8 Financial Projection
8.4 Break Even Analysis
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contingencies 200,000
License
Health permit 1,500
2,800
Business License 1,300
Total 1,194,800
8.4. Break Even Analysis
Due to our product is invisible, and our physical product will sale along with invisible product.
It's not necessary for a customer to buy physical product. There won't be any variable expenses and our contribution margin will be 1. That means when our revenue is equal fixed cost, we break even. That means the break-even point for the first two years will be 1,008,000 and will be 972,000 after two years. That means we will need to serve 3,930 customers each year for the first two years, and 3,600 customers every year after two years. On average, we need 15 customers per day for the first two years, and 14 customers per day after two years to meet the breakeven point.
Table 17 Fixed cost without amortization & depreciation
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Description
First two years After two years
Year Year
Animal staff salary 180,000 180,000
Rent 240,000 240,000
Utilities 156,000 156,000
Salary 396,000 396,000
Promotion 36,000 0
Total 1,008,000 972,000
Break even sales for first two years = 1,008,000 Break even sales after first two years =972,000
Break even units for first two years = 1,008,000/(270*(1-5%))=3,930 Break even units after first two years = 972,000/270=3,600
Break even No. of customers for first two years=3,930/12/22=15 Break even No. of customers after two years=3,600/12/22=14
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ENDED DECEMBER 31 OF EACH YEAR (NTD)
2019 2020 2021 2022 2023
POTENTIAL SALES 1,148,928 1,263,821 1,615,356 1,615,356 1,615,356
Operating Costs
Direct cost
Animal staff salary 180,000 180,000 180,000 180,000 180,000
Animal staff's medication amortization 50,000 50,000 50,000 50,000 50,000
Total direct cost 230,000 230,000 230,000 230,000 230,000
Overhead Cost
Rent 240,000 240,000 240,000 240,000 240,000
Utilities 156,000 156,000 156,000 156,000 156,000
Salary 396,000 396,000 396,000 396,000 396,000
Promotion 36,000 36,000 0
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Amortization & Depreciation 238,960 238,960 238,960 238,960 238,960
Total overhead cost 1,066,960 1,066,960 1,030,960 1,030,960 1,030,960
TOTAL OPERATING COST 1,296,960 1,296,960 1,260,960 1,260,960 1,260,960
INCOME BEFORE TAXES -148,032 -33,139 354,396 354,396 354,396
INCOME TAXES(5%) 57,446 63,191 80,768 80,768 80,768
NET INCOME -205,478 -96,330 273,628 273,628 273,628
8.6. Cash Flow and Net Present Value Analysis
8.6.1. Cash FlowONE BY ONE ANIMAL ACCOMPANY
CASH FLOW STATEMENT PROJECTION
ENDED DECEMBER 31 OF EACH YEAR (NTD)
2019 2020 2021 2022 2023
Revenue 1,148,928 1,263,821 1,615,356 1,615,356 1,615,356
Total cash Receipts 1,148,928 1,263,821 1,615,356 1,615,356 1,615,356
Owner Investment 1,500,000
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Total cash available 2,648,928 1,263,821 1,615,356 1,615,356 1,615,356
Cost of Administrative
Cash disbursement
Animal staff salary 180,000 180,000 180,000 180,000 180,000
Rent 240,000 240,000 240,000 240,000 240,000
Utilities 156,000 156,000 156,000 156,000 156,000
Salary 396,000 396,000 396,000 396,000 396,000
Promotion 36,000 36,000 0 0 0
Total cash disbursement
Operating expenses
1,008,000 1,008,000 972,000 972,000 972,000
Other application on cash
Decoration 820,000
Advertisement 40,000
Equipment 332,000
License 2,800
Total other application 1,194,800 0 0 0 0
Total cash disbursement 2,202,800 1,008,000 972,000 972,000 972,000
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Ending cash position 446,128 255,821 643,356 643,356 643,356
Starting cash position 0 446,128 701,949 1,345,305 1,988,661
Accumulated cash flow 446,128 701,949 1,345,305 1,988,661 2,632,017
8.6.2. Net Present Value Analysis
NPV is a measure to determine whether this business plan will be profitable or not.
Table 18 Net present value and discount rate
Year 2019 2020 2021 2022 2023
Cash flow 446,128 255,821 643,356 643,356 643,356
Discount rate 1.09%
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NPV 1,039,885
Base on the calculation of NPV, NPV of this business plan is 1,039,885. It's base at the discount rate is 1.09%. The discount rate which is established by Taichung bank is the highest one year fixed rate in Taiwan in 2018. The NPV determined that this business plan will be profitable and feasible.
8.7. Payback Period of Investment
The payback period of this business plan to replay the initial investment of 1,500,000 is 3.2 years.
Table 19 Cash flow of each year
Year 2019 2020 2021 2022 2023
Cash flow 446,128 255,821 643,356 643,356 643,356
Table 20 Payback balance of One by one animal Payback balance sheet
Initial investment -1,500,000
Year Cash flow Payback
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2019 446,128 -1,053,872
2020 255,821 -798,051
2021 643,356 -154,695
2022 643,356 488,661
2023 643,356 -
After three years, there will still be 154,695 NTD left to be payback. By the year 2022, it will cost our business 3 months (154,695/643,356*12=2.8) to pay back 154,695. The total payback period will be 3 years and 3 months.
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company in Yangmei.
2. We will combine the needs of people who don't have pets, but want to, and the needs of stray animals. We will adopt 5 stray animals to provide one on one pet accompanying services for consumers.
3. We share the responsibilities of keeping pets, time costs and various financial costs required to keep pets. (ex. Time cost like walking, taking care and cleaning. Financial cost like food, medication, toy, supply and beauty. The responsibility of the owner for pets when it is causing trouble. )
4. We will focus on customers who are single or couple with no child or one child and live near our proposed location.
5. We expect 17 customers per day at the first year, 19 customers per day at the second year, and 23 customers per day after two years.
6. We will charge every customer NTD 270 for one by one animal accompany service.
7. At the first two years, 15 customers can let us break even and after two years, 14 customers will let us break even.
8. The total payback period will be 3 years and 3 months.
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The risks we may have are below:
1.Unacceptable Risk: Our product is invisible. It's not easy to demonstrate to customers and accepted by consumers.
2.Risk of varying quality: If our animal staffs are not friendly, our service loses meaning and value. If our store manager is not sufficiently thoughtful and can't solve the needs of customers or resolve disputes between customers, customers may not come to our store anymore.
3.The risk that the product cannot be stored: Because our product is invisible and can't be produced in advance and put into inventory as physical products, when customers appear at the same time, we may not be able to serve everyone.
4.The risk of income lose due to the illness or injury of store owner: It may happen income lose because of the illness or injury of the store owner, because there is only one person handle this store.
Oral defense committee member's suggestions:
1. Hourly pricing should be adjusted: the current pricing can be adjusted high as the target group is capable of paying higher price range.
2. Raise the price of food and drinks: as food and drinks are not the main products, we want the clients to focus on our main products and not to be presented as a restaurant.
Therefore the price should be higher.
3. Introduce food, snacks, and toys for the animal: increase revenue from introducing products for animals; this increases interaction with animals and help clients memorize animal behaviors and deepens brand royalty.
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