Wi-Fi Kiosks Business Plan
Stroll Net will provide a forum for communication and entertainment through public Internet access. In the first year, we will set up 16 pay-kiosks in public spaces throughout Tech City, frequented by business travelers and students, without nearby internet cafes or similar competition. Our flagship location will be next to the downtown bus and train station, where travelers can check email, locate phone numbers, and look up directions on online-mapping sites. They can also surf the net as their time and budget allows. By accepting real money and credit cards, we can cater to both casual browsers and travelers with money to spend.
Stroll Net answers the increasing demand for affordable and convenient access to communication and information on the Internet. Our goal is to provide the community with a convenient and affordable way to access the Internet away from home and the office.
This business plan aims to obtain financing of $299,671 to purchase public Internet terminals, an office warehouse, office equipment and supplies, company vehicles, and cover expenses in the first year of operations. Additional financing has already been secured in the form of $10,500 of personal savings from owners Cam Piotr and Bob Green and a long-term loan of $100,000.
Stroll Net will be incorporated as a Limited Liability Corporation to shield owners from personal liability and double taxation. Investors will be treated as shareholders and liable only for their individual investment of $5,250 each.
The financing, along with the capital contributions, will allow Stroll Net to successfully open and maintain operations through the first year. The initial capital investment will enable Stroll Net to provide clients with an innovative public Internet terminal. Successful operation in the first year will establish a customer base that will make Stroll Net self-sufficient in year two.
With an investment of $299,671, we project dividends of $100,000 in year two and $200,000 in year three. These projections are based on actual revenues from similar start-up customers of our internet kiosk supplier in other states. In the first year, with a break-even point of $42,599 per month, we expect revenues of $727,072 and a net profit of 18.5%, or $134,305. By year three, revenues will increase to $1,136,067, and the net worth of Stroll Net will increase to $610,320. Dividends thereafter will depend on cash flows, and in year five, investors will have the option of being bought out by the company owners.
1.1 Mission
Our mission is to provide internet users and business travelers with easy and affordable access to the Internet through our public Internet terminals or wireless WiFi connection away from home and the office. For a minimal fee, users of all ages can access the internet while staying in hotels, waiting at airports, shopping in malls, and more.
We aim to be the leader in introducing an innovative and quality public Internet terminal to our market. We will add value to our community by maintaining a quality product and providing excellent customer service.
1.2 Keys to Success
As a start-up company, we must create acceptance for ourselves and our products and services within the marketplace. The keys to our success are:
– Placing an innovative product and quality service that can expand existing markets and create new ones.
– Ensuring steady, disciplined growth.
– Developing a good relationship with clients and customers.
1.3 Objectives
Stroll Net’s objectives for the first year of operation include:
– Introducing an innovative product that offers an affordable and convenient way for Internet users to access the Internet away from home.
– Creating a unique environment that allows traveling businesspeople access to their own files and programs.
– Placing 100 public Internet terminals throughout the North MyState area.
For the following two years, our growth objectives include:
– Increasing the number of public Internet terminals by 20% each year.
– Achieving a revenue growth of 25% per year.
1.4 Risks
The risks involved with starting Stroll Net are:
– Demand for the services offered by Stroll Net in Tech City.
– The future popularity of the Internet.
– Willingness of individuals to pay for Stroll Net’s service.
– Possible drop in the cost of accessing the Internet from home, making public Internet terminals less viable.
Stroll Net, located on the south side of Tech City, MyState, offers a convenient and affordable way to access the Internet. Stroll Net’s public Internet terminals provide full access to email, video email, the Web, and other applications, including a prepaid storefront. Stroll Net aims to provide clients and customers with a unique and innovative product and service.
The public Internet terminals appeal to individuals of all ages and backgrounds. The ease-of-use and instructional menu are designed for those who are not familiar with computers. Convenient locations like hotel lobbies and coffee shops enable business people to access the Internet and office files outside of their offices.
Stroll Net is a privately-held Limited Liability Corporation owned by co-founders Cam Piotr and Bob Green. They each hold equal stock positions of 26%, with investors eligible for up to 48% of Stroll Net stock based on their investment.
The start-up costs for Stroll Net include the purchase of public Internet terminals, an office warehouse, office equipment and supplies, company vehicles, and capital to cover expenses and losses for the first year of operation.
Short-term assets for Stroll Net include two computers, one printer, one scanner, four tables with chairs, two computer desks with chairs, and three telephones. The total cost of these fixtures is $11,400.
Additional funds will be allocated for a large initial marketing/design budget to cover kiosk design and grand opening advertising.
Stroll Net’s public Internet terminals will provide customers access to email, video email, WWW, and other applications like a prepaid storefront. Stroll Net will offer a unique and innovative product and service.
3.1 Product and Service Description:
– Walk-up Internet Access: Customers pay with cash or credit card and receive a specific amount of time on the terminal in exchange for payment. Customers can surf the Internet, check email, and send video email.
– Wireless Internet Access: WiFi users can access the Internet through our Wireless Hotspots.
– Prepaid Storefront: An application that allows customers to purchase products like Prepaid Calling Cards, Prepaid Wireless Top-up, and Prepaid Mobile Content (games, graphics, ring tones, etc.).
– Multimedia Advertising: Local, regional, or national companies can advertise using multimedia on-screen advertisements. Advertisements consist of full motion video "commercials," picture files, or twelve advertising buttons.
Technical Specifications
- Wheelchair Accessible
- Front access for easy service and maintenance
- 15.1 inch touch screen LCD monitor
- Industrial spill and vandal proof keyboard
- Web Camera with integrated microphone
- Bill Acceptor and Credit Card Reader
- Stereo Speakers
- Wireless Router
- Surfnet Premier
PC Specifications
- 2.4GHz Celeron Processor
- 40GB hard Drive
- 256MB DDR-RAM
- 52X CD-ROM
- Floppy Drive
- Windows XP Professional
- 3-Year Hotswap
Contents
3.2 Competitive Comparison
Stroll Net will be first to place public Internet Terminals in Tech City. Stroll Net will differentiate itself from other ISPs in Tech City by providing its customers with the ability to access the Internet even when they are away from their own computer.
We do not expect to replace standard internet access options (home, school, and work-based computers), but to supplement them; similar ventures, such as Internet cafes, have seen great success.
3.3 Fulfillment
Stroll Net will obtain its public Internet terminals from Supplier One, Inc. located in Vancouver, BC. Supplier One, Inc. will provide the locating service and the hardware required to run Stroll Net. Internet access and networking will be provided through Supplier Two.
3.4 Technology
Stroll Net will invest in terminals with high-speed computers to provide its customers with a fast and efficient connection to the Internet. The computers will be reliable and fun to work with. Stroll Net will continue to upgrade and modify the systems to stay current with communications technology. One of the main attractions associated with public Internet terminals is the state of the art equipment available for use. Not everyone has a Pentium PC in their home or office.
3.5 Future Products and Services
To enhance our initial product line, we will look at a newer model of Supplier One terminal that offers a greater variety of technologies.
As we increase our presence in the public Internet access business, we will continue to seek out applications that will allow us to offer a greater variety of services. A key component of this will be customer feedback.
Market Analysis Summary
Stroll Net is faced with the exciting opportunity of being the first-mover in the Tech City public Internet market. The attractiveness of convenience, combined with the growing interest in the Internet, has been proven to be a winning concept in other markets and will produce the same results in Tech City.
The explosion of the Internet has been well documented. The International Data Corporation predicts that by 2004 there will be 210 million Internet users in the U.S. alone. Our increasingly mobile society manes that a large percentage of these users will access the Internet through public Internet terminals.
Research has confirmed that the demand for public Internet terminals is growing exponentially and that the number of terminals in operation worldwide will reach 434,000 by 2006. By 2007 the number of wireless Hotspots in the U.S. is expected to grow to 41,000 and generate in excess of $3 billion in revenue.
4.1 Market Segmentation
Stroll Net’s clients can be described as individual business owners and medium to large companies that provide services to tourists, business travelers, students, and everyday Internet users. Such clients include airports, hotels, truck stops, and coffee shops.
Our customers can be divided into two groups. The first group is familiar with the Internet and desires a convenient and affordable way to access the Internet away from home and their offices. The second group is not familiar with the Internet, yet, and is just waiting for the right opportunity to enter the online community. Stroll Net’s target market includes people between the ages of 18 and 65. According to the 2000 U.S. Census, Tech County has roughly 490,693 residents between the ages of 18 and 65. Of these, many are already internet-savvy.
Within this group, we will target two groups in particular:
- Students
- Traveling Business People
Potential Customers: Growth Year 1 Year 2 Year 3 Year 4 Year 5 CAGR
Students 2% 35,000 35,700 36,414 37,142 37,885 2.00%
Traveling Professionals 3% 24,000 24,720 25,462 26,226 27,013 3.00%
Other 0% 900 900 900 900 900 0.00%
Total 2.38% 59,900 61,320 62,776 64,268 65,798 2.38%
4.2 Service Business Analysis
The Internet has exploded. With an increasingly mobile society, many users access the Internet through public terminals. To remain competitive, business travelers need reliable high-speed access to email, the Internet, and corporate networks. Therefore, it is becoming standard for business travelers to only stay at hotels with high-speed Internet access and public terminals.
Internet terminals with integrated Wi-Fi allow easy Internet access, providing rich multimedia content that cannot be viewed on PDAs. Internet kiosks will soon be standard in all hotels, similar to ATMs and payphones.
Tech City currently has no public Internet terminals. This presents Stroll Net with a profitable niche opportunity.
4.2.1 Competition and Buying Patterns
ATT and BellSouth are the main competitors in public Internet terminals, but they have not established a presence in Tech City or the surrounding areas.
Competition from online service providers exists both locally and nationally. However, none of these providers offer public Internet terminals.
4.3 Target Market Segment Strategy
Stroll Net’s public Internet terminals will attract both local and traveling professionals who want to work or check their email outside the office. These professionals can use Stroll Net’s terminals or connect their notebooks to our wireless WiFi internet connection. Stroll Net’s target market includes a wide range of ages, from Generation X members to Baby Boomers who recognize the importance of computers.
