Real Estate Company Business Plan
BUSINESS PLAN MSN REAL ESTATE
40001 Lincoln Ave.
Portland, Oregon 97201
MSN Real Estate will be formed as a diversified development, brokerage, and management enterprise. Their apartment units will offer a safe environment and state-of-the-art living conditions reflective of the rapid advancements in technology and a growing need for quality housing. Customer and employee satisfaction will be keys to their success. This business plan was compiled using Business Plan Pro™, by Palo Alto Software, copyright © 2000.
- EXECUTIVE SUMMARY
- COMPANY SUMMARY
- MARKET ANALYSIS SUMMARY
- STRATEGY AND IMPLEMENTATION SUMMARY
- MANAGEMENT SUMMARY
- FINANCIAL PLAN
EXECUTIVE SUMMARY
MSN Real Estate will be formed as a diversified development, brokerage, and management enterprise. By being involved in each step of the the way from development to rental, we at MSN can ensure our customers that they are receiving the highest quality living available at that price. We will specialize in providing high quality housing that offers both up-to-date technological amenities as well as state-of-the-art living conditions at reasonable prices. The founders are forming this company in order to provide customers with a living environment that is unparalleled, while cutting expenses through organizational diversification enabling optimal profit margins. MSN's apartment complexes and individual units will foster an atmosphere and a quality of life that is of the highest standards. Customer satisfaction, safety, and an overall healthy working relationship are our main goals at MSN.
Objectives
- Sales of $250,000 in 1998 and $600,000 by the year 2000.
- Gross margin higher than 50%.
- Net income more than 15% of sales by the second year.
- Have a crime rate of 0.
Mission
MSN Real Estate provides high-quality, comfortable rental units in Eugene and other areas of Oregon. MSN's apartment units offer state-of-the-art living conditions reflective of the rapid advancements in technology and a growing need for quality housing. Our company is dedicated to a hassle-free living environment in which our tenants can enjoy all of the benefits of safe, attractive, and inviting units. Unlike many other realty companies that are solely concerned with turning profits, our primary objective at MSN is to maintain the highest level of customer satisfaction that is achievable. Tenant safety, happiness, and comfort are our main goals. MSN maintains competitive market prices, while working toward expanding the number of units owned and increasing total profits earned. Within the company we will strive to work as a cohesive, harmonious unit focused on exemplifying our mission. Just as customer satisfaction is an intricate part of MSN's success, so is employee satisfaction. That is why the founders of MSN Real Estate believe that employee satisfaction will make the company a success and will be the key to their longevity.
Initial focus will be to buy and develop existing apartment complexes. We will modify and remodel the acquired real estate so as to meet MSN standards and increase long-term assets and income. Housing units will predominantly be located in the university neighborhood, targeting both students and professionals. MSN fosters the ideals of the importance of tenant needs along with healthy and understanding relationships and a professional commitment to satisfaction.
Keys to Success
- Safe, quality housing that provides state-of-the-art amenities at competitive prices.
- Maintaining open communication between MSN and its customers in order to ensure the highest level of customer satisfaction and long lasting reputation within the community.
- To continue to expand the number of units owned and maintained, while also increasing the level of profits for both MSN and its investors.
COMPANY SUMMARY
MSN Real Estate is an enterprise that is involved in numerous aspects of the industry. Primary experience and expertise is in the development of high-quality, lower cost living for students and professionals seeking the most up-to-date technologically advanced living environment. An area of intense training and attention is the importance of strong customer service.
Company Ownership
MSN Real Estate will be created as a Limited Liability Corporation based out of Portland, Oregon. It will be owned by its principal investors, Shawn Menashe and Nathan Koach. Shawn Menashe is the acting CEO and holds a 40% stake in the company. Nathan Koach is the acting CFO and holds a 40% share of the company as well. The other 20% is held by silent investors.
Start-up Summary
The total start-up expenses (including legal, stationery, architect, brochures, consultants, insurance, rent, R&D, expensed equipment, and other) come to $18,308. Start-up assets required include $12,000 in short-term assets (truck, cell phone, etc.) and $36,000 in initial cash to handle the architect and contractor fees prior to opening. The rest of the cash is needed to pay all zoning fees and governmental regulations. The details are included in the following table.
Start-up Costs
| Start-up Expenses | |
| Legal | $6,400 |
| Architect fees | $3,000 |
| Stationery, etc. | $220 |
| Brochures | $225 |
| Consultants | $2,550 |
| Insurance | $1,232 |
| Rent | $1,400 |
| Research and development | $2,330 |
| Expensed equipment | $600 |
| Other | $351 |
| Total Start-up Expenses | $18,308 |
| Start-up Needed | |
| Cash Requirements | $36,000 |
| Other Short-term Assets | $12,000 |
| Total Short-term Assets | $48,000 |
| Long-term Assets | $0 |
| Total Assets | $48,000 |
| Total Start-up Requirements | $66,308 |
| Left to finance: | $0 |
| Start-up Funding Plan | |
| Investment | |
| Menashe | $24,650 |
| Koach | $26,500 |
| Other | $14,000 |
| Total investment | $65,150 |
| Short-term Liabilities | |
| Unpaid Expenses | $3,890 |
| Short-term Loans | $5,000 |
| Interest-free Short-term Loans | $0 |
| Subtotal Short-term Liabilities | $8,890 |
| Long-term Liabilities | $0 |
| Total Liabilities | $8,890 |
| Loss at Start-up | ($26,040) |
| Total Capital | $39,110 |
| Total Capital and Liabilities | $48,000 |
| Checkline | $0 |
Company Locations and Facilities
MSN headquarters will be established in A-quality office space in the downtown area of Portland, Oregon. This will be the heart of our company, with satellite locations in Beaverton and Eugene, Oregon. We are also installing an in-house Internet server and 24-hour answering service so that all customer or business communications are dealt with in an expedient and fluid manner. Within any living development with more than 32 units, a representative of the company will be located.
Services
MSN offers on-site security guards who patrol the grounds during evenings, nights, and early mornings. We also offer an on-site repair service. There will always be an open line of communication between the renters and the management via an MSN web page and a 24-hour, call-in answering service.
Competitive Comparison
MSN's competitive advantage is as follows:
- We offer a higher level of quality in our units than the average unit on campus. This allows for those residents who do not want their living situations to inhibit their studies, comfort, or enjoyment of campus life.
- Each unit will be fully wired to the Internet via available modem jacks and/or Ethernet access. If the residents desire to have the best Internet access, we will give them that option.
- Our marketing and advertising costs will be low due to simple marketing strategies. However, the owner's expertise in visual layout and communications will help create a unique and aesthetic product for the customer.
- The main competition MSN will encounter will be average lower cost apartment units.
Sales Literature
MSN will have brochures available at all offices. These will give the customer a general outline of our units and will explain the benefits of our units. We will also have a monthly newsletter that we send out to our clients. This newsletter will inform the clients as to the growth and outreach of MSN. It will also contain some human interest stories about our complexes and the residents.
We will also advertise in the local newspapers including The Daily Emerald, The Register Guard, and The Oregonian. Our marketing strategies are simple but aim to reach a large amount of people. The layout of our publications and advertisements will have a sophisticated and contemporary look without being overly formatted.
Fulfillment
- MSN's key fulfillment will be provided by management's dedication to a higher quality product. This is achieved through the solid network of contractors, and cutting-edge architects who are all dedicated to helping MSN. We are hard workers who have a solid backing from our developers.
- We will maintain a pool of professionals from which to pull for our needed services. This will help us develop a rapport with our contractors as well as maintaining our high expectations.
Technology
MSN Real Estate will have the most up-to-date technology provided both to the customers and to the subcontractors and other clients.
- Ethernet ports and/or modem jacks will be installed in each unit developed by MSN.
