Table of Contents Executive Summary 5
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- 4.3.5 Future Considerations
- 5 The Financial Plan 5.1 Financial Structure
- Table 6: Financial Projections
- Table 7: Net Income Breakeven Analysis
4.3 Staffing Requirements4.3.1 Board of DirectorsThe purpose of the Board of Directors is to establish the strategic direction and performance goals of the company. The Board of Directors is also to provide advice and suggestions to the President as needed and to hold him/her accountable for implementing the strategic direction and the achievement of the company’s goals; the Board is also responsible for hiring the President. It will also be incumbent upon the Board to provide advice and direction regarding the raising of necessary equity. 4.3.2 PresidentThe President oversees the company’s operations reporting to the Board of Directors. The primary responsibilities of the President is the implement the strategic plan and achieve the performance goals through the sound management of the staff. Responsibilities for the President include: hiring the Business Manager, Sales Staff, ensure the sales and the distribution staff are fulfilling their targets, controlling costs, developing relationships with the retail distribution headquarters, and contributing to key sales partners. 4.3.3 SalesAs a member of the Sales team the Sales personnel are responsible for conducting themselves professionally and responsibly with potential and existing clients. They are to value customer service to provide our client with the best customer service required. The goal of the Sales staff is to build relationships with customers to sell our product within the product’s limited sale window. 4.3.4 Business ManagerThe Business Manager has diverse responsibilities including: tracking Accounts Payable, Accounts Receivable, Cash Flow, payroll, and other related bookkeeping duties pertinent to the position such as taxes including GST, various provincial sales taxes, and employment taxes. The Business Manager will ensure books are kept current and accurate and submit to an annual audit. It is also the responsibility to assist the President and liaison with the Sales Staff as needed. Some other duties include answering phones and some customer service duties related to incoming calls and other duties as necessary. 4.3.5 Future ConsiderationsWe are anticipating that it may be necessary to hire a part-time position, perhaps even a full-time position, to help with distribution. This new positioned would be supervised by the Business Manager. It may also be likely that a Lead Sales Representative may need to assist the President as sales volumes increase. 5 The Financial Plan5.1 Financial StructureAutoIQ will be financed with an equity cash injection of $300,000. Due to the nature of the business and the fact that there are few assets that could be used for collateral, debt financing is unlikely and as such is not expected. $60,000 in equity has already been contributed by the developers of the prototype. This money has been used to map out the patent landscape. The remaining $240,000 is required to support production model development and the subsequent sales efforts. 5.2 Capital SpendingCapital spending is expected to be kept to a minimum. Office space will be leased to facilitate a quick exit after year five. $15,000 for office equipment and computers make up the entire initial capital spending budget. This equipment will be required during the first year of operations to facilitate the development of a production model. Following the first year, the leased property will be converted into AutoIQ’s headquarters housing the president and business manager. It will also act as the distribution center. All of the office equipment and computers from the first year will be reused for this new purpose. There will be some special equipment that was used for the production model development that will no longer be needed. Due to the specialized nature of this equipment we do not expect it to have much, if any, salvage value. The remaining financing required for capital spending will be used to support AutoIQ’s net working capital. Because the inventory must be purchased in orders of no less than $5,000 units and they must be manufactured as orders are made, we need to make our orders 60 days prior to the time they are required. In addition, to ensure we do not run out of inventory we plan to keep 30 days of inventory on hand. This requires a significant investment for inventory. The estimated cost for inventory is almost $180,000 in year four. 5.3 Financial AnalysisPlease see Appendix A for the five year financial projections, including the Income Statement, Balance Sheet, Statement of Cash Flows and all input schedules. Because we expect competitors to enter the market quickly as other aftermarket car accessory manufacturers reverse engineering CarBack technology and car manufactures developing their own similar product, we forecast a limited opportunity for sales. As such we expect sales to decline following year four of operations. After year 5 we expect to exit the market, or continue operations if sales do not decline as rapidly as expected. A summary of the financial projects for the five years of operation is provided below: Table 6: Financial Projections
The most critical variables we project are unit price, unit sales and cost of goods sold. Sensitivity Analysis reveals that should the sales price per unit drop from $150.00 to $120.00, the Internal Rate of Return will drop from 57% to 25%. Although we are confident in our projected sales price, should it decrease 20% right from the first year of sales we still expect a healthy rate of return. The table below outlines the unit sales required per year for a break-even of net income. Unit sales at 44% of projected unit sales are needed to be able to break even that year; all other years are higher. Finally, should the cost of goods increase by 20% but the selling cost remains unchanged the Internal Rate of Return drops from 57% to 47%. Table 7: Net Income Breakeven Analysis
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