Strategy and Implementation Summary
The primary strategy is to target power Internet users, including students and business professionals who are highly familiar with the Internet.
The secondary strategy is to build a large loyal customer base, which will attract companies as clients for our interactive advertising service. This advertising space will be in high demand due to the high traffic locations of our public Internet terminals.
5.1 Milestones
The Stroll Net management team has established milestones to prioritize the business plan. Implementation responsibility falls on Cam Piotr’s shoulders. The milestones table will be updated as the year progresses. New milestones will be added during the first year of operations.
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Milestones:
Milestone Start Date End Date Budget Manager Department
Business Plan 10/1/2004 11/15/2004 $1,000 Cam Piotr Admin
Licensing 11/22/2004 11/27/2004 $1,000 Cam Piotr Admin
Secure Start-up Funding 11/29/2004 1/1/2005 $1,000 Cam Piotr Admin
Site Selection 1/15/2005 2/20/2005 $1,000 Cam Piotr Admin
Architect Designs 3/1/2005 3/30/2005 $1,000 Cam Piotr Admin
Designer Proposal 4/1/2005 4/15/2005 $1,000 Cam Piotr Admin
Technology Design 4/1/2005 4/15/2005 $1,000 Cam Piotr Admin
Year 1 Plan 6/1/2005 6/9/2005 $1,000 Cam Piotr Admin
Personnel Plan 7/1/2005 7/5/2005 $1,000 Cam Piotr Admin
Accounting Plan 7/1/2005 7/5/2005 $1,000 Cam Piotr Admin
Totals $10,000
WiFi hotspots offering public Internet access are everywhere today, from cafes to hotels, airports to marinas. Travelers want and expect connectivity. Their decisions on where to eat, sleep, and work are influenced by the availability of wireless service.
Clients offering public internet access can tap into new revenue streams and create loyalty.
Stroll Net’s public Internet terminals provide convenient and easy access to high-speed wireless Internet connectivity. Customers can connect to their networks and the Internet via a high-speed wireless connection in common areas.
5.3 Competitive Edge
Stroll Net differentiates itself by providing the community with an innovative, convenient, and affordable way to access the Internet away from home and the office. As a small company looking to establish itself, we will be attentive and flexible in meeting our customers’ demands.
Stroll Net positions itself as an aggressive, innovative company that offers an affordable way to access the Internet away from home and the office. Advertising is our main source of promotion. We will acquire the services of Empire Communications Group and CyberMark International, Inc. for a diverse advertising campaign on television, radio, the Internet, and in the local newspaper.
Stroll Net’s brochures, letterhead, and business correspondence will reinforce these concepts. We recognize that it costs six times more to attract a customer than to retain one. With this in mind, we operate under the principle that our best marketing is an exceedingly satisfied customer.
5.4.1 Pricing Strategy
Stroll Net bases its prices for Internet and wireless WiFi usage on the “retail profit analysis” provided by our supplier, Supplier One, Inc. They have been in the kiosk industry for 5 years and have developed a solid pricing strategy.
Determining a fair-market, per-transaction fee for Internet and wireless WiFi usage is challenging due to no direct competition from another public internet terminal business in Tech City. Therefore, Stroll Net considered two sources to determine the hourly charge rate. First, we considered the cost to use other Internet servers, whether a local networking firm or a provider like America Online. Internet access providers use different pricing schemes, including monthly and hourly fees or a combination of both. Second, we looked at how public Internet terminals in other markets, such as Miami and New York, priced Internet access. Evaluating these factors resulted in the following:
Walk-up Internet Access – Customers will be charged a .25 per minute transaction fee.
Wireless Internet Access – Customers will incur a fee of $3.95 per hour with a one-hour minimum.
5.4.2 Promotion Strategy
Stroll Net will implement a pull strategy to build consumer awareness and demand. Initially, we have allocated $5,000 for promotional efforts, including advertising with coupons for fifteen minutes of free Internet time.
Stroll Net realizes that in the future, when competition enters the market, additional revenues must be allocated for promotion to maintain market share.
5.5 Sales Strategy
Stroll Net employs route operators to collect sales transactions and perform routine maintenance on its terminals. Each route operator keeps the terminals stocked, clean, and operational. Computer literacy is a requirement for Stroll Net employees. If an employee lacks basic computer skills when hired, they are trained by our full-time technician. Our technician is also available for terminals in need of minor repairs. Stroll Net’s commitment to prompt, dependable service distinguishes us from competitors.
5.5.1 Sales Forecast
Our Sales Forecast is based on real revenue reports from other customers of Supplier One, operating in similar urban settings in nearby states. Prepaid products and advertising will yield the highest revenue per unit, but we expect the most transactions to be in walk-up internet access and Wifi access.
