Business Venture Analysis

Business Venture Analysis



Business Venture Analysis

Introduction

BeautyU Cosmetic is a start-up business specializing in hand-made herbal products. Our products include therapy packs, soaps, oil, balsam eye packs, salves, moisturizers, bath bags, and bath powder. All BeautyU Creations are made from herbs that are either garden grown or gathered in local fields or wooded areas when they are at their peak of maturity and the concentration of active ingredients is highest. Herbal products have grown in popularity with consumers over the past ten years. Herbal products industry exceeded $4.3 billion dollar in sales last year. Where once a customer would have to go to a specialty shop to purchase herbal products, now those same product are available at the local supermarket. The demand has created a cottage industry of supplying herbal products to companies who then market the product under their own brand name. BeautyU Creations will sell its product line to herbal product companies that sell baskets with specific themes (such as balsam salve and eye packs).

Start-up Summary

Start-up costs are shown in three areas. The first is in the start-up table, the second is within the cash flow assumptions and the third is in the P&L (Stover 2003).

Start-up expenses: legal (incorporation and trademark registration), stationery (business cards and office supplies), etc., brochures, consultants (graphic design for logo and packaging), research and development (architecture fees for store and trade fixture design).

Start-up costs expressed in year one cash flow: FF&E for first BeautyU store.

Start-up costs included within year one P&L: brand marketing, management staff, travel costs to coordinate product development.

Start-up Funding

Start-up Expenses to Fund

$170,500

Start-up Assets to Fund

$249,500

Total Funding Required

$420,000

Assets

Non-cash Assets from Start-up

$109,500

Cash Requirements from Start-up

$140,000

Additional Cash Raised

$0

Cash Balance on Starting Date

$140,000

Total Assets

$249,500

Liabilities and Capital

Liabilities

Current Borrowing

$100,000

Long-term Liabilities

$0

Accounts Payable (Outstanding Bills)

$0

Other Current Liabilities (interest-free)

$0

Total Liabilities

$100,000

Capital

Planned Investment

Ray

$256,000

Barbara

$64,000

Additional Investment Requirement

$0

Total Planned Investment

$320,000

Loss at Start-up (Start-up Expenses)

($170,500)

Total Capital

$149,500

Total Capital and Liabilities

$249,500

Total Funding

$420,000

Start-up

Requirements

Start-up Expenses

Legal

$2,500

Stationery etc.

$3,000

Brochures

$10,000

Consultants

$15,000

Research and Development

$30,000

Expensed Equipment

$60,000

Other

$50,000

Total Start-up Expenses

$170,500

Start-up Assets

Cash Required

$140,000

Start-up Inventory

$44,500

Other Current Assets

$0

Long-term Assets

$65,000

Total Assets

$249,500

Total Requirements

$420,000

Financial Plan

BeautyU will become profitable in our third year of operation. Initial growth will be financed by a combination of equity investment and debt financing. Our ratios are well within prudent limits and our growth plans are challenging, but realistic. The tables in this section explain the detail behind our financing plan and our growth plans.

Important Assumptions

Our assumptions are detailed in the proceeding tables. We have planned for relatively slow but stable general economic growth and an interest rate on borrowing of 9.5%.

General Assumptions

Year 1

Year 2

Year 3

Year 4

Year 5

Plan Month

1

2

3

4

5

Current Interest Rate

9.50%

9.50%

9.50%

9.50%

9.50%

Long-term Interest Rate

9.00%

9.00%

9.00%

9.00%

9.00%

Tax Rate

0.00%

0.00%

0.00%

0.00%

0.00%

Other

0

0

0

0

0

Key Financial Indicators

This topic compares five key indicators in regards to how much they change over time. The indicators include sales, gross margin, operating expenses, inventory turnover, and collection ...