C4 Auto Brokers Business Plan - Essay Example

C4 Auto Brokers Business Plan A. Executive Summary A1. Business Identification: There is a need in Orlando for a large selection of attractively priced and quality used economy cars, and C4 Auto Brokers will sell these quality used vehicles at a competitive price. The owners (John and Yesenia Courtney) have several years of sales experience and have developed a professional relationship with a successful used car dealer who is willing to sublease part of his location on S. Orange Blossom Trail (near O.B.T. and Colonial Drive). C4 Auto Brokers will purchase vehicles from the auto auctions in Orlando (Mannheim) and Sanford. The business will focus purchasing and re-selling used Asian economy cars, with an emphasis on reliable models (i.e. Toyota Camry, Nissan Sentra, Honda, etc.) Advertising will be focused on Craigslist and Auto Trader. The company initially will only offer cash sales and indirect financing sales (i.e. credit unions, banks, etc.); utilizing a floor plan financing structure. At a later date, once the company’s liquidity has been increased, the business model is cash flow positive, and a lending consultant has been contracted; the company might offer some in-house financing (i.e. buy here, pay here). A2. Mission, Goals, and Objectives: Mission Statement C4 Auto Brokers will provide an enjoyable car buying experience for its customers by focusing on honesty, professionalism, car quality, and reasonable pricing. Following these values will maximize the customer’ satisfaction and produce an attractive profit for the owners. Goals The reasons why C4 Auto Brokers will be successful include: 1) The vehicles will be priced at very moderate levels (with an average retail price of $3,200) 2) The car inventory will be very carefully selected for its sales appeal, affordability, and quality (all vehicles will be inspected by a mechanic prior to purchase) 3) The staff will offer a pleasant car buying experience 4) The location is a heavily trafficked location in a densely populated and low-income area 5) The current location has been utilized by a used car supplier for many years and the point is familiar to many people both in the neighborhood as well as commuters. The reasons why C4 Auto Brokers has good timing include: 1) America’s standard of living is under pressure, with several American families living paycheck to paycheck. This means more American families will fall into the profile of used car purchasers and potential buy here/pay here consumers. In addition, as the value of the dollar erodes (i.e. the cost of living rises), families feel the pressure to reduce all expenses. This is the reason why used car sales have been increasing in the U.S. 2) Short-term and long-term interest rates will likely upsurge in the impending future, as the current operational Federal Reserve reduces down the purchasing of U.S. debt (meaning that U.S. bonds will be increasingly sold on the open market). This makes new vehicle financing more expensive and less attractive to consumers. The firm estimates that it needs $100,000 in capital to adequately fund the business start-up. $50,000 will be provided by the floor plan financing and $50,000 will be provided by the owners. A reduced amount of $75,000 in capital could be used to fund the business, which would allow the business to have enough capital for three months (as an evidence that it has become self-sufficient as a business model). The floor plan financing structure is estimated at 24% interest annually (i.e. $50/month for a $2,500 vehicle). The vehicles have an average cost of $2,625 ($2,500 purchase and $125 improvements), with an average sales price of $3,200. Eight cars are projected to be sold in the 1st month, rising to fifteen cars sold in the 12th month. The business is expected to be profitable by the 3rd month. In year 1, the business is projected to produce $416,000 in sales and a $14,000 net profit. By the end of year 5, the business is projected to produce $609,000 in sales and a $43,000 net profit. Chart: Projected Performance Objectives 1. 100% customer satisfaction, measured through repeat customers, referrals, and surveys.   2. Produce a $14,000 net profit at the end of year 1.   3. Produce a $43,000 net profit at the end of year 5. A3. Keys to Success: 1. Carefully select quality cars to purchase that have strong sales potential, that pass a stringent mechanic’s examination, and that can offer a reasonable profit. 2. Build effective advertising campaigns and attractive signage that attracts a heavy traffic of customers to the business. 