Sales Forecast
Year 1 Year 2 Year 3
Unit Sales
Walk-Up Internet Access 48,787 60,984 76,230
Wireless WiFi Access 23,092 28,865 36,081
Prepaid Products 19,677 24,596 30,745
Multimedia Advertising 5,854 7,318 9,147
Total Unit Sales 97,411 121,763 152,203
Unit Prices
Year 1 Year 2 Year 3
Walk-Up Internet Access $3.00 $3.00 $3.00
Wireless WiFi Access $3.95 $3.95 $3.95
Prepaid Products $10.00 $10.00 $10.00
Multimedia Advertising $50.00 $50.00 $50.00
Sales
Walk-Up Internet Access $146,361 $182,951 $228,689
Wireless WiFi Access $91,215 $114,017 $142,521
Prepaid Products $196,774 $245,963 $307,453
Multimedia Advertising $292,721 $365,875 $457,344
Total Sales $727,071 $908,806 $1,136,007
Direct Unit Costs
Year 1 Year 2 Year 3
Walk-Up Internet Access $0.60 $0.60 $0.60
Wireless WiFi Access $0.40 $0.40 $0.40
Prepaid Products $1.00 $1.00 $1.00
Multimedia Advertising $5.00 $5.00 $5.00
Direct Cost of Sales
Walk-Up Internet Access $29,272 $36,590 $45,738
Wireless WiFi Access $9,122 $11,402 $14,252
Prepaid Products $19,677 $24,596 $30,745
Multimedia Advertising $29,272 $36,588 $45,734
Subtotal Direct Cost of Sales $87,343 $109,176 $136,470
Management Summary
Stroll Net, owned and operated by Cam Piotr and Bob Green, is a small company with a simple organizational structure. The owners make all major management decisions and oversee all other business activities.
6.1 Personnel Plan
The staff will include 8 full-time route operators and one full-time technician. This simple structure allows for quick and direct communication, enabling Stroll Net to react quickly to market changes.
Personnel Plan
Year 1 Year 2 Year 3
Lorenzo Mitchell $42,889 $49,680 $59,616
Herman Albany $42,889 $49,680 $59,616
Technician $25,920 $27,040 $29,120
Route Drivers $172,800 $183,040 $199,680
Future Staff $0 $0 $49,920
Total People 11 11 13
Total Payroll $284,498 $309,440 $397,952
Sales: Stroll Net bases its projected Internet usage sales on information provided by Supplier One, Inc. Internet usage is estimated by calculating the average number of minutes each customer spends accessing the Internet.
Cost of Goods Sold: The cost of goods sold is determined by the retail profit analysis obtained from Supplier One, Inc. The cost of prepaid calling cards is 20% of the selling price. The cost of Internet access is $50 per month, paid to Supplier Two for networking fees. The cost of terminal placement is 20% of total Internet access sales.
Salaries Expense: The founders of Stroll Net, Cam Piotr and Bob Green, will receive a salary of $24,000 in year one, $26,400 in year two, and $29,040 in year three.
Payroll Expense: Stroll Net plans to hire eight full-time employees at $10.00/hour and a full-time technician at $12.00/hour. The total cost of employing nine people at these rates for the first year is $14,720/month.
Rent Expense: Stroll Net plans to purchase a 2200 square foot facility at $104.74/sq. foot.
Utilities Expense: Stroll Net is responsible for paying for utilities, including electric, water, and garbage disposal. The monthly service charge for utilities is $168.04. The phone bill is generated by five phone lines, with a monthly service charge of $59.95 for each line provided by Bellsouth. The total cost of the five phone lines is estimated at $299.75/month.
Marketing Expense: Stroll Net will allocate $50,000 for promotional expenses at startup. These funds will be used for advertising on television, radio, the Internet, and local newspapers to build consumer awareness.
Insurance Expense: Stroll Net has allocated $1,500 for insurance in the first year. As revenue increases in the second and third year, more money will be invested in additional insurance coverage.
Legal and Consulting Fees: The cost of obtaining legal consultation for client contracts is $1,500.
Depreciation: Stroll Net uses the Modified Accelerated Cost Recovery Method to depreciate its capital equipment over a three-year time period.
Taxes: Stroll Net is an LLC and is not taxed as an entity. However, there is a 10% payroll burden.
7.1 Important Assumptions
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 11.50% 10.00% 10.00%
Tax Rate 25.00% 25.00% 25.42%
Other 0 0 0
The estimated monthly operating expenses for Stroll Net are approximately $37,400, including payroll, rent, insurance, and maintenance. The average direct cost is roughly 90¢ for every $7.46 of sales. Stroll Net reaches break-even at approximately 5,700 sales per month, projected to occur in the seventh month.
Break-even Analysis:
Monthly Units: 5,166
Monthly Revenue: $38,557
Assumptions:
Average Per-Unit Revenue: $7.46
Average Per-Unit Variable Cost: $0.90
Estimated Monthly Fixed Cost: $33,925
7.3 Projected Profit and Loss:
The table below shows our profit and loss projections. We expect a net profit of around $134,300 in the first year as the Stroll Net idea gains popularity and sales grow. These projections have a reasonable net profit margin of 18%.
