Sustainable World Company Financial Plan
Key financial metrics
One of the key financial metrics that will be used is customer retention. We will review the percentage of the paying customers that will be retained annually. High retention will imply that the company is delivering the promised value to our customers and that they are happy with the products we are offering (Hill & Brierley, 2017). The second metric will be return on investment. We will review the losses and gains we make annually to determine whether the company is growing as expected in terms of losses or not. The third metric will be cash flow. We will compare our costs with the revenue we generate to determine the money going in and out of the business. The fourth metric will be net income. We will calculate this by comparing expenses and revenue while considering the cost of customer acquisition, customer lifetime value, cash flow, churn rate, burn rate, and return on investment. The fifth metric will be revenue. This will be calculated based on the sales our company makes.
Capital requirements and anticipated sources of funding
The business requires an investment of $370,000. This amount will be used to cater for manufacturing costs, product sourcing costs, cost of raw materials, design costs, and marketing costs. We intend to consider various sources of funding to meet these costs. The manufacturing costs are estimated to be $120,000. These costs will include the salary paid to designers and the staff in charge of packaging the clothes after manufacturing. Product sourcing costs are estimated to be $50,000. The cost of raw materials is expected to be $30,000 because most of the raw materials will be recycled. The delivery cost will be $20,000, while the marketing and design costs will be $70,000 and $80,000, respectively.
One of the sources of funding will be investment from the business owners. Each business owner will be expected to make a significant contribution to the business startup cost. We expect to agree on a mandatory amount that every owner will contribute and the timeline for contributing. The second source will be grants provided by the government and other organizations to finance startup businesses. We will apply for grants specifying their support for sustainable businesses to increase our chances of receiving the grant due to the fact that our business focuses on manufacturing products using sustainable materials. The third source will be donations from organizations, particularly those supporting sustainable businesses, friends, and community members. We will also source funds through crowdfunding on different online platforms such as Kickstarter. We are also planning on participating in fashion contests that pay winners and do our best to win and claim the cash prize. Participating in fashion contests will also expose the business to potential donors and investors.
Sales forecast for the first year and expected percentage growth for the following two years
The business anticipates having high sales in December due to the festive season and reducing between January and July. The specific forecasts will be $35,000 by the end of December and around $6,000 in January. The average sales are anticipated to be around $10,000 between July and November 2022. We will focus on advertising and special events between July and November 2022 to boost sales. Projected sales for the next three years will be as indicated in the table below
| Year | 2021 | 2022 | 2023 | 2024 | ||||
| Sales | $35,000 | $185,300 | $275,000 | $368,200 | ||||
| Direct cost of sales | ||||||||
| Year | 2021 | 2022 | 2023 | 2024 | ||||
| Sales | $25,000 | $25,000 | $25,000 | $25,000 | ||||
Break-even point
Chiulli (2018) argues that determining the break-even point is crucial in determining the units of product that need to be sold to cover the variable and fixed costs of production. The monthly revenue break-even is estimated to be $7,500. The assumptions that will be made are that the average percent variable cost will be 20%, and the estimated monthly fixed cost will be $5,000.
Assumptions made related to the development of financial statements and funding requirements
Our business anticipates that cash flows will be steady and growth will be moderate. We also expect that marketing will remain below 12% for all the sales we make. The company will additionally invest residual profits into the expansion of the company for three years and then begin investing in financial markets. The company’s financial plan will rely on various assumptions. One of the most important assumptions is that the company will be operating in a strong economy with no major recession. The second assumption is that there will be unforeseen changes in the business environment that could affect the demand and use of apparel, footwear, and accessories, making the use of our products obsolete. The general assumptions relating to the financial plan will be that short-term interest rate and long-term interest rate will remain at 10%, the estimator for payments date will be 25, the estimator for inventory turnover will be 6, the tax rate will be 25%, cash expenses will be 12%, and the personnel burden will be 12%. The sales on credit will be 0%. In the funding requirement, the main assumption will be that the funding sources will help the company raise the required funds by the end of this month so that business operations and sales can begin next month. Another assumption is that all business partners will contribute the mandatory contribution required without creating any internal conflicts that could affect the success of the business. Another assumption is that the funds raised to start the business will be enough to meet the main startup costs despite unforeseen changes in the cost of raw materials, particularly due to COVID-19 disruptions.
References
Chiulli, R. M. (2018). Break-even analysis. Quantitative Analysis, 91-124. https://doi.org/10.1201/9780203741559-3
Hill, N., & Brierley, J. (2017). How to measure customer satisfaction? Taylor & Francis.
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Question 
Sustainable World Company Financial Plan
The financial plan is a forward-looking section of the business plan in which projections are based on anticipated revenues and costs. Each section of the business plan feeds into the development of these projections. The financial plan helps investors determine if they wish to invest in the business and when they may see a return on any investment they make. It also guides the business owner to understand when they may need additional funding and, once the business is up and running, to determine if the business is meeting the anticipated financial targets. This section of the business plan should
- be three to four pages
- summarize key financial metrics
- identify capital requirements and anticipated sources of funding
- include a sales forecast for the first year and expected percentage growth for the following two years
- discuss the break-even point
- state any assumptions made related to the development of financial statements and funding requirements
Note three years of financial projects should be included in the Appendix of the plan.
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