- Access to a 24-hour copy/fax center located on the premises.
- Each unit will contain an emergency panic alert that will automatically go through to the manager and the local police department.
Future Services
In the future, MSN will look to give each department within the company the opportunity to become a more independent entity. This will make expansion efforts more efficient, and will provide specialists in their departments the chance to become more focused in their field.
We are in the process of conducting surveys in order to determine the best possible markets for MSN expansion.
MARKET ANALYSIS SUMMARY
MSN Real Estate's main consumer base will be primarily students at the University of Oregon who will benefit from the apartment's unparalleled level of quality, location, and technological amenities. We also will be marketing to local area professionals and recent graduates, along with faculty and staff at the university. These customers will be looking for safe, high-quality environments that can foster the type of atmosphere needed for scholastic and professional success.
| Potential Customers | Growth | 1999 | 2000 | 2001 | 2002 | 2003 | CAGR |
| Students | 7% | 18,000 | 19,170 | 20,416 | 21,743 | 23,156 | 6.50% |
| Professionals | 4% | 12,000 | 12,480 | 12,979 | 13,498 | 14,038 | 4.00% |
| Faculty/Staff | 5% | 6,000 | 6,300 | 6,615 | 6,946 | 7,293 | 5.00% |
| Other | 3% | 4,000 | 4,120 | 4,244 | 4,371 | 4,502 | 3.00% |
| Total | 5.20% | 40,000 | 42,070 | 44,254 | 46,558 | 48,989 | 5.20% |
Market Segmentation
- MSN's largest market segment in the Eugene area will be students of the local universities. These students will be the most likely to desire the technological amenities that our company offers. We expect this to be the largest growing segment with a growth rate of about 7%.
- Local professionals are another large segment. They will be attracted to the units because of the same technological needs, but will also be attracted to the comfortable, well-maintained living environment. MSN offers units that provide a quality "hub" between college graduation and home ownership. We expect this segment to grow at a rate of about 4% with a more frequent turnover.
- Local university faculty and staff represent the third and smallest identifiable segment, but contain the second highest growth rate. Proximity and quality will entice this segment which we expect to grow at a rate of 5%.
Target Market Segment Strategy
We believe that our unparalleled level of quality and technological amenities put MSN into a niche of its own. This will be the focal point of all our marketing and advertising efforts. These segments are also easily reached through local newspapers and publications, as well frequent open house displays.
It is essential for MSN patrons to understand that their needs are our priority.
Market Needs
Each of our targets need the quality, convenience, service, safety, comfort, and technological amenities that can only be found at our living complexes.
- The student segment needs a quiet, safe atmosphere that fosters a quality learning environment. They also need the convenience of location and on-site amenities.
- The professional segment needs a living environment that separates them from the noisy, dirty inconvenience of average apartment living. Most professionals are on their way to home ownership or movement to a larger city, so they need housing that will let them feel like they are getting the quality that they need.
- The faculty/staff segment also has similar needs. They need to feel separation from the noise and unkempt conditions of most near-campus housing. Along with the students, they also need a place to feel safe and one that fosters convenience.
Market Trends
This industry is constantly evolving and leaving many inflexible companies stagnant. One of the major trends is the need to adapt to technological advancements as well as maintaining the overall appearance and condition of the complexes.
Another important trend is adapting to higher density housing in smaller areas due to urban growth boundaries, etc. MSN is dedicated to following these trends while maintaining the level of comfortable livability that sets us apart from our competitors.
Market Growth
The market for high quality, reasonably priced apartment units has been growing at a rate of6.7% since 1998. Oregon's rental rates have remained even, averaging $697, or $.79 per square foot, during the fourth quarter of 1998. The Oregon market is experiencing rapid employment growth that is fueling demand for apartments, but not many new units are emerging. Not only is MSN pioneering this particular niche of affordable quality living, but it is capitalizing on the strength of the current economic growth in Oregon.