Pro Forma Profit and Loss:
Sales:
Year 1: $727,071
Year 2: $908,806
Year 3: $1,136,007
Direct Cost of Sales:
Year 1: $87,343
Year 2: $109,176
Year 3: $136,470
Other:
Year 1: $0
Year 2: $0
Year 3: $0
Total Cost of Sales:
Year 1: $87,343
Year 2: $109,176
Year 3: $136,470
Gross Margin:
Year 1: $639,728
Year 2: $799,630
Year 3: $999,537
Gross Margin %:
Year 1: 87.99%
Year 2: 87.99%
Year 3: 87.99%
Expenses:
Payroll:
Year 1: $284,498
Year 2: $309,440
Year 3: $397,952
Sales and Marketing and Other Expenses:
Year 1: $53,598
Year 2: $59,174
Year 3: $68,279
Depreciation:
Year 1: $44,676
Year 2: $45,000
Year 3: $45,000
Utilities:
Year 1: $5,613
Year 2: $6,174
Year 3: $6,792
Insurance:
Year 1: $1,500
Year 2: $6,000
Year 3: $7,500
Maintenance/Repairs:
Year 1: $3,500
Year 2: $4,200
Year 3: $5,800
Travel:
Year 1: $13,717
Year 2: $24,652
Year 3: $29,961
Payroll Taxes:
Year 1: $0
Year 2: $0
Year 3: $0
Total Operating Expenses:
Year 1: $407,102
Year 2: $454,640
Year 3: $561,284
Profit Before Interest and Taxes:
Year 1: $232,626
Year 2: $344,990
Year 3: $438,253
EBITDA:
Year 1: $277,302
Year 2: $389,990
Year 3: $483,253
Interest Expense:
Year 1: $10,877
Year 2: $8,500
Year 3: $7,500
Taxes Incurred:
Year 1: $55,437
Year 2: $84,122
Year 3: $109,483
Net Profit:
Year 1: $166,311
Year 2: $252,367
Year 3: $321,270
Net Profit/Sales:
Year 1: 22.87%
Year 2: 27.77%
Year 3: 28.28%
7.4 Projected Cash Flow
Cash flow data for the first three years is presented in the chart and table below. The table shows anticipated repayment of the long-term loan, as well as projected dividends paid to investors in years two and three. In year three, we will purchase two more paykiosk terminals for new locations. More detailed monthly cash flow data can be found in the appendix.
Pro Forma Cash Flow:
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $727,071 | $908,806 | $1,136,007 |
| Subtotal Cash from Operations | $727,071 | $908,806 | $1,136,007 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 |
| Subtotal Cash Received | $727,071 | $908,806 | $1,136,007 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $284,498 | $309,440 | $397,952 |
| Bill Payments | $184,060 | $327,202 | $366,049 |
| Subtotal Spent on Operations | $468,558 | $636,642 | $764,001 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $0 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $10,000 | $10,000 | $10,000 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $40,000 |
| Dividends | $0 | $100,000 | $200,000 |
| Subtotal Cash Spent | $478,558 | $746,642 | $1,014,001 |
| Net Cash Flow | $248,513 | $162,163 | $122,006 |
| Cash Balance | $308,513 | $470,676 | $592,682 |
7.5 Projected Balance Sheet:
Our projected balance sheet is presented in the table below. As sales increase, and we repay our long-term loan, the net worth of the company will increase from $281,710 at start-up to over $610,000 by year three.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Cash | $308,513 | $470,676 | $592,682 |
| Other Current Assets | $11,400 | $11,400 | $11,400 |
| Total Current Assets | $319,913 | $482,076 | $604,082 |
| Long-term Assets | |||
| Long-term Assets | $312,810 | $312,810 | $352,810 |
| Accumulated Depreciation | $44,676 | $89,676 | $134,676 |
| Total Long-term Assets | $268,134 | $223,134 | $218,134 |
| Total Assets | $588,047 | $705,210 | $822,216 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $50,026 | $24,822 | $30,558 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $50,026 | $24,822 | $30,558 |
| Long-term Liabilities | $90,000 | $80,000 | $70,000 |
| Total Liabilities | $140,026 | $104,822 | $100,558 |
| Paid-in Capital | $310,171 | $310,171 | $310,171 |
| Retained Earnings | ($28,461) | $37,850 | $90,217 |
| Earnings | $166,311 | $252,367 | $321,270 |
| Total Capital | $448,021 | $600,388 | $721,658 |
| Total Liabilities and Capital | $588,047 | $705,210 | $822,216 |
| Net Worth | $448,021 | $600,388 | $721,658 |
7.6 Business Ratios:
