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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 business’s 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 owner’s 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 assets | Fixed assets | Intangible assets | ||||||
| Depreciation | Depreciation | Depreciation | ||||||
| 2003 | 2004 | 2005 | 2003 | 2004 | 2005 | 2003 | 2004 | 2005 |
| 33% | 45% | 15% | 33% | 45% | 15% | 33% | 45% | 15% |
| 33% | 45% | 33% | 45% | 33% | 45% | |||
| 33% | 33% | 33% | ||||||
Accumulated depreciation | Accumulated depreciation | Accumulated 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 assets | Costs | |||
| Pessimistic | Realistic | Optimistic | Most probably | |
| a computer | $550,00 | $500,00 | $450,00 | $500,00 |
| a monitor | $275,00 | $250,00 | $225,00 | $250,00 |
| a modem | $96,00 | $80,00 | $66,06 | $80,34 |
| a printer | $180,00 | $150,00 | $135,00 | $152,50 |
| the database | $1 040,00 | $650,00 | $325,00 | $660,83 |
| Other software | $400,00 | $150,00 | $10,00 | $168,33 |
| office equipment | $220,00 | $200,00 | $180,00 | $200,00 |
| a telephone/fax | $100,00 | $90,00 | $80,00 | $90,00 |
| Total: | $2 861,00 | $2 070,00 | $1 471,06 | $2 102,01 |
Working 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 assets | Costs | ||
| Pessimistic | Realistic | Optimistic | |
| Paper | $36,00 | $24,00 | $13,00 |
| Cartridges | $27,50 | $25,00 | $22,50 |
| Writing implements | $15,00 | $12,71 | $7,14 |
| Total: | $78,50 | $65,71 | $42,64 |
Basing 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:
-
The share of the ''Irkutskiy'' market will decrease, as there will appear some competitors.
| 2003 | 2004 | 2005 |
| 45% | 43% | 41% |
The amount of purchases a day in average in the "Irkutskiy" market:
in items
| 2003 | 2004 | 2005 |
| 193 | 219 | 242 |
-
The share of the the ''Fortuna'' martet will decrease as there will appear some competitors.
| 2004 | 2005 |
| 12% | 10% |
The amount of purchases a day in average in the "Fortuna" market:
in items
| 2004 | 2005 |
| 61 | 59 |
-
The share of the ''Complex'' market will stay constant.
| 2005 |
| 19% |
The amount of purchases a day in average in the "Complex" market:
in items
| 2005 |
| 112 |
The assumed amount of potential clients that will use my database:
Share:
| 1 year | 2 year | 3 year |
| 50% | 70% | 85% |
The amount of potential clients a day
| 2003 | 2004 | 2005 |
| 29 | 59 | 105 |
The amount of potential clients a year:
| 2003 | 2004 | 2005 |
| 10650 | 21488 | 38481 |
The projected sales price
| 2003 | 2004 | 2005 |
| $0,80 | $0,84 | $0,88 |
Advertisement expenses
| 2003 | 2004 | 2005 | |
| Printed materials | $347 | $303 | $265 |
| News papers | $312 | $328 | $344 |
| Total: | $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:
| 2003 | 2004 | 2005 | |
| Salary | $200 | $210 | $221 |
A year:
| 2003 | 2004 | 2005 | |
| Salary | $2 400 | $5 040 | $15 876 |
Rent Expense Estimation
Rent, a year
| 2003 | 2004 | 2005 | |
| ``Irkutskiy`` market | $1 600,00 | $1 680,00 | $1 764,00 |
| ``Fortuma`` market | $1 800,00 | $1 890,00 | |
| ``Complex`` market | $3 200,00 | ||
| Total | $1 600,00 | $3 480,00 | $6 854,00 |
MANAGEMENT PLAN
As I plan to organize small venture, I decided to use simple structure for management.
Manager
Consultant 1
Consultant 2
Consultant 3
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