3. Ensure customer satisfaction by focusing on the important values: honesty, professionalism, car quality, and reasonable pricing. B. Company Summary B1. Industry history C4 Auto Brokers will be operating in the automotive industry, an industry that has lately been associated with stiff competition and great innovation. However, rather than manufacturing automobiles as done by many players in this industry, C4 Auto Brokers will concentrate on reselling of automobiles. Considering its revenues, it is one of the world’s most imperative economic segments. The industry started in 1890s after hundreds of manufacturers pioneered the horseless carriage which is perceived to be a breakthrough in motor vehicle invention, production and selling. Prior to the great depression, US produced 90% of the total automobiles in the world which was approximated to be about 32,028,500 (Pride, 2011). By the 1980s, Japan had greatly ventured into the industry and was slowly outdoing the US in production of automobiles. In the early 2000s, China rose to become another world producer of automobiles with 13.8 million units, a figure that the US can hardly achieve. Additionally, Germany too has its part in the automobile industry contributing greatly to the growth and development of the industry. The industry is deemed as one of the most lucrative yet risky sectors with major players such as Chrysler, Honda Motor Co, General Motors, Toyota Motor Co and Ford Motor Co. With the aforementioned giant automobile manufacturers, the industry has undergone various challenges but has ultimately emerged as one of the most money-spinning sectors, particularly in the recent years. The increase in competition is partly attributed to globalization and partly on changing consumer tastes and preferences. In most cases, this competition has disadvantaged domestic car manufactures as they hardly have the aptitude to subcontract low-cost industrial processes, and regulate quality and quantity. Considering the importance of safety in the industry, the standard ISO 26262 was embraced to ensure that environmental safety is maintained by automobile manufacturers. The operators, users, manufacturers, or overall society should not face any risk resulting from delinquency or imprecision. Considering the sheer fact that the automobile industry contribute to more than 25% of a country’s GDP in developed countries, there has been increasing calls to regulate the industry and ensure that the kind of competition that exists is healthy. Nevertheless, this has not been the incident in many instances and competitors often smear the names of industry players as a way of destroying their reputation and in turn gain a greater market share. However, analysts indicate that the industry’s potential is still unexploited and more can be realized in this very competitive industry. B2. Legal form of ownership C4 Auto Brokers will be owned and managed by John and Yesenia Courtney. The business will be organized as an S Corporation (name and federal employment number to be established). Upon obtainment of the federal number, te business will strive to operate as per regulations guiding operations of corporations as clearly stipulated in the Companies Act of 2006. B3. Location and facilities The lot is located at S. Orange Blossom Trail (near O.B.T. and Colonial Drive). C4 Auto Brokers will purchase vehicles from the auto auctions in Orlando (Mannheim) and Sanford. Before the AFI (automotive facilities inspector) provides a MV-50s certificate, certificate of registration and a dealer letter, important facilities must be availed. This include desk, chairs, electricity, heat, business phone, locking cabinet and safes, separating display offices and signs, dealer starter kit and a mailbox. The dealer starter kit will have various components including Odometer Statements, Book of Registry, Warranty Forms and Bills of sale. With this facilities and the stock in the display lot, C4 Auto Brokers will be read to venture into the dynamic world of business. B4. Management structure John and Yesenia Courtney will be assisted by a chairman, vice-president, board of directors and a CEO. Below the CEO will be accounts and sales person who will ensure smooth flow of activities. From time to time, the top management, John and Yesenia Courtney, will delegate as need be. The organizational structure is illustrated below; B5. Products and services The business will focus purchasing and re-selling used Asian economy cars, with an emphasis on reliable models. The vehicles have an average cost of $2,625 ($2,500 purchase and $125 improvements) and an average retail price of $3,200. Additionally, these cars will be of a good quality that will guarantee the customers a lasting experience. Venturing into the industry without provision of outstanding services to complement the products offered will be an inadequate and half-finished venture. Hence, C4 Auto Broker will offer services such as consultation and reparation or maintenance services. C. Market Analysis C1. Target Market Greater Orlando is commonly referred to as the Orlando metropolitan area. Kissimmee, Orlando and Sanford stands out as its principal cities and have always attracted the attention of businessmen. According to the Office of Management and Budget, Orlando consists of various counties that include Seminole, Orange, Lake and Osceola. Apparently, its median inhabitant’s age is 32.8 years, which is significantly younger than the state’s median age of 41.3 years. The median Orlando household income in 2011 was $40,275, lower than the state’s median household income of $44,299. Puerto Ricans contribute to a greater part of Orlando’s population. Between 1980 and 2010, Hispanic population share in Orlando escalated from 4.1% to a staggering 25.4%. Moreover, Orlando has a large and increasing population of Caribbean, with a recognized Haitian community and a West Indian community (consisting of Trinidadian and Tobagonians as well as Jamaicans). Customer Profile: Consumers The business’ customer base fall into the following categories: The retired group: this group is concerned with practicality and quality while price is of little importance. This group wants durability, nicely equipped and comfortable vehicles at a rational price. A vehicle that lasts for years will definitely be attractive to this category of customers (MARKETING PLAN AND PROPOSAL FOR KIA MOTORS LIMITED, n.d.). Students: this group will consist of college and high school age students in need innocuous and cost-effective cars. Being cool, flashy looks and price are major factors that this group is concerned with and the business will strive to meet these expectations and ensure that the business increases its sales. The singles. Just like the students, they want ostentatious cool cars. However, unlike students, they might be working and this enables them to pay more for a vehicle whose quality is outstanding (MARKETING PLAN AND PROPOSAL FOR KIA MOTORS LIMITED, n.d.). Families: they will emphasis on innocuous and practical vehicles. The cars that they are interested in are those that can fetch groceries, perform long trips, carry the kids, and last for years. Price is a determinant factor since most of them operate on a budget. Most of them will be guided by their budgets hence price will be a big element to consider. They will look for specific models that suit them. C2. Industry Analysis The following reasons point to a strong potential market for a used car dealer: Most Americans face an uncertain job market and spending is becoming tighter. As such more Americans are expected to seek services from used-car dealers this year. A large percentage of Americans are living paycheck-to-paycheck, with little to no emergency savings. After meeting financial obligations, many people do not have enough money to save for buying a new car. The important point is that more Americans will be relying on using older cars, meaning that more repair and maintenance costs should be expected. Also, since the population has less disposable income; they’ll be attracted to the idea of purchasing a reasonably priced high quality used car. C3. Competitive Analysis The two significant fundamental needs for used car customers are; large supply of accessible cars and eminent, quality cars at reasonable prices. Considering the present economic conditions, the need of used-car dealers who can offer professional services and quality cars in a pleasant shopping environment and competitive prices is on the increase. Due to increasing unscrupulousness of many used-car dealers, customers are becoming continuously cautious. To change the common perception, we will provide a pleasant and personal experience for the consumer. A follow up shall regularly be made to ensure that customers are satisfied with the cars offered as well as the services provided and this will help us improve our services and meet the market expectations. C4 Auto Broker will build a tremendous working relationship with its customers and suppliers. Used car sales dealers are numerous and most are small or medium size businesses. In the industry, quality and sales personnel are not always adequately compensated are on constant moves from dealer to dealer. We shall circumvent this scenario by properly compensating our sales team. Commission and salaries shall be administered on a fair basis performance being the determinant. The firm competes primarily against other small used car lots including Car Buyer's Market, Ca$h for Car$, Cash4UsedCars.com and Car Cash. These companies are projected to make about $12.6 million annually each and a 12.25% annual revenue growth. However, as most of the companies in this industry operate online, C4 Auto Broker will offer a unique service by offering services out of the internet considering that some customers may not access the internet to do online shopping. C4 Auto Broker’s use of reasonable pricing, attractive car selection, and friend and honest customer service will provide a strong competitive advantage. D. Market Strategy D1. 