STRATEGY AND IMPLEMENTATION SUMMARY
MSN will focus on the three previously mentioned market segments: university students, local area professionals, and university faculty and staff.
Our target customer is usually looking for higher-end living facilities that foster a safe, enjoyable, and convenient environment. They are technology savvy and have a desire to have access to the technological amenities that we provide.
Competitive Edge
We start with a critical competitive edge: there are very few apartment units that offer the same level of quality and technological amenities as MSN properties. We also have a very high regard for customer service; something that is unparalleled in this industry. MSN believes it is essential that the customer feels he/she is being treated with the utmost care and urgency. All staff and personnel go through a training program that teaches many of the skills needed for successful client relations and customer service.
Marketing Strategy
Marketing in a highly competitive housing industry depends on the recognition of excellence, as well as a point of difference to display our units in an individualized light. MSN will build a reputation upon these components.
We will develop and provide a living environment of unmatched proportion. It starts with the commitment to customer satisfaction and fulfilling their demands. Our commitment to quality and comfort includes safety and 24-hour customer service. The aspect of our living developments that differentiate MSN from all other real estate companies is our focus on maintaining the most advanced technological innovations on the market for our tenants.
Positioning Statement
For people who desire high-quality living with all the technological amenities available, only MSN Real Estate properties will be able to fulfill their needs and desires at an affordable price. Unlike most other property management companies, MSN is committed to guaranteeing customers full satisfaction, with 24-hour on-staff service, live answering service, and a web site that handles all complaints instantly.
Pricing Strategy
MSN's pricing will be at the top of what the market will bear. We are competing with large firms who have similar complexes. Our prices will be competitive with these larger firms while maintaining the high level of quality and expert management.
Prices are based on average unit value of $400 and average monthly sales of about $430,000. MSN, however, must try to follow market pricing trends in order to maintain a competitive advantage.
Promotion Strategy
MSN's most successful promotion will come in the form of word of mouth. Since we will own real estate, we will be highly visible to the public. Since our complexes will be in the upper echelon of quality and livability, word will spread through the community about our unique appeal.
Along with word of mouth, our most consistent form of promotion will come from ads in local publications, specifically, The Oregonian, The Daily Emerald, and The Register Guard, as well as smaller magazines and circulars. We also will be personally promoting our product within the community.
Distribution Strategy
We will focus on providing high-quality living in convenient locations with a wide customer base. It is also important that we remain at the upper echelon in the quality range when compared to competitors. We can only do this by organizing and implementing a sound plan that will assume responsibility for the functionality and appearance of MSN properties. We will have an updated web site for anyone interested in the properties.
Marketing Programs
Our most important marketing program is customer word-of-mouth. The only way to truly know the quality of our units is through experience; hence, we must maintain the highest level of customer satisfaction. Rewards will be given to clients or customers that refer new clientele to the company. We confidently believe that the high level of quality that MSN will provide can attract a strong demand for our units.
Another incentive that we will use is the early move-in bonus program. Anyone that signs their lease before June 15th will receive a free month as well as two parking spaces. This will encourage people to try and beat the rush of people who move in later. It will also give the appearance of increased demand.
Sales Strategy
Sales in our business is based upon providing customers with a living concept fitting of their needs. We must be in touch with the needs and desires of our clientele in order to best attract a consistent flow of incoming residents.
Sales Forecast
The following table gives the forecasted earnings for MSN Real Estate apartment rental units. We perceive a gradual increase in the total number of units over the next year. As time goes on, the monthly per-unit rental price will slowly ascend, coupled by the decline in cost over time, producing an increased per-unit profit.
