NIKE FINANCIAL PLAN

Nike Financial Plan

Nike Financial Plan

Company Ownership

Nike is organized as a sole proprietorship where I, am responsible for the daily management, sales, and development of the company. The company will start with two months of inventory on hand for shoes and accessories, as this is the main revenue generator. The majority of the company's assets will reside in inventory. The opening day's cash on hand balance will be $10,000. Successful operation and building a loyal customer base will allow Nike to be self-sufficient and profitable in year two.

Financial Plan

Sales growth will be aggressive the first 18 months as we sharpen our merchandise assortment, size scales, and stock levels to better meet our customers' requirements. However, it is expected that Nike will become profitable in the first year, but not excessively so (Hambrick, and James W, 2001). This is partly due to our lower overall sales price for merchandise, compared to our competitors, but also due to the fact that all our sales must come from customers lured away from other retailers. Once we have a solid customer base, we can increase our margins slightly without risk of losing customers.

Break-even Analysis

Our break-even analysis is summarized by the following chart and table. In order to break even, we must sell at least $7,312 of shoes and accessories per month. We should easily sell more than this even in our first month.

Break-even Analysis

Monthly Revenue Break-even

$6,585

Assumptions:

Average Percent Variable Cost

63%

Estimated Monthly Fixed Cost

$2,436

Projected Profit and Loss

The following table and charts show our profitability for the next three years, and detail our operating expenses. These include a portion of the mortgage for my house, for the spaces which will be dedicated solely to business operations (Etzel, Walker, and William J. Stanton, 2004).

Pro Forma Profit and Loss

Year 1

Year 2

Year 3

Year 4

Year 5

Sales

$107,859

$111,094

$114,427

$117,859

$121,396

Direct Cost of Sales

$67,951

$69,989

$72,089

$68,405

$64,468

Other Costs of Sales

$0

$0

$0

$0

$0

Total Cost of Sales

$67,951

$69,989

$72,089

$68,405

$64,468

Gross Margin

$39,908

$41,105

$42,338

$49,454

$56,928

Gross Margin %

37.00%

37.00%

37.00%

41.96%

46.89%

Expenses

Payroll

$21,510

$21,600

$21,700

$21,700

$21,700

Marketing/Promotion

$2,375

$1,500

$2,000

$2,500

$2,750

Depreciation

$0

$0

$0

$0

$0

Mortgage %/Rent

$1,800

$1,800

$1,800

$1,800

$1,800

Utilities

$960

$1,000

$1,100

$1,200

$1,300

Insurance

$1,800

$1,850

$2,000

$2,200

$2,250

Website maintenance

$372

$375

$375

$375

$375

POS contract/fees

$420

$450

$450

$450

$450

Payroll taxes

$0

$0

$0

$0

$0

Total Operating Expenses

$29,237

$28,575

$29,425

$30,225

$30,625

Profit Before Interest and Taxes

$10,671 ...