Business Plan
- Abstract
This document is presents a proposed five year financial model for ABC Energon, a business firm in the energy industry. The financial model through various statements will indicate how much cash will be required to start the business, an indication of projected expenses and revenues, source of funds for assets and operations and return on capital investment.
- Background
- Source of capital
The initial capital for ABC Energon is projected to be at $ 750,000.00 which shall be raised through Bank loans, bank over drafts, trade discounts, retained earnings, shares, credit facilities and government grants.
The table below is an indication of the expected amounts for financing capital.
The above amounts shall be used to finance start up costs such as legal costs to register the firm, leasing of establishing the manufacturing plant, leasing warehouses, acquiring transport fleet, hiring employee, raw materials, office block and necessary equipment.
- Cash flows projections
The strength of this business shall largely rely on how well its cash flows will be managed. This will ensure that the firm has enough cash to services customer orders, it is able to honor its bills and above all, that it doesn’t incur losses due to interest on pending bills.
The anticipated annual cash flows for firm in the next five years shall be as shown in Table II below:
With fixed costs expected to remain stable in the long run, the firm anticipates to achieve a stable cash flow with closing cash balance at the end of each year projected to have grown by 72% at the end of the fifth year.
- Balance sheet
The following balance sheet shows the projected assets and liabilities of ABC Energon at the beginning of its operations.
- Income Statement
The income statement provided below is a projection of revenues from selling activities less expenses giving the expected profits at the end of each year for the next five years. This income statement has been prepared with the assumption that the market competition and interest rates remains the same.
- Break even Analysis
Break even analysis is aimed at guiding the management to establish the level of production at which the firm will start earning profits with a view to plan on capacity utilization. Through break even analysis, the firm will be able to determine the volume of production required to cover all costs and whatever volume is produced above the break even analysis will now generate profits. This analysis is also important in determining the selling prices of their solar panels.
The table below is a summary indicating the expected break-even point to recover the firm’s expenses:
The selling Price per Solar Panel is expected to be at $150.00
The Break-even Units shall be = Total Fixed Costs
= 40000
150-100
= 800 Units
This therefore means that, ABC Energon will have to sell 800 solar panels so as to recover its expenses. Any more units above 800 units will be generating profits for the firm.
References
Bose, C. (2002). Principles of Management and Adminstration. New Delhi.
Calkins, T. (2008). Breakthrough Marketing Plans. Palgrave: Macmillan.
Cronk, T. & Hill, C. (2008). Global Business Today. McGraw-Hill Australia.