From our opening in January to June, we expect that all units will be completely rented out. In the summer months we anticipate fewer student tenants, so we have planned on a rent lowering process to entice renters to stay. Also, we will only rent on yearly leases to ensure that all rented units remain filled year round. With the estimated profits from the previous months, the annex will be completed in September, adding 12 more units to the total of 54.
| Unit Sales | 1999 | 2000 | 2001 |
| Single units | 311 | 350 | 394 |
| Double units | 174 | 212 | 242 |
| Quad units | 129 | 154 | 168 |
| Luxury Suite | 29 | 54 | 60 |
| Other | 0 | 0 | 0 |
| Total Unit Sales | 643 | 770 | 864 |
| Unit Prices | |||
| Single units | $404.98 | $410.00 | $420.00 |
| Double units | $806.78 | $804.00 | $812.00 |
| Quad units | $1,174.42 | $1,200.00 | $1,220.00 |
| Luxury Suite | $674.14 | $689.00 | $699.00 |
| Other | $0.00 | $0.00 | $0.00 |
| Sales | |||
| Single units | $125,950 | $143,500 | $165,480 |
| Double units | $140,380 | $170,448 | $196,504 |
| Quad units | $151,500 | $184,800 | $204,960 |
| Luxury Suite | $19,550 | $37,206 | $41,940 |
| Other | $0 | $0 | $0 |
| Total Sales | $437,380 | $535,954 | $608,884 |
| Direct Unit Costs | |||
| Single units | $260.00 | $225.00 | $214.00 |
| Double units | $428.00 | $400.00 | $378.00 |
| Quad units | $511.00 | $498.00 | $478.00 |
| Luxury Suite | $302.00 | $287.00 | $284.00 |
| Other | $0.00 | $0.00 | $0.00 |
| Direct Cost of Sales | 1999 | 2000 | 2001 |
| Single units | $80,860 | $78,750 | $84,316 |
| Double units | $74,472 | $84,800 | $91,476 |
| Quad units | $65,919 | $76,692 | $80,304 |
| Luxury Suite | $8,758 | $15,498 | $17,040 |
| Other | $0 | $0 | $0 |
| Subtotal Direct Cost of Sales | $230,009 | $255,740 | $273,136 |
Sales Programs
Our sale program will include sales awards for length of lease agreements, maintaining a full capacity status, and customer service awards for those who best exemplify MSN's commitment to customers. We also will award existing customers for referring new clients to the company.
Strategic Alliances
We depend on our alliance with Rumex contracting services to develop our housing units, as well as Richards Architecture to assist in the layout and design of our units. Familian Northwest also is a key factor in our development process for their continuous fair sales program when we need building supplies.
Milestones
The accompanying table lists our company's milestones, including dates, management responsibility, and budgets. This table indicates our expectations from the company as well as outlining our plan for start-up. The table shows the anticipated divisions that are to occur within the company as it grows, as well as an increase in units owned.
This is an initial assessment, and MSN will continually adjust in order to sustain our business in all the different departments.
| Milestone | Manager | Planned Date | Department | Budget |
| Complete Incorporation | Shawn Menashe (CEO) | 7/30/98 | Administrative/Management | $12,000 |
| Financially Organized Institution | Nathan Koach (CFO) | 2/28/00 | Finance | $2,500 |
| Brokerage Unified | Joe Menashe | 4/00/00 | Brokerage | $10,000 |
| Expansion (UNITS) | Shawn Menashe | 4/24/99 | Development | $150,000 |
| Earnings ($200,000) | Nathan Koach | 12/31/99 | Finance | $1,000 |
| Acquisition (Bought C&R Reality) | Shawn Menashe | 7/30/99 | Brokerage | $500,000 |
| Other | MSN | 1/1/98 | Administration | $5,000 |
| Totals | $680,500 |
MANAGEMENT SUMMARY
The initial management team depends on the founders themselves, with back-up assistance from the property management department of MSN Real Estate. As we continue to grow, we will establish satellite offices in all of our living developments. It also will be necessary to take on additional help in the marketing and R&D sectors as growth continues.
Organizational Structure
MSN Real Estate depends on an organized division of responsibilities in order to run an efficient, diversified enterprise. Main decisions and responsibilities will be divided between the two top partners. They will focus on maintaining high quality and a cohesive business entity. Top division managers will be given specific responsibilities such as marketing, finance, strategic management, or research and development.
