a community of practitioners
Sole Float Company, LLC is a startup float center that seeks to build its brand name within a medical community by providing floatation sessions which are medically perceived to have psychotherapeutic effects. Anxiety, high blood pressure, rheumatism, stress relief, jet lag and migraine headache are some of the conditions that can be improved by engaging in floatation sessions. Since it’s a startup business, the financial plan projections for the center will be purely based on the best estimates. The projections would concern the business cash flow, the balance sheet, profit and loss statements and the break-even analysis.
Sources and Uses of Capital
The selected sources of capital for a business organization ought to have interest rates that do not negatively impact the revenues garnered from business operations. The idea of floatation centers was floated in the medical field in the 1950s although people have been slow to its adoption. Today, more entrepreneurs and investors have taken the idea up and invested millions of dollars into constructing floating centers capable of providing adequate therapeutic effects for the ultimate wellbeing of the users. However, the huge financial investments (Initial costs and maintenance costs) have forced entrepreneurs to acquire finances from different areas that are capable of ensuring smooth operations of the centers. In this regard, the Sole Float Company, LLC would obtain funding from commercial banks, local and government economic development organizations, receivable collections, and small business innovation research grants (Grigore, 2016).
The obtained capital would be used to cater for the initial and maintenance costs of the physical requirements of the floatation center such as buying of pipes and paying for the plumbing services, setting up an electrical substation at the center for warming the salt-water solution, renting of the building used in setting up the floatation tanks and administrative offices and wages and salaries for workers.Additionally, the capital would be used in buying the floatation pods and cabins, installation of hair dryers, purchasing of the salt (Empson salt), etc. However, these uses are indicated on the cash flow projections and other sheets as payrolls, accounts payable, overheads including rent, purchase of fixed assets(pods/cabins), etc.
Cash Flow Projection
As mentioned above, the Sole Float Company, LLC is a startup business and as such, its cash flow projections would entirely be based on the estimations (Chen, 2007). The cash flow projection below was prepared in Microsoft Excel using the following assumptions: seventy-five percent of the revenues generated from customers will be collected in the first month, twenty-five percent will be collected in the second month, the payables will be due in twenty-five days, and sixty percent of the receivables can be used for revolving line of credit.
A balance sheet is a financial statement that gives the details of the assets, liabilities, and equity of the business organization at a specific period. Therefore, a balance sheet has three segments (assets, liabilities and equity) which influence the decision of the investors as they can know what is owed and owned by the business organization (Guta, 2014). In the balance sheet, the assets owned by the organization is a summation of the shareholders’ equity and liabilities i.e. the organization has to pay for all the assets it has by either borrowing loans from commercial banks and other institutions or by obtaining financial support from investors. Examples of long-term and short-term assets include fixed assets, long-term investments, intangible assets, inventory, accounts receivable, cash and cash equivalents, etc. (Chen, 2007). On the other hand, examples of company liabilities include long-term debts, rent, tax, bank indebtedness, wages, interest payable, etc. while shareholders’ equity include retained earnings, treasury stock, etc. Below is a balance sheet projection of the Sole Float Company, LLC as at November.
Profit and loss financial statements (P & L) document the various revenues garnered by a business organization over a specific period in respect to the costs and expenditures incurred by the firm. These statements are vital to the interested investors as they show the ability of the organization to make profits by increasing their revenues and reducing their costs (Grigore, 2016). However, some organizations make losses by incurring costs that surpass the amount of revenues generated within that period. The essay writing service statements are also referred to as the “income & expense statements,” “statement of financial results” etc. and are normally produced quarterly by organizations along with the cash flow
Statements and balance sheets. The income and expense statements have a top line that documents the amounts of revenues garnered by the firm and the costs incurred and a bottom line that shows the amount of profit made by the organization. From the cash flow projections showed above, it is clear that the Sole Float Company, LLC will make a profit in the first five months of operations but will incur losses in the sixth month. Therefore, management needs to come up with an effective way of averting the projected losses in the sixth month of the company’s operation.
The break-even analysis of a firm determines the period when the revenues garnered by the business organization would exceed the costs incurred thus making profits. When carrying out this analysis, one has to determine the startup costs of the firm which enables the determination of the revenues that need to be garnered to effectively pay for the expenditures of the organization (Guta, 2014). Therefore, calculation of both the fixed costs and variable costs is essential when determining the breakeven point of the firm. Fixed costs refer to the expenditures incurred by the firm that does not vary with the volumes of sales e.g. the administrative salaries, rent paid by the Sole Float Company, etc. On the other hand, variable costs are those that fluctuate periodically based on the volumes of sales of the organization such as the amount of purchased inventory, etc. Breakeven point is determined using the below formula: