial calculations. Those assumptions are mentioned below: The bank loans are assumed to carry an interest expense for the company at a constant rate of 5% p.a. The tax rate is assumed to be 30% p.a. The rate of depreciation of the fixed assets of the company is assumed to be 10% calculated using a straight line method of depreciation. All the income and expenditure figures for various items mentioned in the projected financial statements of the company have been assumed after carrying on extensive market research regarding the same. Key Financial Indicators The important financial performance indicators of the company are mentioned below: Projected Sales The projected sales figures have been arrived at after taking into consideration the potential demand of the services that will be offered by About Millimeters in accordance with the market research conducted by the company. The sales figures are expected to increase on a constant basis during the initial five years of operating of the business Gross Margins The gross margin of the company sales is expected to increase for the first three years and then become almost constant for the fourth and fifth years. Operating Expenses The operating expenses of the company are expected to rise at a steady rate. The payroll expenses are considered to be the major constituents of the operating expenses of About Millimeters. Projected Profit and Loss Statement   Year 1 Year 2 Year 3 Year 4 Year 5 Sales 900,000 990000 1089000 1197900 1317690 Cost of Sales 452,140 414,987 314,175 344,916 392,963 Gross Profit 447,860 575,013 774,825 852,984 924,727  Gross Margin %  49.76%  58.08% 71.15%  71.21% 70.18 Expenses           Payroll 265,000 297,000 339,200 376,620 404,282 Depreciation 28,000 28,000 28,000 28,000 28,000 Advertising 15,000 18,000 21,000 23,000 25,000 Utilities 8,000 8,250 8,500 8,750 9,000 Insurance 9,032 9,336 9,566 9,734 9,887 Others 12,000 14,000 15,000 17,000 18,000 Total Operating Expenses 337,032 374,586 421,266 463,104 494,169             EBIT 110,828 200,427 353,559 389,880 430,558 Interest Expenses 47,158 41,738 35,767 29,160 22,212 Profit Before Tax 63,670 158,689 317,792 360,720 408,346 Taxes 19,101 47,607 95,338 108,216 122,504 Net Profit 44,569 111,082 222,454 252,504 285,842 Projected Cash Flow Statement   Year 1 Year 2 Year 3 Year 4 Year 5 Cash Sales 900,000 990,000 1,089,000 1,197,900 1,317,690             Cash Spending 247,425 267,564 293,454 315,429 328,221 Bill Payments 457,046 603,991 664,098 735,113 824,400 Repayment of Loan 55,529 68,445 71,448 75,358 78,669             Net Cash Flow 140,000 50,000 60,000 72,000 86,400 Cash Balance 250,000 300,000 360,000 432,000 518,400 Projected Balance Sheet   Year 1 Year 2 Year 3 Year 4 Year 5 Assets           Current Assets           Cash 250,000 300000 360000 432000 518400 Inventory 310,000 300,000 340,000 385,000 410,000 Other Current Assets 25,500 25,500 25,500 25,500 25,500 Total Current Assets 585,500 625,500 725,500 842,500 953,900 Long-term Assets           Long-term Assets 280,000 280,000 280,000 280,000 280,000 Accumulated Depreciation -28,000 -56,000 -84,000 -112,000 -140,000 Total Long-term Assets 252,000 224,000 196,000 168,000 140,000 Total Assets 837,500 849,500 921,500 1,010,500 1,093,900             Liabilities           Current Liabilities           Accounts Payables 140,000 190,000 210,000 215,000 220,000 Total Current Liabilities 140,000 190,000 210,000 215,000 220,000 Long-term Liabilities 297,500 259,500 311,500 395,500 473,900 Partners' Capital 400,000 400,000 400,000 400,000 400,000 Total Liabilities 837,500 849,500 921,500 1,010,500 1,093,900 Long-term Plan The long-term plan of the company would be to expand its business in different parts of Florida. Then it would move to other parts of United States. The company would utilize its core competency in the home improvement industry to achieve competitive advantage in the market. It needs to be innovative in developing innovative type of services for its customers related to the concerned industry. Such a step will ensure that the company can retain its customers and attract new ones to boost the profitability. Later on, it can turn into a public company and raise capital through issue of shares to the public after it has a developed a good brand value of its services. All these factors would lead the company to become sustainable in future. References Ernst & Young. (1997). Outline for a Business Plan. Retrieved from http://www.uic.edu/cba/ies/C2V/EYplan.pdf. Palo Alto Software Inc. (2002). Acme Consulting – Sample Plan. Retrieved from http://www.rowan.edu/colleges/business/cie/documents/HiTechConsulting_BP.pdf. Read More