The following table outlines some important ratios from the Data communications services industry. The final column, Industry Profile, details specific ratios based on the industry as classified by the Standard Industry Classification (SIC) code, 4899.9901.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 25.00% | 25.00% | 1.63% |
| Percent of Total Assets | ||||
| Other Current Assets | 1.94% | 1.62% | 1.39% | 53.65% |
| Total Current Assets | 54.40% | 68.36% | 73.47% | 74.50% |
| Long-term Assets | 45.60% | 31.64% | 26.53% | 25.50% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 8.51% | 3.52% | 3.72% | 24.78% |
| Long-term Liabilities | 15.30% | 11.34% | 8.51% | 18.28% |
| Total Liabilities | 23.81% | 14.86% | 12.23% | 43.06% |
| Net Worth | 76.19% | 85.14% | 87.77% | 56.94% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 87.99% | 87.99% | 87.99% | 52.82% |
| Selling, General & Administrative Expenses | 73.78% | 60.22% | 59.71% | 30.92% |
| Advertising Expenses | 6.14% | 4.95% | 3.96% | 0.82% |
| Profit Before Interest and Taxes | 31.99% | 37.96% | 38.58% | 6.18% |
| Main Ratios | ||||
| Current | 6.39 | 19.42 | 19.77 | 1.84 |
| Quick | 6.39 | 19.42 | 19.77 | 1.60 |
| Total Debt to Total Assets | 23.81% | 14.86% | 12.23% | 54.39% |
| Pre-tax Return on Net Worth | 49.50% | 56.05% | 59.69% | 8.03% |
| Pre-tax Return on Assets | 37.71% | 47.71% | 52.39% | 17.61% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 22.87% | 27.77% | 28.28% | n.a |
| Return on Equity | 37.12% | 42.03% | 44.52% | n.a |
| Activity Ratios | ||||
| Accounts Payable Turnover | 4.63 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 45 | 27 | n.a |
| Total Asset Turnover | 1.24 | 1.29 | 1.38 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.31 | 0.17 | 0.14 | n.a |
| Current Liab. to Liab. | 0.36 | 0.24 | 0.30 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $269,887 | $457,254 | $573,524 | n.a |
| Interest Coverage | 21.39Sales Forecast
Unit Sales Walk-Up Internet Access: 900, 1,125, 1,406, 1,758, 2,197, 2,747, 3,433, 4,292, 5,364, 6,706, 8,382, 10,477 Wireless WiFi Access: 426, 533, 666, 832, 1,040, 1,300, 1,625, 2,031, 2,539, 3,174, 3,967, 4,959 Prepaid Products: 363, 454, 567, 709, 886, 1,108, 1,385, 1,731, 2,164, 2,705, 3,381, 4,226 Multimedia Advertising: 108, 135, 169, 211, 264, 330, 412, 515, 644, 805, 1,006, 1,257 Total Unit Sales: 1,797, 2,246, 2,808, 3,510, 4,387, 5,484, 6,855, 8,569, 10,711, 13,389, 16,736, 20,920 Unit Prices Walk-Up Internet Access: $3.00 Wireless WiFi Access: $3.95 Prepaid Products: $10.00 Multimedia Advertising: $50.00 Sales Walk-Up Internet Access: $2,700, $3,375, $4,219, $5,273, $6,592, $8,240, $10,300, $12,875, $16,093, $20,117, $25,146, $31,432 Wireless WiFi Access: $1,683, $2,103, $2,629, $3,287, $4,108, $5,135, $6,419, $8,024, $10,030, $12,537, $15,671, $19,589 Prepaid Products: $3,630, $4,538, $5,672, $7,090, $8,862, $11,078, $13,847, $17,309, $21,636, $27,046, $33,807, $42,259 Multimedia Advertising: $5,400, $6,750, $8,438, $10,547, $13,184, $16,479, $20,599, $25,749, $32,187, $40,233, $50,291, $62,864 Total Sales: $13,413, $16,766, $20,957, $26,197, $32,746, $40,932, $51,165, $63,957, $79,946, $99,932, $124,916, $156,144 Direct Unit Costs Walk-Up Internet Access: 20.00%, $0.60 Wireless WiFi Access: 10.00%, $0.40 Prepaid Products: 10.00%, $1.00 Multimedia Advertising: 10.00%, $5.00 Direct Cost of Sales Walk-Up Internet Access: $540, $675, $844, $1,055, $1,318, $1,648, $2,060, $2,575, $3,219, $4,023, $5,029, $6,286 Wireless WiFi Access: $168, $210, $263, $329, $411, $514, $642, $802, $1,003, $1,254, $1,567, $1,959 Prepaid Products: $363, $454, $567, $709, $886, $1,108, $1,385, $1,731, $2,164, $2,705, $3,381, $4,226 Multimedia Advertising: $540, $675, $844, $1,055, $1,318, $1,648, $2,060, $2,575, $3,219, $4,023, $5,029, $6,286 Subtotal Direct Cost of Sales: $1,611, $2,014, $2,518, $3,147, $3,934, $4,917, $6,147, $7,683, $9,604, $12,005, $15,006, $18,758 Personnel Plan