Management Team
MSN Real Estate is completely departmentalized. The main departments are finance, marketing, management, and research and development. Nate Koach, co-owner of the company, assumes the responsibilities of the CFO, while his counterpart, Shawn Menashe, will be responsible for the duties of CEO. The company will make all decisions in accordance with the company mission. Employees are delegated tasks based upon their specialty.
Every six months, the two top partners will assess the results of these tasks, and the personality of the employee involved, to determine promotion and/or salary issues.
Management Team Gaps
The present team requires business development and administrative support. Most of the partners have been working in business environments where this kind of support was provided to them as part of a larger organization.
MSN will turn to Dynamic Public Relations to help create business development programs, such as speaking opportunities and magazine article insertions, as well as forums and seminars that are important to our ongoing development.
Regarding administration, we need a strong finance manager to guard cash flow. Our partners are not accustomed to the worries of cash flow, but they have the sense to listen to reason and deal with constraints if the finance manager provides the proper information.
Personnel Plan
The following table summarizes our personnel expenditures for the first three years, with compensation increasing from less than $100K the first year to about $150K in the third. The founding partners will take limited compensation for the first three years until earnings are substantiated and growth is assured. We believe this plan is a compromise between fairness and expedience and meets the commitment of our mission statement.
| Personnel | 1999 | 2000 | 2001 |
| Nathan Koach, CFO | $15,600 | $20,000 | $25,000 |
| Shawn Menashe, CEO | $15,600 | $20,000 | $25,000 |
| Denise Richards (Administrative Manager) | $9,600 | $10,000 | $12,000 |
| Joe Nash (Brokerage Manager) | $11,700 | $14,000 | $17,000 |
| Head Contractor (Development Manager) | $14,100 | $15,000 | $17,000 |
| Other | $24,000 | $26,000 | $32,000 |
| Total Payroll | $90,600 | $105,000 | $128,000 |
| Total Headcount | 18 | 24 | 32 |
| Payroll Burden | $13,590 | $15,750 | $19,200 |
| Total Payroll Expenditures | $104,190 | $120,750 | $147,200 |
FINANCIAL PLAN
We want to finance growth mainly through cash flow. We recognize that this means we will have to grow more slowly than we might like.
The most important factor in our case is collection days. We can't push our clients hard on collection days. Therefore, we need to develop a permanent system of receivables financing, using one of the established financial companies in that business.
Important Assumptions
MSN's plan depends on the assumptions that are made in the following table. These are annual and monthly assumptions that show the consistent growth of the company. Since we operate on a monthly collection basis, we are assuming that the majority of the collections will be timely and in full.
Some of the underlying assumptions are:
- We assume a healthy growth trend in the local real estate market, along with a continued strong local economy.
- We assume that we stay in line with the continuing advances in technology and housing.
| General Assumptions | 1999 | 2000 | 2001 |
| Short-term Interest Rate % | 10.00% | 10.00% | 10.00% |
| Long-term Interest Rate % | 10.00% | 10.00% | 10.00% |
| Payment Days Estimator | 30 | 30 | 30 |
| Tax Rate % | 25.00% | 25.00% | 25.00% |
| Expenses in Cash % | 10.00% | 10.00% | 10.00% |
| Personnel Burden % | 15.00% | 15.00% | 15.00% |
Key Financial Indicators
MSN foresees growth in both unit rentals as well as increasing the percentage of growth margin.
MSN's cash flow depends on the monthly collection from the renters. We allow for a 25-day grace period, after which unpaid accounts will inhibit our cash flow. However, since we collect on a monthly basis, cash flow should be maintained at a steady level.
Break-even Analysis
The following table summarize our break-even analysis. With fixed costs of $8,000 per month and a variable per-unit cost of $350, we will need to rent out 14 units at $925 per unit, to cover our monthly costs. MSN's housing complex will consist of 34 units. According to the calculations, we will break-even within our first month of operation.
The break-even assumes that all units will be occupied and that all rent will be paid in a timely manner. This assumption is probably unrealistic; therefore our initial break-even per unit will most likely be higher.
| Monthly Units Break-even | 14 |
| Monthly Sales Break-even | $12,870 |
| Assumptions: | |
| Average Per-Unit Revenue | $925.00 |
| Average Per-Unit Variable Cost | $350.00 |
| Estimated Monthly Fixed Cost | $8,000 |
Projected Profit and Loss
The projected profit and loss for MSN is shown on the following table. Sales are increasing from about $440,000 in 1999 to over $600,000 after the third year. We show that net profit in 1999 will be $44,621. This is relatively high, but leaves room for possible unoccupied units.
We are projecting a gross margin of about 48% for the first year. This is an aggressive projection that will help our efforts to keep total cost of sales low while increasing gross margin. We also will have very low marketing costs, due to the public exposure to the units, and good word of mouth around the university area.
The planned projections are included in the attached Profit and Loss Table.
Profit and Loss
| 1999 | 2000 | 2001 | |
| Sales | $437,380 | $535,954 | $608,884 |
| Direct Cost of Sales | $230,009 | $255,740 | $273,136 |
| Other | $0 | $0 | $0 |
| Total Cost of Sales | $230,009 | $255,740 | $273,136 |
| Gross Margin | $207,371 | $280,214 | $335,748 |
| Gross Margin % | 47.41% | 52.28% | 55.14% |
| Operating expenses: | |||
| Advertising/Promotion | $2,700 | $3,000 | $3,500 |
| Travel | $0 | $0 | $0 |
| Miscellaneous | $1,800 | $2,000 | $2,200 |
| Payroll Expense | $90,600 | $105,000 | $128,000 |
| Payroll Burden | $13,590 | $15,750 | $19,200 |
| Depreciation | $1,800 | $1,800 | $1,800 |
| Leased Equipment | $2,400 | $2,600 | $2,800 |
| Utilities | $7,200 | $8,200 | $8,500 |
| Insurance | $14,400 | $15,500 | $1,600 |
| Rent | $3,000 | $4,000 | $5,000 |
| Contractors | $9,300 | $9,000 | $12,000 |
| Total Operating Expenses | $146,790 | $166,850 | $184,600 |
| Profit Before Interest and Taxes | $60,581 | $113,364 | $151,148 |
| Interest Expense Short-term | $1,011 | $2,090 | $3,440 |
| Interest Expenses Long-term | $75 | $700 | $1,075 |
| Taxes Incurred | $14,874 | $27,644 | $36,658 |
| Net Profit | $44,621 | $82,931 | $109,975 |
| Net Profit/Sales | 10.20% | 15.47% | 18.06% |
Projected Cash Flow
The following cash flow projections are a key part of MSN's early success. The annual cash flow figures are included here.
| 1999 | 2000 | 2001 | |
| Net Profit | $44,621 | $82,931 | $109,975 |
| Plus: | |||
| Depreciation | $1,800 | $1,800 | $1,800 |
| Change in Accounts Payable | $22,266 | $2,805 | $834 |
| Current Borrowing (repayment) | $8,400 | $15,000 | $12,000 |
| Increase (decrease) Other Liabilities | $1,152 | $2,500 | $2,000 |
| Long-term Borrowing (repayment) | $4,500 | $5,000 | $2,500 |
| Capital Input | $5,862 | $6,000 | $4,000 |
| Subtotal | $88,602 | $116,035 | $133,109 |
| Less: | |||
| Change in Other Short-term Assets | $0 | $0 | $0 |
| Capital Expenditure | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| Subtotal | $0 | $0 | $0 |
| Net Cash Flow | $88,602 | $116,035 | $133,109 |
| Cash Balance | $124,602 | $240,637 | $373,746 |
Projected Balance Sheet
The balance sheet in the following table shows managed but sufficient growth of net worth, and a sufficiently healthy financial position. The monthly estimates are a good indicator of MSN's increasing annual value.
