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5.3 Promotion strategy
We will manage pet’s events in different places to promote our funeral services including:
1. Online Community website: We will provide some information to our possible new customers about services description, prices, alternatives, events and special promotions.
2. Magazines / Newspapers: We will advertise our services on newspapers and magazine, which are the better and cheaper way to let people know about us. Advertisement expenses will vary depending on customer’s demand.
3. Pet’s sport events: These events have been hosted for several years already and it is a smart way to introduce our services to people.
4. Press Interviews: We will arrange interviews with the media (press and magazines) to introduce our services to general public.
6. Financial Plan
6.1 Source of funds - First Month Startup expense
Pet’s Heaven Funeral Services will ask for a bank loan of USD25,000 and will raise an investment amount of USD 20,000.00 from founders for startup fund.
The fund will be used for the purchase of furniture, an industrial oven, car, computer, advertising & promotion expenses and the first month of operation.
The profit of the first years will be retained to fund future operation expenses.
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The first month startup expense includes the location and administration expenses which are the office rent which is $400 USD and its deposit (one month paid in advance), utilities expenses such as phone bills, internet, electricity, water, etc. Salaries won’t be taken into account until the business start gaining profit. The total source of fund would be for USD 45,000 while the first month expenses would be for a total of USD 27,290, leaving a difference of USD 17,710.00 for future operation reserve fund.
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Table 3. Startup expense
Pet's Heaven - First Month Startup Expense
Source of Capital
Partner's investment 20,000.00
total investment 20,000.00
bank loans 10,000.00
startup expenses
office equipment 8,000.00
Furniture 3,000.00
Car 15,000.00
others -
total capital equipment 26,000.00
location and admin expenses
Office rent 400.00
rent deposit 400.00
salaries -
maintenance 100.00
utility bills (electricity, water, gas) 250.00
telephone bill 40.00
other miscellaneous expense 100.00
total location and admin expense 1,290.00
summary statement
sources of capital 20,000.00
bank loans 10,000.00
total source of funds 30,000.00
startup expenses
capital equipment 28,000.00
location / administration expense 1,290.00
total startup expenses 29,290.00
reserve fund 710.00
6.2 Revenue Forecast
Pet’s Heaven categorizes its services into 5 different types by using their standard prices. Giving a realistic scenario, we won’t earn salaries the first
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year or until we start gaining real profit from the business, In the meantime we would have our own jobs and work on this project part time. The five-year sale forecast shows that the revenue is slowly growing from the first year, but grows constantly year by year. The amount of each year is shown in table 4 and figure 1.
Table 4. Revenue Forecast
5 years revenue forecast
Revenue Pick up Cremation Burial
Exhumation
Accessories Total Cremation
+ Burial
+ Ashes Cremation
2012 3,000.00 7,430.00 6,220.00 4,500.00 3,350.00 2,500.00 27,000.00 2013 4,200.00 9,800.00 8,600.00 6,200.00 4,200.00 3,000.00 36,000.00 2014 8,650.00 11,550.00 10,500.00 9,900.00 8,050.00 5,350.00 54,000.00 2015 9,550.00 13,400.00 12,800.00 10,600.00 10,150.00 6,500.00 63,000.00 2016 10,300.00 15,300.00 14,700.00 12,900.00 10,950.00 7,850.00 72,000.00
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Figure 1. Revenue Forecast
6.3 Revenue vs Expenses
Revenues are forecasted to be USD 27,000 in the first year, which is an average of 15 regular sales per month. We expect this quantity to increase year by year, to reach an amount of USD 72,000 revenues in the 5th year which is an average of 40 regular sales per month,
Expenses include utility bills (electricity and water), phone bills, gasoline expenses, rent, advertising expenses, wages & salaries
0.00 10,000.00 20,000.00 30,000.00 40,000.00 50,000.00 60,000.00 70,000.00 80,000.00
2012 2013 2014 2015 2016
Revenue Forecast
Revenue
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Table 5. Revenue vs Expenses
Year revenues expenses 2012 27,000.00 21,280.00 2013 36,000.00 21,280.00 2014 54,000.00 25,280.00 2015 63,000.00 29,620.00 2016 72,000.00 27,960.00
Figure 2. Revenue vs Expenses
6.4 Projected Cash Flow
Cash flow projection shows the outflow is steadily reducing from beginning of the second year and cash inflow is significantly increasing from beginning of third year. The major cash spent is on advertising & promotion, equipment purchases and utilities expenses as a service based business. From those expenses only utilities will remain constant regardless of the sales revenue,
0.00%
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while advertising & promotion will always vary year by year and equipment purchase are occasional expenses necessary to run the business at the beginning. The following table indicates the projected cash flow:
Table 6. Projected Cash Flow
6.5 Income Statement
The net profit for a service-based business is a reflection of the efficiency in which those services are offered. Panama has a quite low inflation rate, so we are not going to take it into consideration, we will assume the for the next 5 years, cost expenses and operating costs will increase as sales increases, phone bill, maintenance will not vary. The highest business expense will reach USD 25,780 by year 5 approximately.
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Wages are one of the crucial part in the cost budget. We will assume that there will be no wages expense until we start gaining at least a low amount of profit, then we will start taking it into account, probably starting in the end of the first year or the beginning of the second, depending on how the business performance goes.
With a realistic scenario in sales, business will start to make significant profit in the third year, and we expect to become more profitable afterwards.
Table 7. Income Statement
Pet's Heaven 5 years Forecast
year 1 year 2 year 3 year 4 year 5
Revenues 27,000.00 36,000.00 54,000.00 63,000.00 72,000.00 Operating cost 3,500.00 4,000.00 6,600.00 10,000.00 12,000.00 Operating gross profit 23,500.00 32,000.00 47,400.00 53,000.00 60,000.00
Expenses
Wages - 6,000.00 6,000.00 6,000.00 6,000.00
Utility bill 6,000.00 6,500.00 8,000.00 10,400.00 11,500.00
Phone bill 480.00 480.00 480.00 480.00 480.00
Rent 4,800.00 4,800.00 4,800.00 4,800.00 4,800.00
Advertising 10,000.00 6,000.00 6,000.00 3,000.00 3,000.00 Total expense 21,280.00 21,280.00 25,280.00 24,680.00 25,780.00 profit before tax 2,220.00 10,720.00 22,120.00 28,320.00 34,220.00
income tax 7% -750.40 -1,548.40 -1,982.40 -2,395.40
net operating profit 2,220.00 9,969.60 20,571.60 26,337.60 31,824.60
6.6 Breakeven Analysis
To review the project of Pet’s Heaven Funeral Services start up business, we analyzed the breakeven conditions and related financial indicators. The results show that the project’s initial investment will be recovered by the third year of
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running the business, the Net Present Value (NPV) is 29,007.09 and the IRR is 21%, which means the project is economically feasible to be implemented.
The cash generated by years is detailed in the following table Table 8. Breakeven Analysis
Breakeven Analysis
6.7 Legal consideration
For any legal affair, Pet’s heaven will outsource this service from a law firm when the service is needed.