4Ps Product The firm will offer a selection of quality of used vehicles and reasonable prices. C4 Auto Brokers will purchase vehicles from the auto auctions in Sanford and Orlando. The business will repurchase and resell Toyota models and Honda models and offer them to the customers after improving the overall status of the cars and guarantee shoppers a lasting experience. The customers will quickly notice the difference in the car shopping/buying experience being more pleasant. Moreover, the services offered will be friendly, personal, and professional thus attracting more customers. The average price of $3200 per car will be lower compared to the current market prices and will consequentially create a competitive advantage considering the quality that customers will gain from usage of the cars. Place The main base of operation will be the open lot at S. Orange Blossom Trail. The car lot will offer an attractive selection of quality used cars that can meet a family or individual’s budget. Moreover, during times of higher demand, our services and products will be assessable from lots operated be friends and this shall be effected through franchising that shall allow contracting of some activities. C4 Auto Brokers will also operate a website from where potential customers can view the products sold and services offered and intends to allow customers the opportunity to make their orders online within 1 year after the commencement of business. Additionally, C4 Auto Broker will network with various distributors and suppliers who will enable it obtain the used cars as well as distribute the cars to the required destinations. Orders shall be handled as soon as possible since C4 Auto Broker will embrace the lean strategy where services are customer centered and demand driven. Price The cars will be offered to customers at a price of approximately $3200 which is affordable to the target middle class and lower income consumers that make up a large chunk of the Orlando metropolitan. Similarly, services will be offered at a low rate of as low as $100 which is 27% below the prevailing market rates. At some instances, the markup and differentiation pricing strategies will also be supplemented by cash rebates pricing and later adopt the loss leader pricing strategy after the business is well established and in times of recessions or market failures. Promotion Since customers are an important component in the success of the business, they will be treated with utter diligence and respect that will create an experience and ambiance of wanting to return, factors that will help C4 Auto Broker create a profound and strong customer-base, composed of loyal customers (Pride, 2011). To raise consumer awareness, C4 Auto Broker will utilize TV advertisements, billboards, neon light ads and billboards around the street. This will make the business more familiar and customers will confidently walk into the display lot to select cars that fit their specific needs, preferences and tastes. D2. Price list The price list of the some of the products and services offered is shown below; Service/product Selling price ($) Toyota Camry 3100 Honda 3250 Toyota FJ Cruiser 3400 Jeep Wrangler 2800 Nissan Sentra 2300 Chevrolet Camaro 4000 Servicing 350 Consultation 100 D3. Selling strategy C4 Auto Broker will combine two marketing strategies: company differentiation and completed confidence that gives the customer a unique experience. In selling the cars, we shall ensure that the buying process is easy and convenient for the benefit of the customer and the disadvantage of competitors. In the display lot, extreme confidence shall be exhibited particularly when handling customers. Sales personnel shall strive to convince the customers that they will be crazy or foolish to buy from someone else and this will eventually win the heart of savvy customers (Pride, 2011). With this selling strategy, the following shall be achieved; Sale 8 cars within the first month of business Sell 15 cars monthly by the end of 1 year. Generate sales revenues worth $416,000 and a $14,000 net profit within the first year. Produce $609,000 in sales and a $43,000 net profit by the end of the 5th year. The aforementioned goals, milestones and objectives will enable the business to ensure that it is always in line with the inventors’ objective of maximizing profits and sales through delivery of outstanding services and products. D4. Sales forecast Year Cars sold Sales value($) Net profit ($) 1 130 416000 14000 2 146 467200 20700 3 168 537600 29144 4 181 579200 36900 5 191 609000 43000 Any deviation of above 2.5% from the above objectives shall necessitate stoppage of activities so that the real cause of the deviation can be ascertained and corrective action taken (Horngren et al., 2008). Moreover, most selling activities shall be outsourced to friends as a way of diversifying the sales team and winning more customers. E. Implementation Strategy E1. Overall Strategy C4 Auto Broker plan will be implemented with special consideration to the micro and macro environment including legal provisions. The $100,000 initial capital will be raised through owners’ contribution and floor plan financing on a fifty-fifty basis. The owners (John