Lorenzo Mitchell: $3,289, $3,600, $3,600, $3,600, $3,600, $3,600, $3,600, $3,600, $3,600, $3,600, $3,600, $3,600 Herman Albany: $3,289, $3,600, $3,600, $3,600, $3,600, $3,600, $3,600, $3,600, $3,600, $3,600, $3,600, $3,600 Technician: $2,160, $2,160, $2,160, $2,160, $2,160, $2,160, $2,160, $2,160, $2,160, $2,160, $2,160, $2,160 Route Drivers: $14,400, $14,400, $14,400, $14,400, $14,400, $14,400, $14,400, $14,400, $14,400, $14,400, $14,400, $14,400 Future Staff: $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0, $0 Total People: 11 Total Payroll: $23,138, $23,760, $23,760, $23,760, $23,760, $23,760, $23,760, $23,760, $23,760, $23,760, $23,760, $23,760 General Assumptions Plan Month: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 Current Interest Rate: 10.00% Long-term Interest Rate: 11.50% Tax Rate: 25.00% Other: 0 Pro Forma Profit and Loss Sales: Month 1: $13,413 Month 2: $16,766 Month 3: $20,957 Month 4: $26,197 Month 5: $32,746 Month 6: $40,932 Month 7: $51,165 Month 8: $63,957 Month 9: $79,946 Month 10: $99,932 Month 11: $124,916 Month 12: $156,144 Direct Cost of Sales: Month 1: $1,611 Month 2: $2,014 Month 3: $2,518 Month 4: $3,147 Month 5: $3,934 Month 6: $4,917 Month 7: $6,147 Month 8: $7,683 Month 9: $9,604 Month 10: $12,005 Month 11: $15,006 Month 12: $18,758 Other: Month 1: $0 Month 2: $0 Month 3: $0 Month 4: $0 Month 5: $0 Month 6: $0 Month 7: $0 Month 8: $0 Month 9: $0 Month 10: $0 Month 11: $0 Month 12: $0 Total Cost of Sales: Month 1: $1,611 Month 2: $2,014 Month 3: $2,518 Month 4: $3,147 Month 5: $3,934 Month 6: $4,917 Month 7: $6,147 Month 8: $7,683 Month 9: $9,604 Month 10: $12,005 Month 11: $15,006 Month 12: $18,758 Gross Margin: Month 1: $11,801 Month 2: $14,752 Month 3: $18,440 Month 4: $23,050 Month 5: $28,812 Month 6: $36,015 Month 7: $45,019 Month 8: $56,274 Month 9: $70,342 Month 10: $87,928 Month 11: $109,909 Month 12: $137,387 Gross Margin %: Month 1: 87.99% Month 2: 87.99% Month 3: 87.99% Month 4: 87.99% Month 5: 87.99% Month 6: 87.99% Month 7: 87.99% Month 8: 87.99% Month 9: 87.99% Month 10: 87.99% Month 11: 87.99% Month 12: 87.99% Expenses: Payroll: Month 1: $23,138 Month 2: $23,760 Month 3: $23,760 Month 4: $23,760 Month 5: $23,760 Month 6: $23,760 Month 7: $23,760 Month 8: $23,760 Month 9: $23,760 Month 10: $23,760 Month 11: $23,760 Month 12: $23,760 Sales and Marketing and Other Expenses: Month 1: $4,467 Month 2: $4,467 Month 3: $4,467 Month 4: $4,467 Month 5: $4,467 Month 6: $4,467 Month 7: $4,467 Month 8: $4,467 Month 9: $4,467 Month 10: $4,467 Month 11: $4,467 Month 12: $4,467 Depreciation: Month 1: $3,723 Month 2: $3,723 Month 3: $3,723 Month 4: $3,723 Month 5: $3,723 Month 6: $3,723 Month 7: $3,723 Month 8: $3,723 Month 9: $3,723 Month 10: $3,723 Month 11: $3,723 Month 12: $3,723 Utilities: Month 1: $468 Month 2: $468 Month 3: $468 Month 4: $468 Month 5: $468 Month 6: $468 Month 7: $468 Month 8: $468 Month 9: $468 Month 10: $468 Month 11: $468 Month 12: $468 Insurance: Month 1: $125 Month 2: $125 Month 3: $125 Month 4: $125 Month 5: $125 Month 6: $125 Month 7: $125 Month 8: $125 Month 9: $125 Month 10: $125 Month 11: $125 Month 12: $125 Maintenance/Repairs: Month 1: $292 Month 2: $292 Month 3: $292 Month 4: $292 Month 5: $292 Month 6: $292 Month 7: $292 Month 8: $292 Month 9: $292 Month 10: $292 Month 11: $292 Month 12: $292 Travel: Month 1: 15%, $1,143 Month 2: $1,143 Month 3: $1,143 Month 4: $1,143 Month 5: $1,143 Month 6: $1,143 Month 7: $1,143 Month 8: $1,143 Month 9: $1,143 Month 10: $1,143 Month 11: $1,143 Month 12: $1,143 Payroll Taxes: Month 1: 15%, $0 Month 2: $0 Month 3: $0 Month 4: $0 Month 5: $0 Month 6: $0 Month 7: $0 Month 8: $0 Month 9: $0 Month 10: $0 Month 11: $0 Month 12: $0 Total Operating Expenses: Month 1: $33,355 Month 2: $33,977 Month 3: $33,977 Month 4: $33,977 Month 5: $33,977 Month 6: $33,977 Month 7: $33,977 Month 8: $33,977 Month 9: $33,977 Month 10: $33,977 Month 11: $33,977 Month 12: $33,977 Profit Before Interest and Taxes: Month 1: ($21,554) Month 2: ($19,225) Month 3: ($15,537) Month 4: ($10,927) Month 5: ($5,165) Month 6: $2,038 Month 7: $11,042 Month 8: $22,297 Month 9: $36,365 Month 10: $53,951 Month 11: $75,932 Month 12: $103,410 EBITDA: Month 1: ($17,831) Month 2: ($15,502) Month 3: ($11,814) Month 4: ($7,204) Month 5: ($1,442) Month 6: $5,761 Month 7: $14,765 Month 8: $26,020 Month 9: $40,088 Month 10: $57,674 Month 11: $79,655 Month 12: $107,133 Interest Expense: Month 1: $950 Month 2: $942 Month 3: $934 Month 4: $926 Month 5: $918 Month 6: $910 Month 7: $902 Month 8: $894 Month 9: $886 Month 10: $879 Month 11: $871 Month 12: $863 Taxes Incurred: Month 1: ($5,626) Month 2: ($5,042) Month 3: ($4,118) Month 4: ($2,963) Month 5: ($1,521) Month 6: $282 Month 7: $2,535 Month 8: $5,351 Month 9: $8,870 Month 10: $13,268 Month 11: $18,765 Month 12: $25,637 Net Profit: Month 1: ($16,878) Month 2: ($15,126) Month 3: ($12,354) Month 4: ($8,890) Month 5: ($4,563) Month 6: $846 Month 7: $7,605 Month 8: $16,052 Month 9: $26,609 Month 10: $39,804 Month 11: $56,296 Month 12: $76,910 Net Profit/Sales: Month 1: -125.84% Month 2: -90.22% Month 3: -58.95% Month 4: -33.94% Month 5: -13.93% Month 6: 2.07% Month 7: 14.86% Month 8: 25.10% Month 9: 33.28% Month 10: 39.83% Month 11: 45.07% Month 12: 49.26% Pro Forma Cash Flow Cash Received: Cash from Operations: Month 1: $13,413 Month 2: $16,766 Month 3: $20,957 Month 4: $26,197 Month 5: $32,746 Month 6: $40,932 Month 7: $51,165 Month 8: $63,957 Month 9: $79,946 Month 10: $99,932 Month 11: $124,916 Month 12: $156,144 Subtotal Cash from Operations: Month 1: $13,413 Month 2: $16,766 Month 3: $20,957 Month 4: $26,197 Month 5: $32,746 Month 6: $40,932 Month 7: $51,165 Month 8: $63,957 Month 9: $79,946 Month 10: $99,932 Month 11: $124,916 Month 12: $156,144 Additional Cash Received: Sales Tax, VAT, HST/GST Received: Month 1: 0.00% Month 2: $0 Month 3: $0 Month 4: $0 Month 5: $0 Month 6: $0 Month 7: $0 Month 8: $0 Month 9: $0 Month 10: $0 Month 11: $0 Month 12: $0 New Current Borrowing: Month 1: $0 Month 2: $0 Month 3: $0 Month 4: $0 Month 5: $0 Month 6: $0 Month 7: $0 Month 8: $0 Month 9: $0 Month 10: $0 Month 11: $0 Month 12: $0 New Other Liabilities (interest-free): Month 1: $0 Month 2: $0 Month 3: $0 Month 4: $0 Month 5: $0 Month 6: $0 Month 7: $0 Month 8: $0 Month 9: $0 Month 10: $0 Month 11: $0 Month 12: $0 New Long-term Liabilities: Month 1: $0 Month 2: $0 Month 3: $0 Month 4: $0 Month 5: $0 Month 6: $0 Month 7: $0 Month 8: $0 Month 9: $0 Month 10: $0 Month 11: $0 Month 12: $0 Sales of Other Current Assets: Month 1: $0 Month 2: $0 Month 3: $0 Month 4: $0 Month 5: $0 Month 6: $0 Month 7: $0 Month 8: $0 Month 9: $0 Month 10: $0 Month 11: $0 Month 12: $0 Sales of Long-term Assets: Month 1: $0 Month 2: $0 Month 3: $0 Month 4: $0 Month 5: $0 Month 6: $0 Month 7: $0 Month 8: $0 Month 9: $0 Month 10: $0 Month 11: $0 Month 12: $0 New Investment Received: Month 1: $0 Month 2: $0 Month 3: $0 Month 4: $0 Month 5: $0 Month 6: $0 Month 7: $0 Month 8: $0 Month 9: $0 Month 10: $0 Month 11: $0 Month 12: $0 Subtotal Cash Received: Month 1: $13,413 Month 2: $16,766 Month 3: $20,957 Month 4: $26,197 Month 5: $32,746 Month 6: $40,932 Month 7: $51,165 Month 8: $63,957 Month 9: $79,946 Month 10: $99,932 Month 11: $124,916 Month 12: $156,144 Expenditures: Expenditures from Operations: Cash Spending: Month 1: $23,138 Month 2: $23,760 Month 3: $23,760 Month 4: $23,760 Month 5: $23,760 Month 6: $23,760 Month 7: $23,760 Month 8: $23,760 Month 9: $23,760 Month 10: $23,760 Month 11: $23,760 Month 12: $23,760 Bill Payments: Month 1: $2,614 Month 2: $3,462 Month 3: $4,456 Month 4: $5,887 Month 5: $7,678 Month 6: $9,918 Month 7: $12,719 Month 8: $16,223 Month 9: $20,603 Month 10: $26,080 Month 11: $32,928 Month 12: $41,490 Subtotal Spent on Operations: Month 1: $25,752 Month 2: $27,222 Month 3: $28,216 Month 4: $29,647 Month 5: $31,438 Month 6: $33,678 Month |
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