| Assets | ||||
| Short-term Assets | Starting Balances | 1999 | 2000 | 2001 |
| Cash | $36,000 | $124,602 | $240,637 | $373,746 |
| Other Short-term Assets | $12,000 | $12,000 | $12,000 | $12,000 |
| Total Short-term Assets | $48,000 | $136,602 | $252,637 | $385,746 |
| Long-term Assets | ||||
| Capital Assets | $0 | $0 | $0 | $0 |
| Accumulated Depreciation | $0 | $1,800 | $3,600 | $5,400 |
| Total Long-term Assets | $0 | ($1,800) | ($3,600) | ($5,400) |
| Total Assets | $48,000 | $134,802 | $249,037 | $380,346 |
| Liabilities and Capital | ||||
| Accounts Payable | $3,890 | $26,156 | $28,961 | $29,795 |
| Short-term Notes | $5,000 | $13,400 | $28,400 | $40,400 |
| Other Short-term Liabilities | $0 | $1,152 | $3,652 | $5,652 |
| Subtotal Short-term Liabilities | $8,890 | $40,708 | $61,013 | $75,847 |
| Long-term Liablities | $0 | $4,500 | $9,500 | $12,000 |
| Total Liabilities | $8,890 | $45,208 | $70,513 | $87,847 |
| Paid in Capital | $65,150 | $71,012 | $77,012 | $81,012 |
| Retained Earnings | ($26,040) | ($26,040) | $18,581 | $101,512 |
| Earnings | $0 | $44,621 | $82,931 | $109,975 |
| Total Capital | $39,110 | $89,593 | $178,524 | $292,499 |
| Total Liabilities and Capital | $48,000 | $134,802 | $249,037 | $380,346 |
| Net Worth | $39,110 | $89,593 | $178,524 | $292,499 |
Business Ratios
The following ratios point out MSN's liquidity, debt, performance, and some other important aspects. We expect to generate healthy ratios for our profitability and return.
| Profitability Ratios: | 1999 | 2000 | 2001 | RMA |
| Gross Margin | 47.41% | 52.28% | 55.14% | 0 |
| Net Profit Margin | 10.20% | 15.47% | 18.06% | 0 |
| Return on Assets | 33.10% | 33.30% | 28.91% | 0 |
| Return on Equity | 49.80% | 46.45% | 37.60% | 0 |
| Activity Ratios | ||||
| AR Turnover | 0.00 | 0.00 | 0.00 | 0 |
| Collection Days | 0 | 0 | 0 | 0 |
| Inventory Turnover | 0.00 | 0.00 | 0.00 | 0 |
| Accts Payable Turnover | 9.38 | 9.38 | 9.38 | 0 |
| Total Asset Turnover | 3.24 | 2.15 | 1.60 | 0 |
| Debt Ratios | ||||
| Debt to Net Worth | 0.50 | 0.39 | 0.30 | 0 |
| Short-term Liab. to Liab. | 0.90 | 0.87 | 0.86 | 0 |
| Liquidity Ratios | 1999 | 2000 | 2001 | RMA |
| Current Ratio | 3.36 | 4.14 | 5.09 | 0 |
| Quick Ratio | 3.36 | 4.14 | 5.09 | 0 |
| Net Working Capital | $95,893 | $191,624 | $309,899 | 0 |
| Interest Coverage | 55.79 | 40.63 | 33.48 | 0 |
| Additional Ratios | ||||
| Assets to Sales | 0.31 | 0.46 | 0.62 | 0 |
| Debt/Assets | 34% | 28% | 23% | 0 |
| Current Debt/Total Assets | 30% | 24% | 20% | 0 |
| Acid Test | 3.36 | 4.14 | 5.09 | 0 |
| Asset Turnover | 3.24 | 2.15 | 1.60 | 0 |
| Sales/Net Worth | 4.88 | 3.00 | 2.08 | 0 |