and Yesenia Courtney) will be the managers of the business on a daily basis. They have several years of sales experience and have developed a professional relationship with a successful used car dealer who is willing to sublease part of his location on S. Orange Blossom Trail (near O.B.T. and Colonial Drive). John and Yesenia Courtney are both successful Orlando real estate property managers. This position has allowed them to gain in-depth insight into the middle and lower income classes of Orlando, as well as the demographic profiles of the inhabitants. John is a decently discharged past master of the U.S. Marine Corps. The strategy is to offer quality used cars at reasonable prices with honest and professional customer service. John and/or Yesenia Courtney will be on the lot during business hours to ensure that customers are well taken care of. If necessary, the nearby used car dealer (friend of John and Yesenia) can manage the lot for short intervals. However, provision of outstanding products and services shall be C4 Auto Broker’s objective from the day it will be launched. E2. Implementation The business shall be launched on 20th January 2015 with a main objective of taking advantage of the early year sales and the January effect where stocks are cheap. It will be launched in the open lot and several dignitary individuals shall be invited to witness the launching. Moreover, it will be aired on national and intercontinental media as a way of commercializing it. E3. Control plan Rather than assessing deviations, the business’ performance shall also be evaluated and controlled through financial ratios including; 1. ROI = (Gain from investment-cost of investment)/cost of investment 2. Operating margin = operating income/sales x 100% 3. Gross margin = gross profit/sales x 100% 4. Profit margin = net income/sales x 100% (Horngren et al., 2008). Regular determination of these ratios will enable the managers to gauge the business’ performance and take corrective action when deviation is noted. Moreover, impending losses resulting from market fiascos shall be circumvented through insuring the lot and all cars in display (Horngren et al., 2008). F. Financial Statements and Projections F1. Revenue and Cost Estimate- Sales Forecast Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Unit Sales Sales 8 8 9 9 10 10 11 11 12 13 14 15 Other Income 0 0 0 0 0 0 0 0 0 0 0 0 Total Unit Sales 8 8 9 9 10 10 11 11 12 13 14 15 Unit Prices Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Sales $3,200.00 $3,200.00 $3,200.00 $3,200.00 $3,200.00 $3,200.00 $3,200.00 $3,200.00 $3,200.00 $3,200.00 $3,200.00 $3,200.00 Other Income $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Sales Sales $25,600 $25,600 $28,800 $28,800 $32,000 $32,000 $35,200 $35,200 $38,400 $41,600 $44,800 $48,000 Other Income $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Sales $25,600 $25,600 $28,800 $28,800 $32,000 $32,000 $35,200 $35,200 $38,400 $41,600 $44,800 $48,000 Direct Unit Costs Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Sales 82.00% $2,624.00 $2,624.00 $2,624.00 $2,624.00 $2,624.00 $2,624.00 $2,624.00 $2,624.00 $2,624.00 $2,624.00 $2,624.00 $2,624.00 Other Income 0.00% $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Direct Cost of Sales Sales $20,992 $20,992 $23,616 $23,616 $26,240 $26,240 $28,864 $28,864 $31,488 $34,112 $36,736 $39,360 Other Income $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Cost of Sales $20,992 $20,992 $23,616 $23,616 $26,240 $26,240 $28,864 $28,864 $31,488 $34,112 $36,736 $39,360 The business’ financial position at the end of Y1 is indicated below; C4 Auto Broker statement of financial position at the end of year 1 Year 1 Assets Current Assets Cash $73,563 Inventory $78,720 Other Current Assets $0 Total Current Assets $152,283 Long-term Assets Long-term Assets $2,500 Accumulated Depreciation $0 Total Long-term Assets $2,500 Total Assets $154,783 Liabilities and Capital Year 1 Current Liabilities Accounts Payable $48,003 Current Borrowing $50,000 Other Current Liabilities $0 Subtotal Current Liabilities $98,003 Long-term Liabilities $0 Total Liabilities $98,003 Paid-in Capital $50,000 Retained Earnings ($7,500) Earnings $14,280 Total Capital $56,780 Total Liabilities and Capital $154,783 Net Worth $56,780 The amount in cash in Y1 ($73,563) is in line with the projected annual sale for Y1. The $48000 is projected sales for the 12th month of Y1 and not the whole year. F2. Forecasted Profit and Loss Statement Pro Forma Profit and Loss Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Sales $25,600 $25,600 $28,800 $28,800 $32,000 $32,000 $35,200 $35,200 $38,400 $41,600 $44,800 $48,000 Direct Cost of Sales $20,992 $20,992 $23,616 $23,616 $26,240 $26,240 $28,864 $28,864 $31,488 $34,112 $36,736 $39,360 Total Cost of Sales $20,992 $20,992 $23,616 $23,616 $26,240 $26,240 $28,864 $28,864 $31,488 $34,112 $36,736 $39,360 Gross Margin $4,608 $4,608 $5,184 $5,184 $5,760 $5,760 $6,336 $6,336 $6,912 $7,488 $8,064 $8,640 Gross Margin % 18.00% 18.00% 18.00% 18.00% 18.00% 18.00% 18.00% 18.00% 18.00% 18.00% 18.00% 18.00% Expenses Marketing/Promotion $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 Rent (sublease) $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 Web Page Maintenance $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 Travel Expense-Auctions $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 Lot/Inventory Cleaning $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 Phone/Net $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 Liability Insurance $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 Total Operating Expenses $4,050 $4,050 $4,050 $4,050 $4,050 $4,050 $4,050 $4,050 $4,050 $4,050 $4,050 $4,050 Profit Before Interest and Taxes $558 $558 $1,134 $1,134 $1,710 $1,710 $2,286 $2,286 $2,862 $3,438 $4,014 $4,590 EBITDA $558 $558 $1,134 $1,134 $1,710 $1,710 $2,286 $2,286 $2,862 $3,438 $4,014 $4,590 Interest Expense $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 Taxes Incurred $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Net Profit ($442) ($442) $134 $134 $710 $710 $1,286 $1,286 $1,862 $2,438 $3,014 $3,590 Net Profit/Sales 1.73% 1.73% 0.47% 0.47% 2.22% 2.22% 3.65% 3.65% 4.85% 5.86% 6.73% 7.48% F3. Forecasted Balance Sheet- Pro Forma Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5 Assets Current Assets Cash $73,563 $90,923 $115,678 $146,246 $184,779 Inventory $78,720 $68,793 $75,672 $83,239 $91,563 Other Current Assets $0 $0 $0 $0 $0 Total Current Assets $152,283 $159,716 $191,350 $229,485 $276,342 Long-term Assets Long-term Assets $2,500 $2,500 $2,500 $2,500 $2,500 Accumulated Depreciation $0 $0 $0 $0 $0 Total Long-term Assets $2,500 $2,500 $2,500 $2,500 $2,500 Total Assets $154,783 $162,216 $193,850 $231,985 $278,842 Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5 Current Liabilities Accounts Payable $48,003 $35,126 $39,715 $43,291 $47,216 Current Borrowing $50,000 $50,000 $50,000 $50,000 $50,000 Other Current Liabilities $0 $0 $0 $0 $0 Subtotal Current Liabilities $98,003 $85,126 $89,715 $93,291 $97,216 Long-term Liabilities $0 $0 $0 $0 $0 Total Liabilities $98,003 $85,126 $89,715 $93,291 $97,216 Paid-in Capital $50,000 $50,000 $50,000 $50,000 $50,000 Retained Earnings ($7,500) $6,780 $27,090 $54,135 $88,694 Earnings $14,280 $20,310 $27,045 $34,559 $42,932 Total Capital $56,780 $77,090 $104,135 $138,694 $181,626 Total Liabilities and Capital $154,783 $162,216 $193,850 $231,985 $278,842 Net Worth $56,780 $77,090 $104,135 $138,694 $181,626 Note: earnings account records the income generated from the operations of the business while retained earnings account records the amount of the net income that the business does not distribute to shareholders but rather holds it for further investment in business operations (Horngren et al., 2008). G1. Financial Projections G1a- Breakeven Point- Break-even Analysis Monthly Units Break-even 7 Monthly Revenue Break-even $22,500 Assumptions: Average Per-Unit Revenue $3,200.00 Average Per-Unit Variable Cost $2,624.00 Estimated Monthly Fixed Cost $4,050 Financial Assumptions 1) $100,000 in capital is needed, $50,000 is provided by the floor plan financing, and $50,000 in provided by the owners. 2) The owners could reduce their investment to $25,000 and still have approximately 3 months of operating expenses (i.e. give the business 3 months to prove that it can produce sufficient cash flow to be sustainable) 3) The floor plan financing is estimated at 24% annually ($50/month for a $2,500 vehicle) 4) The vehicles have an average cost of $2,625 ($2,500 purchase and $125 improvements) and an average retail price of $3,200. 5) The projection assumes that monthly sales grow from 8 cars in the 1st month to 15 cars in the 12th month. 6) Two large monthly operating expense (lot rent of $1,500 and lot/inventory cleaning of $1,200) are expenses that could be used for hiring a part-time employees (assuming that the lot rent or lot/inventory cleaning expense could be reduced). 7) The business in unprofitable for the 1st two months. 8) The business needs to sell 9 cars per month in order to break-even (it will produce a small profit with the sale of 9 cars). G1c-Capital/Investment Needs: Startup Startup Expenses Legal $300 Website, Social Media, Brochures $1,600 Initial Advertising $3,000 Rent Deposit $2,000 Supplies $600 Total Startup Expenses $7,500 Startup Assets Cash Required $40,000 Startup Inventory $50,000 Long-term Assets $2,500 Total Assets $92,500 Total Requirements $100,000 Loan Amount (Floor Plan Financing, est. 24%) $50,000 Owner’s Investment $50,000 References Horngren, C. T., Harrison, W. T., & Oliver, M. S. (2008). Accounting. Upper Saddle River, N. J: Prentice Hall. Pride, W. M. (2011). Marketing principles. South Melbourne, Vic: Cengage Learning. MARKETING PLAN AND PROPOSAL FOR KIA MOTORS LIMITED. (n.d.). Retrieved from http://finalprojects4.blogspot.com/2013/01/marketing-plan-and-proposal-for-kia.html Read More